alt Hacker NewsI just don’t understand why a non-profit was allowed to do this. Does this not set a precedent that non-profit doesn’t actually mean anything? You can just use a favorable structure until it’s time to enrich yourself.
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There's a lot of things these days that you can't do that are being done.
Non profits have always been able to have for profit subsidiaries, owned by the non profit.
Most startups don't actually make profits and nonprofits can't give equity so it's not really a favorable structure.
This case was the first of its kind and it was never tested if OpenAI breached their charitable mission and the case was dismissed due to the statute of limitations.
Other than researchers, nobody from big tech would ever see themselves wanting to work at a charity / non-profit. The moment the VCs came into the picture then all the grifters poured in and AGI meant IPO.
> You can just use a favorable structure until it’s time to enrich yourself.
Maybe that diary was made out of teflon.
Nonprofit doesn't mean anything, since people can just route the profits into salaries. It's just another legacy regulation that may have once once had a societally-constructive purpose that wealthy people just use as one of the array of financial tools to help implement their latest scams. IMO, here are no legitimate nonprofits.
Western countries have been utterly strangled by nonprofits. Governments fund them with tax money in order to lobby themselves for legislation that financially benefits individuals in government and their donors. Obama even expanded the rules in the US to allow the government to unconstitutionally fund religious groups to accomplish functions that belong in government.
They should all be either reformed so that their internal bylaws and compensation are strictly regulated or probably preferably, they should simply be destroyed. If you only pay taxes on your profits (and we get rid of legal vehicles to hide profits) and your employees are obligated to pay taxes on their incomes, there's no need for a nonprofit status. If nonprofits want to engage in business (religions included), let them pay taxes. If they engage in charity, they won't have anything to tax.
It should not surprise you to learn that Greg Brockman is a Trumper and major donor.
It should also not surprise you that the Epstein files have not been released.
Everything is possible and not possible in a corrupted system.
I think it would be helpful for you to clarify which part of the chain you found objectionable:
- in 2015, OpenAI was founded as a Delaware nonprofit
- in 2017, OpenAI discovered the scaling laws and realized they needed far more compute (and thus money) than they had initially anticipated
- that discovery precipitated a series of negotiations between the founders on how to restructure OpenAI to raise more money for compute, ultimately resulting in Musk’s departure when the other founders would not give him control
- in 2018, OpenAI attempted to dramatically increase its fundraising despite Elon ending his contributions, but raised only $50M of its $100M goal
- in 2019, OpenAI created a capped-profit subsidiary in order to attract funding from commercial entities
- the nonprofit hired an independent assessor to value its IP, and then transferred that IP to the for-profit for fair value (around $60 million in 2019)
- the OpenAI nonprofit received a right to 100x capped return on its IP investment, or $6B, once the for-profit began making a profit. The nonprofit also received the right to the residual profit after all future investors reached their caps
- in 2019, OpenAI’s capped-profit received $1B in investment from Microsoft. OpenAI later received $2B from Microsoft in 2021 and $10B in 2023 as compute scaling continued
- Microsoft received a cap of 20x on its $1B investment, and 6x on its $2B and $10B investments, for a total of $92B target redemption
- in 2025, OpenAI’s for-profit entity recapitalized from a capped-profit entity with residuals flowing to the nonprofit to a traditional public benefit corporation with traditional equity
- in exchange for the residual (and 100x profit cap on the original $60M transfer) the nonprofit received a 26% equity stake in the for-profit. That stake is currently valued at around $200B
All of the above is from the record in Musk v. Altman, thanks to which we now have all the details. The upshot for the nonprofit is that it transferred IP worth around $60M in 2019 for rights to $6B in future profit, and then ended up with $200B in equity after the recapitalization. I see a lot of people in this thread assuming that the nonprofit no longer exists, which is not true.