Sam Altman is trying to sell OpenAI on the cheap... to himself

And he might get away with it.

Sam Altman is currently trying to sell OpenAI to himself at a lowball price. It is a bit technical, so he may get away with it.

I'm no journalist but it makes me angry, so here is a full explanation, originally posted to twitter.

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Yesterday Elon Musk offered $100bn for OpenAI.

Altman tweeted a dismissal, insulting twitter in the process¹.

But that’s fine, right? It’s it Altman’s job to decide on takeover offers?

No, not really.

OpenAI is not a company. It's a company owned by a non-profit. There is OpenAI the non-profit, which owns OpenAI the for-profit. Legally, the non-profit is top dog.

And that non-profit was set up so that its primary duties were to humanity, not shareholders. This language is still in their charter, (emphasis mine).

Remember the OpenAI crisis? That was a conflict between the non-profit board and Altman (the CEO). The old board fired Altman and then he outmanoeuvred them. Since then everyone I know and respect at OpenAI has left or in some cases been fired.

There was a conflict, Altman won².

Now Altman wishes to take OpenAI private.

Let's consider the impacts of this:

• He will be able to raise money more easily

• No duty to humanity

• He will become very rich

But one can't just 'take a non-profit private'. Property rights matter.

There are two OpenAIs - the non-profit owns the for-profit.

So if Altman wants to run OpenAI as a for-profit, he will have to buy it from the non-profit. Which is what he wants to do.

So far, so normal. Trade money or shares for something someone (the non-profit) owns.

But the current price that's being discussed is $40bn, despite investors recently giving it a valuation of $260bn³.

Why is the non-profit selling its assets so cheaply?

Well, I suggest, it's because Altman is both the for-profit CEO and is on the board of the non-profit. He is part of the buyer and the seller.

He is selling to himself! Of course he wants to pay a low price. And if he sells, he maybe gets 7% of the new shares. Seems like a colossal conflict of interest.

So other people have started offering more than Altman’s lowball offer⁴.

Musk today offered $100 bn.

This makes it harder for Altman to claim $40 bn is a fair price - someone has offered more than double.

No thanks, Altman says, with a jibe about twitter.

And this is what got me so worked up.

Is he implying the offer (higher than his supposed offer) is lowball? Is he saying it's an insult to offer to buy something he doesn't want to sell? I don't know

But what is clear is that Altman (the board member) is rejecting Musk's offer despite the only other offer we've heard being Altman (the OpenAI CEO).

Why is it in the non-profit's best interest to do this? Why is it in the interests of humanity (remember the non-profit’s primary duty is to humanity)?

I don't know all the facts. Perhaps Altman and the board have good reason to prefer Altman's lower offer. Perhaps I am wrong about something⁵.

But Altman has a history of moving fast and getting what he wants. To avoid this we need to spot the pattern and act to avert it.

A common joke format repurposed to the current situation

And honestly I am annoyed.

I am annoyed he has the gall to try and sell a huge business to himself at a below market rate then mock someone for pointing out the absurdity of it⁶.

The feminists have a word for that. It's called gaslighting.

Anyway, there you go.

Why is it in the OpenAI (the non-profit)'s interests to sell one of the leading AI companies at a knockdown price to members of it's own board?

Seems suspect. Someone should look into it⁷.

Where am I wrong?

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Since posting this thread, the top tweet has been seen 6mn times and 100k people have viewed all the way to the bottom.

I am not paid to do this and it can be quite time consuming. If you would like to give me more time to pursue threads like this, please consider a paid subscription.

1. The twitter ‘offer’ is far less than the $40bn Musk paid for it. To me this reads as an insult or an implication that Musk’s offer is ludicrous.

2. At the time, employees banded together around Altman saying “OpenAI is nothing without its people”. Many tweeted this. I wonder how that feels now many who disagreed with Altman are gone.

3. Some point out that OpenAI (the non-profit) has sold the right to maybe the first $1 trillion of profits. But this misses that it has the ability to fire the CEO, and should AGI be created, there is a clause that says it owns all the IP and profits. This is extremely valuable, and I suggest, why Microsoft and co absolutely do not want the current structure to exist.

4. We don’t know Altman’s offer yet, just what has been discussed. But Altman can assure us the offer is higher any time he wants.

5. This thread has now been viewed to the end by 100k people. I have made minor changes and these footnotes. I think if there were major errors I would know.

6. I am also annoyed that the non-profit made specific promises and the board seem to be trying to break these.

7. It seems both the Delaware and California Attorneys General are looking into it, but its unclear if the non-profit will get a fair price if it’s own board is going against it’s objectives. When founded the non-profit made legally binding objectives for itself. Rose Chan Loui:

As you said, it was very carefully structured. And in the beginning, in 2015, it was pretty straightforward: it was founded as a scientific research organisation. The specific purpose was to provide funding for research, development, and distribution of technology related to AI. Then they also made the promise that the resulting technology will benefit the public, and the corporation will seek to open source technology for the public benefit when applicable.