12 ms·

It’s interesting that she was threatened with being held responsible for violating a fiduciary duty for the for-profit entity while she was sitting on the non-p

It’s interesting that she was threatened with being held responsible for violating a fiduciary duty for the for-profit entity while she was sitting on the non-profit board. Going fwd, I wonder why they cannot convert the structure to a traditional c-corp. Supposedly: “tax issues”. Whatever problems OpenAI dealt with last week, the current non-profit structure will continue to cause future problems IMO.

mrkramer 3y ago
Microsoft should acquire them and cut the non-profit crap.
- happytiger 3y ago
  Isn’t that basically what is happening with a few extra steps?
  - mrkramer 3y ago
    Yes....it's actually Microsoft vs Google AI arms race, that's why Google went all in with their LLM technology.
    - mistrial9 3y ago
      > cut the non-profit crap Great learning opportunity for those that have not taken time to learn and understand non-profit structures in the USA. this is clearly an opportunity for the uninformed to study the US non-profit system, unique in the world. For example, I recall a delegation from Japan touring the HQ of a non-profit educational group in San Francisco. Like the p-poster here, they apparently had no clue why or how capable people could come together and form stable work culture aside from "hierarchical, profit motive in USD$" (.. and people did actual work, unlike many management level stock manipulators).
      - mrkramer 3y ago
        I'm from southeast Europe and I graduated from IB high school programme[0], it is an international Swiss based educational programme that prepares you to study abroad and it is a non-profit. As a non-profit they are efficient af at what they do but in the world of technological innovations, incentives are so much higher and so much more impactful when an organization is for-profit. [0] https://en.wikipedia.org/wiki/International_Baccalaureate https://en.wikipedia.org/wiki/International_Baccalaureate
      - mistrial9 3y ago
        Mark Surman writes: As I wrote in Fast Company earlier this week, we risk missing the real lesson from the OpenAI governance debacle. ... "In the aftermath of the OpenAI governance battle, the narrative has been dominated by the idea that “the capitalists won.” While this conclusion is catchy, it misses the point. The real (and bigger) story is: The founders of OpenAI set out to create a nonprofit public institution to ensure that AI’s evolution aligns with the interests of humanity at large. Last month, it became clear that they failed. What is also clear: Public institutions that prioritize the public good over short-term profits are desperately needed for the AI era."
Havoc 3y ago
> fiduciary duty for the for-profit entity I read it as both. If OpenAI collapses operationally then the non profit fails at its mission too. That’s the board she is on and that’s the fiduciary duty relevant (She may also be on the for profit board idk)
- stcredzero 3y ago
  In the current legal framework, isn't the reality, fiduciary uber alles?
- webmaven 3y ago
  Wait, does the for-profit even have a board?
  - Havoc 3y ago
    Had a quick look at structure and I'd say probably not
- 0xDEAFBEAD 3y ago
  >If OpenAI collapses operationally then the non profit fails at its mission too. Not necessarily true. "We will attempt to directly build safe and beneficial AGI, but will also consider our mission fulfilled if our work aids others to achieve this outcome [...] if a value-aligned, safety-conscious project comes close to building AGI before we do, we commit to stop competing with and start assisting this project." https://openai.com/charter https://openai.com/charter
dragonwriter 3y ago
> Going fwd, I wonder why they cannot convert the structure to a traditional c-corp. Supposedly: “tax issues”. Because, IIRC, when a charity nonprofit like OpenAI, Inc.-- a 501(c)(3), other nonprofits are different -- converts to a for-profit (C-corp or otherwise doesn't matter), all the assets acquired while it was a charity must either remain dedicated to and used exclusively for the charitable purpose, be returned, or be donated to charity (or sold, and then the proceeds treated the same way.) For the charity OpenAI, Inc., this would include its interest in OpenAI, LLC (the wholly owned subsidiary through which it exercises control of OpenAI, LP and OpenAI Global, LLC -- the latter being the for profit entity that actually sells product, etc.), and OpenAI, LP (the holding company which in turn is majority owner of OpenAI Global, LLC).
- gnulinux 3y ago
  Just curious: can they legally sell all their assets to themselves (i.e. OpenAI nonprofit sells it to for-profit OpenAI Inc. for market price real $$$) and then use that $$$ for charitable purposes. Would this satisfy IRS by letting them retain the intellectual property rights?
  - yieldcrv 3y ago
    self dealing regulations are to prevent that. also OpenAI Inc. for profit doesnt exist, a wholly owned LLC subsidiary does. so they would need to divest of that LLC first (by selling the shares) the way around the self dealing regulations are to reduce their ownership below 20% - 35% (yes, its that range, for multiple reasons) good thing here is that most venture backed companies subvert this already by simply share dilution and youre breaking into one the best secrets of Silicon Valley. Non-profits pump the value of startups and launder the reputation of the founders because their ideas get so much “validation” so quickly. (non profits they partially control act as lead investors for startups they control. they both sell shares at higher price, ideally: founders get QSBS tax free treatment, non profit retains tax free capital gains too. nothing wrong with that, you just probably cant do it too) so open ai for profit llc needs to get rid of the PPU’s and bring in outside investors to dilute ownership enough, but two birds one stone: the outside investors have to get a higher valuation
WillPostForFood 3y ago
It’s interesting that she was threatened with being held responsible for violating a fiduciary duty for the for-profit entity while she was sitting on the non-profit board. Fiduciary doesn't mean financial or monetary duty, it means holding something in trust. Violating a fiduciary duty could be financial, social, reputational, or in this case, literally destroying the operation of the company you were entrusted with.
jacquesm 3y ago
Tax issues and regulatory issues both.
JKCalhoun 3y ago
> It’s interesting that she was threatened with being held responsible for violating a fiduciary duty Yeah, that smells like a bullshit threat. Anyone would do well to ignore it.

