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I’m confused by this news story and the response here. No one seems to understand OpenAI’s corporate structure or non profits at all. My understanding: OpenAI

I’m confused by this news story and the response here. No one seems to understand OpenAI’s corporate structure or non profits at all. My understanding: OpenAI follows the same model Mozilla does. The nonprofit has owned a for-profit corporation called OpenAI Global, LLC that pays taxes on any revenue that isn’t directly in service of their mission (in a very narrow sense based on judicial precedent) since 2019 [1]. In Mozilla’s case that’s the revenue they make from making Google the default search engine and in OpenAI’s case that’s all their ChatGPT and API revenue. The vast majority (all?) engineers work for the for-profit and always have. The vast majority (all?) revenue goes through the for-profit which pays taxes on that revenue minus the usual business deductions. The only money that goes to the nonprofit tax-free are donations. Everything else is taxed at least once at the for-profit corporation. Almost every nonprofit that raises revenue outside of donations has to be structured more or less this way to pay taxes. They don’t get to just take any taxable revenue stream and declare it tax free. All OpenAI is doing here is decoupling ownership of the for-profit entity from the nonprofit. They’re allowing the for profit to create more shares and distribute them to entities other than the non-profit. Or am I completely misinformed? [1] https://en.wikipedia.org/wiki/OpenAI#2019:_Transition_from_non-profit https://en.wikipedia.org/wiki/OpenAI#2019:_Transition_from_n...

