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OpenAI’s flip-flop will not get Elon Musk off its back OpenAI’s flip-flop will not get Elon Musk off its back

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OpenAI’s flip-flop will not get Elon Musk off its back – Crypto News

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12 months ago

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Call it a rare win for Elon Musk. The world’s richest man, whose business empire has lately taken a beating, has long pursued a vendetta against Sam Altman, boss of OpenAI. In recent months Mr Musk, who helped found the artificial-intelligence (AI) lab but left in 2018, has sought to block its proposed conversion into a for-profit company through various methods, including an unsolicited (and unsuccessful) $97bn bid for the assets of the non-profit entity that controls it.

Mr Musk was thus surely grinning when, on May 5th, Mr Altman announced that OpenAI had abandoned the planned conversion. The screeching u-turn means a company valued at $300bn in its latest funding round will stay controlled by a non-profit board with a fuzzy mission to help “benefit all of humanity”. That could present big problems for Mr Altman.

OpenAI’s structure will remain baffling. The company is made up of a for-profit entity—in which outside parties can invest, entitling them to a profit whose maximum value is capped—nestled inside a non-profit entity. As previously planned, the for-profit entity will become a public-benefit corporation (PBC) that seeks to serve both investors and society at large; outside investors will receive shares in the PBC. But plans to unshackle it from the control of the non-profit have been dropped.

Of most concern for OpenAI is how this affects its ability to raise money. It is burning through significant amounts of cash as it invests to develop ever smarter models, and seems unlikely to turn a profit soon. When OpenAI announced its previous plan to restructure in December, it cited its vast funding needs: “Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness.”

OpenAI’s non-profit board, which temporarily ousted Mr Altman in November 2023, is a particular concern for some investors. It has since been expanded and packed with people sympathetic to Mr Altman’s ambitions for OpenAI. But it remains unclear how the board will balance his desire to develop AI models as clever as humans rapidly with concerns over the safety of the technology.

Mr Altman has argued that, despite the u-turn, OpenAI will still be able to secure the funding it needs. In particular, he has said that the $30bn promised by Softbank, a Japanese tech conglomerate, is still on the table. Microsoft, the biggest investor in OpenAI’s for-profit entity, remains broadly sanguine. But new investors may balk at pouring money into a company whose controlling board does not need to take their interests into account.

Meanwhile, ditching its previous plan will not spare OpenAI from prying regulators. The company said that its about-face followed talks with civic leaders and the attorneys-general of Delaware, where OpenAI is incorporated, and California, where it is headquartered. The California Department of Justice said it was reviewing the new plan. Delaware found it encouraging. But as a non-profit entity, OpenAI will continue to fall under their regulatory aegis. It can expect ongoing scrutiny.

Nor has Mr Altman succeeded in getting Mr Musk off his back. Shortly after the announcement of OpenAI’s reversal, Marc Toberoff, Mr Musk’s lawyer in the matter, declared that it “changes nothing”, as the company’s founding mission to develop AI that benefits all of humanity “remains betrayed”. Mr Musk, who runs a rival lab, xAI, intends to proceed with a lawsuit to block OpenAI’s restructuring. He will continue to be a thorn in Mr Altman’s side.

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