Returns for our first round of investors are capped at 100x their investment (commensurate with the risks in front of us), and we expect this multiple to be lower for future rounds as we make further progress.
I remember OpenAI or Sam Altman saying that in subsequent funding rounds, the profit cap would decrease, eventually reaching 2x. But I can't find a source for this right now. (Even if I am remembering correctly, who knows if OpenAI ever actually lowered the cap below 100x.)
Now that I'm thinking about it more, the 100x profit cap was always too low. If OpenAI's valuation in 2019 was $3 billion or less, then now, with a valuation of $300 billion, those first-round investors would already hit the cap on their returns.
It seems like OpenAI was already trying to rectify this problem before its recent announcement. In 2023, The Economist reported that:
Profits for investors in this venture were capped at 100 times their investment (though thanks to a rule change this cap will rise by 20% a year starting in 2025). Any profits above the cap flow to the parent non-profit.
If the purpose of the profit cap (or return on investment cap) is to limit OpenAI investors from having an obscene level of ownership over the wealth generated by AGI, this this makes a lot more sense. (I'm assuming that the profit cap is abandoned now and this is a moot point, but I find it interesting to think about anyway.)
If OpenAI had stuck to the plan of increasing the 100x profit cap by 20% year every year starting in 2025, here's what the profit cap would be in future years.[1]
2030: 250x
2035: 620x
2040: 1,540x
2045: 3,830x
2050: 9,540x
2055: 23,740x
2060: 59,070x
2065: 146,980x
2070: 365,730x
As time goes on, eventually the number gets too big, but even 365,730x is not a totally unprecedented return on investment in the pre-AGI world. Mike Markkula's angel investment in Apple would have had a return on investment (ROI) of over 3,000,000x had he retained his shares from the beginning until the 2020s.
If you look up lists of the stocks that have grown the most from IPO to their all-time high, or the venture capital investments that have had the best ROI, you see some numbers in the 1,000x to 10,000x range. So, a 10,000x cap would not be unreasonable.
If you think the amount of wealth generated by AGI will be essentially unlimited and defy calculation by conventional standards, then it shouldn't be a problem to have a cap of 10,000x or even 100,000x or 1,000,000x, since that would still end up being a small percentage of the overall amount of wealth generated by AGI.
Executive summary: OpenAI’s announcement that its nonprofit will retain control of the company appears to be a partial concession to critics, but accompanying structural changes — particularly the likely elimination of profit caps — suggest a deeper shift toward investor-friendly governance, raising doubts about whether the nonprofit’s oversight will meaningfully constrain for-profit incentives.
Key points:
Nonprofit control retained, but profit caps likely removed: OpenAI affirmed that its nonprofit will remain in control, but Sam Altman’s statements indicate a move toward a traditional corporate structure, suggesting the elimination of previously pledged profit caps meant to ensure mission alignment.
Profit cap removal implies high investor expectations: The shift away from capped returns, despite claims of lower expected profits, suggests investors still see massive potential upside — undermining claims that profit limitations were obsolete or merely complex.
Questions around investor clawbacks and nonprofit compensation: While OpenAI hasn’t clarified whether investors can demand repayment of $26.6 billion due to missed restructuring deadlines, the post predicts that eliminating profit caps is part of a broader deal including significant nonprofit compensation.
Board independence and meaningful control remain unclear: Though the nonprofit technically appoints the board of the for-profit entity, the same individuals currently sit on both boards, raising concerns about the board’s ability to act independently — especially after the reversal of Altman’s firing in 2023.
Potential strategic use of nonprofit funds: The author expects the nonprofit to use new funds to buy OpenAI services for governments and nonprofits, especially those with regulatory power over the company.
Cautious reception from critics: Some civil society leaders and former employees express skepticism, noting that real nonprofit control hinges on enforceable duties and independent oversight, not just legal structure — and that OpenAI’s shift came only under public and legal pressure.
This comment was auto-generated by the EA Forum Team. Feel free to point out issues with this summary by replying to the comment, and contact us if you have feedback.
Four Predictions About OpenAI's Plans To Retain Nonprofit Control
An apparent victory for opponents of the company's for-profit ambitions may be more complicated
This is the full text of a post first published Monday on Obsolete, a Substack that I write about the intersection of capitalism, geopolitics, and artificial intelligence. I’m a freelance journalist and the author of a forthcoming book called Obsolete: Power, Profit, and the Race to Build Machine Superintelligence. Consider subscribing to stay up to date with my work.
After months of controversy and litigation, OpenAI just announced that it will keep its nonprofit in control of the company — while hinting that caps on investor profits might disappear.
