We announced our “capped profit” structure in 2019, about 3 years after founding the original OpenAI Nonprofit.
Since the beginning, we have believed that powerful AI, culminating in AGI—meaning a highly autonomous system that outperforms humans at most economically valuable work—has the potential to reshape society and bring tremendous benefits, along with risks that must be safely addressed.
…We always suspected that our project would be capital intensive, which is why we launched with the goal of $1b in donation commitments [Elon Musk ultimately welshed on most of his commitment]. Yet over the years, OpenAI’s Nonprofit received ~$0.13b in total donations, which funded the Nonprofit’s operations and its initial exploratory work in deep learning, safety, and alignment. It became increasingly clear that donations alone would not scale with the cost of computational power and talent required to push core research forward, jeopardizing our mission. So we devised a structure to preserve our Nonprofit’s core mission, governance, and oversight while enabling us to raise the capital for our mission:
-
The OpenAI Nonprofit would remain intact, with its board continuing as the overall governing body for all OpenAI activities.
-
A new for-profit subsidiary would be formed, capable of issuing equity to raise capital and hire world-class talent, but still at the direction of the Nonprofit. Employees working on for-profit initiatives were transitioned over to the new subsidiary.
-
The for-profit would be legally bound to pursue the Nonprofit’s mission, and carry out that mission by engaging in research, development, commercialization and other core operations. Throughout, OpenAI’s guiding principles of safety and broad benefit would be central to its approach.
-
The for-profit’s equity structure would have caps that limit the maximum financial returns to investors and employees to incentivize them to research, develop, and deploy AGI in a way that balances commercialization with safety and sustainability, rather than focusing on pure profit-maximization.
-
The Nonprofit would govern and oversee all such activities through its board in addition to its own operations.
In that way, the Nonprofit would remain central to our structure and control the development of AGI, and the for-profit would be tasked with marshaling the resources to achieve this while remaining duty-bound to pursue OpenAI’s core mission. The primacy of the mission above all is encoded in the operating agreement of the for-profit, which every investor and employee is subject to:
IMPORTANT
Investing in OpenAI Global, LLC is a high-risk investment
Investors could lose their capital contribution and not see any return
It would be wise to view any investment in OpenAI Global, LLC in the spirit of a donation, with the understanding that it may be difficult to know what role money will play in a post-AGI world
The company exists to advance OpenAI, Inc’s mission of ensuring that safe artificial general intelligence is developed and benefits all humanity. The Company’s duty to this mission and the principles advanced in the OpenAI, Inc Charter take precedence over any obligation to generate a profit. The Company may never make a profit, and the Company is under no obligation to do so. The Company is free to re-invest any or all of the Company’s cash flow into research and development activities and/or related expenses without any obligation to the Members. See §6.4 for additional details.
The structure in more detail: While investors typically seek financial returns, we saw a path to aligning their motives with our mission. We achieved this innovation with a few key economic and governance provisions:
-
First, the for-profit subsidiary is fully controlled by the OpenAI Nonprofit. We enacted this by having the Nonprofit wholly own and control a manager entity (OpenAI GP LLC) that has the power to control and govern the for-profit subsidiary.
-
Second, because the board is still the board of a Nonprofit, each director must perform their fiduciary duties in furtherance of its mission—safe AGI that is broadly beneficial. While the for-profit subsidiary is permitted to make and distribute profit, it is subject to this mission. The Nonprofit’s principal beneficiary is humanity, not OpenAI investors.
-
Third, the board remains majority independent. Independent directors do not hold equity in OpenAI. Even OpenAI’s CEO, Sam Altman, does not hold equity directly. [Note: this permits him to hold his own board seat, while excluding many potential replacements like VCs or OA employees—eg. Reid Hoffman was forced out by Altman, for similar reasons as Elon Musk was.] His only interest is indirectly through a Y Combinator investment fund that made a small investment in OpenAI before he was full-time.
-
Fourth, profit allocated to investors and employees, including Microsoft, is capped. All residual value created above and beyond the cap will be returned to the Nonprofit for the benefit of humanity.
-
Fifth, the board determines when we’ve attained AGI. Again, by AGI we mean a highly autonomous system that outperforms humans at most economically valuable work. Such a system is excluded from IP licenses and other commercial terms with Microsoft, which only apply to pre-AGI technology.
…Our board: OpenAI is governed by the board of the OpenAI Nonprofit, comprised of OpenAI Global, LLC employees Greg Brockman (Chairman & President), Ilya Sutskever (Chief Scientist), and Sam Altman (CEO), and non-employees Adam D’Angelo, Tasha McCauley, Helen Toner.