OpenAI Stays Nonprofit-First, Adjusts Growth Strategy

OpenAI has reverted to its previous course of maintaining control of its business operations, revealing that its nonprofit side will retain the authority of the company. CEO Sam Altman conveyed these changes in a pitch to employees. The apparently morale-boosting news item for OpenAI is that Altman's side of the company is not supposed to take over control in any significant manner that would hamper the mission of realizing a safe and beneficial future with advanced AI.

The first plan had targeted shifting more power to the for-profit portion of the business. But that plan got influenced, of course, by regulatory scrutiny and public worries. So now we have a situation where OpenAI still controls things but does so under the auspices of a nonprofit organization.

A New Corporate Framework Emerges

Following the newly amended strategy, OpenAI will transmogrify its for-profit offshoot into a public benefit corporation (PBC). This structure, said to be a first among American artificial intelligence (AI) companies, is designed to balance at least two critical tasks: profit-making, always a challenge in the public-benefit space, especially when you’re following the model of Google, a company that started with a public-mission project and ended up with a very lucrative search engine; and the PBC’s artificial intelligence is not set to take over the world.

A significant modification is removing profit caps for certain investors, allowing for much more flexible financing. Shareholders will now get stock, too, which makes their interests much more aligned with the long-term goals of the company. Altman made the point that these changes make the organization clearer and more fit for the scale of its operations. That is, a PBC can much more readily engage in mergers and acquisitions that corporations typically do.

The nonprofit will keep choosing the members of the board for the new public benefit corporation. That means real oversight isn't going anywhere. How much the nonprofit owns of the new structure isn't clear. Reports suggest, however, that the initial board much resembles the current nonprofit leadership.

Balancing Growth with Mission

OpenAI began in 2015 as a research lab. Its founders, Elon Musk, Sam Altman, and others, set up the organization as a nonprofit, with the idea that it would develop AI in a safe and ethical manner. Today, OpenAI has a market valuation of around INR 25 lakh crore and serves approximately 400 million users each week.

OpenAI has chosen to maintain nonprofit control of its for-profit arm while moving that operation into a public benefit corporation. The company hopes that this combination will allow it to fulfill the dual aims of pushing its technology forward and staying true to its founding principles.