The dramatic ouster of Sam Altman from OpenAI, the high-profile technology organization behind ChatGPT, demonstrated a rare reversal of the usual power dynamics when the goals of purpose and profit intersect.
Under the unusual structure of an AI company, a nonprofit board oversees a for-profit arm backed by Microsoft and venture capital firms — and on Friday, the board abruptly fired Altman, the CEO of a for-profit subsidiary. An entire TV season of drama ensued over the next four days (and it’s far from over), as OpenAI’s powerful investors tried to reverse the board’s decision. Then one of those investors, Microsoft, decided to hire Altman directly and offer jobs to OpenAI employees — while some of those employees and other backers continued to push for OpenAI to bring back Altman.
The ongoing spectacle highlights some long-standing and all-too-common tensions in the relationships between nonprofits, the wealthy people, and the companies that make their work possible. While the reasons behind OpenAI’s collapse and its eventual ramifications are still shaping up, it’s clear that the organization’s unusual corporate structure played a role.
OpenAI was founded in 2015 as a non-profit organization dedicated to the lofty goals of helping humanity safely build and use AI – without worrying about making money. OpenAI declared in its most recent tax filing that its “mission is to build general-purpose AI that benefits humanity, unconstrained by the need for financial return.”
But building artificial intelligence is an expensive business. So, in 2019, the organization launched a for-profit arm, run by Altman, that went on to raise $13 billion from Microsoft. This, as Bloomberg’s Matt Levin pointed out on Monday, gave Microsoft tacit control over OpenAI. “The board of directors has all the governance rights, and the investors have none. … But they have money.” Levin wrote. “The board could keep running OpenAI forever if it wanted to, as a technical matter of controlling the relevant legal entities. But if everyone quits to join Sam Altman at Microsoft, what’s the point of continuing to control OpenAI?”
It’s truly remarkable that the OpenAI board went so far as to fire Altman in the first place. “But they have money” This may be the mantra of our new golden age of billionaire philanthropy, in which wealthy founders and investors openly exercise their influence – and distribute the wealth accumulated by their for-profit activities – through non-profit channels (as well as for-profit investments).
There is usually little doubt about who has more power in these for-profit/non-profit relationships, especially when the two sides come into conflict. We only have to witness the recent headlines about Apollo CEO Mark Rowan, hedge fund founder Leon Cooperman, and other billionaires threatening to halt donations to universities over their response to the crises in Israel and Gaza.
It is true that the for-profit/non-profit relationship is not always full of conflict. Mackenzie Scott, the record-setting philanthropist who gave away more than $14 billion of her Amazon fortune in three years, has won widespread praise for the unrestricted nature of her giving to nonprofits. Scott has also publicly acknowledged and wrestled with our inherent power imbalance “But they have money” The Age, writing in 2021: “Putting major donors at the center of stories of social progress is a distortion of their role. We are trying to give away the wealth that has been enabled by systems that need to change.
Silicon Valley in particular has tried to “disrupt” the traditional relationship between funder and funded in recent years – most notably through its embrace of “effective altruism,” a controversial philosophical movement that is essentially a radical form of utilitarianism. But his effective altruism has been tainted by his association with a prominent hero, Sam Bankman Fried, the now-disgraced founder of FTX, who was convicted of stealing billions from customers of his cryptocurrency exchange. And now it’s also playing a supporting role in the current corporate drama: Other supporters of effective altruism include some of the OpenAI board members who fired Altman.
However, some charities have figured out how to coexist with their money-making operations under one corporate roof. As Felix Salmon points out at Axios, Patagonia and Novo Nordisk are two other examples of organizations in which nonprofits use money earned by an affiliate to fund their operations.
But “OpenAI differs from this model,” Salmon wrote, in that nonprofits and for-profits pursue fundamentally mismatched goals. He concludes that of the various constituencies that existed until Friday as one of the OpenAI companies, “none of their interests were completely aligned.”
So, whenever the dust settles on OpenAI, and wherever Altman, its board members, and its investors end up, it seems unlikely that nonprofit interests will come to the fore. After all: they have no money.