Balancing Profit and Humanity - OpenAI’s two-fold approach for balancing profit with purpose

OpenAI is one of the most prominent AI research labs, known for creating ChatGPT, a technology that caused ripple effects throughout many industries. During November 2023, OpenAI went through severe public turmoil where their CEO and Founder, Sam Altman, was fired and then rehired. Upon his return as CEO, Sam Altman, made it very clear in an internal message to the company, how excited he was about the future and the unique set-up of OpenAI:

“I believe our resilience and spirit set us apart in the industry.”

Sam Altman, CEO OpenAI[1]

The resilience, spirit, and ultimately, the success of OpenAI have not been overnight achievements, as some may believe. In fact, OpenAI was founded in 2015 as a non-profit company by a number of tech experts and serial entrepreneurs, including Sam Altman and Elon Musk, with the purpose of ensuring ‘AI that benefits all of humanity’[2]. However, being a non-profit company, and a leading developer of AI aiming to benefit all of humanity, does not come without its challenges. One of OpenAI’s challenges has been choosing a financial strategy stable enough to balance the research and technological output whilst still underpinning the non-profit nature of the company.

The early days of OpenAI could be illustrated as a research laboratory funded by pledged donations. The focus was to create cutting-edge AI research and allow free and open collaboration with other organizations, researchers, and institutions, giving credence to the name ‘OpenAI’. As demarcated on an introductory OpenAI post from 2015, it states: “Since our research is free from financial obligations, we can better focus on a positive human impact.”[3] With much of the funding coming from pledged donations – in excess of $1 billion dollars from the founding members – OpenAI was not pressured by external investors to create commercial value and could focus on developing AI for humanity rather than commercializing a product.

However, OpenAI faced financial challenges and internal conflicts, leading to a pivotal decision in 2019 to transition from a non-profit to a for-profit model, with Microsoft prevailing as its biggest investor. The shift sparked concerns about whether the company’s commitment to ethical governance of AI would waver in pursuit of financial gain. To address these concerns, OpenAI devised a unique corporate structure with two arms: a non-profit and a for-profit, featuring a 'capped profit' framework. Under this framework, excess profits from the for-profit arm flows directly to the non-profit, ensuring the purpose remains paramount while still delivering the promised return to investors.

OpenAI’s intention with this new ‘capped profit’ model is to ensure that the purpose statement still takes priority, and to disincentivize that decisions are made purely based on financial gain[4]. To further strengthen this objective, only a very limited number of board members can hold a financial stake. Those with a financial stake are prohibited from voting on any business matters due to the conflict of interest between limited partners and OpenAI’s purpose statement.

The valuation of OpenAI, its resilience as referred to by Sam Altman, and early focus on developing AI benefitting all of humanity, is a complex story which is very likely only in its early stages. Striking a balance between ethical development of a product, that could influence how we work in the future, and governing a company able to secure funding based on solid returns, is a very unique case which will be followed by all tech stakeholders from all over the world over the coming years.

[1] OpenAI: “Sam Altman returns as CEO, OpenAI has a new initial board”, 2023 

[2] OpenAI: ”About”, n.d. 

[3] OpenAI: ” Introducing OpenAI”, 2015

[4] OpenAI: ”OpenAI LP”, 2019