@choldgraf asked me elsewhere “I thought non-profits couldn’t sell assets to for-profits”.
As my wife (a non-profit accountant) puts it: “non-profits can still sell things!” Here, OpenAI transferred assets to a wholly-owned for-profit. Moz and WMF have both done that, to help manage the vast cash flows that search revenue can generate, while using the non-profit’s control of the for-profit to ensure the public interest is still served.
@choldgraf The question is … is the public interest still being served by the for-profit? A big initial donor to OpenAI has been asking that question, and I think it’s a *very* fair one: “competitive concerns are causing us to [violate widely-agreed industry best-practice safety standards]” is a sentence a public-interest company should never utter.
California’s attorney general has the power to investigate this, and it should.
@luis_in_brief but isn't that only possible if the non profit is the sole shareholder of the for profit? And if that is the case, how can the for profit have investors? Maybe my first assumption there is wrong?
@luis_in_brief and yeah either way I think it is pretty clear that the non profits original mission was not "withhold all valuable IP from the public and serve as a competitive moat for Microsoft"
@luis_in_brief (and yes one reason I'm partially interested in the non profit question is because I've explored this for 2i2c as well, but thus far have concluded that it's a delicate path to walk for the reasons you describe)
@luis_in_brief it seems very easy to create an extreme version of "donor capture" when your non profit depends on a for-profits funding or investors
@choldgraf @luis_in_brief This is a super interesting thread, thanks Luis and Chris. Can either of you suggest a primer I can read to catch me up on what's publicly known/knowable about OpenAI in this area?
@jfleck @luis_in_brief i don't actually know as much as I should and would enjoy a resource like this as well!
@choldgraf @jfleck I might end up doing a (verrrry brief) one in the newsletter, if not this weekend probably next…)
@luis_in_brief @jfleck thanks for chatting about this with me here btw. I'm glad that there are people like yourself in the world who are thoughtful about this!
@choldgraf I’m not a deep expert in this area of the law, and the relevant investment terms are not public, so it’s hard to say with certainty. But in the 1099 from a few years back that I looked at, OpenAI claimed that they had 100% control of the for-profit, so it’s possible the investors only have claims on the revenue streams and not governance?
Looking at the details of all that is exactly what the CA AG’s office should be looking into, IMHO.
@luis_in_brief i could still see that being in the interests of a subset of companies, if they felt they could still control the non profit and give themselves privileged licensing and API access
@luis_in_brief but obviously not in the interests of the public unless you do a bunch of AGI "existential threat" effective altruism acrobatics I guess
@luis_in_brief which, I guess, is exactly what they're doing to justify this
@choldgraf I’m sympathetic to the claims that (1) you need a lot of money to do this public-interest research and (2) true openness might be very problematic for the public interest!
But you give away the public interest game when you say “competitive interests” are part of your closed-ness reasoning in any way, shape, or form…
@luis_in_brief for sure - I'm open to that too, but then you better have *excellent* governance, oversight, accountability, and have extra organizational and strategic transparency to make up for the lack of your operational transparency
@luis_in_brief not run yourself like a startup in non profit clothing
@choldgraf Yupppp. Again, a good topic for the AG to explore.
(I wonder if there’s a space for CA non-profits in the space to put together a letter to the AG?)
@choldgraf It’d have to be pretty nuanced (“look, we’re not against non-profits getting funding! or doing work with for-profits!”) but…
@luis_in_brief that's an interesting idea. I think it's an important topic because I believe that the institutional instrument of "the not for profit" is super important and this kind of thing really cheapens its meaning, especially in such a high profile case and especially in the tech sector (where my non profit lives). It might have ramifications that affect many if the government gets involved (didn't something like this happen with Mozilla non profit software development back in the day?)
@luis_in_brief I agree w your take - I think many people are too limited in their thinking of what non profits can do. I wish that *more* of them sold things (or services) and just did so in a way that was oriented towards a mission and with good governance and accountability. I think this clear abuse of non-profit status by openai makes it harder to do this the "right way"
@luis_in_brief
I've sat on the board for nonprofits (and currently have an LLC that I am working on converting) and I know that my lawyers response to any statement I made publicly about competitive concerns would be loud, unhappy, and probably come with a written memo to preserve for the record that they were not involved in that decision.
@choldgraf
@luis_in_brief
Edit: I was wrong, they are registered as a 501c3. I guess I shouldn't try to do research while eating.
I note that openai is not a 501c3, which is good for them, because I know they would have IRS agents watching them around the clock if they tried this shit under federal law.
@choldgraf
@samweingamgee @luis_in_brief oh really?! I didn't know that.
@choldgraf
Huh, I take that back. They are actually a 501c3, win 81-0861541. This is what I get for tooting while having dinner.
@luis_in_brief
@choldgraf @luis_in_brief
Yeah, that's not a good place for them to be in, especially given how valuable their IP is.
@samweingamgee @luis_in_brief yessss then my outrage has returned!
