Profit or Purpose? OpenAI's $300 Billion Question, with Rose Chan Loui

Capitalisn't

University of Chicago Podcast Network

Stigler Center, Chicago Booth, Socialism, Antitrust, University Of Chicago Podcast Network, Growth, 087667, Policy, Monopoly, Professors, Distortion, Research, Competition, Capitalisnt, Inequality, Promarket, Politics, Policymaking, Special Interest, Economics, Efficiency, Regulations, Chicago, Business, Markets, University Of Chicago, Kate Waldock, Capitalism, Friction, Bethany Mclean, Government, Macroeconomics, News, Education, Waldock, Georgetown, Microeconomics, Luigi Zingales, Zingales, Finance, Ucpn

4.5 • 584 Ratings

🗓️ 17 April 2025

⏱️ 48 minutes

🔗️ Recording | iTunes | RSS

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Summary

All too often, capitalism is identified with the for-profit sector. However, one organizational form whose importance is often overlooked is nonprofits. Roughly 4% of the American economy, including most universities and hospital systems, are nonprofit. One prominent nonprofit currently at the center of a raging debate is OpenAI, the $300 billion American artificial intelligence research organization best known for developing ChatGPT. Founded in 2015 as a donation-based nonprofit with a mission to build AI for humanity, it created a complex “hybrid capped profit” governance structure in 2019. Then, after a dramatic firing and re-hiring of CEO Sam Altman in 2023 (covered on an earlier episode of Capitalisn’t: “Who Controls AI?”), a new board of directors announced that achieving OpenAI’s mission would require far more capital than philanthropic donations could provide and initiated a process to transition to a for-profit public benefit corporation. This process has been fraught with corporate drama, including one early OpenAI investor, Elon Musk, filing a lawsuit to stop the process and launching a $97.4 billion unsolicited bid for OpenAI’s nonprofit arm. Beyond the staggering valuation numbers at stake here–not to mention OpenAI’s open pursuit of profits over the public good–are complicated legal and philosophical questions. Namely, what happens when corporate leaders violate the founding purpose of a firm? To discuss, Luigi and Bethany are joined by Rose Chan Loui, the founding executive director of the Lowell Milken Center on Philanthropy and Nonprofits at UCLA Law and co-author of the paper "Board Control of a Charity’s Subsidiaries: The Saga of OpenAI.” Is OpenAI a “textbook case of altruism vs. greed,” as the judge overseeing the case declared? Is AI for everyone, or only for investors? Together, they discuss how money can distort purpose and philanthropy, precedents for this case, where it might go next, and how it may shape the future of capitalism itself.

Transcript

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0:00.0	There's so much money to be made. So then do you say it's better for philanthropy to take that money, their share of it and go?
0:08.0	Or is really important to follow the purpose? The purpose is very clear.
0:15.0	I'm Bethany McLean. Did you ever have a moment of doubt about capitalism and whether greed's a good idea?
0:21.9	And I'm Luigi Zengalis.
0:23.3	We have socialism for the very rich, rugged individualism for the poor.
0:28.8	And this is Capital Isn't, a podcast about what is working in capitalism.
0:32.7	First of all, tell me, is there some society you know that doesn't run on greed?
0:37.2	And most importantly, what isn't?
0:39.3	We ought to do better by the people that get left behind.
0:42.3	I don't think we should have killed the capital system in the process.
0:46.3	All too often, capitalist is identified with the for-profit sector.
0:51.3	One important organizational form, which is often ignored, is a non-for-profit.
0:56.3	Roughly 4% of the economy is run by non-for-profit. It seems small, but most universities and a lot
1:02.5	of hospitals are non-for-profits. And, of course, a once not-for-profit is at the very heart of one
1:08.4	of today's biggest debates, which is the future of Open AI.
1:11.7	Open AI is the company, of course, that created the famous ChatGBT.G.T. It was founded in 2015
1:16.5	as a nonprofit research lab with a mission to develop artificial general intelligence called
1:21.8	AGI for the benefit of humanity, and the quote was unconstrained by a need to generate financial return.
1:28.9	Open AI technically was initially a tax-exempt 501c3 nonprofit, a dealer-aware non-stock corporation.
1:37.9	It rely on large donation to fund research, and as a non-for-profit had no owners or shareholders,
1:43.9	it was governed by a board
1:45.1	of directors tasked with ensuring that any assets and work serve the public benefit.
	...

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