OpenAI emails show Elon Musk wanted a non-profit structure in 2017

On Friday, OpenAI applauded after Elon Musk, one of its founders, became a billionaire. order last month a federal court to prevent ChatGPT-maker from becoming a completely non-profit business.

In a blog post Under the headline “Elon Musk wanted an OpenAI nonprofit,” the startup alleged in 2017 that Musk “not only wanted a nonprofit, but actually created one” to serve as the company’s proposed new structure.

“When he didn’t get majority equity and full control, he walked away and told us we were going to fail,” OpenAI wrote in the blog post. “Now that OpenAI is the leading AI research lab and Elon runs a competing AI company, he’s asking the court to stop us from effectively fulfilling our mission.”

Musk and xAI did not immediately respond to requests for comment.

Since Musk announced it the debut xAI, its competitor OpenAI, in July 2023, the startup launched its Grok chatbot and is raising $6 billion at a $50 billion valuation, partly to buy 100,000. Nvidia chips, CNBC notify last month

Musk questioned OpenAI’s nonprofit model from day one, a member of OpenAI’s legal team told CNBC.

OpenAI’s “structure doesn’t seem optimal,” Musk wrote in a November 2015 email to OpenAI CEO Sam Altman, according to screenshots shared in the blog post. He added that “getting a nonprofit salary messes up the alignment of incentives” and that “a standard C corp with a parallel nonprofit is probably better.”

In a text conversation with former board member Shivon Zilis, OpenAI co-founder Greg Brockman wrote that the conversation with Musk turned to “talking about structure” and that Musk “said it was a good fit for a nonprofit, maybe it wasn’t right now. appropriate,” according to screenshots from the blog.

Musk forwarded a paper on China’s strategy for AI research facilities to Brockman and OpenAI co-founder Ilya Sutskever. Musk wrote that China will “do whatever it takes to get what we develop. Maybe another reason to change course,” according to the blog post.

Brockman agreed, writing that starting in 2018, OpenAI’s path should be “Al research + hardware for profit,” according to the blog post. Musk replied, “Let’s talk Saturday or Sunday. I have a tentative game plan I’d like to execute with you.”

Over a period of six weeks or so in the fall of 2017, Musk, Brockman, Altman and others negotiated terms for the for-profit OpenAI, but the negotiations broke down as the participants could not agree on capital, control and who would be the CEO. the startup said in the blog. For his investment in OpenAI, Musk initially proposed a scenario where he would have “unquestionable initial control of the company,” but said “this will change quickly” after the company’s board grows to 12 to 16 members, according to the OpenAI blog.

Musk founded a public benefit corporation called “Open Artificial Intelligence Technologies, Inc” in September 2017, according to screenshots from OpenAI’s blog post. Days later, OpenAI rejected Musk’s proposed no-profit terms and offered to hold talks, but Musk responded that his offer was “not on the table” and that “discussions are over,” according to the screenshots.

In January 2018, Musk proposed the introduction of OpenAI Teslahis electric vehicle company, according to the blog.

“The only avenues I can think of are a major expansion of OpenAl and a major expansion of Tesla Al. Maybe both at the same time. The first would require increased donated funds and very credible people to join our board. The current state of the board is very. weak” , Musk wrote, according to the blog. He added that “OpenAI is on the path to certain failure compared to Google.”

Brockman responded with a long-term plan, including the idea that the company should “strive to remain unprofitable,” according to the screenshots. In February 2018, Musk resigned as co-chairman of OpenAI.

OpenAI debuted as a non-profit in 2015, and in 2019 it transitioned to a “no-profit” model, in which OpenAI was a non-profit. government organization for its non-profit subsidiary. Altman said on stage at the DealBook Summit last week that the company decided to move to a profit-limit structure in part because Musk stopped funding it.

Thanks in large part to the viral spread of ChatGPT, which debuted in November 2022, OpenAI has become one of the hottest, and sometimes the hottest. controversialstartups on the planet. The company’s valuation has risen to $157 billion since launching ChatGPT. OpenAI has raised about $13 billion Microsoftand him it closed its latest $6.6 billion round in OctoberLed by Thrive Capital and including a stake in the chipmaker NvidiaSoftBank and others.

The company also received a $4 billion revolving credit facilitybringing its total liquidity to over $10 trillion. OpenAI expects losses of $5 billion this year on revenue of $3.7 billion, CNBC confirmed in September with a person familiar with the situation.

OpenAI is now in the middle of a two-year process to become a non-profit public benefit corporation, which could make it more attractive to investors. The restructuring plan will maintain OpenAI’s nonprofit status as a separate entity, CNBC previously reported. notify.

OpenAI has faced increasing competition from startups like Musk’s xAI and Anthropic, as well as tech giants. google, Amazon and Meta. It’s an AI creator’s marketplace It is projected to exceed $1 trillion a decade of revenue and business spending for AI creation It’s up 500% this yearAccording to the latest data from Menlo Ventures.

Lawyers representing Musk, his AI startup xAI and Zilis he sought a preliminary injunction Against OpenAI on November 29th.

In the request for a preliminary injunction, Musk’s lawyers argued that OpenAI should be prohibited from “benefiting from improperly obtained competitive information or coordination through the Microsoft-OpenAI board interlocks.”

The latest court filings represent an escalation of the legal battle between Musk, OpenAI and Altman, as well as other longtime parties and backers, including Reid Hoffman and tech investor Reid Hoffman. Microsoft.

Musk in March 2024 He sued OpenAI — and co-founders Altman and Brockman — in state court in San Francisco, alleging breach of contract and breach of fiduciary duty. In the suit, Musk said the initial OpenAI team had begun development artificial general intelligence “For the benefit of mankind”, but that the project has become a for-profit entity, largely controlled by the main shareholder. Microsoft.

In June, Musk later withdrew that complaint File again in federal court. Musk’s attorneys in the federal lawsuit, led by Marc Toberoff in Los Angeles, argued in their complaint that OpenAI violated federal racketeering, or RICO, laws.

In November, they expanded their complaint to include allegations that Microsoft and OpenAI violated antitrust laws, with the ChatGPT founder allegedly urging investors not to invest in rival companies, including Musk’s xAI.

“Microsoft and OpenAI now seek to consolidate this dominance by cutting off their competitors’ access to investment capital (group boycotts) while continuing to benefit from years’ worth of competitively sensitive shared information during the AI ​​creator’s formative years,” the lawyers wrote. November presentation They added that the terms OpenAI asked investors to agree to were a “group boycott that blocks xAI’s access to key investment capital.”

Altman denied that OpenAI investors can’t invest in competitors in an interview with The New York Times last week on stage at the DealBook Summit. Altman said investors are welcome to do so, but the company will freeze “informational rights” such as sharing the research roadmap and other materials.

Microsoft has invested nearly $14 billion in OpenAI but appeared in October that it would Record a loss of $1.5 billion in the present period, to a large extent, one expected loss From the start of AI. Microsoft dropped theirs supervisor seat OpenAI’s board in July, even as CNBC reported that the Federal Trade Commission would continue to monitor the two companies’ influence on the AI ​​industry.

– CNBC’s Lora Kolodny contributed reporting.

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