The OpenAI meltdown shows that when nonprofits and for-profits clash, the one with the money usually wins
Sam Altman’s dramatic firing from OpenAI, the high-profile tech organization behind ChatGPT, showed a rare reversal of the usual power dynamics when the goals of purpose and profit intersect.
Under the AI company’s unusual structure, a nonprofit board oversees a for-profit arm backed by Microsoft and venture capital firms—and on Friday, the board abruptly ousted Altman, the CEO of its profits-focused subsidiary. An entire TV season’s worth of drama ensued in the next four days (and has yet to conclude), as OpenAI’s powerful investors tried to reverse the decision of the board. Then one of those investors, Microsoft, decided to just hire Altman directly and offer jobs to OpenAI’s employees—while some of those employees and other backers have continued pushing for OpenAI to reinstate Altman.
The ongoing spectacle underlines some very old, very common tensions in the relationships between nonprofits and the wealthy people and companies that make their work possible. While the reasons behind, and ultimate fallout from, OpenAI’s meltdown are still taking shape, it’s clear that the organization’s unusual corporate structure played a role.
OpenAI was founded in 2015 as a nonprofit dedicated to the lofty goals of helping humanity build and use artificial intelligence safely—without worrying about making money. Its “mission is to build general-purpose artificial intelligence that benefits humanity, unconstrained by a need to generate financial return,” OpenAI declared on its most recent tax return.
But building A.I. is expensive work. So in 2019, the organization launched a for-profit arm, run by Altman, that went on to raise $13 billion from Microsoft. That, as Bloomberg’s Matt Levine pointed out on Monday, essentially gave Microsoft implicit control over OpenAI. “The board has all the governance rights, and the investors have none. … But they have the money,” Levine wrote. “The board can keep running OpenAI forever if it wants, as a technical matter of controlling the relevant legal entities. But if everyone quits to join Sam Altman at Microsoft, then what is the point of continuing to control OpenAI?”
Really, it’s remarkable that the OpenAI board got as far as firing Altman in the first place. “But they have the money” could be the refrain of our new Gilded Age of billionaire philanthropy, in which wealthy founders and investors publicly wield their influence—and deploy the fortunes their for-profit activities accumulated—via nonprofit channels (as well as for-profit investments).
There’s usually little doubt about who wields more power in these for-profit/nonprofit relationships, especially when the two sides come into conflict. Just witness recent headlines about Apollo CEO Marc Rowan, hedge fund founder Leon Cooperman, and other billionaires who have threatened to stop donating to universities over those schools’ response to the crises in Israel and Gaza.
True, the for-profit/nonprofit relationship isn’t always this riddled with conflict. MacKenzie Scott, the record-setting philanthropist who has given away more than $14 billion of her Amazon fortune in three years, has drawn widespread praise for the no-strings-attached nature of her grants to nonprofits. Scott also has publicly acknowledged—and wrestled with—the power imbalances inherent to our “but they have the money” era, writing in 2021: “Putting large donors at the center of stories on social progress is a distortion of their role. We are attempting to give away a fortune that was enabled by systems in need of change.”
Silicon Valley in particular has tried to “disrupt” the traditional funder/fundee relationship in recent years–most notably with its embrace of “effective altruism,” a controversial philosophical movement that’s essentially a radical form of utilitarianism. But effective altruism has been tainted by its association with a prominent champion, now-disgraced FTX founder Sam Bankman-Fried, who was convicted of stealing billions from the customers of his crypto exchange. Now it’s also playing a supporting role in the current corporate drama: Other proponents of effective altruism include some of the OpenAI board members who fired Altman.
Still, some charities have figured out how to coexist with money-making operations under one corporate roof. As Felix Salmon points out at Axios, Patagonia and Novo Nordisk are other examples of organizations in which a non-profit uses the money earned by a corporate subsidiary to fund its operations.
But “OpenAI diverges from that model,” Salmon writes, with the nonprofit and the for-profit pursuing fundamentally mismatched goals. Among the various constituencies that until Friday existed as one OpenAI, “none of their interests are entirely aligned,” he concludes.
So whenever the dust finishes settling at OpenAI, and wherever Altman and its board members and its investors wind up, it seems unlikely the nonprofit interests are likely to come out on top. After all: They don’t have the money.