seizethecheese 2y ago
“Decoupling” is such a strange euphemism for removing an asset worth north of $100b from a nonprofit.
- throwup238 2y ago
  OpenAI Global LLC is the $100b asset. It’s not being removed, the nonprofit will still own all the shares it owns now until it decides to sell.
  - deleted 2y ago
    [deleted]
  - sangnoir 2y ago
    The shares will be diluted - the LLC used to be 100% owned by the non-profit; and now there's no bottom.
    - Aeolun 2y ago
      Normally shareholders aren’t ok with that.
      - b800h 2y ago
        I was under the impression that in UK law at least, (and obviously not in this case) the trustees of a non-profit would be bound to work in the best interests of that non-profit. And so allowing an asset like this to somehow slip out of their control would be the sort of negligence that would land you in very hot water. I'd be interested to know how this isn't the case here.
        upwardbound 2y ago
        I think it is the case here, and I hope Elon Musk persists in his lawsuits about this. As a large donor to the nonprofit in its early days he’s one of the people with the strongest standing to sue / strongest claim for damages. Obviously Elon is mostly doing this suit as a way to benefit Grok AI but honestly I don’t mind that; competitors are supposed to keep each other in check, and this is a good and proper way for companies to provide checks & balances to each others’ power and it’s one reason why monopolies are bad is the absence of competitor-enforced accountability. Lawsuit: https://www.reuters.com/technology/elon-musk-revives-lawsuit-against-sam-altman-openai-nyt-reports-2024-08-05/ https://www.reuters.com/technology/elon-musk-revives-lawsuit... https://www.reuters.com/technology/elon-musk-revives-lawsuit-against-sam-altman-openai-nyt-reports-2024-08-05/
        stale2002 2y ago
        > somehow slip out of their control would be the sort of negligence that would land you in very hot water. > how this isn't the case here. Its not the case because they are doing the opposite of what you are suggesting. They are increasing the value of the asset that they own. Sure, the asset itself is being diluted, but the individual parts that it owns are more valuable. It is perfectly reasonable for a non profit to prefer to own 30% of a 100 billion dollar asset, lets say, compared to 100% of a 10 billion dollar asset.
  - dangitman 2y ago
    [dead]
simantel 2y ago
> Almost every nonprofit that raises revenue outside of donations has to be structured more or less this way to pay taxes. I don't think that's true? A non-profit can sell products or services, it just can't pay out dividends.
- throwup238 2y ago
  If those products and services are unrelated business income, they have to pay taxes on it: https://www.irs.gov/charities-non-profits/unrelated-business-income-tax https://www.irs.gov/charities-non-profits/unrelated-business... What counts as “related” to the charity’s mission is fuzzy but in practice the courts have been rather strict. They don’t have to form for-profit subsidiaries to pay those taxes but it helps to derisk the parent because potential penalties include loss of nonprofit status. For example, the nonprofit Metropolitan Museum of Modern Art has a for-profit subsidiary that operates the gift shop. National Geographic Society has National Geographic Partners which actually owns the TV channel and publishes the magazine. Harvard and Stanford have the Harvard Management Company and Stanford Management Company to manage their endowments respectively. The Smithsonian Institute has Smithsonian Enterprises. Mayo Clinic => Mayo Clinic Ventures. Even the state owned University of California regents have a bunch of for-profit subsidiaries.
throwaway314155 2y ago
It's about the narrative they tried to create. The spin. It doesn't matter much if they were technically behaving as a for-profit entity previously. What matters is that they wanted the public (and likely, their talent) to _think_ that they weren't even interested in making a profit as this would be a philosophical threat to the notion of any sort of impartial or even hopefully benevolent originator of AGI (a goal which is laid plainly in their mission statement). As you've realized, this should have been (and was) obvious for a long time. But that doesn't make it any less hypocritical or headline worthy.
- pj_mukh 2y ago
  Occam's razor: I think Sam's personal narrative is the correct one. He built a non-profit that took off in a way that he didn't expect it and now a for-profit is the best way to run the lightning they've caught. In terms of profit, AFAICT, Sam doesn't have designs on building extra large yachts and his own space agency but what he wants is to be the one at the stead of building what he considers is world-changing tech. One could rationally call this power-hungry but one could also rationally call this just helicopter parenting of a tech you've helped built. And for that a for-profit that is allowed to maximize profits to re-invest in the tech is the optimal setup (esp if all the competitors are doing the same) Is this a different org than when it started? Yes. Was this a dupe from the beginning? I don't think so. "But why can't he have a more worldly-aligned board looking over his shoulder?" Because we live in California and have a bad taste for governance by committee or worse: governance by constant non-representative democracy (see: Housing). If this now completely comes off the wheels, I still think Congressional action can be a stopgap, but atleast for now, this restructure makes sense to me.
  - grey-area 2y ago
    He didn’t build it.
    - eberfreitas 2y ago
      Can we please, move this comment to the top?
halJordan 2y ago
It isnt a tax thing or a money thing, its a control and governance thing. The board of the non-profit fired Altman and then Altman (& MS) rebelled, retook control, & gutted the non-profit board. Then, they stacked the new non-profit board with Altman/MS loyalists and now they're discharging the non-profit. It's entirely about control. The board has a legally enforceable duty to its charter. That charter is the problem Altman is solving.
- knome 2y ago
  >That charter is the problem Altman is solving We worry about the existential threat of AI becoming a paperclip factory while many humans are already.
- teleforce 2y ago
  I wished I have 10 upvote to give you, bravo excellent observations and conclusions.
burnte 2y ago
The problem is that OpenAI calls itself OpenAI when it's completely sealed off, and calls itself a non-profit when, as you say, almost everything about is for profit. Basically they're whitewashing their image as an organization with noble goals when it's simply yet another profit motivated company. It's fine if that's what they are and want to be, but the lies are bothersome.
- rilien 2y ago
  It's like North Korea calling themselves Democratic People's Republic of Korea. The name doesn't mean anything
bbor 2y ago