At a glance, this appears to be a significant reversal from the company's previous plan to shed nonprofit control over the for-profit entity, an effort that faced major opposition from parties including Elon Musk, civil society leaders, former employees, and legal scholars.
"OpenAI was founded as a nonprofit, and is today overseen and controlled by that nonprofit. Going forward, it will continue to be overseen and controlled by that nonprofit," Bret Taylor, chair of the nonprofit's board, wrote in a blog post today. The announcement followed discussions with the attorneys general (AGs) of California and Delaware, who oversee charitable organizations in their states and havebeen scrutinizing the proposed restructuring — which either of them could have blocked.
But what does "control" actually mean in this context? And will the profit caps — which would have sent OpenAI's profits to the nonprofit once investors received returns of up to 100-times their investment — remain in place?
And does OpenAI now owe investors $26.6 billion, plus interest? The company reportedlygave investors in its last two fundraising rounds the ability to claw back tens of billions of dollars, if it didn't shed its nonprofit controls by certain deadlines. The status of these provisions didn't appear to be explicitly addressed by OpenAI.
Reading between the lines
While the announcement keeps the nonprofit in control, CEO Sam Altman's accompanying letter suggests a significant change to the capped-profit model:
Instead of our current complex capped-profit structure—which made sense when it looked like there might be one dominant AGI effort but doesn’t in a world of many great AGI companies—we are moving to a normal capital structure where everyone has stock. This is not a sale, but a change of structure to something simpler.
This language implies that the profit caps, a crucial feature of OpenAI's original model, will be modified. These caps were intended to ensure that if OpenAI became wildly profitable through building artificial general intelligence (AGI), the vast majority of profits would flow to the nonprofit. OpenAI's charter defines AGI as "a highly autonomous system that outperforms humans at most economically valuable work." And it's worth noting that normal corporations don't have caps on investor returns.
Altman seems to be arguing that because many companies will build AGI, no single company is going to pull in the trillion-dollar-plus profits they once anticipated. As a result, the nonprofit will actually be giving up less in expected profit and will need to receive less compensation for the removal of the caps.
But if investors have been balking at the profit caps, as they reportedly have been, then that may mean they think OpenAI has some appreciable chance of hitting them.
In other words, what Altman wrote doesn't make much sense. If OpenAI is no longer on track for trillion-dollar profits, the caps should be irrelevant. The fact that investors purportedly pushed to eliminate them suggests they believe OpenAI’s upside remains enormous — and that the caps were more than just a technical nuisance. I find it hard to imagine that investors are put off by the complexity of OpenAI's structure more than the caps themselves.
Without these limits, OpenAI’s investors could reap uncapped returns — fundamentally changing the company's incentives and undermining its original intention to avoid the corrupting influence of profit-maximization.
The control question
A key question that remains unanswered is how much OpenAI's nonprofit control really matters if the board doesn't exercise independent judgment. After the November 2023 firing and rapid rehiring of Altman, it's reasonable to wonder if the nonprofit board will ever again meaningfully stand up to the CEO or the for-profit entity.
Taylor shared a "technical detail" with reporters: the PBC will have its own board, but the nonprofit will appoint its directors — and for now, the same people will sit on both boards.
As the technology OpenAI builds grows more capable and widely used, the way it's governed matters more.
This also matters because if OpenAI actually builds AGI, it's not out of the question to think it could generate trillions in profits. Without profit caps, there would be no legal obligation to share that money with the world, beyond what they pay in taxes and whatever stake the nonprofit retains.
Perhaps more importantly, nonprofit control makes it easier for directors to justify decisions that are good for the world or safety but bad for the bottom line. Shortly after Altman was fired, OpenAI's chief strategy officer Jason Kwon reportedly told then-director Helen Toner that by voting for the firing, she had violated her duties — but under the nonprofit structure, her duty was to humanity writ large, not shareholders.
A fiduciary duty to humanity may sound silly, but the degrees of freedom it offers could matter enormously in moments of crisis or when making key decisions about powerful AI systems.
Four predictions
Based on my past reporting and reading between the lines of the announcement, here's what I expect to happen:
The profit caps will be gone, replaced with a "normal capital structure where everyone has stock" — and that stock entitles you to uncapped future profits.
OpenAI won't have to pay back the $26.6 billion to investors because they've signed off on this change in return for the profit caps being eliminated.
The nonprofit will be compensated tens of billions by the for-profit entity for the removal of the caps.
The nonprofit will largely use that money to buy OpenAI services for nonprofits and governments, targeting constituencies that can make life difficult for the company (like California nonprofits).
