Better Offline - Monologue: OpenAI Was Never A Non-Profit

Episode Date: February 20, 2025

In this week's monologue, Ed Zitron walks you through the early days of OpenAI - and the simmering war between Elon Musk and Sam Altman over its non-profit status. Suit: https://www.courtlistener.com/docket/69013420/musk-v-altman/ --- LINKS: https://www.tinyurl.com/betterofflinelinks Newsletter: https://www.wheresyoured.at/ Reddit: https://www.reddit.com/r/BetterOffline/  Discord: chat.wheresyoured.at Ed's Socials: https://twitter.com/edzitron https://www.instagram.com/edzitron https://bsky.app/profile/edzitron.com https://www.threads.net/@edzitronSee omnystudio.com/listener for privacy information.

This is an IHeart podcast. Guaranteed human. Run a business and not thinking about podcasting. Think again. More Americans listen to podcasts than adds supported streaming music from Spotify and Pandora. And as the number one podcaster, IHearts twice as large as the next two combined. Learn how podcasting can help your business. Call 4-4-844-I-Hart.

CallZone Media. Hello and welcome to this week's Better Offline monologue. I'm your host, Ed, Ed, Zittron. And I know some of you are going to say, Ed, didn't you see? say we'd get a second part. Didn't you say we'd get a second part? Ed, where's the second part? It's coming tomorrow.

You get a monologue as well. Good Lord, the complaints from some of you. Just kidding. You're all very nice. Now, because I deeply hate myself, I decided to sit down and read Case 424 CV 04722YGR from the United States District Court of West and Northern District of California. Nevertheless, what I'm talking about, of course,

is Elon Musk's lawsuit against Open AI filed in August, November of last year. was an amended complaint. Nevertheless, Elon Musk is alleging multiple kinds of fraud as well as violations of the Sherman Act, a core anti-monopoly law from the late 1800s, which most notably was the same law that might lead to the breakup of Google's ad tech and search businesses. Elon Musk, he's suing and he loves to sue. But in layman terms, Musk alleges that Sam Altman tricked him into funding Open AI as a charity, when he actually wanted it to be more like a for-profit entity, a classical startup model. Musk also alleges a conspiracy by OpenAI

to stop people who invested in OpenAI from investing in other generative AI companies, specifically Musk's own AI, as long as others like Anthropic. This sounds like some Musky and bullshit, but this is actually true. It was reported by the information in other outlets. The lawsuit itself is contrived,

including annoying things like Musk's lawyers, referring to Open AI's tax-exempt non-profit as a for-profit market paralyzing Gorgon. Just you don't need to write like this. You fucking losers. Anyway, it is pretty interesting though, and it explores the deeply weird beginnings of open AI itself. To explain, Open AI was originally founded in 2015 by Elon Musk, Sam Altman, and a selection of other engineers. Specifically, it's a non-profit making open source artificial intelligence, and it was meant to be a research house.

Now, another thing is it was specifically made as a reaction to Google's acquisition of artificial intelligence firm DeepMind. The plan, according to emails shared as part of the lawsuit, was to beat Google to the punch by making artificial general intelligence. You know, the entirely fictional concept of a conscious autonomous computer, and then they'd go and open source it. In what Sam Altman called an AI Manhattan project, just I could go into the history there, but is that really what you want to compare this? Anyway, anyway, Antean would go on to tell Elon Musk that the mission would be to create the first general AI, AGI. use it for an individual empowerment, i.e. the distributed version of the future that seems the safest. More generally, safety should be a first-class requirement, and that is a quote, by the way, with the technology owned by the foundation, referring to open AI, and use for the good of the world.