Good questions! Right now, OpenAI, Inc. (California non-profit, lets say the charity) is the sole controlling shareholder of OpenAI Global LLC (Delaware for-profit, lets say the company). So, just to start off with the big picture: the whole enterprise was ultimately under the sole control of the non-profit board, who in turn was obligated to operate in furtherance of "charitable public benefit". This is what the linked article means by "significant governance changes happening behind the scenes," which should hopefully convince you that I'm not making this part up. To get really specific, this change would mean that they'd no longer be obligated to comply with these CA laws: https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=GOV&division=3.&title=2.&part=2.&chapter=6.&article=7 https://leginfo.legislature.ca.gov/faces/codes_displayText.x... https://oag.ca.gov/system/files/media/registration-reporting-supervision.pdf https://oag.ca.gov/system/files/media/registration-reporting... And, a little less importantly, comply with the guidelines for "Public Charities" covered by federal code 501(c)(3) (https://www.law.cornell.edu/uscode/text/26/501 https://www.law.cornell.edu/uscode/text/26/501) covered by this set of articles: https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-501c3-organizations https://www.irs.gov/charities-non-profits/charitable-organiz... . The important bits are: The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency. ... The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization's net earnings may inure to the benefit of any private shareholder or individual. I'm personally dubious about the specific claims you made about revenue, but that's hard to find info on, and not the core issue. The core issue was that they were obligated (not just, like, promising) to direct all of their actions towards the public good, and they're abandoning that to instead profit a few shareholders, taking the fruit of their financial and social status with them. They've been making some money for some investors (or losses...), but the non-profit was, legally speaking, only allowed to permit that as a means to an end. Naturally, this makes it very hard to explain how the nonprofit could give up basically all of its control without breaking its obligations. All the above covers "why does it feel unfair for a non-profit entity to gift its assets to a for-profit", but I'll briefly cover the more specific issue of "why does it feel unfair for OpenAI in particular to abandon their founding mission". The answer is simple: they explicitly warned us that for-profit pursuit of AGI is dangerous, potentially leading to catastrophic tragedies involving unrelated members of the global public. We're talking "mass casualty event"-level stuff here, and it's really troubling to see the exact same organization change their mind now that they're in a dominant position. Here's the relevant quotes from their founding documents: OpenAI is a non-profit artificial intelligence research company. Our goal is to advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return. Since our research is free from financial obligations, we can better focus on a positive human impact... It’s hard to fathom how much human-level AI could benefit society, and it’s equally hard to imagine how much it could damage society if built or used incorrectly. Because of AI’s surprising history, it’s hard to predict when human-level AI might come within reach. When it does, it’ll be important to have a leading research institution which can prioritize a good outcome for all over its own self-interest. From their 2015 founding post: https://openai.com/index/introducing-openai/ https://openai.com/index/introducing-openai/ We commit to use any influence we obtain over AGI’s deployment to ensure it is used for the benefit of all, and to avoid enabling uses of AI or AGI that harm humanity or unduly concentrate power. Our primary fiduciary duty is to humanity... We are concerned about late-stage AGI development becoming a competitive race without time for adequate safety precautions. Therefore, 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. We will work out specifics in case-by-case agreements, but a typical triggering condition might be “a better-than-even chance of success in the next two years.” From their 2018 charter: https://web.archive.org/web/20230714043611/https://openai.com/charter https://web.archive.org/web/20230714043611/https://openai.co... Sorry for the long reply, and I appreciate the polite + well-researched question! As you can probably guess, this move makes me a little offended and very anxious. For more, look at the posts from the leaders who quit in protest yesterday, namely their CTO.
nfw2 2y ago
> "All OpenAI is doing here is decoupling ownership of the for-profit entity from the nonprofit." Yes, but going from being controlled by a nonprofit to being controlled by a typical board of shareholders seems like a pretty big change to me.
wubrr 2y ago
What leverage does Sam Altman have to get equity now? Does he personally have control over that decision?
joe_the_user 2y ago
There's a now-quintessential HN post format, "Poster criticizing X don't seem to under [spray of random details about X that don't refute the criticism - just cast posts as ignorant]". In this case, Mozilla as a non-profit owning a for-profit manages to more or less fulfill the non-profit's mission (maintaining an open, alternative browser). OpenAI has been in a hurry to abandon it's non-profit mission for a while and the complex details of its structure doesn't change this.
mr_toad 2y ago
> All OpenAI is doing here is decoupling ownership of the for-profit All? As far as I know this is unprecedented.
- A1kmm 2y ago
  Maybe at this scale. But unfortunately charities and not-for-profits putting their core business into a company, and then eventually selling it off is not unprecedented. For example, The Raspberry Pi Foundation was a not-for-profit organisation around Raspberry Pi. They formed a LLC for their commercial operations, then gradually sold it off before eventually announcing an IPO: https://www.raspberrypi.org/blog/what-would-an-ipo-mean-for-the-raspberry-pi-foundation/ https://www.raspberrypi.org/blog/what-would-an-ipo-mean-for-.... I think it is terrible that not-for-profits are just being used as incubators for companies that eventually take the core mission and stop primarily serving the public interest. There are of course other examples of charities or not-for-profits that put part of their core operations in a company and don't sell out, instead retaining 100% ownership - for example Mozilla. However, I think there should be some better way for impactful not-for-profits to have some revenue generating aspects in line with their mission (offset by allowing temporary surplus to cover future expenses, or by other expenses).
  - throwup238 2y ago
    > Maybe at this scale. I don't think it's unprecedented, even at this scale. Novo Nordisk, the pharmaceutical company behind Semaglutide (aka Ozempic) with a market cap >$600 bilion, was founded by the Novo Nordisk Foundation before going public. The latter now has an endowment of over $150 billion and owns a significant fraction of the public company.
deleted 2y ago
[deleted]
hackernewds 2y ago
How is it possible to make tax free "donations" for profit making applications? You seem to imply there is nothing nefarious about the setup. Except the non-profit designation doesn't actually perform no social services, instead stand as a business structure to skirt taxation. Change my mind
- throwup238 2y ago
  > How is it possible to make tax free "donations" for profit making applications? The nonprofit invests the tax free donations into the for-profit. It gets to keep its equity just like any other investor and as long as that equity held by the non-profit, there's no taxable event. If the nonprofit sells its share - since it was closely involved in the creation and management of the for-profit as an active investment - it becomes a taxable event under the unrelated business income tax rules. Until that time, the only "profit making applications" like ChatGPT and the API are run by the for-profit, which - I repeat - pays its taxes. I genuinely don't understand why people think they've skirted taxation except out of sheer ignorance of how non-profits actually work. A 501(c)(3) is not some magic Monopoly "get-out-of-tax-free" card and the IRS isn't stupid, there's a ton of rules for tax exemption. They'd have a much easier time with tax avoidance if they were an actual for profit corporation with billions of dollars because GAAP rules are a lot more forgiving than non-profit regulations.
mossTechnician 2y ago
This might be unpopular, but I don't think Mozilla's behavior is inherently good[1]. And even if it has, I don't think it should be used as a litmus test for other corporate behavior. Every company should stand on its own against scrutiny. [1] "The Mozilla Foundation has no members" https://hacktivis.me/articles/mozilla-foundation-has-no-members https://hacktivis.me/articles/mozilla-foundation-has-no-memb...