As Altman wrote in the letter, the nonprofit "will become a big shareholder in the [new public benefit corporation for-profit entity], in an amount supported by independent financial advisors, giving the nonprofit resources to support programs so AI can benefit many different communities."
Is this a victory?
The "Not for Private Gain" letter from civil society leaders, former employees, and Nobel laureates that Obsolete covered last month argued that no sale price could adequately compensate the nonprofit for what it would be giving up — control over a company that might build AGI. They essentially said: this isn't a debate about fair market value.
In response to the news, former OpenAI researcher Todor Markov tweeted:
Glad you're making this commitment.
I do think it's unfortunate that you only made it after public pressure and the Attorneys General getting involved. Had you done this back in December, it would have looked like principle, not like you got dragged kicking and screaming.
Still, regardless of your true motivations, this decision is a win for the broader public. We’ll be watching closely to make sure nonprofit control remains more than just words on paper.
Page Hedley, who led the "Not for Private Gain" letter and also used to work at OpenAI, is less sure that this is a win. "We’re glad that OpenAI is listening to concerns from civil society leaders and Attorneys General Jennings and Bonta," he wrote in a statement that raises these questions:
Will OpenAI's commercial goals continue to be legally subordinate to its charitable mission, which is enforceable by the attorneys general?
Who will own the technology that OpenAI develops?
Hedley concludes, "The 2019 restructuring announcement made the primacy of the mission very clear, but so far, these statements have not."
Whether this development marks a meaningful victory for those concerned about OpenAI’s governance — or just a clever repackaging of its original plans — remains an open question.
This is a crosspost from the new Animal Welfare Alignment Newsletter by Anima International. You can subscribe on Substack if you are interested in following these efforts. Audio reading also available on Substack.
The goals of this post are to:
1. Raise a question I see as crucially important to the goal of aligning AI to animal welfare...
I used AI to fix transcription errors, rerrarange the ideas, and suggest tweaks to the title and some sentences.
Three of the most exciting projects to come out of EA in recent years are, in a vague sense, CEA spinouts:
* Kairos is directly a spinout of CEA and now handles most support for university AI safety groups. Basically everyone I've found who knows them is really excited about what they do
* NEST is an opinionated ideas-fi...
Hello! I'm Justin Portela. I got hired by GWWC to make YouTube videos after AI in Context did such a kickass job.
My channel is using that same cinematic, high-production value beauty to talk about everything in the EA universe that isn't AI.
...
From the 2019 announcement:
I remember OpenAI or Sam Altman saying that in subsequent funding rounds, the profit cap would decrease, eventually reaching 2x. But I can't find a source for this right now. (Even if I am remembering correctly, who knows if OpenAI ever actually lowered the cap below 100x.)
Now that I'm thinking about it more, the 100x profit cap was always too low. If OpenAI's valuation in 2019 was $3 billion or less, then now, with a valuation of $300 billion, those first-round investors would already hit the cap on their returns.
It seems like OpenAI was already trying to rectify this problem before its recent announcement. In 2023, The Economist reported that:
If the purpose of the profit cap (or return on investment cap) is to limit OpenAI investors from having an obscene level of ownership over the wealth generated by AGI, this this makes a lot more sense. (I'm assuming that the profit cap is abandoned now and this is a moot point, but I find it interesting to think about anyway.)
If OpenAI had stuck to the plan of increasing the 100x profit cap by 20% year every year starting in 2025, here's what the profit cap would be in future years.[1]
2030: 250x
2035: 620x
2040: 1,540x
2045: 3,830x
2050: 9,540x
2055: 23,740x
2060: 59,070x
2065: 146,980x
2070: 365,730x
As time goes on, eventually the number gets too big, but even 365,730x is not a totally unprecedented return on investment in the pre-AGI world. Mike Markkula's angel investment in Apple would have had a return on investment (ROI) of over 3,000,000x had he retained his shares from the beginning until the 2020s.
If you look up lists of the stocks that have grown the most from IPO to their all-time high, or the venture capital investments that have had the best ROI, you see some numbers in the 1,000x to 10,000x range. So, a 10,000x cap would not be unreasonable.
If you think the amount of wealth generated by AGI will be essentially unlimited and defy calculation by conventional standards, then it shouldn't be a problem to have a cap of 10,000x or even 100,000x or 1,000,000x, since that would still end up being a small percentage of the overall amount of wealth generated by AGI.
I used this compound interest calculator to figure this out: https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator I rounded these numbers to the nearest ten.