Aguilar’s fresh venture, LatinoProsperity, focuses on fostering generational wealth, and he hoped that future high-paying AI chatbots like ChatGPT would be a key component of a large number of well-paying jobs. He was concerned, however, that turning into a public-benefit organization with the authority to chase profits would benefit the currently wealthy and disregard the company’s stated goal of advancing humanity’s entire society with AI.
Aguilar decided to make a phone call that morning, kicking off a series of events that eventually led him to become one of the leading tones battling over OpenAI’s coming and the creation of what may be the deepest-pocketed generous base in the world.
The for-profit operation of OpenAI is currently under the control of a nonprofit, and investors ‘ returns are limited. Investors have demanded greater payback as OpenAI’s ambitions have grown and staying on top of the game has required it to raise significantly more funding.
OpenAI said a recent$ 40 billion investment round propelled its valuation to$ 300 billion, but 75 percent of the pledged cash is contingent on the startup completing a structural revamp by early next year. The AI startup predicted that “one of the best resourced nonprofits in history” would emerge as a result of the decision, though one with less authority over the products OpenAI creates and for whom.
Aguilar is leading a coalition of advocacy groups that met with the San Francisco-based OpenAI in March and is pushing the state’s nonprofits’ nonprofits ‘ California attorney general to make sure the startup’s restructuring is compliant with the law. Their activism has already contributed to OpenAI forming a small advisory commission that includes legendary labor activist Dolores Huerta.
Aguilar claims that “tech companies, they like to disrupt.” We can’t let them deviate from our charitable system and get away with it. We have a tool already—a nonprofit OpenAI with a stated mission to do good things. If that were to be lost in the race for the development of AI, that would be unfortunate.
According to Lindsey Held, a spokesperson for OpenAI, the company’s restructuring “would ensure that as the public benefit corporation succeeds and grows, as does the nonprofit, enabling us to accomplish the mission” of AI broadly benefiting the public.
A group of tech industry heavyweights, including Elon Musk and Sam Altman, cofounded OpenAI as a nonprofit in 2015 with the goal of countering existing AI projects run by big, profit-driven companies. OpenAI intended to share its research with the general public while putting a focus on creating AI systems that are both highly capable and useful.
However, as ChatGPT became a overnight hit and development cost more, OpenAI has increasingly shifted to withholding some of the key details about its research for security and competitive reasons. It’s also now trying to generate significant revenue from its services.
Making a wager that they could find a way to capitalize on the so-called capped-profit venture that sits under its nonprofit parent, Microsoft and several venture capital firms poured tens of billions of dollars into the startup. According to a person with knowledge of internal discussions at the company who requested anonymity to protect industry relationships, those investors could see their returns materializing as soon as 2027, when OpenAI hopes to hold an initial public offering of the public-benefit corporation.
Post-restructing, OpenAI plans to have an affiliated nonprofit. However, it is unclear how much of its current value and potential future profits will be divided between its nonprofit and for-profit arm, as well as what kind of control will either entity have over the other. According to its most recent publicly available federal tax filing, OpenAI’s current nonprofit division reported net assets of about$ 21 million as of December 31, 2023.
Aguilar contends that valuing OpenAI’s nonprofit entity even a penny short of its fair market worth would be unlawful, and anything but total independence from OpenAI would allow commercial imperatives to corrupt the charity. Let’s fair value this and make it independent, he says.
Irrevocable State
Aguilar’s first call last October was to Fred Blackwell, executive director of the San Francisco Foundation, an organization that gives grants to social justice groups, and its chief impact officer, Judith Bell. In an era of cutting-edge treatments and new technologies, the two of them learned about dozens of nonprofit hospitals and health insurance companies that were transforming into for-profit organizations in the 1990s.
Health care executives had discovered ways to increase payouts for themselves while squandering money for affiliated philanthropic organizations as part of some of the conversions. Bell and her then-colleagues at the advocacy group Consumers Union zeroed in on California law stipulating that any money held by nonprofits belongs to the people of the state forever and can only ever be used for charitable purposes. In exchange, nonprofits and their supporters have tax breaks.
