[speedylight]

> Microsoft, which has invested billions in OpenAI, learned that OpenAI was ousting CEO Sam Altman just a minute before the news was shared with the world, according to a person familiar with the situation.

Well this probably disproves the theory that it was a power grab by Microsoft. It didn’t make too much sense anyway since they already have access to tech behind GPT and Microsoft doesn’t necessarily need the clout behind the OpenAI brand.

[aduffy]

The "coup by MSFT" conspiracy theory made no sense. Microsoft has an insanely good deal with OpenAI:

    * Exclusive access to resell OpenAI's technology and keep nearly all of that revenue for themselves, both cloud and services
    * Receive 75% of OpenAI's profits up to $1 trillion

All they had to do is not rock the boat and let the golden goose keep laying eggs. A massive disruption like this, so soon after DevDay would not fit that strategy.

My guess at this point is financial malfeasance, either failing to present a deal to the board or OpenAI has been in financial straits and he was covering it up.

[IAmNotACellist]

OpenAI shouldn't even be making a profit, as it's a 501(c)3 charity. The whole umbrella for-profit corp they formed when they became popular should be illegal, and is clearly immoral.

[quickthrowman]

You have it backwards, the not for profit entity owns the for profit entity. From Wikipedia:

> OpenAI is an American artificial intelligence (AI) organization consisting of the non-profit OpenAI, Inc.[4] registered in Delaware and its for-profit subsidiary corporation OpenAI Global, LLC.[5]

IKEA [0] and Rolex [1] are structured in a similar manner, although different since they’re not US based.

[0] https://en.m.wikipedia.org/wiki/Stichting_INGKA_Foundation

[1] https://en.m.wikipedia.org/wiki/Hans_Wilsdorf#Hans_Wilsdorf_...

[goodluckchuck]

What’s the point of the subsidiary?

Nonprofits can already raise funds by e.g. selling T-Shirts, baked goods, ai services, etc…

[next_xibalba]

It is hard to attract multi-billion dollar investments and attract elite AI talent when competing with for-profits. This was the stated reason and makes a lot of sense. The comp packages for elite AI talent is now claimed to be in the range of $10M.

[jltsiren]

To maintain a clear separation between for-profit and non-profit activities. If a non-profit operates in a market with for-profit competitors, tax authorities may start considering it a for-profit organization, making all of its income taxable.

And maybe to allow choosing the right people for the right job. If the non-profit has an ideological purpose, its leadership should probably reflect that. At the same time, the for-profit subsidiary probably works better under professional management.

[wmf]

If a nonprofit has mostly revenue and few donations (Mozilla) the IRS revokes their tax exemption. OpenAI could not have done the Microsoft deal as a nonprofit.

[dragonwriter]

> What’s the point of the subsidiary

Closing the huge fundraising gap OpenAI had as a nonprofit by returning profits from commercial efforts instrumental to, but distinct from, the nonprofits charitable purpose, without sacrififing any governance or control of the subordinate entity.

[blackoil]

Lol, 10 billion dollars of cookies and t-shirts. They'll have to be bigger than Nestle and Zara. To sell AI services, they need to build it and for that they need the money.

[Sosh101]

Sounds perverse somehow.

[bastawhiz]

It's literally the exact corporate structure of Mozilla.

[sho_hn]

And Bosch, more or less:

> Robert Bosch GmbH, including its wholly owned subsidiaries, is unusual in that it is an extremely large, privately owned corporation that is almost entirely (92%) owned by a charitable foundation. Thus, while most of the profits are invested back into the corporation to build for the future and sustain growth, nearly all of the profits distributed to shareholders are devoted to humanitarian causes.

> [...] Bosch invests 9% of its revenue on research and development, nearly double the industry average of 4.7%.

(Source: Wikipedia)

I always considered this a wonderful idea for a tech giant.

[asmithmd1]

And Bose. MIT, the nonprofit owns 100% of the for profit company

[moralestapia]

Lol, is this supposed to be an argument in favor of that structure?

Have you read any news about Mozilla's budget in the past 10 years or so?

[numbsafari]

Sounds perverse somehow.

[belter]

Preverse it is: "IKEA’s 15 years of tax evasion and fraud via the Netherlands" - https://www.europarl.europa.eu/doceo/document/E-9-2021-00517...

[dev1ycan]

It is but that's capitalism, the alternative is to have what happens with most corporations where their majority shareholder is blackrock/vanguard etc, a basically souless investment conglomerate, whose majority shareholder is the other of blackrock/vanguard, etc. and then the 3rd biggest and then the fourth so on and so on.

