[HN Gopher] OpenAI's promise to stay in California helped clear ...
___________________________________________________________________
OpenAI's promise to stay in California helped clear the path for
its IPO
https://archive.ph/NCZhi
Author : badprobe
Score : 128 points
Date : 2025-10-29 17:44 UTC (5 hours ago)
(HTM) web link (www.wsj.com)
(TXT) w3m dump (www.wsj.com)
| AndrewKemendo wrote:
| It used to be that you could find an IPO underwriter after 100M
| in revenue and growing YoY above others in the competitive
| basket.
|
| I'm not sure that's true anymore, I think you still need the
| revenue, but just need attention. everything else is just
| whatever because you can't predict 10 year outcomes for any
| business at this point with any level of confidence, and there's
| nothing to compare it to other than extremely different
| businesses.
|
| Ultimately it's more of the same goal with differing levers:
|
| Offload a massive illiquid investment onto the public so that
| investors make their fund
|
| Make sure it can tread water long enough for people to forget
| about it so it can go through the long and slow enshittification
| period
|
| After all the prime investors have liquidated and some cooling
| period, risk of lawsuits from activist investors drops
| significantly, they can ratchet up the margins, do a few years of
| layoffs to pump the price.
|
| Then everyone involved is back to where they started, only the
| top 100 richest people put even more distance between themselves
| and everyone else so they can now invest in radical life
| extension or whatever
| gretch wrote:
| I agree with you and I hope you are right.
|
| >Offload a massive illiquid investment onto the public
|
| Because this state seems like a very solvable problem: All you
| have to is not buy it
| somanyphotons wrote:
| ETFs like VOO will buy it eventually.
|
| It started me wondering if theres an ETF that explicitly
| avoids the top 20 companies
| NewJazz wrote:
| Couldn't you set up some options to simulate that?
| CGMthrowaway wrote:
| XMGA
| d0odk wrote:
| My gut instinct is that this would be a hugely
| underperforming investment strategy on both an absolute and
| risk adjusted basis. I would welcome empirical evidence
| contradicting my gut.
| hshdhdhehd wrote:
| I'd rather cross to international (including. US) than to
| that, for a less performing but more Black Swan proof
| fund.
| jakub_g wrote:
| There's SPXT (S&P 500 excluding tech sector), +79% in 5y,
| vs full S&P +110% in 5y.
|
| Obviously, in tech/AI bull market it can't be not
| underperforming.
| jppope wrote:
| > "Offload a massive illiquid investment onto the public so
| that investors make their fund"
|
| This is what it looks like to me. Crazy growth numbers to bump
| the valuation and public interest, go public, gradually let the
| company shift into irrelevancy after major owners have cashed
| out.
|
| The smoke and mirrors part here is that no one except the AI
| research community knows what the ML/AI capabilities will look
| like in 5 years. What that means is that the general public is
| probably going to eat up this IPO. Probably a better move to
| hedge by buying Microsoft, but whatevs.
| neom wrote:
| For folks curious, In terms of IPO, rule of 40 was common when
| I was involved in thinking about IPOs.
| https://www.mckinsey.com/industries/technology-media-and-tel...
|
| Depends how you look at it but at DO we shot for 50, ended
| around 55. (25 % growth + 30 % profitability)
| leetharris wrote:
| This is kind of a wild story. Sam Altman is openly flexing that
| he was able to skirt the rules and regulations by threatening
| economic damage to California. It's not even subtle anymore.
|
| This reminds me of when the former CEO of Hyundai, Chung Mong-
| koo, went to prison for embezzlement. In just 3 years he was
| pardoned because the President of South Korea basically said, "we
| need you for the economy."
|
| We're not even pretending that the government is in control
| anymore. It's just full on anarcho-capitalism on display.
| kridsdale1 wrote:
| Democracy lets us swap out our king and some of the nobles.
|
| The dukes and earls are still essential to run the nation, and
| must be courted.
| CamelCaseName wrote:
| Can someone explain to me what Sam Altman is doing to be so far
| ahead of everyone else in terms of navigating these high stakes
| roles?
|
| This happened at YC and a number of other places too, he goes
| into situations with nothing and comes out on top despite all
| odds.
|
| Is he that skilled an operator, negotiator, or manipulator or
| something?
| FloorEgg wrote:
| I can only speculate so take it with a spoon of salt... But
| people who are really good at sussing out other people's
| wants can find ways to make more people happy. It's like a
| maze of interests and I guess he's just really motivated and
| good at navigating and aligning them (at least among the rich
| and powerful).
|
| He also seems to understand something about power and
| perception, in that he takes calculated risks that seem to
| keep working out.
|
| So in other words, he seems to be an extraordinarily skillful
| politician (in both the general and the Patrick Lencioni
| sense).
| rhetocj23 wrote:
| Lol glazing much. Hes a poor mans Steve Jobs.
| kelipso wrote:
| This is the guy who had everyone here rooting for him
| when the OpenAI board tried to kick him out. Which was
| almost certainly the result of a very successful PR
| campaign carried out by him.
