OpenAI’s Alarm Bells: The X.ai Dilemma
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We have big news out of OpenAI. All of the drama around OpenAI switching their nonprofit to a for-profit company seems to have halted. It looks like they've actually reversed courses and they're going to be keeping their nonprofit as a essentially nonprofit. They're going to be making some changes and I'll go over that. Sam Altman, the CEO of OpenAI, released a letter detailing the entire story. I'm going to be breaking down a lot of what he said there as I think it's

super fascinating and pertinent to not just them, but a lot of other AI companies that he calls out. And we're also going to talk a little bit about the lawsuits and drama that might have led to this, namely from Elon Musk and even recently a bunch of Nobel laureates that essentially sent letters to the attorney generals in Delaware and California asking them to halt the transition of opening eyes nonprofit to for-profit. So there's a lot to unpack here. There's a lot of drama. I'll be breaking it down and talking about essentially this

huge new pivot that they have made. Before we get into that, I wanted to say that I have a huge announcement that I have been waiting to give you essentially for the last two and a half years. And that is that my startup AI box that I've been working on for two and a half years, you've no doubt heard me mention it a thousand times at this point has officially launched its first product. It's called the AI box playground. And it essentially, it allows you to use all of the AI models

all on one place. So for $20 a month, you get access to all of the best text models, all of the best image models, all of the best audio models, and you're able to generate, talk to, and use all of these models in the same chat thread. So you could start a chat thread with Anthropic and say, look, I just need you to do some better math, switch to something like Grok that might be a little bit better at the math side of it. And then you're like, fantastic. Now I want you to turn this into a PDF. You could go and get

open AI and use their image generator to create an infographic of that. And this is all happening in the same chat thread, getting context from previous messages, et cetera. So it's really exciting. You can also compare different models side by side. There's a lot of exciting stuff in here. And of course there's a media storage folder where you can see every piece of content,

that you've generated and it will trace you back to whatever chat you were in. So you're not going to, you know, no longer will you be losing images, losing audio and forgetting what conversations those were in and having to try to scroll through them. You could see all of that inside of the media storage. Okay. Let's get back to what's happening over on opening. Oh, and also for AI box, you go to AI box.ai or check out the link in the description to try it out.

I hope you love it. It's something I'm so passionate about. And if you have any good ideas or features or things you want to add, let me know. We're currently actively developing and making some exciting changes and features to it all the time. All right, let's get to OpenAI.

So essentially what's going on, the big drama here is that Elon Musk essentially filed a lawsuit against opening. And a lot of other people, this wasn't just Elon Musk. I know he's got big beef with Sam Altman, but I think this there was a lot of people that were kind of opposed to this. So his lawsuit essentially accused opening. I have abandoned the nonprofit mission, which he said was, you know, trying to.

keep its AI research benefits for all of humanity. He saw a preliminary injunction to open AI's conversion. There was a federal judge that denied that request, but then they actually permitted the case to go to jury trial in spring of next year. So this thing was pending and was going to happen next year if open AI tried to go through with it, but it seems like they have changed course. So

Sam wrote a letter to all of their employees and it's pretty much an open ledger they publish on their website so anyone could read it. And this is what he said. He said, OpenAI is not a normal company and never will be. Our mission is to ensure that artificial general intelligence, AGI,

benefits all of humanity. When we started OpenAI, we did not have a detailed sense for how we were going to accomplish our mission. He kind of talks about how they were just a bunch of researchers that were all sitting around a table. They didn't have any idea that you're going to be using AI for medical devices or learning productivity. They didn't have any idea that you were going to need hundreds of billions of dollars in compute to train models and, you know, to help their users. He says, quote, we did not really know how AGI was going to get built.

or used a lot of people could imagine an oracle that could tell scientists and presidents what to do and thought it could be incredibly dangerous maybe those few could be trusted with it so i mean allegedly he's saying that they just thought like oh we're gonna make something that a handful is really really useful to a handful of high impact people and that's who's gonna have it because we can trust them to have it but he didn't really envision this where everyone had it so

He said, "We now see a way for AGI to directly empower everyone as the most capable tool in human history. If we can do this, we believe people will build incredible things for each other and continue to drive society and the quality of life forward. It will, of course, not all be used for good, but we trust humanity and think the good will outweigh the bad by orders of magnitude." This is kind of interesting, right? The debate of if AI is good or bad.

evidently be able to find use cases of bad, but also everybody's using this every day for all sorts of fantastic things. So I think this is a good take and also accurate. I'm happy to just being honest about that.