You basically never have a person in the chain actually making decisions for anything but to maximize profit.

[dragonwriter]

> OpenAI shouldn't even be making a profit, as it's a 501(c)3 charity

First, the “OpenAI" whose profits are being discussed isn't a 501(c)3 charity, but a for-profit LLC (OpenAI Global, LLC) with three other organizations between it and the charity.

Second, charities and other nonprofits can make profits (surplus revenue), they just can't return revenues (but they can have for profit subsidiaries that return profit to them and other investors in certain circumstances.)

> The whole umbrella for-profit corp they formed when they became popular should be illegal

The umbrella organization is a charity. The for profit organizations (both OpenAI Global LLC that Microsoft invests in, and its immediate holding company parent which has some other investors besides the charity) are subordinate to the charity and its goals.

> and is clearly immoral.

Not sure what moral principal and analysis you are applying to reach this conclusion.

[HeavyStorm]

> Not sure what moral principal and analysis you are applying to reach this conclusion.

I'm not the parent, but I think it's clear: if I'm a charity, and I have a subordinate that is for profit, then I'm not a charity. I'm working for profit, and disguising myself for the benefits of being a charity.

[dragonwriter]

Not only do I think that that's not obvious, I think its a nonsensical conclusion that really only makes sense as a general statement if you think “for profit” means “to earn revenue” rather than “to return money to an interested party” and invert the parent/subsidiary relationship.

Obviously, the for profit subsidiary ooerates for profit—and where its not a wholly owned subsidiary, it may return some profit to investors that aren't the charity—but neither the subsidiary nor the outside investors getbthe benefits of charity status.

[nativeit]

Profits don’t necessarily have to be used to pad the already overstuffed offshore accounts of wankers. Sometimes organizations choose to use profits to directly fund charitable works. Please wipe up after yourself if this causes your head to explode.

[patmcc]

(I'm going to make some assumptions, just consider the broad point, if you please)

The girl guides are a non-profit; they teach kids about outdoor stuff, community, whatever, they do good works, visit old folks, etc.

If for some legal reasons they had a subsidiary that sold cookies (and made a profit), with all the profits returned to the non-profit parent, I think that'd be ....fine? Right?

[wmf]

If OpenAI hadn't restructured they wouldn't have gotten any money from Microsoft and they would have either run out of money or the team would have left and started ClosedAI. There's no scenario where they developed GPT-3/4 while staying nonprofit.

[theonemind]

I'm guessing that's the point. Ethics required getting out of the 501(c)(3), so the ClosedAI thing sounds more ethical. The 501(c)(3) should've collapsed or not exist.

[thayne]

I'm not really sure what is open about OpenAI.

[BiteCode_dev]

BS, you can still make a deal with microsoft as a non profit, where the deal gives them an exclusive licence to use the result in exchange for financing.

MS doesn't care about how money it cost, they care about the fact it's their ticket back into the fight with google and apple.

[YeBanKo]

Or they would get more money from other donors to build open source models.

[ffgjgf1]

Hard to believe. Nobody is going around throwing billions without any hope of recouping any of it eventually (except the EU of course but giving any money to organizations which actually might be capable of building something useful is against their policy).

[morpheuskafka]

Doesn't Mozilla have an identical structure (which is the inverse of what you said, the nonprofit owns the for-profit--it wouldn't make any sense for a for-profit to own a non-profit due to the no private inurement requirement)?

[dragonwriter]

I think Mozilla Corp is 100% owned by the nonprofit, which is a little different. It allows activity which a nonprofit couldn't directly do, and which has a different tax treatment, but its not returning profits to someone else like OpenAI Global LLC and, as I understand it, its immediate parent holding company both do.

But they are similar in that both involve a nonprofit controlling subordinate for-profit entities.

[jowea]

> it wouldn't make any sense for a for-profit to own a non-profit due to the no private inurement requirement)?

The most obvious example is the corporate foundation, but if we believe the first result from a search you're right in they are controlled but not owned by the for-profit:

> A for-profit cannot own a nonprofit because a nonprofit has no owners. However, a for-profit can set up a structure in which it effectively has control over the nonprofit, subject to applicable laws, including those regarding private inurement, private benefit, and corporate self-dealing

> https://nonprofitlawblog.com/can-a-nonprofit-own-a-for-profi...

[jacooper]

AFAIK that's how OpenAI does it, the non-profit controls the for-profit.

[abigail95]

Illegal to restructure a business?

[AYBABTME]

It's not just "restructuring" a business that's a 501(c)3... to make it a golden goose for MSFT. The whole thing was created to avoid one of Big Tech having a monopoly on AI, and it turns into Big Tech having a monopoly.