|
| He's not really comparable with Jobs. This guy is a
| politician and Jobs was a product guy.
| JumpCrisscross wrote:
| > _This guy is a politician and Jobs was a product guy_
|
| They're both excellent marketers.
| thereitgoes456 wrote:
| It's too early to say if his risks "keep working out".
| Restructuring is not a risk. His, and others', original
| decision to make the company a non-profit was also not a
| calculated risk in this sense.
|
| When he was fired from OpenAI, his use of employee
| manipulation to regain his position is not a risk; it is
| the only option he had. It was his bond maturing, of
| carefully cultivated loyalty he had accrued over years.
| Gaining that loyalty was not really a risk. It was smart
| politics.
|
| One risk he took is: signing away such a large portion of
| the company to Microsoft. I'm not sure whether that is
| working out.
|
| Another risk he took is: neglecting and sidelining the
| "safety" portion of his organization. This caused a talent
| exodus and led to the formation of many competitors. I'm
| not sure whether that is working out either.
| JumpCrisscross wrote:
| > _Restructuring is not a risk...his use of employee
| manipulation to regain his position is not a risk; it is
| the only option he had_
|
| In both cases he had the option of accepting the _status
| quo_.
| bix6 wrote:
| https://www.newyorker.com/magazine/2016/10/10/sam-altmans-
| ma...
| danielmarkbruce wrote:
| It's a bit much to say he goes into situations with nothing -
| he, along with others created OpenAI. It's a decent sized
| company now and they have sway with governments. All decent
| sized companies do as employers. This kind of stuff happens
| all the time and it just doesn't get reported as much.
| mrDmrTmrJ wrote:
| It's a great question. Here are two Paul Graham (PG) quotes
| on Sam Altman (Sama) from 2008 and 2009.
|
| Note, PG is the founder of YC, Sam's former boss, and the one
| who removed Sam from the position of President of YC after
| first appointing Sam to succeed him as President of YC. (Sama
| was more focused on OpenAI than on YC at the time, which
| doesn't work when you're supposed to be leading YC.)
|
| 2008 Essay "A Fundraising Survival Guide"
| https://www.paulgraham.com/fundraising.html
|
| Sam Altman has it. You could parachute him into an island
| full of cannibals and come back in 5 years and he'd be the
| king. If you're Sam Altman, you don't have to be profitable
| to convey to investors that you'll succeed with or without
| them. (He wasn't, and he did.) Not everyone has Sam's deal-
| making ability. I myself don't. But if you don't, you can let
| the numbers speak for you.
|
| 2009 Essay "5 Founders" https://paulgraham.com/5founders.html
|
| 5. Sam Altman I was told I shouldn't mention founders of YC-
| funded companies in this list. But Sam Altman can't be
| stopped by such flimsy rules. If he wants to be on this list,
| he's going to be. ... What I learned from meeting Sama is
| that the doctrine of the elect applies to startups. It
| applies way less than most people think: startup investing
| does not consist of trying to pick winners the way you might
| in a horse race. But there are a few people with such force
| of will that they're going to get whatever they want.
|
| That's PG's take on Sama.
|
| I would say, looking at a wide range of Sam Altman's more
| investments https://observer.com/2025/06/sam-altman-startup-
| investments/
|
| from OpenAI to Helion energy (Fusion), to Retro Biosciences
| (longevity), Neuralink (brain computer interface), to Reddit
|
| Sama really wants to "build the future," and when some of
| those investments "hit", like OpenAI did - basically become
| the first new company with a clear path to a $1T valuation
| since Facebook or TikTok), you gain immense credibility for
| "betting the future will happen and getting your organization
| there first."
|
| If YC's motto is "build something people want," and OpenAI is
| now serving 800M active users while delivering incredible
| revenue growth (and investors want to see both). Sama gains
| power by giving investors what they want, by giving users
| what they want, and basically authoring an entire new type of
| software company and a new part of the economy.
|
| A thing to note here is that, being a YC partner and top
| angel investor from 2011 to 2020, you can argue that Sam
| himself is "the most successful YC graduate." He saw
| thousands of companies go through YC. He saw hundreds of
| 'hard tech companies' go through YC. And in that decade, he
| could only have learned an immense amount about how
| VCs/successful CEOs think and make decisions. Certainly, we
| see the learnings of those experiences in what he's been able
| to pull off since.
| SecretDreams wrote:
| > Is he that skilled an operator, negotiator, or manipulator
| or something?
|
| He probably has everything every politician has ever asked
| chatgpt index and ready to be emailed out at any given time?
| coliveira wrote:
| There is a book written about this topic. SA is the classic
| manipulator. He talks to each person whatever they want to
| hear, irrespective of what he really believes. Many of the
| things he says about AI and OpenAI are clear BS, but he'll
| sell that to anyone with a different flavor.
| alhazraed wrote:
| What book?
| bazmattaz wrote:
| 'Empire of AI' maybe?
| btian wrote:
| He has great foresight, which helps a lot in investing and
| operating OAI.
| danielmarkbruce wrote:
| This is very cynical, and almost certainly deliberately false
| take.
