OpenAI’s latest announcement, reprinted below, leaves me almost speechless regarding tax exemption jurisprudence.  Almost.  When we speak of “OpenAI,” by the way we might be referring to OpenAI (c)(3), not taxed at all, OpenAI LLC, taxed as a partnership, or OpenAI Public Benefit Corporation, soon to be taxed as a corporation.  Or all three at the same time.  We would be correct whichever we select because the triplets are really one single freak of tax and nonprofit nature.  That’s my only point, that charity sometimes looks like public benefit and private profit all at once.

As an aside, though, take a look at the announcement and behold the way these IT Vikings seep into our brains in their quest to take over the world.  There is singular subliminal messaging in the first sentence of each paragraph: (1) “We are making progress on our mission to ensure artificial general intelligence benefits all of humanity, (2) “We’ve raised $6.6B in new funding at a $157B post-money valuation to accelerate progress on our mission, and (3) “We aim to make advanced intelligence a widely accessible resource.”  By which OpenAI — whichever one we refer to — asserts three times, “we are a charity, we are a charity, and we are a charity.” Is it Orwellian doublespeak, that profit is really charity?  

I’m still thinking it through but now I am back on the other side.  In a new essay I argue that public benefit and private profit are coterminous and mutually dependent.  In this case, public benefit cannot be achieved without private profit, and private profit does not preclude public benefit.  We have seen public benefit and private profit occupy the exact same space before on an even more massive scale.  It was during Covid-19, when government subsidized private profit-making in search of world wide public benefit.  We spent nearly $5 trillion (and counting) much of it to subsidize profit-makers whose goals were otherwise entirely consistent with public benefit.  Even despite all the money pouring in, my current thinking is that OpenAI (c)(3) could still be a tax exempt charity if profit-seekers would allow it. OpenAI needs their money and their cooperation.  But profit seekers apparently won’t allow it.

Profit makers just want profit; they want to get rich or die trying.  But OpenAI (c)(3)’s public benefit mission is inconsistent and mutually exclusive only as a theoretical matter. Nor is the 10,000% limitation on OpenAI LLC investor returns inconsistent with investor instincts for unlimited profit. Not unless the market routinely produces returns like that.  I doubt it, but I am not an economic analyst.  The real barrier to our being sanguine about OpenAI the tax exempt organization is a psychological one.  Investors will not accept “mission first” or limited profit-taking, not even when those qualifiers are only theoretical limits on their greed.     

October 2, 2024

New funding to scale the benefits of AI

We are making progress on our mission to ensure that artificial general intelligence benefits all of humanity. Every week, over 250 million people around the world use ChatGPT to enhance their work, creativity, and learning. Across industries, businesses are improving productivity and operations, and developers are leveraging our platform to create a new generation of applications. And we’re only getting started.

We’ve raised $6.6B in new funding at a $157B post-money valuation to accelerate progress on our mission. The new funding will allow us to double down on our leadership in frontier AI research, increase compute capacity, and continue building tools that help people solve hard problems.

We aim to make advanced intelligence a widely accessible resource. We’re grateful to our investors for their trust in us, and we look forward to working with our partners, developers, and the broader community to shape an AI-powered ecosystem and future that benefits everyone. By collaborating with key partners, including the U.S. and allied governments, we can unlock this technology’s full potential.

darryll k. jones