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Can someone explain to me why California would believe Sam Altman plans to stay in California? This is a weak handshake agreement that could easily be flipped p

by hodder 1y ago

Can someone explain to me why California would believe Sam Altman plans to stay in California? This is a weak handshake agreement that could easily be flipped post IPO. The very flip from non-profit to IPO shows he will do what it takes for OpenAI to "succeed", so why would the geographical location be any more permanent than corporate structure. This isnt a diss to Sam either, it just shows he is motivated by whatever is best for the entity at any given time. They might stay in California, but that probably has far more to do with available researchers and employee preferences than some agreement with the Attorney General.

gyomu 1y ago
Perhaps it’s not so much that they believe he’ll stay in California long term if he gets what he wants; more that they do believe he’ll leave in the short term if he doesn’t.
throwaway294729 1y ago
> This isnt a diss to Sam either, it just shows he is motivated by whatever is best for the entity at any given time. This is the kind of weird rationalist (?) thing that people say a lot these days to justify bad behaviors: in this case Sam Altman behaves like a pathological liar.
Hansenq 1y ago
In any negotiation, you need to understand what leverage either side has. In this case, CA could block the conversion, and OpenAI could leave California. Both are possible but extremely unlikely outcomes! So the whole point is to take these unlikely outcomes to the table, negotiate in good faith, and come out with an agreement. So California needs to believe that OpenAI will stay in California just as much as OpenAI needs to believe that CA won't block the conversion (or impose other onerous regulations around AI). So yes, it's possible to speculate about whether or not people are sincere in their motivations, but when you need to make a deal, there needs to be a measure of good faith and trust on both sides in order to make something happen. And in this case, both sides are incentivized to make the deal. OpenAI wants to be a PBC in order to access more capital, and California wants OpenAI to be a PBC so that it can IPO so that all employees (all of whom are likely CA residents), will sell stock, which can then be taxed as CA income.
- johnrob 1y ago
  If I am understanding things correctly, OpenAI could leave in the future - but CA can’t retroactively block the conversion in that case.
  - groby_b 1y ago
    Yup, but the IPO will still have happened in CA, and there's going to be a tax windfall from that. It's about a moment in time, not an "in perpetuity" agreement.
    - cma 1y ago
      Not if the big holders aren't residents, they can move away just before like Rogan with his Spotify deal, or Jonathan Blow just before a game release after developing in California and going to public college there, etc. Since it's a non-profit still holding it any gains to the non-profit entity upon the conversion don't go to California, and principal stakeholders can move away. Other funds raised from the IPO can be invested in other states untaxed (long term datacenter leases instead of booking the capital of building one) until they move the company away I think. There will probably be a lot of smaller stakeholders that stay with a lot of money for the state, and California at least doesn't do the $15 million QSBS so they may get a lot from that tail of employees. A large portion of this tail of lower compensated employees may get laid off due to AI replacement before IPO and lose a lot of unvested years, if we are to believe OpenAI's own claims about timelines for job replacement in that field at lower levels.
      - tedd4u 1y ago
        I'd recommend anyone expecting to profit from OpenAI stock and aiming to avoid California taxes to look into the subject in depth with paid advisors. The California FTB is not stupid or naïve and has a history of successfully getting paid for stock that vested with a California nexus, even if the beneficiary moves out of state. Good luck!
        1y ago
harmmonica 1y ago
If they're still based in CA when they IPO at least those initial taxes will be collectible in state (assuming they're structured in a way where the IPO is a taxable event for the leadership and staff). Pretty sure the taxes collected from OpenAI will be the single biggest IPO tax windfall ever (correct me if I'm wrong, but I can't think of a bigger one).
- cosmicgadget 1y ago
  We're finally going to get that bullet train.
  - s3r3nity 1y ago
    lol if you think $ was the barrier there, I have a few bridges to sell you too…
  - harmmonica 1y ago
    Oh man know I know I shouldn’t say it but that’s a genius reply! Thanks for the (depressing) laugh.
  - int_19h 1y ago
    Yeah, but it'll be run by ChatGPT. ~
- mmooss 1y ago