|
| Many situations are fundamentally uncertain with respect to
| laws/rules in place. The idea that they "skirted rules and
| regulations" is wrong. Did they push in an attempt to get a
| decision made which would favor them? Sure. But there was a
| decision to be made.
|
| And, the people are supposed to be in control anyway, not the
| government.
| coliveira wrote:
| With cynical people, a cynical take is the right one.
| swyx wrote:
| > threatening economic damage to California.
|
| whoa there. corporations have the right to move to the best
| location for them. California does not have the eternal right
| to OpenAI's taxes and employee base. think about what you're
| implicitly assuming here. if one company simply leaving causes
| concerning "damage" then perhaps it is the government that is
| the problem, not the corporation driving economic growth.
| rxyz wrote:
| Corporations used to not have that much political power
| krapp wrote:
| Corporations used to have their own militaries, they
| colonized entire nations and owned people. They underwrote
| kings and empires.
| dragonwriter wrote:
| Corporations are applications of government power and have no
| natural rights, their legal rights are at best proxies for
| the rights of natural persons with some interest in them, and
| at worst a fiction which serves to limit the rights of
| natural persons.
|
| Also, having a right to do something does not contradict a
| description of you leveraging power by using a threat of
| doing it, in the first place.
| JumpCrisscross wrote:
| > _Corporations are applications of government power and
| have no natural rights_
|
| Sure. Whatever. The people who own and work at OpenAI have
| no obligation to remain in California.
|
| (I'd also argue that global norms are currently walking
| back from the notion of natural rights pretty much
| everywhere except for in some parts of Europe. The concept
| doesn't work without an appeal to divinity.)
| MichaelZuo wrote:
| The legal entity is what owns the IP, contracts,
| obligations, property, etc... so even if 100% of the
| current employees and owners moved, their collective
| worth and prospects would be significantly reduced if the
| legal entity doesn't also come along.
| trhway wrote:
| The government believed him that OpenAI will stay in CA the
| same way that that government, OpenAI founders and others
| believed that OpenAI will be non-profit.
|
| I think here is the answer to another commenter's question
| about success - it looks like great success comes to one who is
| able to recognize in time when old obligations become
| "obsolete" and thus drop them well before those obligations
| start to block or heavily tax the way to further success.
| GolfPopper wrote:
| That seems like expected behavior from someone whose barely
| veiled pitch is "the first one to AGI will IPO - Install
| Planetary Overlord.[1] Give me money and be part of the future
| ruling elite!" (Whether his actual plan is based on what he's
| saying in public, or to take the money and run, permanently
| install his company as in inescapable rent-extracting middle-
| man for modern life[2], or something else, I don't know.)
|
| 1. Credit to Charles Stross, _The Jennifer Morgue_ 2. Thneed-
| style capitalism
| scottrogers86 wrote:
| didn't Sam does this before with another company? he was able
| to restructure it and come out on top... searching for
| article... was it Helion? now that i think harder, didnt he
| comment about it on HN??
| trilogic wrote:
| OpenAi managed to keep Microsoft as major shareholder. Looking at
| the speed of growth Nvidia and friends are growing, OpenAI is 1
| click far to IPO and one more click to 10x after IPO then finally
| buy Nvidia when GPU market cools down.
|
| Just sayin...
| jameslk wrote:
| TFA:
|
| > OpenAI had spent months making the case that it was the
| economic heart of the California economy--and would be willing to
| leave if Bonta blocked its plan to convert to a simpler corporate
| structure.
|
| https://x.com/sama/status/1983223056668746218:
|
| > California is my home, and I love it here, and when I talked to
| Attorney General Bonta two weeks ago I made clear that we were
| not going to do what those other companies do and threaten to
| leave if sued.
|
| Hmmm...
| swyx wrote:
| > if Bonta blocked its plan to convert to a simpler corporate
| structure.
|
| i'm a bit out of the loop but honestly why does California have
| a say? surely the investor base and Microsoft was a far harder
| negotiation than this one. this one smells of govt overreach.
| hrimfaxi wrote:
| Corporations exist at the pleasure of government do they not?
| They are not some naturally-existing thing.
| atonse wrote:
| I would think that sort of framing implies that the
| government gives them permission to exist.
|
| Rather than, the natural state is that they exist unless
| they do something bad enough to be shut down.
|
| Unless you mean, they need the government's "permission" to
| even file to become a corporation... But even in that case,
| you aren't asking for permission, you're doing the old
| school equivalent of signing up for a domain, you're
| submitting a filing and reserving a spot for that name/ID.
| ElevenLathe wrote:
| It's more than that. When you file to incorporate, there
| is a birth. A new person is created, one that can
| potentially never die. Yes, it's routine, but it wasn't
| always, and it doesn't need to be forever. The ability to
| create a new, fake, person in order to shield yourself
| and your business partners from liability is a _not_ a
| right. It is a deliberate policy that _some_ sovereign
| jurisdictions allow their citizens.
| palmotea wrote:
| > I would think that sort of framing implies that the
| government gives them permission to exist.
|
| > Rather than, the natural state is that they exist
| unless they do something bad enough to be shut down.
