Space Age Pimpin -- OpenAI, Elon and Nonprofts

OpenAI was founded as a nonprofit with a bold promise: build Artificial General Intelligence that benefits humanity — not shareholders.

But AI costs money. A LOT of coins!

In Episode 6 of Philanthropy N The Black, “Space Age Pimpin. . . OpenAI, Elon & Nonprofits,” we unpack how OpenAI evolved from a mission-driven nonprofit into a billion-dollar Public Benefit Corporation backed by massive corporate investment.

We breakdown:

• Why OpenAI created a for-profit subsidiary
• Elon Musk’s lawsuit against OpenAI
•  How nonprofits use for-profit entities
• The ethical tension between mission and money

This episode explores the collision of nonprofit governance, artificial intelligence, corporate power, and the future of public trust in innovation.

Because this isn’t just about AI.

It’s about what happens when a nonprofit creates something worth a trillion dollars.

Transcript

SPEAKER_00 0:00

Yo, is Elon Musk right? Or is he the devil? Let's get into it. This is philanthropy in the black, where we endeavor to help nonprofits stay in the black, not only financially, social, and more. But what we're about to get into right now is the hot topic right now. You're paying attention out there, technology, business, law, and nonprofits. This is where we come in. This is why we're about to talk about it. Let's go. Listen. Listen, listen, listen. Open AI, people. If you don't know what that is, where shall I begin? I'm gonna break some things down to you about this whole um change in structure as it relates to open AI starting as a nonprofit and then moving on into uh different structures on the for-profit side and how that impacts our community in the nonprofit sector. So rock with me for a tight minute and we're gonna get through this. Let's go. So here it is. Here it is. Right now, we're dealing with one of the biggest, to me, one of the biggest nonprofit identity crisis in modern history. Like to me, the last few years watching OpenAI maneuvering, it has been fascinating and terrifying because the company behind open AI started as a nonprofit, right? You know, you we have this corporate stuff now, and we'll get into what it is now. But it started as a nonprofit, not in Delaware, um, not nonprofit-ish, but a actual mission-driven nonprofit. And now, with all of the work and investment and donations and possibly a public uh what was that, that Wall Street uh initial public offering, we're looking at a company and foundation that together in some ways could be worth a trillion dollars by the end of the year. And I'm talking about with a T, a trillion dollars. It has investors, commercial products, corporate partners, employee equity, and now it has a public benefit structure. And I'm gonna go over what that is with you again. I dived into I dove into a rabbit hole, and you're coming with me now. So let's go. You ready to go down this rabbit hole? Here we go. So the question becomes did open AI abandon the public or did reality force them to evolve? Am I my brother's keeper? And more importantly, for our world, what happens in a nonprofit sector when your mission becomes worth billions of dollars? We're talking 850 billion plus right now, and I think the foundation 130, 130 billion dollars. What happens when your mission becomes worth money? So I'll take you back briefly so so we understand how we got here. And if you haven't heard this story, well, here you go and always fact-check me. Here we go. So 2015, 14, 16, OpenAI was funded, I'm sorry, founded by guys and gals like Sam Altman, Greg Brockman, John Schulman, uh Suits Kiever, I believe how you say that. And of course, Elon Musk. Now, Elon reportedly in the beginning, in those days, he upped uh 38 million with an M to help OpenAI get started. And right now, he's suing OpenAI and his people. We're gonna get to that mess a little bit later. But the original mission of the uh, and still the mission, I don't want to say original, the mission still of OpenAI is as follows. To ensure artificial general intelligence benefits all humanity. That's their mission. Ensure all artificial general intelligence benefits I'm sorry, benefits all humanity. Humanity, not shareholders, not Wall Street, humanity. That's you and I, right? That's what their goal started as, and we'll get into whether it is still that and how this thing plays out. I believe it is. Okay. The founders of what they call, you know, we call AI, they call they're calling AGI, artificial general intelligence. They believed that AGI could become too powerful to be controlled by corporations. They didn't want that. So the nonprofit structure was supposed to protect the public. That was the whole point. Protect you and me. So nonprofit, you know, nonprofits are all about the good of the public interest or the public interest, right? Taking care of those things in our community that need to be taken care of. So, what better way with a mission that strong, you know, you don't jump into corporate America, you jump into the nonprofit sector. And we'll tell talk about how that um right now, about how that probably backfired a little bit. We'll see. Your opinion matters too, guys. Um, the problem was AI is expensive as hell, y'all. Like that, so you start as a nonprofit, and this is a great thing. You're out here doing God's work. You're doing work in the community, you are doing, and then you realize one day something, something is off. Something is wrong. Show me the money. Let's look at that's this work, y'all. This work is expensive. And when I say this work, I'm talking, I'm not talking about nonprofit gala expensive. AI work is supercomputer expensive, it's data center in New Orleans East expensive, it's a billion-dollar chip expensive, it's