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Hi, I'm Ed Zittron, and this is your weekly Better Offline monologue.

Precarious. That's the nature of the generative AI industry, and especially Open AI, a company that has never made a profit, has no pathway to profitability, and is contingent upon other companies spending tens of billions of dollars on new infrastructure to power their models in the future. Throughout countless podcasts and newsletters, I've argued that

all of these factors mean that open AI, and by extension, the greater generative AI industry will

eventually collapse. Open AI is just one of a long line of dominoes, and it really only takes one

to fall before the entire thing collapses. But by comparison, I haven't really paid nearly as much

of the attention as I should have to the unusual structure of Open AI, which I believe will also contribute to its downfall.

Open AI was initially started as a non-profit intended to further the safe development of artificial intelligence, if you believe them.

Over time, it morphed into an entirely different beast, becoming the most valuable startup in history, and the startup that has now raised the most capital in history, sort of.

But for legal reasons, it couldn't quite walk away from its non-profit origins, and so we're now left with this strange hybrid that consists of a non-profit that owns much of OpenAI's intellectual property and assets,

and a for-profit business sort of tacked on awkwardly at the side.

In order to satiate its infinite thirst for capital, Open AI must radically restructure the entire

organization, moving valuable assets and intellectual property from the non-profit to the

for-profit entity. Their ability to raise money is entirely

contingent upon this, as generally investors don't plow tens of billions of dollars into philanthropic

ventures where they will never see a return. Indeed, many of OpenAI's previous funding rounds

have had caveats that would radically alter the terms of their deal if OpenAI fails to convert

into a for-profit business.

Last October, they raised $6.6 billion from a bevy of investors, but the deal included a

covenant of sorts that should they fail to convert into a for-profit entity in two years,

...