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Thanks for another polite response! I think this is the fundamental misunderstanding: What assets were gifted, exactly? ...It's currently a useless appendag

by bbor 2y ago

Thanks for another polite response! I think this is the fundamental misunderstanding: What assets were gifted, exactly? ...It's currently a useless appendage and will never have any real power or resources until either OpenAI is in the black and sending profit up to it, or they can sell OpenAI shares. The charity will gift its control of a $100B company for some undisclosed "minority stake" (via a complex share dilution scheme), in exchange for nothing other than "the people we're gifting it to have promised to do good with it". It's really that simple. The charity never was intended to draw profit from the for-profit, and the "never have any real power" contention is completely inaccurate -- they have direct, sole control over the whole enterprise. This restructuring opens the way for the nonprofit to sell its shares and it's going to be a hell of a lot of money to dedicate towards their mission Even putting aside the core issue above (they won't have many shares to sell), the second part of my comment comes back here: what would they buy with all that money? Anthropic? Their explicit mission is to beat for-profit firms in the race to AGI so convincingly that an arms race is avoided. How could they possibly accomplish this after gifting/selling away control of the most capable AI system on the planet? Finally, one tiny side point: Courts are very strict in their interpretation of what "unrelated business income" is and the for-profit LLC protects the non-profit's tax exempt status. I'm guessing you're drawing on much more direct experience than I am and I don't question that, but this seems like a deceptive framing. Normal charities have no issues with unrelated business income, because they don't run "trades or businesses", they just spend their money. I know that selling ChatGPT subscriptions is a large income source, but it's far from the only way to pursue their mission -- and is wildly insufficient, anyway. They in no way were forced to do it to meet their obligations. Again, I'm a noob, so I'll cite the IRS-for-dummies page on the topic for onlookers: https://www.irs.gov/charities-non-profits/unrelated-business-income-defined https://www.irs.gov/charities-non-profits/unrelated-business...