@choldgraf @luis_in_brief
It does mean that the attack surface against them is way higher. The IRS doesn't like folks not paying taxes.
@samweingamgee @choldgraf Much of the tax story depends on how much cash flows out of the for-profit to the non-profit (unless they fucked this up, the answer is almost certainly zero) and how you spend your assets (could be tricky here, given the potentially massive size of the asset).
But I do also note that this is almost *exactly* the kind of for-profit shenanigans that almost got *all* “open” non-profits per se banned by the IRS.
@samweingamgee @choldgraf (Which now that I write it that way is probably one paragraph in the hypothetical letter from CA tech non-profits to Rob Bonta…)
@luis_in_brief @samweingamgee ah yeah that's what I was referring to re: Mozilla, wasn't it them that got the whole field into that mess?
@choldgraf @samweingamgee As far as I know, no one really knows exactly what started that. But I think the field’s assumption is that it was more the large corporate “open” projects, who weren’t yet 100% (c)6s, than Mozilla.
@luis_in_brief
Yeah, I took a look at their 990 and there are a lot of people who are part time their and part-time other related places as well. I'd love to see someone make a chart (of I guess I can when its not Friday night)
@choldgraf
@luis_in_brief
I would not want to be them arguing that all the monetizable IP they created was during their hours for the for profits, as opposed to their time at the nonprofit.
@choldgraf
@choldgraf @luis_in_brief
I feel a little bit better about my mess-up after doing a corp entity lookup. There are:
OpenAI Corp. A delaware corp founded 12.11.2015
OPENAI OPCO, LLC, a Delaware LLC which seems to be the trademark holder for ChatGPT et al. 9.19.2018
OPENAI GP, L.L.C., A Delaware LLC 9.19.2018
OpenAI LP. Which California thinks is a Delaware LP, but I can't find in Delaware's lookup 10.10.2018
1/3
@choldgraf @luis_in_brief
OPENAI, LLC. A Wyoming LLC founded on 10.10.2019 which was administratively dissolved for not paying its taxes and confusingly shares a name with:
OPENAI, L.L.C. A Delaware LLC 9.17.2020
OPENAI STARTUP FUND MANAGEMENT, LLC, another Delaware LLC 7.16.2021
OPENAI STARTUP FUND I, L.P. A Delaware LP, 7.28.2021
OPENAI STARTUP FUND GP I, L.L.C. A Delaware LLC, 7.28.2021
OPENAI HOLDCO, LLC, A Delaware LLC 12.28.2022
OPENAI GLOBAL, LLC, A Delaware LLC 12.28.2022
2/3
@choldgraf @luis_in_brief
OPENAI INVESTMENT LLC, a Delaware LLC 2.6.2023
OPENAI HOLDINGS, LLC, A Delaware LLC 3.17.2023
3/3
@samweingamgee @choldgraf @luis_in_brief
Thanks for the hint, folks interested in past non-profit filings by OpenAI as a 501C3 should checkout ProPublica:
https://projects.propublica.org/nonprofits/organizations/810861541
@shanecurcuru
Yeah, I was browsing their 990 for 2019. They certainly made a lot of money in rent for a non-profit
@choldgraf @luis_in_brief
@shanecurcuru @choldgraf @luis_in_brief
I dug into #OpenAI 's public filing data a bit. Interestingly enough, they are classified as a public charity, rather than a private foundation. This is curious as it certainly doesn't match my perception of their funding structure (and in fact looking at their 2018 990 doesn't match their accounting either). Foundation versus Charity status is tricky (and my understanding is that they get a 5 year grace period), but I'd love to see a more recent filing.
@shanecurcuru @choldgraf @luis_in_brief
Their mission statement is also weird: "OpenAIs goal is to advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return. We think that artificial intelligence technology will help shape the 21st century, and we want to help the world build safe AI technology and ensure that AI's benefits are as widely and evenly distributed as possible."
@shanecurcuru @choldgraf @luis_in_brief
No mention of a scientific, education, or charitable purpose. At least not as anyone not suffering from late stage silicon valley brain rot would interpret it.
@samweingamgee @shanecurcuru @choldgraf I mean, I’m not a fan of theirs but “benefit humanity as a whole” is… pretty cut-and-paste from a lot of charitable mission statements. Charity regulators (for not-bad reasons!) are loath to scrutinize this sort of thing too closely. (But, again, I think in this case the California AG should be looking into it.)
@luis_in_brief @samweingamgee @shanecurcuru it primarily sounds like wishful thinking to me lol.
"Unconstrained by the need for financial return" but "we can't make our work public because of the competitive landscape"
@luis_in_brief
Honestly I'm mainly kvetching 'cause I've been drafting a mission statement for #OpenMS' (no relation to openai) incorporation and 1023 filing and obsessing over every word.
@shanecurcuru @choldgraf
@samweingamgee @luis_in_brief @shanecurcuru yes it really sucks when you see people twist the meaning and purpose of public institutions so that they can further their own aims