Um, in any case, he brings up a very interesting point, which he's saying is called essentially democratic AI. He said that they're trying to stay on this democratic AI path, um, that they want to essentially let everybody be able to use this. And he says that they hope that this democratic AI will beat out the, um, you know, the authoritative AI, which I think he's kind of referring to China and a lot of AI models coming out of there, which are heavily censored, et cetera, et cetera.

So, he said, we believe this is the best path forward. AGI should enable all of humanity to benefit each other. And we know some people have different opinions. This is an interesting line that I had not, like, heard before, but I love it. He said, we want to build a brain for the world and make it super easy for people to use for whatever they want.

He did put some caveats in there as far as whatever they want. He said this will be subject to a few restrictions. Freedom shouldn't impinge on other people's freedom, for example. This makes sense. But yeah, I love this concept of building a brain for the entire world. He goes through a bunch of, you know, he kind of outlines a bunch of things. People are using it for productivity, scientists, coders, a lot of other things and stuff.

you know, how people are using it to handle difficult situations and getting advice and, you know, helping them fulfill all sorts of missions. So he said, and then he, I think he's, he's, so he's building on all the kind of the hype and all the good things it's able to do. And then we get to an interesting part. He says, yeah,

But they want to use it much more. We currently cannot supply nearly as much AI as the world wants, and we have to put usage limits on our systems and run them slowly. As our systems become more capable, they will want to use it even more for even more wonderful things. We had no idea this was going to be the state of the world when we launched our research lab almost a decade ago, but now that we see this picture, we are thrilled.

thrilled. It's time for us to evolve our structure. Here are three things we want to accomplish. So he outlines three specific things. He said, we want to be able to operate and get resources in such a way that can make our services broadly available to all of humanity. So what's crazy here is this is why they essentially justified or said they wanted to switch to a four

profit. They're like, no one's, you know, investors aren't going to give a nonprofit money. We need to be a for-profit so the investors can get money in. And they kind of have this weird capital structure where there was, it was a capped capital structure. So Microsoft invested $10 billion, but they could only get a certain amount of upside. And once they achieved AGI, whatever that definition of AGI is, OpenAI was going to cut off all profits to Microsoft

So like there was all these kind of like rules and they're arguing that those are not necessary. I'll go over why in a minute further on this letter. Sam Altman says why he believes they he wants to get like they want to get rid of that. So what they're kind of doing to get around it.

But before that, he said something crazy in this list of three things. He said, basically, like they want to give it to more people. But he said, which currently requires hundreds of billions of dollars and may eventually require trillions of dollars. If you all remember, there was kind of this article headline a while back that said Sam Alton was trying to raise $7 trillion from, I don't know, like Saudi Arabia and a bunch of other companies and other people or countries. And people were saying he was like crazy and laughing at him.

It looks like he's serious. He thinks this thing's going to need trillions of dollars. And when we're talking about the compute and the data centers and the energy, like it isn't impossible, but that is just such an unfathomably massive number that it is very, very crazy. Okay, the second thing he said they want to achieve

he said, we want our nonprofit to be the largest and most effective nonprofit in history that will be focused on using AI to enable high leverage outcomes for people. Okay, so they want to raise a ton of money and make this available to everyone. They want it to be the most successful nonprofit ever. He

He said, we want to deliver beneficial AGI. This includes contributing to the shape and safety of alignment. We're proud of our track record and the systems we've accomplished. Right. So he's talking about kind of like red teaming and safety. And this is where he puts the line. He says, we want to make sure democratic AI wins over authoritarian AI. Okay. Very cool. Now,

So why did he make this decision? Why are they doing this? He outlines this. He says, we made this decision for the nonprofit to stay in control after hearing from civic leaders and having discussions with the offices of the Attorney General of California and Delaware. So at the end of the day, I don't think staying a nonprofit is just out of the kindness of his heart. He very actively wanted to not do that. But it looks like the Attorney General in these two states, California and Delaware, where they're incorporated and

they would have to essentially use them to transfer this. We're not playing ball. And like I mentioned earlier in the episode, Elon Musk is,

We spearheaded some lawsuits. We had some Nobel laureates that were sending letters to the attorney general of California asking them not to allow them to do this. So there's a lot of political pressure, a lot of pressure from the community. What's interesting is they call it Microsoft because I'm sure Microsoft was one of the big players that was like, okay, let's get rid of this stupid capital structure thing. We invest a lot of money in you. We got a big partnership going. We don't want to be capped.