seizethecheese 2y ago

“Decoupling” is such a strange euphemism for removing an asset worth north of $100b from a nonprofit.

throwup238 2y ago
OpenAI Global LLC is the $100b asset. It’s not being removed, the nonprofit will still own all the shares it owns now until it decides to sell.
- deleted 2y ago
  [deleted]
- sangnoir 2y ago
  The shares will be diluted - the LLC used to be 100% owned by the non-profit; and now there's no bottom.
  - Aeolun 2y ago
    Normally shareholders aren’t ok with that.
    - b800h 2y ago
      I was under the impression that in UK law at least, (and obviously not in this case) the trustees of a non-profit would be bound to work in the best interests of that non-profit. And so allowing an asset like this to somehow slip out of their control would be the sort of negligence that would land you in very hot water. I'd be interested to know how this isn't the case here.
      - upwardbound 2y ago
        I think it is the case here, and I hope Elon Musk persists in his lawsuits about this. As a large donor to the nonprofit in its early days he’s one of the people with the strongest standing to sue / strongest claim for damages. Obviously Elon is mostly doing this suit as a way to benefit Grok AI but honestly I don’t mind that; competitors are supposed to keep each other in check, and this is a good and proper way for companies to provide checks & balances to each others’ power and it’s one reason why monopolies are bad is the absence of competitor-enforced accountability. Lawsuit: https://www.reuters.com/technology/elon-musk-revives-lawsuit-against-sam-altman-openai-nyt-reports-2024-08-05/ https://www.reuters.com/technology/elon-musk-revives-lawsuit... https://www.reuters.com/technology/elon-musk-revives-lawsuit-against-sam-altman-openai-nyt-reports-2024-08-05/
      - stale2002 2y ago
        > somehow slip out of their control would be the sort of negligence that would land you in very hot water. > how this isn't the case here. Its not the case because they are doing the opposite of what you are suggesting. They are increasing the value of the asset that they own. Sure, the asset itself is being diluted, but the individual parts that it owns are more valuable. It is perfectly reasonable for a non profit to prefer to own 30% of a 100 billion dollar asset, lets say, compared to 100% of a 10 billion dollar asset.
- dangitman 2y ago
  [dead]

