Mission creep? OpenAI defends for-profit shift as critical to sustain humanitarian mission Elon Musk may be the last obstacle to stop OpenAIs for-profit shift. Ashley Belanger Dec 27, 2024 11:58 am | 26 Credit: Anadolu / Contributor | Anadolu Credit: Anadolu / Contributor | Anadolu Story textSizeSmallStandardLargeWidth *StandardWideLinksStandardOrange* Subscribers only Learn moreOpenAI has finally shared details about its plans to shake up its core business by shifting to a for-profit corporate structure.On Thursday, OpenAI posted on its blog, confirming that in 2025, the existing for-profit arm will be transformed into a Delaware-based public benefit corporation (PBC). As a PBC, OpenAI would be required to balance its shareholders' and stakeholders' interests with the public benefit. To achieve that, OpenAI would offer "ordinary shares of stock" while using some profits to further its mission"ensuring artificial general intelligence (AGI) benefits all of humanity"to serve a social good.To compensate for losing control over the for-profit, the nonprofit would have some shares in the PBC, but it's currently unclear how many will be allotted. Independent financial advisors will help OpenAI reach a "fair valuation," the blog said, while promising the new structure would "multiply" the donations that previously supported the nonprofit."Our plan would result in one of the best resourced nonprofits in history," OpenAI said. (During its latest funding round, OpenAI was valued at $157 billion.)OpenAI claimed the nonprofit's mission would be more sustainable under the proposed changes, as the costs of AI innovation only continue to compound. The new structure would set the PBC up to control OpenAI's operations and business while the nonprofit would "hire a leadership team and staff to pursue charitable initiatives in sectors such as health care, education, and science," OpenAI said.Some of OpenAI's rivals, such as Anthropic and Elon Musk's xAI, use a similar corporate structure, OpenAI noted.Critics had previously pushed back on this plan, arguing that humanity may be better served if the nonprofit continues controlling the for-profit arm of OpenAI. But OpenAI argued that the old way made it hard for the Board "to directly consider the interests of those who would finance the mission and does not enable the non-profit to easily do more than control the for-profit."We have a nonprofit and a for-profit today, and we will continue to have both, with the for-profits success enabling the nonprofit to be well funded, better sustained, and in a stronger position for the mission," OpenAI said.Musk plans to stand in OpenAIs wayOpenAI dedicated a substantial portion of the blog to explaining how its mission has changed over timewhich is the subject of a lawsuit Musk filed alleging that Altman fraudulently induced $44 million in seed funding by promising Musk that OpenAI would be a permanent nonprofit with open-source technology. Musk has repeatedly held that he only invested in OpenAI out of fears that if a for-profit corporation controlled AI, it would likely pursue profits to the detriment of humanity.But OpenAI defends its evolution into a for-profit structure as critical to developing AI that benefits humanity. In the blog, OpenAI explained that in the "early days," OpenAI started as a research lab in 2015 with the goal of "advancing digital intelligence in the way most likely to benefit humanity as a whole, unconstrained by a need to generate financial return."To achieve this goal, the company went with a nonprofit structure, raising $137 million in donations, of whichOpenAI's blog pointedly seemed to downplay"less than a third" was "from Elon."Musk left OpenAI in 2018. In his lawsuit, he said that Altman's recasting OpenAI as a "moneymaking endeavor" turned Musk into a "fool who is essentially providing free funding to a startup."OpenAI has denied Musk's claims. Around the time of Musk's departure, OpenAI's blog explained, "it became clear that the most advanced AI would continuously use more and more compute" and "therefore far more capital" than OpenAI could "obtain with donations."That's why OpenAI transitioned to a bespoke structure in 2019, creating a for-profit arm controlled by the nonprofit, "with a capped profit share for investors and employees."Once Musk was out of the funding picture, Microsoft quickly showed up, providing OpenAI with $1 billion in funding in 2019, which helped pave the way for ChatGPT's explosive release in 2022. Then in 2023, Microsoft exclusively licensed GPT-4 and all of OpenAI's "pre-AGI" technology, further cementing the link between the two entities.Now, OpenAI needs even more funding but alleges that investors are demanding "conventional equity and less structural bespokeness" before backing OpenAI's efforts, which includes supporting a pivot in its research. As OpenAI prepares to release more products, the company has entered a "new research paradigm," its blog said, "with our o-series models demonstrating new reasoning capabilities that scale with 'thinking' compute, stacking together with compute for training."To support this new direction, OpenAI needs to ensure it can keep up with competitors investing "hundreds of billions of dollars" into AI development. Thats the only way to support the nonprofit's current mission, OpenAI said, or else OpenAI risks losing investors at a time when "we once again need to raise more capital than wed imagined."OpenAI's plans to restructure remain controversial, partly because under the new structure, Altman notably would receive equity in the for-profit company for the first time, potentially securing as much as a 7 percent stake.To critics, Altman's potential for immense personal gains under the new structure reflects a stark departure from Altman's previous stance that accepting equity in the company might conflict with OpenAI's mission to serve humanitynot enrich its leadership.According to the New York Times, OpenAI has been plotting this shift in corporate structure ever since the nonprofit arm's board tried and failed to oust Altman as CEO, feeling that he no longer could be trusted to ensure OpenAI was built to better humanity. Microsoft moved to protect Altman, and after he was reinstated, new board members were brought onboard and Microsoft took on a new role as board observer.As OpenAI prepares to "become more than a lab and a startup" and pivot to instead "become an enduring company" in 2025, Musk's lawsuit may be the final obstacle standing in the way of OpenAI's plans.Musk has long been among OpenAI's biggest critics, and this December, Musk asked a US district court in California to block OpenAI's conversion to a for-profit. He also wants the court to void OpenAI's exclusive license to Microsoft.Musk and OpenAI are currently locking horns over Musk's request for an injunction that would pause OpenAI's plans while the court battle plays out. Unsurprisingly, OpenAI has opposed that motion, partly by arguing that Musk has not shown that there's evidence that OpenAI's current business and operations are restricting trade or that Musk will be "irreparably harmed" if the injunction isn't granted. To the contrary, in its blog, OpenAI highlighted how competition is "vibrant" in AI, while claiming that "OpenAIs pursuit of leadership in the field can inspire other organizations to advance" the public good mission too.Musk is expected to file his response to OpenAI's opposition today, but this court battle will drag on for months, potentially slowing down OpenAI's transformation. A hearing on OpenAI's motion to dismiss isn't scheduled until the end of May.Ashley BelangerSenior Policy ReporterAshley BelangerSenior Policy Reporter Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience. 26 Comments