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I'm Ed Zittron. This is P. Better Offline.

I'm Ed Zittron. This is Better Offline and this is the second episode of my two-part series

where I explain how Open AI has become a systemic risk to the tech industry.

Even with its massive $40 billion funding round, a birdbrain benefactor in the form of SoftBank,

the world's foremost authority in losing money. Now, before I continue, shameless request, better offline has been nominated for a Webby, and I want to win this thing. I've linked to it in my Twitter and my blue sky, and if you could vote for me, well, it'll be in the episode notes too. Moving on. Back at it. Okay. All right. Open AI now has $40 billion somehow. Right, great, right? Well,

old your horses. As part of its deal with SoftBank, Open AI must also convert its bizarre non-profit structure into a for-profit entity by December 2025, or it'll lose $10 billion from that $40 billion round of funding.

And just to be clear, by the way, they've only really got $10 billion of that so far.

The rest is at the end of the year.

Furthermore, in the event that OpenAI fails to convert into a for-profit company by October

2026, investors in its previous $6.6 billion funding round can claw back their investment,

with a converting into a loan with an attached interest rate.

Naturally, this represents a nightmare scenario for the company, as a little increase

both its costs and its outgoings.

This is a complex situation that almost warrants its own podcast, but the long and short

of it is that Open AI would have to effectively dissolve itself, start in the process of reforming an entirely new entity, and distribute its assets to other non-profits or seller-license them to a for-profit company at fair market rates, which they would not set.

It would also require valuing Open AI's assets, which in and of itself would be a difficult task, as well as getting past the necessary state regulators, the IRS, state revenue agencies, and the upcoming trial with Elon Musk.

Well, that only adds further problems.

I've simplified things here, and that's because, as I've said, this stuff is a little complex and pretty boring.

Suffice to say, this isn't as simple as

...