burn money faster than Uber expensive because training advanced AI models cost billions of dollars, not millions, but billions. And eventually, Open AI realized that donations and philanthropy alone could not fund the future of what they were trying to build. Woke up one day and said, This ain't right. So, you know, I was reading like these articles in the New York Times and and the BBC, and it showed that the leadership in this uh organization at the time, nonprofits still, they needed access to levels of capital usually reserved for tech giants and and public markets. They needed the money. Because while nonprofits move on grants, AI moves on what they call compute, and that's like the engine of AI. It's the training advanced infrastructure, right? Compute. And compute costs money. I hope I said that word right. It's spelled compute, a ridiculous amount of money. So in 2019, this leadership, this this structure with my man Oatman and such decided, you know what, we're gonna um create Open AI LP. It's a uh it was called a capped profit company, basically saying, yes, investors and employees can make money, but only up to a limit. And that right there, that's where everything changed because that's when they got this influx of money, um, massive investment, including uh like a billion from Microsoft. You know, you can't be in a technology space without the big boys in there. And right now, Microsoft owns or has equity of about 27% in Open AI. That's a lot. So you know they probably that's probably billions in itself, but they invested, they were an early investor in this new structure, right? But this is where the nonprofit world should have paid attention because open AI stopped being a nonprofit building technology, right? That's what it was, a nonprofit building technology. What it became was a technology company with a nonprofit mission. That's a big difference. Mission-driven, sure, but capital-powered, absolutely. And I don't want you guys to think that this kind of maneuvering by a nonprofit to survive and to grow is is new. OpenAI didn't invent this structure. A lot of AI now, a lot of nonprofits have for-profit subset subsidiaries, right? And what these nonprofits create these subsidiary subsidiaries to do is generate revenue, protect their text, exempt status, separate any risky business operation, monetize intellectual property, and the scale comp uh operations. A lot of um nonprofits are always um these feasibility studies and uh advisors and consultants always say, you know, they warn organizations about the opportunity and the danger of these structures, right? Like there's inherent risk when you become when you get into the capital world, the capitalistic world, right? But you have to survive. But again, this isn't new. There are here's some examples of four nonprofits that have four-profit subsidiaries. Goodwill. Goodwill runs workforce and employment programs, right? Um, but they also have huge retail business, the thrift stores, right? Those stores that you go in and buy the $5 shirt, that's commercial revenue supporting the mission, right? You many universities have hotels, they own hotels, bookstores, real estate companies, research parks, licensing businesses. Some universities operate billion-dollar ecosystems while still legally being a nonprofit. Let's not forget healthcare, nonprofit hospitals. Many of these nonprofit hospitals own insurance companies, form pharmacy operations, uh, urgent care chains, so on and so forth. Mission at the top, commercial activity underneath. That's what this is. But here's what's different about open AI as opposed to those places. I'm gonna blow your mind. I think I'm going to blow your mind because here's what's different. Open AI, they weren't selling t-shirts and washing cars to raise money, right? They weren't a small operation. They build technology that is currently shaping everything we do. This is civilization changing what they're doing. They're not just trying to find a cure for foot cancer or eyesores. They're they're creating and reshaping civilization. I'm talking about our jobs, education, warfare, even what we're dealing with now. AI is a big part of what's going on. The elections, healthcare, journalism, human relationships themselves are changing based on this AGI. And here's the thing: I'm not talking Chat GPT people. Listen, I know I love chat GPT. I use it, okay? But here's the thing that's basic level. I'm not talking about that. When I say AGI, I'm talking about advanced reasoning models, I'm talking about autonomous AI agents, I'm talking about robotics integration, scientific research acceleration. This is infrastructure level technology, I'm talking about, not just help me write this paper. So think about that. This company, as I said earlier, you know, looks like it's it's being valued right now. The worth the the worth of this company is around 852 with a B billion. And before they do this public IPO deal, it might hit a trillion dollars. Can you imagine that? So, unlike most nonprofits, nonprofit subsidiaries, this one could become one of the most powerful corporations in human history. OpenAI. A trillion dollars. Now, let's get into the mess. Musk says uh that uh open AI abandoned its nonprofit mission. And if you remember, the mission is to ensure that uh artificial general intelligence benefits humanity. Musk is saying that they abandoned that mission when they became for profit. He argues that uh AI was supposed to serve humanity, not become another tech giant, right? Valuation and marketing. And I listen, so his he these these are his arguments, right? But you know there's some ego in there and there's some competition in there, so he's probably feeling like You embarrass me, man.