mrkramer 3y ago

Microsoft should acquire them and cut the non-profit crap.

happytiger 3y ago
Isn’t that basically what is happening with a few extra steps?
- mrkramer 3y ago
  Yes....it's actually Microsoft vs Google AI arms race, that's why Google went all in with their LLM technology.
  - mistrial9 3y ago
    > cut the non-profit crap Great learning opportunity for those that have not taken time to learn and understand non-profit structures in the USA. this is clearly an opportunity for the uninformed to study the US non-profit system, unique in the world. For example, I recall a delegation from Japan touring the HQ of a non-profit educational group in San Francisco. Like the p-poster here, they apparently had no clue why or how capable people could come together and form stable work culture aside from "hierarchical, profit motive in USD$" (.. and people did actual work, unlike many management level stock manipulators).
    - mrkramer 3y ago
      I'm from southeast Europe and I graduated from IB high school programme[0], it is an international Swiss based educational programme that prepares you to study abroad and it is a non-profit. As a non-profit they are efficient af at what they do but in the world of technological innovations, incentives are so much higher and so much more impactful when an organization is for-profit. [0] https://en.wikipedia.org/wiki/International_Baccalaureate https://en.wikipedia.org/wiki/International_Baccalaureate
    - mistrial9 3y ago
      Mark Surman writes: As I wrote in Fast Company earlier this week, we risk missing the real lesson from the OpenAI governance debacle. ... "In the aftermath of the OpenAI governance battle, the narrative has been dominated by the idea that “the capitalists won.” While this conclusion is catchy, it misses the point. The real (and bigger) story is: The founders of OpenAI set out to create a nonprofit public institution to ensure that AI’s evolution aligns with the interests of humanity at large. Last month, it became clear that they failed. What is also clear: Public institutions that prioritize the public good over short-term profits are desperately needed for the AI era."

Havoc 3y ago

> fiduciary duty for the for-profit entity I read it as both. If OpenAI collapses operationally then the non profit fails at its mission too. That’s the board she is on and that’s the fiduciary duty relevant (She may also be on the for profit board idk)

stcredzero 3y ago
In the current legal framework, isn't the reality, fiduciary uber alles?
webmaven 3y ago
Wait, does the for-profit even have a board?
- Havoc 3y ago
  Had a quick look at structure and I'd say probably not
0xDEAFBEAD 3y ago
>If OpenAI collapses operationally then the non profit fails at its mission too. Not necessarily true. "We will attempt to directly build safe and beneficial AGI, but will also consider our mission fulfilled if our work aids others to achieve this outcome [...] if a value-aligned, safety-conscious project comes close to building AGI before we do, we commit to stop competing with and start assisting this project." https://openai.com/charter https://openai.com/charter

dragonwriter 3y ago

> Going fwd, I wonder why they cannot convert the structure to a traditional c-corp. Supposedly: “tax issues”. Because, IIRC, when a charity nonprofit like OpenAI, Inc.-- a 501(c)(3), other nonprofits are different -- converts to a for-profit (C-corp or otherwise doesn't matter), all the assets acquired while it was a charity must either remain dedicated to and used exclusively for the charitable purpose, be returned, or be donated to charity (or sold, and then the proceeds treated the same way.) For the charity OpenAI, Inc., this would include its interest in OpenAI, LLC (the wholly owned subsidiary through which it exercises control of OpenAI, LP and OpenAI Global, LLC -- the latter being the for profit entity that actually sells product, etc.), and OpenAI, LP (the holding company which in turn is majority owner of OpenAI Global, LLC).

gnulinux 3y ago
Just curious: can they legally sell all their assets to themselves (i.e. OpenAI nonprofit sells it to for-profit OpenAI Inc. for market price real $$$) and then use that $$$ for charitable purposes. Would this satisfy IRS by letting them retain the intellectual property rights?
- yieldcrv 3y ago
  self dealing regulations are to prevent that. also OpenAI Inc. for profit doesnt exist, a wholly owned LLC subsidiary does. so they would need to divest of that LLC first (by selling the shares) the way around the self dealing regulations are to reduce their ownership below 20% - 35% (yes, its that range, for multiple reasons) good thing here is that most venture backed companies subvert this already by simply share dilution and youre breaking into one the best secrets of Silicon Valley. Non-profits pump the value of startups and launder the reputation of the founders because their ideas get so much “validation” so quickly. (non profits they partially control act as lead investors for startups they control. they both sell shares at higher price, ideally: founders get QSBS tax free treatment, non profit retains tax free capital gains too. nothing wrong with that, you just probably cant do it too) so open ai for profit llc needs to get rid of the PPU’s and bring in outside investors to dilute ownership enough, but two birds one stone: the outside investors have to get a higher valuation

WillPostForFood 3y ago

It’s interesting that she was threatened with being held responsible for violating a fiduciary duty for the for-profit entity while she was sitting on the non-profit board. Fiduciary doesn't mean financial or monetary duty, it means holding something in trust. Violating a fiduciary duty could be financial, social, reputational, or in this case, literally destroying the operation of the company you were entrusted with.

jacquesm 3y ago

Tax issues and regulatory issues both.

JKCalhoun 3y ago

> It’s interesting that she was threatened with being held responsible for violating a fiduciary duty Yeah, that smells like a bullshit threat. Anyone would do well to ignore it.