  What are the taxes on an IPO? It's capital gains, which aren't taxed until the capital (IPO stock) is liquidated. I'm sure some people will liquidate their stock promptly but I expect that most will hold it, expecting further growth, and that the big investors, including Altman, will hold onto it for because of the same reason, because they need to sell optimism (what would people think if Altman or Microsoft sold a significant chunk of stock?), and because OpenAI needs lots of assets to build datacenters and buy power.
- dragonwriter 1y ago
  stocks sold by the company in an IPO aren’t taxable income. Pre-IPO stocks that people liquidate because there is now a liquid market and they want to realize some gains will generate some, but I don’t know how you’d predict the magnitude of that.
make3 1y ago
In the US, one has to remember that megacorps usually end up winning, as people mostly only care about money and blindly supporting corporations is seen as pro-economy. There are also no limits on political financial contributions, and people have really short attention spans. Politicians taking the superficial short-term win, as they will end up giving in to the megacorp anyway, is not surprising to me.
- philipallstar 1y ago
  > and blindly supporting corporations is seen as pro-economy These clumsy stereotypes are so pointless.
  - afavour 1y ago
    It’s a broad statement but I wouldn’t say it’s an incorrect one.
JumpCrisscross 1y ago
> Can someone explain to me why California would believe Sam Altman plans to stay in California? The simple answer is unless developing LLMs becomes commoditised, the best place in the world to do it is in San Francisco. You don't take your manufacturing business out of Shenzhen without very good reason.
- booi 1y ago
  except developing AI is very much a knowledge exercise with very little dependency on location. You don't move your manufacturing business out of Shenzhen because the entire hard supply chain from mining, refining, manufacturing, test, ship and trade are all there. You can't move a refinery that easily much less the entire supply chain.
  - brokencode 1y ago
    Sure, but most of the country’s AI talent is concentrated there. Not to mention venture capital. What’s the advantage of moving? Maybe lower taxes and a cheaper rent. That seems like a small price to pay compared to the hundreds of billions they’re putting into data centers.
    - alfalfasprout 1y ago
      They're concentrated there because they've been asked to concentrate there. That can change on a dime. It's not like data centers are mainly in SF.
      - vessenes 1y ago
        I think you're wrong. The concentration is for a host of reasons. Witness the large number of cities and countries that have tried to create a local Silicon Valley competitor unsuccessfully over the last 25 years. The data centers I think prove this point, and disprove yours -- huge spend has gone into data centers, but places like Wenatchee remain stubbornly not Silicon Valley. Intel has not made Portland into SV. Austin, while a tech hub and one of the US supply chain centers for hardware, is multiple orders of magnitude less productive than SV for tech startups. Productive as in numbers of unicorns, total value creation, however you want to spin it.
terminalshort 1y ago
Can someone explain to me how staying in CA has anything whatsoever to do with whether or not they IPO? Because it seems like it should have absolutely nothing to do with it. (Linked article is a paywall, so I can't read it.)
- Hansenq 1y ago
  OpenAI needs to IPO because they want to access the public capital markets to fund their AI investments, more deep-pocketed investors are wary of investing in a LLC, and for liquidity, etc. OpenAI needs to convert to a C-corp in order to IPO. OpenAI needs the CA Attorney General's approval to convert a LLC into a C-Corp because the LLCs is headquartered in CA and incorporated with many CA laws. So the article is making the point that OpenAI likely got the CA Attorney General's approval for the conversion because they promised to stay in CA (whether or not that's actually true). (or support journalism and pay to read the article)
tw04 1y ago
I’m pretty sure Sam is motivated by whatever is best for Sam, not OpenAI.
deleted 1y ago
[deleted]
dragonwriter 1y ago
> Can someone explain to me why California would believe Sam Altman plans to stay in California? This is a weak handshake agreement that could easily be flipped post IPO. It is not a “handshake agreement”, but binding written agreement with terms constraining the governance of the restructure OpenAI entities. https://oag.ca.gov/system/files/attachments/press-docs/Final https://oag.ca.gov/system/files/attachments/press-docs/Final Executed MOU Between OpenAI and California AG re Notice of Conditions of Non-Objection %2810.27.2025%29 %28Signed by OpenAI%29 %28Signed by CA DOJ%29.pdf
- bix6 1y ago
  Page not found
qwertox 1y ago
> whatever is best for the entity Whatever is best for his ego.