Let's get rid of this. So they said, we look forward to advancing the details of this plan and continued conversation with them, Microsoft and our newly appointed nonprofit commissioner, AKA like they don't want us to change. So we're going to say nonprofit and we're excited for our ongoing conversations with Microsoft on how exactly that's going to work. So I'm going to be curious to see what Microsoft says about that. In any case.

He said, opening I was founded as a nonprofit. Is today a nonprofit that oversees and controls the for-profit and going forward will remain a nonprofit that oversees and controls the for-profit. That will not change. Okay. He says the for-profit LLC under, so now we're getting into like the business structure details, but I do think this is interesting because he's calling out a couple other companies that are doing the same thing. So he said the for-profit LLC under the nonprofit, right? So they have a nonprofit that owns a for-profit LLC and

is going to transition. Oh, what? What you say? They're still transitioning? Yes. The for-profit LLC is going to transition into a PBC or a public benefit corporation. And it's going to have the same mission. But essentially, he says that PBCs have become the standard for-profit structure for other AGI companies. So he actually calls out a couple others like

and XAI. Elon Musk obviously throwing a ton of lawsuits his way has XAI who is set up as a PBC, a public benefit corporation. So it looks like opening eyes like, look, if we can't be a for-profit, we're just going to copy other guys, be a public benefit corporation. There's some benefits there that they weren't seeing

from their for-profit LLC. He said, many other purpose-driven companies like Patagonia have done this. We think it makes sense for us too. So he said, instead of our current complex capped profit structure, and by complex, this is actually true. This is quite complex what they have going on because the

The big debate is like they said, once we achieve AGI, Microsoft no longer gets to, you know, get any of our profit. And the reason why he's calling this a complex structure is because there is no clear definition of AGI. They're making it up and they're also developing AGI. And so it's obviously a very tricky point where it's like they don't want to classify anything as AGI or Microsoft doesn't want them to because they don't want their profit to stop. And they don't want to.

I guess they probably are incentivized to categorize things as AGI sooner than later because then they can stop paying Microsoft. But there's all these, that would be an absolutely insane legal battle whenever they say they achieve AGI and want to cut Microsoft off. So I think they're just trying to get ahead of that and say, look, just forget the cap structure. We'll make it normal. And I think that's kind of what this conversion is all about. Obviously, Microsoft, one of the big players that's put in $10 billion is probably pushing pretty hard for all of this.

So they say we're moving to a normal capital structure where everyone has stock. This is not a sale, but a change of structure to something simpler. Okay, so they're getting rid of the capped thing. So they say the nonprofit will continue to control the PBC. It's going to be this biggest shareholder.

In any case, he kind of goes over all of that and says that this is the recommendation. This is what he thinks, whatever. He talks about some of the great things they're doing. He says, this is the final line here. He says, we believe this sets us up to continue to make rapid, safe progress and to put great AI in the hands of everyone. Creating AGI is our brick in the path of human progress. We can't wait to see what bricks you will add next. Sam Altman.

All right, this is absolutely fascinating. Fascinating, so much drama, but it is really interesting to see what they've wrestled with, why they're doing this and where they are today. I'll definitely keep you up to date on all things OpenAI, all the different updates that they have.

rolling out and how this conversion goes through. If Elon Musk, I'm assuming will now drop his lawsuit as there doesn't seem like as much purpose for it. And to be honest, maybe his lawsuit accomplished its purpose, kind of scared them away from spring of 2026 when they had to fight through that with him. They could just get rid of it by copying exactly what he's doing with the PBC. So very, very interesting. Thank you so much for tuning into the podcast today. I hope you learned something new about AI, about this crazy

crazy world we are living in. And if you want to try my new AI platform, AI box, try out our new, our new beta playground. It is AI box.ai. There's a link in the description and I would love to have you tell me what you think and let me know if there's any cool features you'd love for me to add. Thank you so much. And I will catch you next time.