throwup238 2y ago
> The charity will gift its control of a $100B company for some undisclosed "minority stake" (via a complex share dilution scheme), in exchange for nothing other than "the people we're gifting it to have promised to do good with it". It's really that simple. The charity never was intended to draw profit from the for-profit. That's not my interpretation. It sounds like the restructuring is part of the deal that values OpenAI at $100-150 billion [1]. They're not "gifting" away anything any more than a Series A investor gifts something to a Series B investor. They're restructuring so that their stake will be worth more afterwards than it is now, regardless of the percentages. That's what every company owner goes through when the company raise a VC round, goes public, or even just offers employees stock options. That doesn't change because the owner is a nonprofit and it sounds like until they restructure, the for-profit is worth nowhere near that crazy 12 figure number. "Minority stake" just means that they won't have enough to control the corp out right with 50%+1 which is probably what everyone wants to justify the investment. Reuters TFA says "The plan is still being hashed out with lawyers and shareholders and the timeline for completing the restructuring remains uncertain" so we don't really know what the post valuation numbers look like or who is getting what. We also don't know how the voting vs non-voting shares will split. Losing majority control after multiple multi-billion dollar rounds is the norm so if Microsoft's previous $10 bil investment converts and 10-20 pts go to the employee pool, it's a perfectly fair deal. > Even putting aside the core issue above (they won't have many shares to sell), the second part of my comment comes back here: what would they buy with all that money? Anthropic? Their explicit mission is to beat for-profit firms in the race to AGI so convincingly that an arms race is avoided. How could they possibly accomplish this after selling control of the most capable AI system on the planet? As far as I can tell, without this deal OpenAI LLC goes bankrupt under the rumored $5b/yr losses and the charity loses all relevance when the bankruptcy court fire sales the IP. With this deal, it can create a secondary market and use the funds to focus on its actual mission. The only way that his deal doesn't make sense (in my mind) is if you believe that GPT4/o1/whatever are the keys to fulfilling OpenAI's mission and it becomes impossible if it loses control. Personally I find that very hard to believe, which might be the actual disconnect we're having here. What would they buy? They'd hire people to do research under their umbrella instead of a for-profit one, fund compute infrastructure for researchers who don't have billions for H100s, give grants to organizations, or spin off more startups. Even if it's a 20% stake of a $100 billion, that's enough for a ivy league sized endowment that can fund AI research for generations. If it's a 49% stake of $150 billion, that makes it the second wealthiest charity after Novo Nordisk Foundation - which continues to do tons of biomedical research even though it doesn't have total control over the public Novo Nordisk or the semaglutide IP. OpenAI would become one of the largest grant giving organizations in the world overnight using just the interest from the endowment. Imagine the equivalent to 50-100% of the NSF's annual grant budget going just to AI research! > Normal charities have no issues with unrelated business income, because they don't run "trades or businesses", they just spend their money. See my other reply [2] for a sample of some nonprofits that have for-profit arms. A significant fraction of them do, especially those that offer some sort of product or service (I don't have hard stats but I'd venture it's the majority of the major charities that do the latter). "Normal" charities that just disburse grant money and spends donations is only one type among many. [1] https://www.reuters.com/technology/artificial-intelligence/openais-stunning-150-billion-valuation-hinges-upending-corporate-structure-2024-09-14/ https://www.reuters.com/technology/artificial-intelligence/o... [2] https://news.ycombinator.com/item?id=41661063 https://news.ycombinator.com/item?id=41661063
- bbor 2y ago
  Hmm, fair points, especially on there not being a strict norm for charities. Thanks for taking more time to clarify. I’d say we disagree about the following somewhat indeterminate points: 1. Whether OpenAI has/could-have-had staying power without raising immense amounts of venture capital. I will readily admit that they’ve gone so far down this road that they are now somewhat trapped by their massive investments and contracts, not to mention losing almost all their top researchers. 2. Whether the people in charge of this deal can be trusted to propose a fair outcome for the charity other than “their mission ineffably lives on in us” (and as a corollary, whether a fair outcome is likely). 3. Whether the private technical assets of OpenAI (GPT, DALLE, and Sora) are meaningfully unique in their potential for impact, knowing what the public knows in the current moment — which I will admit is far from the complete competitive picture. 4. Whether OpenAI’s mission could be meaningfully achieved by passing out grants to a diverse body of scientists. I’d be happy to “debate” (lol) any of those particulars if you want, but I think it’s otherwise best to leave it at “we assess the known facts differently”. If we let some time pass, that’ll at least settle question 2…
  - throwup238 2y ago
    > 2. Whether the people in charge of this deal can be trusted to propose a fair outcome for the charity other than “their mission ineffably lives on in us” (and as a corollary, whether a fair outcome is likely). Since Sam Altman is on the board of OpenAI Inc, I expect this deal will be under extreme scrutiny for self dealing. He has flown under the radar so far by not taking any equity but this changes the second he does (IANAL). California, Delaware, and the feds will be looking closely at the deal. I don't think the danger for OpenAI the charity is as great as people make it out to be. They'll be able to do a lot more than hand out grants with an 11 figure endowment.

