Mark Zuckerberg, CEO of Meta, has approached the Californian government with a request to halt the plans of AI startup OpenAI to transition from a non-profit organization to a for-profit entity. The letter was addressed to General Attorney Rob Bonta. Zuckerberg argues that OpenAI should not be allowed to convert assets built as a “charitable organization” into a source of large potential profits. Tech billionaire Elon Musk is also mentioned as opposing the for-profit status of OpenAI and is already engaged in a legal battle against the company. Zuckerberg claims that Musk is representing the interests of Californians. Musk co-founded OpenAI in 2015 but left three years later, before the success of services like ChatGPT.
Zuckerberg fears “seismic impacts” from OpenAI’s restructuring. In its latest funding round at the end of September, OpenAI received $6.6 billion from investors in the form of a convertible bond. This new investment is contingent on OpenAI giving up its non-profit status. Previously, investors could only receive a limited return, with any surplus automatically going to the non-profit organization. The new structure would remove the cap on how much investors can earn from their investment.
Zuckerberg believes OpenAI’s direction could have “seismic impacts” on Silicon Valley. It represents a “paradigm shift” for tech startups, as it incentivizes organizations to initially start as non-profits to collect tax-free donations for research and development, only to switch to a for-profit model once the business becomes profitable.
OpenAI claims to serve humanity. The US news portal The Verge published the full letter and quoted OpenAI’s chairman, Bret Taylor. The OpenAI leadership focuses on fulfilling its “fiduciary duty,” which includes positioning OpenAI as economically strong as possible. OpenAI aims to ensure that all of humanity benefits from AI. In any potential restructuring, a part of OpenAI would remain non-profit and retain full value for its current involvement in the for-profit wing.
Currently, OpenAI’s investors and employees are involved in a limited way in the profits of a for-profit subsidiary managed by the non-profit parent organization. However, only a portion of the profits is distributed, with the rest going to the non-profit leadership. OpenAI must now remove this limitation to become fully for-profit, or return the money from the last funding round to investors.
Meta itself offers an AI model called Llama, which Zuckerberg aims to make the most used AI in the world. This might have played a role in his letter to the US government. Musk is also launching an AI chatbot named Grok, which will soon have its own smartphone app, similar to offerings from competitors like Anthropic, Google, and OpenAI.