SPEAKER_01 13:12

For the all them people, you treating me like I was soft, man. You treated me like I was violent.

SPEAKER_00 13:19

Yeah, that's Elon to Musk, right? Or muck, I'm sorry, Musk to Altman, or vice versa, really, at the end of the day, because this the court testimony and the reporting should suggest that the legal battle really centers around um whether or not open AI misled donors, but people are saying it's an ego thing. Like it he wanted to get in, right? My man has a whole AI company of his own called XAI, I believe, right? And so people are going, he wants to take control. That's what he was aware of these things. This is the messy part. This is why they are in court, right? I think the judge threw out a lot of things, but the the premises basically now did open AI abandon its mission, mislead, let's put it this way, mislead donors. Did they change? But open AI is saying this the restructuring was necessary. My man Musk knew about the discussions about commercial expansion, and AI simply costs too much to develop under a net a traditional nonprofit structure. So that's why my my folks are at board right now, and there's a lot going on. He'll probably lose, but he may, you know, when you look at the Southern Poverty Law Center case about misleading donors, that's always that's what's important for our sector to remember, folks. Do not mislead your donors, and so we'll see how that plays out. But that's the core, and that's the messy part. But I want to get back to the public benefit corporations. So let's move to 2025, late 25. They restructured again, open AI, right? They became a public benefit corporation or PBC. Now, here's why that matters. A PBC is still a for-profit company, it is still a for-profit company. It but but here's the caveat: it is legally required to consider public benefit alongside shareholder profit. Think about that. We're getting this money, but we got to make sure we watching our mission. Yeah, that's crazy to me. I I don't know. I don't know. Um AI is saying, I'm sorry, open AI is saying that they they had to come to this PBC structure to raise the massive capital needed. We keep going back to the money. They needed to they needed it to preserve the nonprofit oversight. Uh, you got your board. They needed it to legally bind the company to a public mission and create long-star long-term stability for future growth. The nonprofit parent organization still controls the company through governance rights and board oversight, right? So they still have the power of fiduciary responsibility and all that. I think they also appoint board members to the for-profit board and so on and so forth. So, reports suggest that the nonprofit equity, the the parent company, could eventually see exceed $130 billion. Listen, the nonprofit size specifically could be valued at $130 billion with the B dollars. If that's true, this would be one of the largest philanthropic endowments in human history. Surpassing Rockefeller and uh Bill and Melinda Gates, apparently. Think about that. One of the largest philanthropic endowments in human history. This is where we are, people. And here's why it matters for our sector and why why I brought this to you uh via this podcast. Because open AI is exposing one of the biggest questions in philanthropy to me. And that question is what happens when your when mission-driven work, good work, becomes commercially valuable. What happens when mission-driven work becomes commercially valuable? The nonprofit advisory world warned us for years that for-profit subsidiaries create opportunities, but also they create mission drift. I'm here to save the world, but there's a billion dollars over here. I gotta, you know, what they say, what's that saying? Um money is the root of all evil. That's one. Uh absolute power corrupts absolutely. All the things, right? So can you hold on to your mission when you get in billions, people? We ain't even talking millions. Again, you have opportunities when you create this for-profit subsidiary, but you could get gov uh conflict on your board or governance problems, compensation controversies, public trust concerns, and blurred lines between public good and private enrichment. Do you stay pure and underfunded? Do we poll? We poll, we poll out here. Do you stay poor and underfunded? Or do you scale up and risk becoming the very thing you were trying to protect people from? This ain't just an AI question. That's a nonprofit question. As we are always in a campaign season, either going in one, coming out of one, or preparing, right? Like it's always more money is needed. Every founder has to face this question, every board has to face this question. Every growing organization eventually faces this question, people. It is a heavy question because we need the support, we need to scale up in some ways. Sometimes we need to merge with other and collaborate with other organizations. Sometimes we need to close the damn doors to the organization we run because it is not creating any impact. That's just the hard facts, people. At the end of the day, open AI may still legally serve humanity, but the bigger they get, the harder it becomes to separate mission from money. Huh. That's Philanthropy in the Black. If you enjoyed this, please share this content with your family, folks, and friends and colleagues. And we're gonna keep coming back with more. I appreciate you. Check out the website philanthropyandheblack.com. I'm your host, Selly Sell. We out.