Just a lot of bollocks, really. Anyway, things began to get tense in September 2016, when Sam Altman arranged a deal with Microsoft to buy $60 million of compute for, well, for $10 million, dollars in exchange for evangelizing Microsoft to Zer as their preferred cloud provider, along with some sort of vague consultancy services over Microsoft's models. Musk would respond to the terms by saying, fine with me if they don't use the active messaging would be worth way more than 50 million, not seem like Microsoft's marketing bitch. Two months later, Microsoft would put out a blog post saying that OpenAI was choosing Azure as their primary cloud platform and that OpenAI would become an early adopter

of Azure N-Series virtual machines. some of Microsoft's early GPU compute instances. It's been going quite a while. A year later, in an exhibit from the trial from September 20, 2017, things would get a little more frayed, with Ilius Sutskeva, a gifted engineer recruited by Musk in Open AI's earliest days, sending an email to both Musk and Altman sharing concerns about the future. Altman, worried about how much money it would cost to fund OpenAI, had been considering finding a way to make it a, wouldn't you guess it, for-profit entity. But Sutskeva had other problems and was far more worried about Altman and Musk. In the email, Sutskhaver raised concerns that Elon Musk wanted unilateral absolute control over the AGI,

and that while Musk had claimed otherwise, in negotiating how to keep Open AI going, it was very clear that, and I quote, absolute control was extremely important to him. As an example, Sutskava added that Musk had said that he needed to be CEO of the new company so that everyone would know that he was the one in charge, even though he also stated that he hated being CEO and would much rather not be CEO. Sutskeva added that Musk's concerns that there would be an AGI dictatorship run by Dimmis Hashabis, CEO of Deep Mind, but that in the current structure that Musk was suggesting, he would become a dictator if he chose to. All very good stuff.

Sitskeva, bizarrely, then immediately moved on to say something very, very similar to Sam Altman, saying that, and I quote, he didn't understand why the CEO title was so important, important, and that Sam Altman's reasons had changed, and that it was really hard to understand what was driving them. Sutskeva also added a question, and I quote, is AGI truly your primary motivation? How does it connect to your political goals? How has your thought process changed over time? Altman would reassure Musk both personally and through others that he remained focused on OpenAI's non-profit mission. In January 2018, Altman would suggest a ridiculous idea, selling cryptocurrency to fund Open Open AI, which Musk would warn would simply result in a massive loss of a credibility for Open

AI and everyone associated with the ICO, referring, of course, to an initial coin offering, a flimsy idea that just means just buy a bunch of tokens before the thing goes live, basically how crypto works, I guess. It was a whole boom. I'm not doing a fucking podcast about it. Let's move on. Musk would step down from Open AI in February 2018, and a month later, Sam Womwell would propose a fixed maximum term equity raise, essentially selling stock in Open AI, but an associated entity. Yet it was still a non-profit at the time, and that had a maximum amount you could make on buying it.

It's just very confusing. And what it basically means is, it means that they would create an entity on the side that you could raise money for, that would also own all the bits. I'll get to that in a second. Nevertheless, this is all extremely dodgy and weird. around a year later in 2019, Sam Olin would eventually create the legally precarious for-profit arm of OpenAI,

what I was just talking about, and it was called OpenAILP. And immediately, according to Elon Musk's lawsuit, transferred most of the company's assets and staff. The same year, OpenAI would strike an exclusive partnership with Microsoft to provide the compute for their models. As part of the deal, OpenAI would give Microsoft full license to use their pre-AGI intellectual property and research, which is to say literally everything they've ever made. And this would in turn make, well, this is the funny, weird part. This is the really crazy. This is the part that really gets me.

They would own everything. Microsoft would own everything until they hit AGI. Now, AGI at this point has been defined by OpenAI and Microsofters when they hit $100 billion in profit. Every time I read about and talk about this stuff, I just think, who is the idiot here? Is it Satchinadella? Is it Sam Altman? Are they both just the kind of mediocre rich guy who just bounces their skulls together and they say,

who has the shittiest idea? Who will be the dumbest boy today? Nevertheless, Microsoft owns everything OpenAI makes until they invent AGI, by which I mean they make $100 billion in profit. It's also goddamn stupid. It's also stupid. Now, at some point, I want to do an entire episode on this lawsuit, because it's got so many exhibits and so many warring incentives. Elon Musk's XAI competes directly with OpenAI to make large language models that no one really needs