by hodder 1y ago

gyomu 1y ago

Perhaps it’s not so much that they believe he’ll stay in California long term if he gets what he wants; more that they do believe he’ll leave in the short term if he doesn’t.

throwaway294729 1y ago

> This isnt a diss to Sam either, it just shows he is motivated by whatever is best for the entity at any given time. This is the kind of weird rationalist (?) thing that people say a lot these days to justify bad behaviors: in this case Sam Altman behaves like a pathological liar.

Hansenq 1y ago

In any negotiation, you need to understand what leverage either side has. In this case, CA could block the conversion, and OpenAI could leave California. Both are possible but extremely unlikely outcomes! So the whole point is to take these unlikely outcomes to the table, negotiate in good faith, and come out with an agreement. So California needs to believe that OpenAI will stay in California just as much as OpenAI needs to believe that CA won't block the conversion (or impose other onerous regulations around AI). So yes, it's possible to speculate about whether or not people are sincere in their motivations, but when you need to make a deal, there needs to be a measure of good faith and trust on both sides in order to make something happen. And in this case, both sides are incentivized to make the deal. OpenAI wants to be a PBC in order to access more capital, and California wants OpenAI to be a PBC so that it can IPO so that all employees (all of whom are likely CA residents), will sell stock, which can then be taxed as CA income.

johnrob 1y ago
If I am understanding things correctly, OpenAI could leave in the future - but CA can’t retroactively block the conversion in that case.
- groby_b 1y ago
  Yup, but the IPO will still have happened in CA, and there's going to be a tax windfall from that. It's about a moment in time, not an "in perpetuity" agreement.
  - cma 1y ago
    Not if the big holders aren't residents, they can move away just before like Rogan with his Spotify deal, or Jonathan Blow just before a game release after developing in California and going to public college there, etc. Since it's a non-profit still holding it any gains to the non-profit entity upon the conversion don't go to California, and principal stakeholders can move away. Other funds raised from the IPO can be invested in other states untaxed (long term datacenter leases instead of booking the capital of building one) until they move the company away I think. There will probably be a lot of smaller stakeholders that stay with a lot of money for the state, and California at least doesn't do the $15 million QSBS so they may get a lot from that tail of employees. A large portion of this tail of lower compensated employees may get laid off due to AI replacement before IPO and lose a lot of unvested years, if we are to believe OpenAI's own claims about timelines for job replacement in that field at lower levels.
    - tedd4u 1y ago
      I'd recommend anyone expecting to profit from OpenAI stock and aiming to avoid California taxes to look into the subject in depth with paid advisors. The California FTB is not stupid or naïve and has a history of successfully getting paid for stock that vested with a California nexus, even if the beneficiary moves out of state. Good luck!
      - 1y ago

harmmonica 1y ago

If they're still based in CA when they IPO at least those initial taxes will be collectible in state (assuming they're structured in a way where the IPO is a taxable event for the leadership and staff). Pretty sure the taxes collected from OpenAI will be the single biggest IPO tax windfall ever (correct me if I'm wrong, but I can't think of a bigger one).

cosmicgadget 1y ago
We're finally going to get that bullet train.
- s3r3nity 1y ago
  lol if you think $ was the barrier there, I have a few bridges to sell you too…
- harmmonica 1y ago
  Oh man know I know I shouldn’t say it but that’s a genius reply! Thanks for the (depressing) laugh.
- int_19h 1y ago
  Yeah, but it'll be run by ChatGPT. ~
mmooss 1y ago
What are the taxes on an IPO? It's capital gains, which aren't taxed until the capital (IPO stock) is liquidated. I'm sure some people will liquidate their stock promptly but I expect that most will hold it, expecting further growth, and that the big investors, including Altman, will hold onto it for because of the same reason, because they need to sell optimism (what would people think if Altman or Microsoft sold a significant chunk of stock?), and because OpenAI needs lots of assets to build datacenters and buy power.
dragonwriter 1y ago
stocks sold by the company in an IPO aren’t taxable income. Pre-IPO stocks that people liquidate because there is now a liquid market and they want to realize some gains will generate some, but I don’t know how you’d predict the magnitude of that.