|
| JFC, come on. Corporations are legal entities and have
| _no_ existence separate from the law. If they even have a
| natural state, that natural state is non-existence.
| travisjungroth wrote:
| > All corporations are devoid of inherent nature.
|
| > There is no inherent nature whatsoever.
|
| > What is inherently existing is empty.
|
| > What is empty is inherently existing.
|
| _Nagarjuna vs Delaware_
| atonse wrote:
| Yeah I think we're splitting hairs and actually aren't in
| any sort of disagreement here. I 100% agree that you have
| to be registered on paper with a government entity to get
| all the legal protections, insurance, etc etc etc. I've
| been a business owner for nearly 20 years. Like, a real
| business, with real paperwork and insurance and all that.
|
| I'm thinking of all the unofficial mom and pops that
| transact and do business every day without having a
| proper legal entity. so it's more of a "does that count
| as a business even if they didn't file articles of
| incorporation?" of course it does, as far as its
| customers are concerned.
|
| Think of the idea of "this guy has a lawn care business,
| I pay him every week to mow my lawn for 10 years", as far
| as his customers are concerned, he didn't need to get
| permission from the government to start doing that. And
| this sort of thing happens all the time.
|
| I am NOT arguing whether a business where you filed
| articles is a legal entity, etc. There's no question that
| they are.
|
| Hope that clarifies my point.
| JumpCrisscross wrote:
| > _If they even have a natural state, that natural state
| is non-existence_
|
| A corporation is a legal fiction that describes an
| association of people. The association is real and has a
| natural state. The corporate existence does not.
| (Analogous: a house is real. Land is real. Property is a
| social construct.)
| atonse wrote:
| This is exactly my point that you articulated in way
| fewer words, thanks.
| JumpCrisscross wrote:
| > _Corporations exist at the pleasure of government do they
| not?_
|
| No. "At the pleasure of" means total discretion. The
| government can't just stop letting businesses incorporate
| because it doesn't like how a county voted.
| zeroonetwothree wrote:
| There is no constitutional right to incorporate.
| Theoretically states could stop it at any time. Although
| they would still have to honor corporations formed in
| other states so it's of limited effect.
| JumpCrisscross wrote:
| > _There is no constitutional right to incorporate_
|
| The Constitution directly grants very few individual
| rights. It's mostly a document about what the government
| can't do.
|
| > _Theoretically states could stop it at any time_
|
| Sure. That's not "at the pleasure of." Driver's licenses
| are not issued "at the pleasure of" a state. Neither are
| marriage certificates. They're issued as a matter of
| process that binds both the issuer and recipient to a
| predictable set of rules.
| hrimfaxi wrote:
| Why can't the government do that? Is it because the
| government created laws that limited its total
| discretion? That is besides my point. The people allow
| for corporations to exist is what I was getting at, and
| in the US businesses incorporate at the state level. So
| asking why California has a say in the structure of a
| company incorporated in it seemed odd to me on its face.
| NickC25 wrote:
| >The government can't just stop letting businesses
| incorporate because it doesn't like how a county voted.
|
| The government can revoke a corporation's charter at any
| time it desires to.
| danielmarkbruce wrote:
| The entity in question operates in california and is thus
| subject to california law. California has laws around
| charitable entities.
|
| One might reasonably claim it's overreach, but in response
| OpenAI could just leave the state. Which is what they
| threatened.
| wbl wrote:
| Not when the AG sues the board and Sam for all the
| violations that happened around his ouster. The board isn't
| independent.
| danielmarkbruce wrote:
| They absolutely can leave the state.
|
| Board independence is largely a stupid idea, and in this
| case it's not even clear which board you mean - the
| current one? The previous one? In what way are they less
| independent than any other board?
| bix6 wrote:
| Because the company was formed as a non-profit and now wants
| to cash out? He has to protect the integrity of non-profits
| as a distinct entity type.
| mandevil wrote:
| Because of the unusual history of OpenAI, the Government had
| far more of a say than normal for a company. Remember, OpenAI
| was originally created as a California non-profit (a charity
| doing work to create a better AI future). As a charity, it
| doesn't have to pay the same taxes as it would as a for-
| profit company, but in exchange it has more rules it needs to
| follow. And then it released ChatGPT, it exploded in value,
| it needed to raise truly absurd amounts of capital in order
| to get to the next model, and thus the lawyers had to spend a
| good long time extracting the company from the charity.
|
| For very good reasons, the laws make it hard to go from a
| charity to a for-profit company- because if you could easily
| transition between the two you could game tax laws with ease.
| In the end, being allowed to do this required negotiations,
| and promising to keep OpenAI in California- where they would
| be subject to other California regulations and taxes in the
| future.
|
| If they had a "normal" corporate history- had been founded as
| a Delaware S Corp from the beginning- then this wouldn't be a
| thing and they would be free to move as they like(1). But,
| being a weird charity probably helped them attract talent in
| the critical beginning phases (before it became a money race
| with Zuck), and it has consequences now.
|
| 1: Just as an example, Palantir moved their corporate
| headquarters to Denver from Palo Alto years ago without a
| peep from the CA government.
