Breakingviews: OpenAI closes one sticky door but opens another

OpenAI is inviting a fresh round of queries about its large-language model. The owner of the groundbreaking ChatGPT artificial intelligence chatbot scrapped a controversial plan to become a fully for-profit company and opted to leave its nonprofit entity in charge. Who serves on that controlling board and how much clout backers Microsoft and SoftBank get are unanswered questions that will be vital to the technology’s fate.

Boss Sam Altman said on Monday that OpenAI, valued privately at some $300 billion, had reversed itself after talking to civic leaders and various state legal authorities. There were widespread concerns about the possibly dangerous aspects of AI and whether the company should primarily serve financial stakeholders. Four months ago, Altman argued that having a nonprofit oversee a for-profit failed to “directly consider the interests” of investors.

The diluted restructuring seems to keep those funders in mind. Under the existing setup, OpenAI’s profit is capped, but the redesign will leave it able to generate unlimited earnings for all involved with a stake, including employees, investors and the non-profit entity. OpenAI also will convert from a limited liability company to a public benefit corporation required to follow a somewhat vague mission of having AI serve many communities. A nonprofit board will hire and fire directors at the board of the PBC, which in turn will have fiduciary duties to shareholders, including the nonprofit outfit.

Whether this hybrid structure can deliver what investors in one of the world’s most richly valued, privately held enterprises want is unclear. If the nonprofit holds a super-voting controlling stake, it could override shareholder interests to block decisions that clash with the purpose-driven goals and limit OpenAI’s revenue and profit growth.

Moreover, Altman’s influence over the nonprofit board and whether he plays a role in appointing its members could leave his power eclipsing others. Microsoft and SoftBank might get big stakes in the PBC, but wind up with little voting influence. Although it wouldn’t be a novel approach for Silicon Valley, its effectiveness might be strained given the scope and significance of ChatGPT. For now, there are too many questions with potentially unsatisfying answers.