make3 1y ago

In the US, one has to remember that megacorps usually end up winning, as people mostly only care about money and blindly supporting corporations is seen as pro-economy. There are also no limits on political financial contributions, and people have really short attention spans. Politicians taking the superficial short-term win, as they will end up giving in to the megacorp anyway, is not surprising to me.

philipallstar 1y ago
> and blindly supporting corporations is seen as pro-economy These clumsy stereotypes are so pointless.
- afavour 1y ago
  It’s a broad statement but I wouldn’t say it’s an incorrect one.

JumpCrisscross 1y ago

> Can someone explain to me why California would believe Sam Altman plans to stay in California? The simple answer is unless developing LLMs becomes commoditised, the best place in the world to do it is in San Francisco. You don't take your manufacturing business out of Shenzhen without very good reason.

booi 1y ago
except developing AI is very much a knowledge exercise with very little dependency on location. You don't move your manufacturing business out of Shenzhen because the entire hard supply chain from mining, refining, manufacturing, test, ship and trade are all there. You can't move a refinery that easily much less the entire supply chain.
- brokencode 1y ago
  Sure, but most of the country’s AI talent is concentrated there. Not to mention venture capital. What’s the advantage of moving? Maybe lower taxes and a cheaper rent. That seems like a small price to pay compared to the hundreds of billions they’re putting into data centers.
  - alfalfasprout 1y ago
    They're concentrated there because they've been asked to concentrate there. That can change on a dime. It's not like data centers are mainly in SF.
    - vessenes 1y ago
      I think you're wrong. The concentration is for a host of reasons. Witness the large number of cities and countries that have tried to create a local Silicon Valley competitor unsuccessfully over the last 25 years. The data centers I think prove this point, and disprove yours -- huge spend has gone into data centers, but places like Wenatchee remain stubbornly not Silicon Valley. Intel has not made Portland into SV. Austin, while a tech hub and one of the US supply chain centers for hardware, is multiple orders of magnitude less productive than SV for tech startups. Productive as in numbers of unicorns, total value creation, however you want to spin it.

terminalshort 1y ago

Can someone explain to me how staying in CA has anything whatsoever to do with whether or not they IPO? Because it seems like it should have absolutely nothing to do with it. (Linked article is a paywall, so I can't read it.)

Hansenq 1y ago
OpenAI needs to IPO because they want to access the public capital markets to fund their AI investments, more deep-pocketed investors are wary of investing in a LLC, and for liquidity, etc. OpenAI needs to convert to a C-corp in order to IPO. OpenAI needs the CA Attorney General's approval to convert a LLC into a C-Corp because the LLCs is headquartered in CA and incorporated with many CA laws. So the article is making the point that OpenAI likely got the CA Attorney General's approval for the conversion because they promised to stay in CA (whether or not that's actually true). (or support journalism and pay to read the article)

tw04 1y ago

I’m pretty sure Sam is motivated by whatever is best for Sam, not OpenAI.

deleted 1y ago

[deleted]

dragonwriter 1y ago

> Can someone explain to me why California would believe Sam Altman plans to stay in California? This is a weak handshake agreement that could easily be flipped post IPO. It is not a “handshake agreement”, but binding written agreement with terms constraining the governance of the restructure OpenAI entities. https://oag.ca.gov/system/files/attachments/press-docs/Final https://oag.ca.gov/system/files/attachments/press-docs/Final Executed MOU Between OpenAI and California AG re Notice of Conditions of Non-Objection %2810.27.2025%29 %28Signed by OpenAI%29 %28Signed by CA DOJ%29.pdf

bix6 1y ago
Page not found

qwertox 1y ago

> whatever is best for the entity Whatever is best for his ego.