| JumpCrisscross wrote:
| > _a California non-profit (a charity doing work to create
| a better AI future)_
|
| Note: non-profit != charity. (All charities are non-
| profits. Not all non-profits are charities. PACs and non-
| profit hospitals, for example, are not charities, though
| the latter can have charitable arms.)
| conradev wrote:
| But who oversees how charities use their assets and ensures
| that they are used for public benefit? That job
| lies with the Charitable Trusts Section of California's
| Office of the Attorney General, which is part of the state's
| Department of Justice. Charged with both regulatory and law
| enforcement responsibilities, the section has a big job.
|
| https://www.svcf.org/about/news-media/blog/california-
| attorn...
| isx726552 wrote:
| This feels like a narrative being pushed. Tech oligarchs these
| days are flexing by showing off how much they are able to bully
| government, and Altman wants to get in on the game by spinning
| things this way. I'm not convinced they really bent the rules
| for OpenAI any more than usual given they only employ a few
| hundred people.
| colinmorelli wrote:
| OpenAI has over 5,000 employees. In addition to their
| headcount, they are now the highest valued private company in
| the world.
|
| They're going to have some leverage.
| dmix wrote:
| I doubt OpenAI has to try very hard to convince state
| politicians, especially to the point of bullying. It's
| usually the complete opposite where they throw money at you
| to stay.
|
| Imagine if California managed to scare away the hottest
| company in the world and all the tax revenue it brings...
| burningChrome wrote:
| Musk said the same thing about CA too. All CEO's make decisions
| based on what is best for them and their companies. There is no
| loyalty in business.
|
| _Edward Niedermeyer, author of "Ludicrous: The Unvarnished
| Story of Tesla Motors," said Musk was happy to benefit from
| California's largesse when it suited him and to move on when he
| saw fit._
|
| _"I think Musk has made the calculation that he's gotten all
| the benefits he's likely to get out of the state and he's
| moving on to the next one," Niedermeyer said. "The state of
| California clearly thought that all its work bought loyalty
| [from Musk] but, instead, I think it bought a sense of
| entitlement."_
|
| Elon Musk's messy divorce with California leaves ugly
| grievances all around:
| https://www.latimes.com/california/story/2024-07-23/elon-mus...
| thaumaturgy wrote:
| OpenAI announced $10 billion ARR in June of this year
| (https://www.cnbc.com/2025/06/09/openai-hits-10-billion-in-
| an...).
|
| Agriculture in California hit $61 billion in annual receipts in
| 2024 (https://www.cdfa.ca.gov/statistics/).
|
| So, not that OpenAI isn't big, but, "the heart of the
| California economy"?
|
| OpenAI _needs_ to IPO, because if they don 't get in on the
| current meme stock economy, they're going to collapse.
| fourseventy wrote:
| How can a non-profit IPO? I know that technically OpenAI is a
| for-profit company that is owned by a non-profit, but I still
| don't get it.
| swyx wrote:
| you can IPO the for-profit subsidiary. done before. the main
| tricky part is resolving the tax issues since as a non profit
| you are exempt, but obviously a for profit is not exempt from
| paying taxes
| throwup238 wrote:
| Mozilla has this same structure (non-profit parent, for-
| profit subsidiary) because the subsidiary has to pay taxes on
| the money Google pays to be Firefox's default search engine.
|
| As do many gift shops attached to non-profit museums and art
| galleries.
| scyzoryk_xyz wrote:
| OpenAI - the AGI entity with a gift shop.
| mdasen wrote:
| The difference is that Mozilla's for-profit arm is owned by
| the non-profit. The for-profit part of OpenAI is there to
| make a lot of individuals and for-profit corporations rich.
|
| OpenAI's profit-generating subsidiary isn't just there to
| further the non-profit mission like a museum gift shop or
| Mozilla's for-profit subsidiary.
| throwup238 wrote:
| That's why this was scrutinized more and the California
| AG got involved but it's not that rare either.
|
| Novo Nordisk the maker of Ozempic for example IPOd,
| diluting the Novo Nordisk Foundation's share (though they
| still have controlling voting rights due to share classes
| IIRC) to raise money. SRI International spinoffs often
| get sold (Siri) or raise money and IPO (Nuance) diluting
| the nonprofit's share significantly in the process.
|
| A nonprofit that owns a for profit subsidiary is no
| different than a regular shareholder and can decide that
| diluting to reward employees or get investors is worth it
| to grow the value of the whole company.
| adastra22 wrote:
| It is being restructured to no longer be a nonprofit, but a
| for-benefit corporation instead. That is why California's
| approval was required (and IMO is just as corrupt as it
| sounds).
| polski-g wrote:
| But aren't non profits a federal thing with rules dictated by
| the IRS? Why is California involved?
| righthand wrote:
| The Usa is divided into states, each with their own legal
| jurisdictions. Businesses tend to pay taxes to their state.
| OpenAI is headquartered in San Francisco, California.