Perhaps it's all legal but I think it's very understandable to look at it and think it's a travesty.

[pfannkuchen]

I thought it was created to prevent specifically Google from having a monopoly on AI. So mission accomplished?

[OkayPhysicist]

To restructure a non-profit, that solicited donations, into a for-profit entity? Abso-fucking-lutely.

[sbierwagen]

Easy enough to return the donations.

[arthurcolle]

Money is spent

[username135]

Is this sarcasm?

[speedylight]

I imagine you’d have to either pay back all of the people who donated to the non-profit first, or negotiate a deal with for a stake in the company before you can transform it into a for profit.

[partiallypro]

A non-profit still can't continuously have millions or billions in cash burn with no new income. It's not about profit, it's about surviving at all.

[speedylight]

This is probably a dumb question, but what are some specific scenarios of financial malfeasance that could’ve taken place? Like Altman stealing money from OpenAI?

[fakedang]

That's my unsubstantiated hypothesis. The board going so public of this nature could only mean he was doing some grave shit like embezzlement or intentional financial misreporting.

[disgruntledphd2]

Or the board messed up because they're not strong in corporate governance.

[fakedang]

That's increasingly turning out to be the case.

[irthomasthomas]

Maybe this is the reason?

[dathinab]

Yes I would even say it's the opposite.

Through the public actions of Sam Altman in various places like the US congress it has become rather clear that his goals are to device and fear monger to create an environment of regulatory capture where due to misguided laws OpenAI will have an unfair competitive advantage.

This might be quite in line with what Microsoft tends to like. But it also can be a risk for MS if regulation goes even a step further.

This is also in direct opposition with the goals OpenAI set themself and which some of the other investors might have.

So MS being informed last minute to not give them any chance to change that decision is quite understandable.

At the same time it might have been pushed under the table by people in MS which where worried it poses to much risk, but which maybe e.g. might need an excuse why they didn't stop it.

Lastly is the question why Sam Altman acted the way he did. The simplest case is greed for money and power, in which case it would be worrying for business partners at how bad he was when it comes to public statements not making him look like a manipulative untranslatable **. The more complex case would be some twisted believe that a artificial pseudo monopoly is needed "because only they [OpenAI] can do it in the right way and other would be a risk". In that case he would be an ideologically driven person with a seriously twisted perception of reality, i.e. the kind of people you don't want to do large scale business with because they are too unpredictable and can generally not be trusted. Naturally there are also a lot of other options.

But one thing I'm sure about is that many AI researchers and companies doing AI products did not trust the person Sam Altman at all after his recent actions, so ousting him and installing a different CEO should help increasing trust into OpenAI.

[avsteele]

Or maybe he just believes the things he testified to. Would be parsimonious.

[dathinab]

through some of the things he sayed where very clearly not true if you understand a bit the technology used and very clearly pure fear mongering

so if he believed everything he sayed it means he would be incompetent, which just can't be true however I look at it (which means I'm 100% certain sure he acted dishonest in congress, and like I sayed before I'm not fully sure why but it's either way a problem as he lost the trust of a lot of other people involved through that and some other actions).

[SheinhardtWigCo]

Completely disagree. Right now they're not much more than a fancy reseller of OpenAI's technology. The real prize would be exclusivity and control of the roadmap.

Buying them (or getting de facto control) is clearly an easier way to achieve that, vs. replicating the technology in-house.

IMO this is the most important part of Nadella's blog post:

> Most importantly, we’re committed to delivering all of this to our customers while building for the future.

It's curious to me that they see the departure of Sam Altman as a reason to remind us that they are "building for the future" (which I take to mean: working toward independence from OpenAI). I think it actually lends credence to the theory that this was a failed power grab of some sort.

[cma]

> was ousting CEO Sam Altman just a minute before the news was shared with the world, according to a person familiar with the situation.

Maybe almost had to since it was during market hours.

[justinjlynn]

Maybe shouldn't have been given advanced notice at all, since it was during trading hours.

[ffgjgf1]

You can still easily buy/sell stocks in the after hours market until 8PM ET or even 24/6 if you want to

[hindsightbias]

Microsofts AGI predicted this a year back, so they've just been sitting on it.

[bloqs]

Could you explain and or link to any sources? Thanks

[wly_cdgr]

You can't be serious. You think that Microsoft themselves saying they didn't know DISPROVES that it was a covert power grab by them? Have you heard of "lying"?

I'm not saying I think it WAS that, but come on.