simantel 2y ago

> Almost every nonprofit that raises revenue outside of donations has to be structured more or less this way to pay taxes. I don't think that's true? A non-profit can sell products or services, it just can't pay out dividends.

throwup238 2y ago
If those products and services are unrelated business income, they have to pay taxes on it: https://www.irs.gov/charities-non-profits/unrelated-business-income-tax https://www.irs.gov/charities-non-profits/unrelated-business... What counts as “related” to the charity’s mission is fuzzy but in practice the courts have been rather strict. They don’t have to form for-profit subsidiaries to pay those taxes but it helps to derisk the parent because potential penalties include loss of nonprofit status. For example, the nonprofit Metropolitan Museum of Modern Art has a for-profit subsidiary that operates the gift shop. National Geographic Society has National Geographic Partners which actually owns the TV channel and publishes the magazine. Harvard and Stanford have the Harvard Management Company and Stanford Management Company to manage their endowments respectively. The Smithsonian Institute has Smithsonian Enterprises. Mayo Clinic => Mayo Clinic Ventures. Even the state owned University of California regents have a bunch of for-profit subsidiaries.

throwaway314155 2y ago

It's about the narrative they tried to create. The spin. It doesn't matter much if they were technically behaving as a for-profit entity previously. What matters is that they wanted the public (and likely, their talent) to _think_ that they weren't even interested in making a profit as this would be a philosophical threat to the notion of any sort of impartial or even hopefully benevolent originator of AGI (a goal which is laid plainly in their mission statement). As you've realized, this should have been (and was) obvious for a long time. But that doesn't make it any less hypocritical or headline worthy.

pj_mukh 2y ago
Occam's razor: I think Sam's personal narrative is the correct one. He built a non-profit that took off in a way that he didn't expect it and now a for-profit is the best way to run the lightning they've caught. In terms of profit, AFAICT, Sam doesn't have designs on building extra large yachts and his own space agency but what he wants is to be the one at the stead of building what he considers is world-changing tech. One could rationally call this power-hungry but one could also rationally call this just helicopter parenting of a tech you've helped built. And for that a for-profit that is allowed to maximize profits to re-invest in the tech is the optimal setup (esp if all the competitors are doing the same) Is this a different org than when it started? Yes. Was this a dupe from the beginning? I don't think so. "But why can't he have a more worldly-aligned board looking over his shoulder?" Because we live in California and have a bad taste for governance by committee or worse: governance by constant non-representative democracy (see: Housing). If this now completely comes off the wheels, I still think Congressional action can be a stopgap, but atleast for now, this restructure makes sense to me.
- grey-area 2y ago
  He didn’t build it.
  - eberfreitas 2y ago
    Can we please, move this comment to the top?

halJordan 2y ago

It isnt a tax thing or a money thing, its a control and governance thing. The board of the non-profit fired Altman and then Altman (& MS) rebelled, retook control, & gutted the non-profit board. Then, they stacked the new non-profit board with Altman/MS loyalists and now they're discharging the non-profit. It's entirely about control. The board has a legally enforceable duty to its charter. That charter is the problem Altman is solving.