| JumpCrisscross wrote:
| > _aren 't non profits a federal thing with rules dictated
| by the IRS? Why is California involved?_
|
| Most states incorporate federal rules for their own
| exemptions for charities and non-profits. California
| treating OpenAI to date as a non-profit has revenue
| implications for Sacramento.
| wbl wrote:
| Because charities are also regulated by states as are all
| corporations. There is no federal corporate governance
| statute.
| mrbabbage wrote:
| Corporate law is overwhelmingly state law. Every federally
| tax exempt entity is a state (or foreign) corporation or
| other kind of entity, and states (or foreign governments)
| impose rules on corporations registered in their borders.
|
| Plus, many states levy their own corporate taxes. A
| nonprofit corporation needs to secure tax-exempt status
| from states as well as the federal government. This is a
| necessary implication of America's dual-sovereignty system.
| adastra22 wrote:
| Corporations and nonprofits are a state regulated thing.
| The IRS only gets involved to approve whether donations are
| federally tax deductible and things like that, which apply
| to federal tax laws only.
| stefan_ wrote:
| So they avoid billions of tax on nonprofit status, then
| magically get to keep it all when they are for-benefit? How
| about no, fuck you, dissolve?
| ergocoder wrote:
| I mean, OpenAI has never been profitable. If anything, they
| are insanely unprofitable.
| vessenes wrote:
| There's so, so much misinformation about this out there.
|
| For example - every US nonprofit starts as a plain old vanilla
| C corporation, and then _applies_ for 501(c)3 status which the
| IRS may or may not _grant_. It 's a privilege to be a
| nonprofit.
|
| The punishment that may be levied on a nonprofit is ... loss of
| that status and a return to a commercial corporation. That loss
| of status might have knock-on impacts on things like, say, tax
| deductions offered to donors, and I guess possibly on corporate
| income tax to the extent a company's accounting shows a profit.
| But it's not a thing you're "locked into" somehow and trying to
| escape. Quite the opposite; it's a thing the Federal government
| chooses to support financially as a matter of public policy.
|
| oAI had a lot of work to do to get recapitalized like it did,
| but it was not the non-profit status that was the (major)
| problem. It was (at the least) the investment covenants made
| with the Microsofts of the world that bound them; the MS deal
| was the big thing here.
| jacquesm wrote:
| Prediction for the future: OpenAI IPO's lots of money changes
| hands, it chugs along for a while, hits a hard spot and then is
| taken private for pennies on the dollar by Microsoft.
| DenisM wrote:
| Could you elaborate? Not looking for a proof, just want to
| understand your train of thought. Always liked your commentary.
| Thanks!
| hshdhdhehd wrote:
| Probably predicting either pop of AI bubble like dotcom in
| 1999 or the OpenAI emperor has no clothes and the marker sees
| its shrunk hunk.
| dmbche wrote:
| Spitballing
|
| There is no clear path to the trillion dollars today. By
| IPOing, the owners (who have a good idea of where it's going)
| can exchange their ticket to the trillion for cash today.
|
| Seems like a bad deal unless you know the ticket won't get
| called. Then you've just made bank.
|
| And you might have noticed some form of hype around AI these
| last few years - arguably this could be to make the trillion
| dollar seem more realistic and therefore making the owners
| more money when selling their ticket to it.
| empath75 wrote:
| Open AI will probably have the highest market cap of any
| company in the world on the opening day of trading.
| sipjca wrote:
| that would be certifiably insane
| vessenes wrote:
| Jacques, I've been reading and enjoying your posts here for at
| least 15 years. (Thank you for your service.)
|
| But I think you're totally incorrect on this; oAI is going to
| be one of the enduring tech consumer brands built in this half
| of the 21st century.
| Sparkyte wrote:
| Staying in California doesn't mean it will keep employees in
| California. Prepare for the great offshoring.
| brcmthrowaway wrote:
| Is it possible for a poor fool retail investor to invest in OAI
| hshdhdhehd wrote:
| The bag is being designed, cut and stitched, with retail
| investor shaped handles.
| astrange wrote:
| Just buy $QQQ.
|
| The correct time to invest in individual companies is never.
| JumpCrisscross wrote:
| > _Is it possible for a poor fool retail investor to invest in
| OAI_
|
| If you're an accredited investor? Yes. If you're a smart
| individual? No. Not unless you're putting millions to work, at
| least not at the terms I've seen for anyone willing to accept
| small cheques.
| bazmattaz wrote:
| From what i understand, and I'm no expert, is that all the
| smart money Is able to get in on an IPO early on way before
| retail investors have a chance. By the time the retail
| investors have a chance it's too late and usually the stock
| dips post IPO as the early investors sell.
|
| Of course the stock can rise again eventually.
| hodder wrote:
| Can someone explain to me why California would believe Sam Altman
| plans to stay in California? This is a weak handshake agreement
| that could easily be flipped post IPO. The very flip from non-
| profit to IPO shows he will do what it takes for OpenAI to
| "succeed", so why would the geographical location be any more
| permanent than corporate structure. This isnt a diss to Sam
| either, it just shows he is motivated by whatever is best for the
| entity at any given time.