and that cost more to run than they will ever make. And this lawsuit, as with others, features broad demands for discovery in depositions of people at LinkedIn co-founder and former OpenAI board member Reid Hoffman and attempts to name both Microsoft and Hoffman himself as co-defendants. Since filing the lawsuit, and the Elon Musk-led consortium of buyers has offered $97.4 billion for the assets of OpenAI's charity,

and offer that would require multiple different government agencies to approve, which OpenAI's board has now declined. Either way, while Musk is regularly full of shit, he's right about one thing. Sam Womintman clearly had no intention of ever keeping Open AI as non-profit, nor was he ever dedicated to doing so, or really anything other than making himself CEO and getting a billion dollars. Since 2019, OpenAI has raised up. over $20 billion in funding, and it's reportedly raising as much as $40 billion in the next round,

led by fucking Masayoshi son of SoftBank. It's so good. I love it. And they're likely doing this because the company burned $5 billion in 2024, and is set to as much as double that in 2025, according to estimates. Musk's lawsuit is likely an attempt to interfere with this funding, or to destabilize Open AI at its weakest point. It's flimsy status as a nonprofit that will require a great deal of legal effort to unwind if it's even possible at all. And I must be clear, it may not be possible. I don't think there's any precedent of anyone ever taking a non-profit of this size, of this weirdness, connected to like 20 different for-profit entities, and turning it into a for-profit end. It just doesn't make sense. But I will tell you something that might make you happy,

or might just make your laugh, which is, Open AI only has a year and a half to do so, a year and half to turn from a non-profit into a for-profit. Because a year and a half, all that equity they raised, but it's not equity, it's some weird for-profit sharing. Nevertheless, all the money they've raised in the last round, the six-something billion-dollar one? Yeah, it all turns into debt. Oh, well, I'm sure they'll work it out. They sure haven't yet. Another podcast from some SNL late-night comedy guy, not quite. Unhumor me with Robert Smygel and friends, me and hilarious guests from Bob Odenkirk to David Letterman help make you funnier.

This week, my guest, SNL's Mikey Day and head writer, Streeter Seidel, help an a cappella band with their between songs banter. Where does your group perform? We do some retirement homes. Those people are starving for banter. Listen to humor me with Robert Smigel and friends on the I-Heart Radio app, Apple Podcasts,

or wherever you get your podcasts. Imagine an Olympics where doping is not only legal, but encouraged. It's the enhanced games. Some call it grotesque. others say it's unleashing human potential. Either way, the podcast's Superhuman documented it all, embedded in the games and with the athletes for a full year. Within probably 10 days, I'd put on 10 pounds.

I was having trouble stopping the muscle growth. Listen to Superhuman on the I-Hard Radio app, Apple Podcasts, or wherever you get your podcasts. A win is a win. A win is a win. Yep, that's me. Clifford Taylor the 4th. You might have seen the skits, my basketball and college football journey, or my career in sports media.

Well, now I'm bringing all of that excitement to my brand new podcast, The Clifford Show. This is a place for raw, unfilled conversations with athletes, creators, and voices that not only deserve to be heard, but celebrated. So let's get to it. Listen to The Clifford Show on the IHeard Radio app, Apple Podcast, or wherever you get your podcast. And for more behind the scenes, follow at Clifford and at TikTok Podcast Network on TikTok. I'm Michelle McPhee, and I've been unraveling the strangest criminal alliance I've ever reported on, a Mormon polygamist and an Armenian businessman. Multi-million dollar house, Ferraris and Lamborghinis, private jets, a billion dollar fraud.

But how long can this alliance last? Tell me what you know. Is somebody coming after me? Listen to Kingdom of Fraud on the I-Heart Radio app, Apple Podcasts, or wherever you get your podcasts. This is an I-Heart podcast. Guaranteed human.