knome 2y ago
>That charter is the problem Altman is solving We worry about the existential threat of AI becoming a paperclip factory while many humans are already.
teleforce 2y ago
I wished I have 10 upvote to give you, bravo excellent observations and conclusions.

burnte 2y ago

The problem is that OpenAI calls itself OpenAI when it's completely sealed off, and calls itself a non-profit when, as you say, almost everything about is for profit. Basically they're whitewashing their image as an organization with noble goals when it's simply yet another profit motivated company. It's fine if that's what they are and want to be, but the lies are bothersome.

rilien 2y ago
It's like North Korea calling themselves Democratic People's Republic of Korea. The name doesn't mean anything

bbor 2y ago

Good questions! Right now, OpenAI, Inc. (California non-profit, lets say the charity) is the sole controlling shareholder of OpenAI Global LLC (Delaware for-profit, lets say the company). So, just to start off with the big picture: the whole enterprise was ultimately under the sole control of the non-profit board, who in turn was obligated to operate in furtherance of "charitable public benefit". This is what the linked article means by "significant governance changes happening behind the scenes," which should hopefully convince you that I'm not making this part up. To get really specific, this change would mean that they'd no longer be obligated to comply with these CA laws: https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=GOV&division=3.&title=2.&part=2.&chapter=6.&article=7 https://leginfo.legislature.ca.gov/faces/codes_displayText.x... https://oag.ca.gov/system/files/media/registration-reporting-supervision.pdf https://oag.ca.gov/system/files/media/registration-reporting... And, a little less importantly, comply with the guidelines for "Public Charities" covered by federal code 501(c)(3) (https://www.law.cornell.edu/uscode/text/26/501 https://www.law.cornell.edu/uscode/text/26/501) covered by this set of articles: https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-501c3-organizations https://www.irs.gov/charities-non-profits/charitable-organiz... . The important bits are: The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency. ... The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization's net earnings may inure to the benefit of any private shareholder or individual. I'm personally dubious about the specific claims you made about revenue, but that's hard to find info on, and not the core issue. The core issue was that they were obligated (not just, like, promising) to direct all of their actions towards the public good, and they're abandoning that to instead profit a few shareholders, taking the fruit of their financial and social status with them. They've been making some money for some investors (or losses...), but the non-profit was, legally speaking, only allowed to permit that as a means to an end. Naturally, this makes it very hard to explain how the nonprofit could give up basically all of its control without breaking its obligations. All the above covers "why does it feel unfair for a non-profit entity to gift its assets to a for-profit", but I'll briefly cover the more specific issue of "why does it feel unfair for OpenAI in particular to abandon their founding mission". The answer is simple: they explicitly warned us that for-profit pursuit of AGI is dangerous, potentially leading to catastrophic tragedies involving unrelated members of the global public. We're talking "mass casualty event"-level stuff here, and it's really troubling to see the exact same organization change their mind now that they're in a dominant position. Here's the relevant quotes from their founding documents: OpenAI is a non-profit artificial intelligence research company. Our goal is to advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return. Since our research is free from financial obligations, we can better focus on a positive human impact... It’s hard to fathom how much human-level AI could benefit society, and it’s equally hard to imagine how much it could damage society if built or used incorrectly. Because of AI’s surprising history, it’s hard to predict when human-level AI might come within reach. When it does, it’ll be important to have a leading research institution which can prioritize a good outcome for all over its own self-interest. From their 2015 founding post: https://openai.com/index/introducing-openai/ https://openai.com/index/introducing-openai/ We commit to use any influence we obtain over AGI’s deployment to ensure it is used for the benefit of all, and to avoid enabling uses of AI or AGI that harm humanity or unduly concentrate power. Our primary fiduciary duty is to humanity... We are concerned about late-stage AGI development becoming a competitive race without time for adequate safety precautions. Therefore, 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. We will work out specifics in case-by-case agreements, but a typical triggering condition might be “a better-than-even chance of success in the next two years.” From their 2018 charter: https://web.archive.org/web/20230714043611/https://openai.com/charter https://web.archive.org/web/20230714043611/https://openai.co... Sorry for the long reply, and I appreciate the polite + well-researched question! As you can probably guess, this move makes me a little offended and very anxious. For more, look at the posts from the leaders who quit in protest yesterday, namely their CTO.