Additionally, the law mandates that the attorney general of California approves charitable fund management and conversions. A former California official who was involved in conversion reviews but is not authorized to speak about them publicly says it’s typically a cordial process meant to help organizations lawfully transition to their desired structure—but outside input is welcome.
Bell eventually helped to form a strong alliance of labor and community organizations to lobby the AG over the health care conversions. A set of arrangements, according to Bell, saved$ 15 billion in charitable money from being stolen by businesses and their investors, helped nonprofits retain significant shares in newly established companies. Three of the state’s biggest independent foundations by assets—the California Endowment, California Wellness Foundation, and the California Health Care Foundation—emerged from that advocacy. Bell believes that the for-profit organizations have also succeeded admirably. You can safeguard the charitable assets and enable these businesses to flourish in the for-profit sector, she says.
Late last year, Bell, Blackwell, and Aguilar decided to dust off the old playbook. They organized a coalition of what is now a coalition of over 50 community organizations working together to try to influence the future of one of the world’s hottest tech companies by commissioning a legal memo that reiterated the attorney general’s authority over the irrevocable status of charitable funds.
According to Blackwell, some members of the group are concerned that OpenAI’s plans could compromise the nonprofit sector as a whole. Donors, they argue, may be reluctant to continue contributing if they feel that money earmarked for the public good could be peeled off into for-profit pursuits.
The coalition launched a campaign in January to get the attention of the public after California attorney general Rob Bonta was asked to do a thorough investigation into the OpenAI conversion. The campaign has received a lot of support, including from some ex-OpenA I employees and AI researchers, who have also urged Bonta’s Delaware counterpart, where OpenAI is chartered, to make sure its mission isn’t hampered by the restructuring. ( Both attorney general’s offices have said they are investigating the matter but provided few details. )
By March, OpenAI was planning to meet with Aguilar’s advocacy group. Blackwell, Aguilar, and another coalition leader sat down with two of OpenAI’s global affairs staffers at the San Francisco Foundation’s offices, including Debbie Mesloh, a former senior adviser to then-California attorney general Kamala Harris.
OpenAI’s Held says the meeting raised a “number of misconceptions about our corporate structure—many of which seemed to echo those voiced by Musk”. According to Aguilar, OpenAI wished to change its charitable mission. But what were fundamental concerns about the level of support and independence OpenAI would grant the charitable arm that were left unaddressed?
‘ Big Damn Deal ‘
Daniel Zingale, a retired former adviser to several California governors and now a consultant for OpenAI, was another attendee at the meeting. Mesloh and other business leaders, who had worked with Zingale in California politics, requested his assistance in organizing a group of thought-leaders from the charitable sector to discuss how OpenAI should spend its funds and give its technology to other organizations. In 2023, OpenAI’s current nonprofit arm gave out over$ 2.6 million in grants, including to education institutions, AI safety groups, and economics researchers.
Zingale claims that the outside coalition’s advocacy contributed to the establishment of OpenAI’s advisory commission, which met on April 21 and whose recommendations are due by July 20. ( OpenA I spokesman Held claims that the commission was born out of a long-held desire to connect with the wider nonprofit community in more ways. ) Whether the commission ultimately tackles the concerns raised by the activists remains unclear.
Former media executives Monica Lozano, 95-year-old Huerta, and veteran political adviser Jack Oliver make up its membership. They did not respond to comments made.
Zingale also helped recruit Robert Ross, who previously spent about a quarter century as CEO of the California Endowment, one of the nonprofits that emerged from the health care conversions of the ‘ 90s. Rosens claims that OpenAI is a success because his former organization is well known for its nonprofit-to-profit conversion efforts.
According to Ross,” This is a big deal in civic and political circles, and it will have a lot of negative effects on marginalized and underserved communities as well.” ” Our task is more on the spending side—how should the assets be deployed. If we don’t address governance-related issues, it’s incomplete. I believe you’ll find a report that addresses both concerns.
Aguilar says he is skeptical of the advisory panel’s efforts. Zingale and Ross both claim they have little experience using AI themselves, despite the commission’s purported recommendations for how OpenAI can help ensure everyone has the opportunity to benefit from AI tools.
What I know about AI might fit into a thimble, says Ross, adding that he is eager to learn from more knowledgeable people.
