Profit or Purpose? OpenAI's $300 Billion Question, with Rose Chan Loui

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Apr 17, 2025

In this engaging discussion, Rose Chan Loui, a leading expert in philanthropy from UCLA Law, dives into the complexities of OpenAI's evolution from a nonprofit to a hybrid profit model. She explores the ethical dilemmas and corporate drama surrounding this transition, including Elon Musk's legal challenges. The conversation also touches on governance issues, the balance between profit and purpose, and the implications of AI development on society. Loui emphasizes the importance of nonprofit values in shaping a future that prioritizes humanity over mere profitability.

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INSIGHT

Profit vs. Purpose

OpenAI's proposed shift to a Public Benefit Corporation raises concerns about prioritizing profit over its original mission.
This structure allows profit considerations but lacks the binding commitment of a non-profit.

INSIGHT

Legal Oversight

Delaware and California Attorney Generals have authority to ensure OpenAI upholds its non-profit mission.
Delaware is investigating, while California has requested documents but not joined litigation.

ANECDOTE

Recruiting Tool

OpenAI's non-profit status initially attracted top AI talent concerned about ethical development, offering lower salaries than competitors.
This strategy proved successful in recruiting experts who prioritized purpose over profit.

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All too often, capitalism is identified with the for-profit sector. However, one organizational form whose importance is often overlooked is nonprofits. Roughly 4% of the American economy, including most universities and hospital systems, are nonprofit.

One prominent nonprofit currently at the center of a raging debate is OpenAI, the $300 billion American artificial intelligence research organization best known for developing ChatGPT. Founded in 2015 as a donation-based nonprofit with a mission to build AI for humanity, it created a complex “hybrid capped profit” governance structure in 2019. Then, after a dramatic firing and re-hiring of CEO Sam Altman in 2023 (covered on an earlier episode of Capitalisn’t: “Who Controls AI?”), a new board of directors announced that achieving OpenAI’s mission would require far more capital than philanthropic donations could provide and initiated a process to transition to a for-profit public benefit corporation. This process has been fraught with corporate drama, including one early OpenAI investor, Elon Musk, filing a lawsuit to stop the process and launching a $97.4 billion unsolicited bid for OpenAI’s nonprofit arm.

Beyond the staggering valuation numbers at stake here–not to mention OpenAI’s open pursuit of profits over the public good–are complicated legal and philosophical questions. Namely, what happens when corporate leaders violate the founding purpose of a firm? To discuss, Luigi and Bethany are joined by Rose Chan Loui, the founding executive director of the Lowell Milken Center on Philanthropy and Nonprofits at UCLA Law and co-author of the paper "Board Control of a Charity’s Subsidiaries: The Saga of OpenAI.” Is OpenAI a “textbook case of altruism vs. greed,” as the judge overseeing the case declared? Is AI for everyone, or only for investors? Together, they discuss how money can distort purpose and philanthropy, precedents for this case, where it might go next, and how it may shape the future of capitalism itself.

Show Notes:

Read extensive coverage of the Musk-OpenAI lawsuit on ProMarket, including Luigi’s article from March 2024: “Why Musk Is Right About OpenAI.”

Guest Disclosure (provided to The Conversation for an op-ed on the case): The authors do not work for, consult, own shares in, or receive funding from any company or organization that would benefit from this article. They have disclosed no relevant affiliations beyond their academic appointment.