by bbor 2y ago

throwup238 2y ago

> The charity will gift its control of a $100B company for some undisclosed "minority stake" (via a complex share dilution scheme), in exchange for nothing other than "the people we're gifting it to have promised to do good with it". It's really that simple. The charity never was intended to draw profit from the for-profit. That's not my interpretation. It sounds like the restructuring is part of the deal that values OpenAI at $100-150 billion [1]. They're not "gifting" away anything any more than a Series A investor gifts something to a Series B investor. They're restructuring so that their stake will be worth more afterwards than it is now, regardless of the percentages. That's what every company owner goes through when the company raise a VC round, goes public, or even just offers employees stock options. That doesn't change because the owner is a nonprofit and it sounds like until they restructure, the for-profit is worth nowhere near that crazy 12 figure number. "Minority stake" just means that they won't have enough to control the corp out right with 50%+1 which is probably what everyone wants to justify the investment. Reuters TFA says "The plan is still being hashed out with lawyers and shareholders and the timeline for completing the restructuring remains uncertain" so we don't really know what the post valuation numbers look like or who is getting what. We also don't know how the voting vs non-voting shares will split. Losing majority control after multiple multi-billion dollar rounds is the norm so if Microsoft's previous $10 bil investment converts and 10-20 pts go to the employee pool, it's a perfectly fair deal. > Even putting aside the core issue above (they won't have many shares to sell), the second part of my comment comes back here: what would they buy with all that money? Anthropic? Their explicit mission is to beat for-profit firms in the race to AGI so convincingly that an arms race is avoided. How could they possibly accomplish this after selling control of the most capable AI system on the planet? As far as I can tell, without this deal OpenAI LLC goes bankrupt under the rumored $5b/yr losses and the charity loses all relevance when the bankruptcy court fire sales the IP. With this deal, it can create a secondary market and use the funds to focus on its actual mission. The only way that his deal doesn't make sense (in my mind) is if you believe that GPT4/o1/whatever are the keys to fulfilling OpenAI's mission and it becomes impossible if it loses control. Personally I find that very hard to believe, which might be the actual disconnect we're having here. What would they buy? They'd hire people to do research under their umbrella instead of a for-profit one, fund compute infrastructure for researchers who don't have billions for H100s, give grants to organizations, or spin off more startups. Even if it's a 20% stake of a $100 billion, that's enough for a ivy league sized endowment that can fund AI research for generations. If it's a 49% stake of $150 billion, that makes it the second wealthiest charity after Novo Nordisk Foundation - which continues to do tons of biomedical research even though it doesn't have total control over the public Novo Nordisk or the semaglutide IP. OpenAI would become one of the largest grant giving organizations in the world overnight using just the interest from the endowment. Imagine the equivalent to 50-100% of the NSF's annual grant budget going just to AI research! > Normal charities have no issues with unrelated business income, because they don't run "trades or businesses", they just spend their money. See my other reply [2] for a sample of some nonprofits that have for-profit arms. A significant fraction of them do, especially those that offer some sort of product or service (I don't have hard stats but I'd venture it's the majority of the major charities that do the latter). "Normal" charities that just disburse grant money and spends donations is only one type among many. [1] https://www.reuters.com/technology/artificial-intelligence/openais-stunning-150-billion-valuation-hinges-upending-corporate-structure-2024-09-14/ https://www.reuters.com/technology/artificial-intelligence/o... [2] https://news.ycombinator.com/item?id=41661063 https://news.ycombinator.com/item?id=41661063

bbor 2y ago
Hmm, fair points, especially on there not being a strict norm for charities. Thanks for taking more time to clarify. I’d say we disagree about the following somewhat indeterminate points: 1. Whether OpenAI has/could-have-had staying power without raising immense amounts of venture capital. I will readily admit that they’ve gone so far down this road that they are now somewhat trapped by their massive investments and contracts, not to mention losing almost all their top researchers. 2. Whether the people in charge of this deal can be trusted to propose a fair outcome for the charity other than “their mission ineffably lives on in us” (and as a corollary, whether a fair outcome is likely). 3. Whether the private technical assets of OpenAI (GPT, DALLE, and Sora) are meaningfully unique in their potential for impact, knowing what the public knows in the current moment — which I will admit is far from the complete competitive picture. 4. Whether OpenAI’s mission could be meaningfully achieved by passing out grants to a diverse body of scientists. I’d be happy to “debate” (lol) any of those particulars if you want, but I think it’s otherwise best to leave it at “we assess the known facts differently”. If we let some time pass, that’ll at least settle question 2…
- throwup238 2y ago
  > 2. Whether the people in charge of this deal can be trusted to propose a fair outcome for the charity other than “their mission ineffably lives on in us” (and as a corollary, whether a fair outcome is likely). Since Sam Altman is on the board of OpenAI Inc, I expect this deal will be under extreme scrutiny for self dealing. He has flown under the radar so far by not taking any equity but this changes the second he does (IANAL). California, Delaware, and the feds will be looking closely at the deal. I don't think the danger for OpenAI the charity is as great as people make it out to be. They'll be able to do a lot more than hand out grants with an 11 figure endowment.