|
| They might stay in California, but that probably has far more to
| do with available researchers and employee preferences than some
| agreement with the Attorney General.
| gyomu wrote:
| Perhaps it's not so much that they believe he'll stay in
| California long term if he gets what he wants; more that they
| do believe he'll leave in the short term if he doesn't.
| throwaway294729 wrote:
| > This isnt a diss to Sam either, it just shows he is motivated
| by whatever is best for the entity at any given time.
|
| This is the kind of weird rationalist (?) thing that people say
| a lot these days to justify bad behaviors: in this case Sam
| Altman behaves like a pathological liar.
| Hansenq wrote:
| In any negotiation, you need to understand what leverage either
| side has. In this case, CA _could_ block the conversion, and
| OpenAI _could_ leave California. Both are possible but
| extremely unlikely outcomes! So the whole point is to take
| these unlikely outcomes to the table, negotiate in good faith,
| and come out with an agreement.
|
| So California needs to believe that OpenAI will stay in
| California just as much as OpenAI needs to believe that CA
| won't block the conversion (or impose other onerous regulations
| around AI). So yes, it's possible to speculate about whether or
| not people are sincere in their motivations, but when you need
| to make a deal, there needs to be a measure of good faith and
| trust on both sides in order to make something happen.
|
| And in this case, both sides are incentivized to make the deal.
| OpenAI wants to be a PBC in order to access more capital, and
| California wants OpenAI to be a PBC so that it can IPO so that
| all employees (all of whom are likely CA residents), will sell
| stock, which can then be taxed as CA income.
| johnrob wrote:
| If I am understanding things correctly, OpenAI could leave in
| the future - but CA can't retroactively block the conversion
| in that case.
| harmmonica wrote:
| If they're still based in CA when they IPO at least those
| initial taxes will be collectible in state (assuming they're
| structured in a way where the IPO is a taxable event for the
| leadership and staff). Pretty sure the taxes collected from
| OpenAI will be the single biggest IPO tax windfall ever
| (correct me if I'm wrong, but I can't think of a bigger one).
| cosmicgadget wrote:
| We're finally going to get that bullet train.
| s3r3nity wrote:
| lol if you think $ was the barrier there, I have a few
| bridges to sell you too...
| harmmonica wrote:
| Oh man know I know I shouldn't say it but that's a genius
| reply! Thanks for the (depressing) laugh.
| make3 wrote:
| In the US, one has to remember that megacorps usually end up
| winning, as people mostly only care about money and blindly
| supporting corporations is seen as pro-economy. There are also
| no limits on political financial contributions, and people have
| really short attention spans.
|
| Politicians taking the superficial short-term win, as they will
| end up giving in to the megacorp anyway, is not surprising to
| me.
| philipallstar wrote:
| > and blindly supporting corporations is seen as pro-economy
|
| These clumsy stereotypes are so pointless.
| afavour wrote:
| It's a broad statement but I wouldn't say it's an incorrect
| one.
| JumpCrisscross wrote:
| > _Can someone explain to me why California would believe Sam
| Altman plans to stay in California?_
|
| The simple answer is unless developing LLMs becomes
| commoditised, the best place in the world to do it is in San
| Francisco. You don't take your manufacturing business out of
| Shenzhen without very good reason.
| booi wrote:
| except developing AI is very much a knowledge exercise with
| very little dependency on location.
|
| You don't move your manufacturing business out of Shenzhen
| because the entire hard supply chain from mining, refining,
| manufacturing, test, ship and trade are all there. You can't
| move a refinery that easily much less the entire supply
| chain.
| brokencode wrote:
| Sure, but most of the country's AI talent is concentrated
| there. Not to mention venture capital.
|
| What's the advantage of moving? Maybe lower taxes and a
| cheaper rent.
|
| That seems like a small price to pay compared to the
| hundreds of billions they're putting into data centers.
| alfalfasprout wrote:
| They're concentrated there because they've been asked to
| concentrate there. That can change on a dime.
|
| It's not like data centers are mainly in SF.
| vessenes wrote:
| I think you're wrong. The concentration is for a host of
| reasons. Witness the large number of cities and countries
| that have tried to create a local Silicon Valley
| competitor unsuccessfully over the last 25 years.
|
| The data centers I think prove this point, and disprove
| yours -- huge spend has gone into data centers, but
| places like Wenatchee remain stubbornly not Silicon
| Valley.
|
| Intel has not made Portland into SV. Austin, while a tech
| hub and one of the US supply chain centers for hardware,
| is multiple orders of magnitude less productive than SV
| for tech startups. Productive as in numbers of unicorns,
| total value creation, however you want to spin it.
| shuckles wrote:
| > That can change on a dime.
|
| People tried very hard to change it between 2020-2023 and
| utterly failed.
| yellow_postit wrote:
| The Texas Stock Exchange launches next year and I predict we
| will see a lot of tech try to move to launch there given txse
| claim to have lower compliance and less esg needs.
| afavour wrote:
| It's frauds all the way down
| vessenes wrote:
| downvoted -- this is a low quality comment, and worse,
| it's uninformed. Texas may be lower reg than NASDAQ at
| launch, and it may compete for business that way, and
| consumers may or may not like this and may or may not
| benefit from it.