nfw2 2y ago

> "All OpenAI is doing here is decoupling ownership of the for-profit entity from the nonprofit." Yes, but going from being controlled by a nonprofit to being controlled by a typical board of shareholders seems like a pretty big change to me.

wubrr 2y ago

What leverage does Sam Altman have to get equity now? Does he personally have control over that decision?

joe_the_user 2y ago

There's a now-quintessential HN post format, "Poster criticizing X don't seem to under [spray of random details about X that don't refute the criticism - just cast posts as ignorant]". In this case, Mozilla as a non-profit owning a for-profit manages to more or less fulfill the non-profit's mission (maintaining an open, alternative browser). OpenAI has been in a hurry to abandon it's non-profit mission for a while and the complex details of its structure doesn't change this.

mr_toad 2y ago

> All OpenAI is doing here is decoupling ownership of the for-profit All? As far as I know this is unprecedented.

A1kmm 2y ago
Maybe at this scale. But unfortunately charities and not-for-profits putting their core business into a company, and then eventually selling it off is not unprecedented. For example, The Raspberry Pi Foundation was a not-for-profit organisation around Raspberry Pi. They formed a LLC for their commercial operations, then gradually sold it off before eventually announcing an IPO: https://www.raspberrypi.org/blog/what-would-an-ipo-mean-for-the-raspberry-pi-foundation/ https://www.raspberrypi.org/blog/what-would-an-ipo-mean-for-.... I think it is terrible that not-for-profits are just being used as incubators for companies that eventually take the core mission and stop primarily serving the public interest. There are of course other examples of charities or not-for-profits that put part of their core operations in a company and don't sell out, instead retaining 100% ownership - for example Mozilla. However, I think there should be some better way for impactful not-for-profits to have some revenue generating aspects in line with their mission (offset by allowing temporary surplus to cover future expenses, or by other expenses).
- throwup238 2y ago
  > Maybe at this scale. I don't think it's unprecedented, even at this scale. Novo Nordisk, the pharmaceutical company behind Semaglutide (aka Ozempic) with a market cap >$600 bilion, was founded by the Novo Nordisk Foundation before going public. The latter now has an endowment of over $150 billion and owns a significant fraction of the public company.

deleted 2y ago

[deleted]

hackernewds 2y ago

How is it possible to make tax free "donations" for profit making applications? You seem to imply there is nothing nefarious about the setup. Except the non-profit designation doesn't actually perform no social services, instead stand as a business structure to skirt taxation. Change my mind

throwup238 2y ago
> How is it possible to make tax free "donations" for profit making applications? The nonprofit invests the tax free donations into the for-profit. It gets to keep its equity just like any other investor and as long as that equity held by the non-profit, there's no taxable event. If the nonprofit sells its share - since it was closely involved in the creation and management of the for-profit as an active investment - it becomes a taxable event under the unrelated business income tax rules. Until that time, the only "profit making applications" like ChatGPT and the API are run by the for-profit, which - I repeat - pays its taxes. I genuinely don't understand why people think they've skirted taxation except out of sheer ignorance of how non-profits actually work. A 501(c)(3) is not some magic Monopoly "get-out-of-tax-free" card and the IRS isn't stupid, there's a ton of rules for tax exemption. They'd have a much easier time with tax avoidance if they were an actual for profit corporation with billions of dollars because GAAP rules are a lot more forgiving than non-profit regulations.

mossTechnician 2y ago

This might be unpopular, but I don't think Mozilla's behavior is inherently good[1]. And even if it has, I don't think it should be used as a litmus test for other corporate behavior. Every company should stand on its own against scrutiny. [1] "The Mozilla Foundation has no members" https://hacktivis.me/articles/mozilla-foundation-has-no-members https://hacktivis.me/articles/mozilla-foundation-has-no-memb...