|
| However, post Sarbox US is vastly more regulated than the
| markets that "built" Silicon Valley, and there are many
| costs to corporations, founders and employees of that
| heavier regulation -- including a radically less friendly
| public capital market for companies worth hundreds of
| millions of dollars.
| everfrustrated wrote:
| I learned recently that Nasdaq imposes DEI on companies as
| a requirement of listing.
| kasey_junk wrote:
| The 5th circuit struck those rules down last year.
| nradov wrote:
| I doubt it. The state where a company is incorporated or
| has its headquarters located doesn't impact where it can
| list shares. There are several foreign companies with no
| significant US operations which are listed on US stock
| markets just to gain access to capital.
| kasey_junk wrote:
| Not to mention that the actual trading will happen in New
| Jersey
| JumpCrisscross wrote:
| > _Texas Stock Exchange launches next year_
|
| The TXSE was launched by an energy magnate [1] and "is
| financed by institutional investors including Charles
| Schwab, Fortress, BlackRock, and Citadel Securities" [2].
| It's a direct response to the NASDAQ and NYSE putting their
| feet down on carbon emissions.
|
| Nothing about its structure requires a company be
| incorporated in Texas much less based there [3]--those
| restrictions would go against the reason it was founded.
|
| [1] https://en.wikipedia.org/wiki/Kelcy_Warren
|
| [2] https://en.wikipedia.org/wiki/Texas_Stock_Exchange
|
| [3] https://www.hunton.com/insights/legal/a-comparative-
| analysis...
| wubrr wrote:
| The location you're physically sitting in doesn't really
| matter. Saying 'san francisco cause san francisco' is also
| kinda boring and meaningless.
| vessenes wrote:
| This is the opposite of true. It's actively wrong. Location
| is almost everything; people move to financial and tech
| centers for a reason -- it matters where you are and who
| you know.
| JumpCrisscross wrote:
| > _location you 're physically sitting in doesn't really
| matter_
|
| Of course it does.
|
| The benefits of proximity to business clusters [1] is well
| researched [2]. There is no evidence remote work has
| dampened that tendency; if anything, as evidenced by AI,
| the effect seems to have increased.
|
| [1] https://en.wikipedia.org/wiki/Business_cluster#Cluster_
| effec...
|
| [2] https://www.isc.hbs.edu/competitiveness-economic-
| development...
| BobaFloutist wrote:
| That still doesn't explain the value of Sam Altman's pinky
| promise.
| jcmontx wrote:
| If this happened any non-western country headlines would say
| "corruption".
| eagleinparadise wrote:
| CA needs the UHNW taxpayers lol
| khazhoux wrote:
| I don't understand the animus towards OAI going public. ChatGPT
| undoubtedly changed the world. The non->for profit status of the
| company is not impacting anyone. It's not like their success was
| made possible by being a non-profit.
|
| Suddenly everyone here is very very concerned with the
| classification of this corporate entity, and I detect people feel
| personally slighted. Why is that?
| lukebechtel wrote:
| Because the development of this technology was originally done
| under a certain set of promises ostensibly intended to prevent
| pure capitalist profitmaxxing.
|
| The workers and supporters who were taken by this idealistic
| vision, believe it was a bait-and-switch, and that the original
| promises were never intended to be kept.
| khazhoux wrote:
| > The workers and supporters who were taken by this
| idealistic vision
|
| I haven't heard from any of the workers. Why are people
| white-knighting for them? My hot take is that they don't mind
| being able to afford a house (or more) for their efforts.
| Where's the outraged employees in this conversation?
|
| As for "supporters," what does that mean? People who watch
| from the sidelines and never actually contributed don't
| usually get a say.
| vessenes wrote:
| They are chronically online and reading uninformed headlines by
| fellow youth.
|
| Combined with a feeling that they don't like this wave of
| GenAI, you get a lot of uninformed hate that's deeply felt, and
| probably reasonably felt. But also totally uninformed.
| rottencupcakes wrote:
| They founded OpenAI on the explicit premise that advanced AI
| poses existential risks to humanity, and that a non profit
| structure was essential to prioritize safety over profits. They
| reaped major benefits from this status, including tax
| exemptions, easier talent recruitment (by appealing to mission-
| driven researchers), and massive donations.
|
| Then, once GPT models exploded in value, making the for-profit
| arm worth tens of billions, they attempted to restructure
| toward a public company model to let investors and insiders
| cash out at scale, while claiming the non-profit board would
| still "control" the direction. This directly contradicts their
| original charter, which warned that profit motives could lead
| to unsafe AI racing.
|
| Now it is clear that we are nowhere near AGI, and hence they
| have to make money from making fake tiktok videos and smut. And
| they just want to cash out because the original premise won't
| deliver. Specifically it was very disingenuous and that is why
| people hate it.
| JumpCrisscross wrote:
| Copy of the Memorandum of Understanding between California and
| OpenAI: https://oag.ca.gov/system/files/attachments/press-
| docs/Final...
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