Did Elon Musk just Mu$k Sam Altman?

With some bonus eye candy to lighten the mood

So… after I dashed off my unplanned, typo-ridden (my apologies!) essay on the Paris Summit this morning, my plan for the day was to go snowboarding, and not think about AI for the rest of the day.

And indeed, in the early hours I got some fantastic photos. Like this one:

and this one …

… reminding me that there is more to the world than AI.

And then… I made the mistake of checking my phone. Elon Musk had decided to put together (with the help of, among others, Hollywood superagent Ari Emanuel, one of the inspirations for Jeremy Piven’s Ari Gold in Entourage) a $97.4 billion bid for the assets of OpenAI’s nonprofit, which, you may recall, controls the for-profit, in one of the most complex business structures I have ever seen.

Altman quickly rejected Musk’s bid, and seems to have the support of OpenAI’s board, but I am not sure that’s the end of it.

Here’s my best guess about the subtext, with no promises that I am right.

1. Altman desperately needs to ditch the OpenAI nonprofit. It’s become an albatross around his neck. His business is burning cash, and investors don’t like the nonprofit. And in the last round of funding, OpenAI reportedly agreed to convert its recent $6,6B investment into debt, if the company is unable to convert the for-profit wing of OpenAI into a freestanding profit within two years of accepting that investment. The clock as ticking.

2. As the organization Public Citizen previously explained (and as I once reported here), making the conversion required compensating the nonprofit for giving up control of the for profit.

3. How much is that worth? Some people had previously speculated that the nonprofit’s cut should be around $40 billion — which in essence would the cost of OpenAI For Profit’s freedom.

4. By turning down Musk’s bid, Altman makes it hard to justify paying the nonprofit anything less than the $97B that was just offered. Roughly speaking, this means that (at little real cost, since the bid was never going to be accepted) Musk has more than doubled the cost of OpenAI for-profit’s freedom. (E.g., if OpenAI for-profit tries now to offer a mere $40B to the non-profit, in exchange for breaking off as a for-profit, the Attorney General of Delaware or the Attorney General of California can strongly argue that that number is no longer fair market value, and block the deal.)

5. All of this has the effect of potentially slowing down Musk’s competitor Altman, who can ill afford an extra $50B+ outlay given his current cash flow situation. And OpenAI’s investors are all now staring at a lot of unexpected potential dilution.

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Public Citizen, which has been thinking about this potential conversion for a long time, and publicly urging such a conversion, because OpenAI seems to have abandoned their original nonprofit mission, put out a statement. Since they were first to lay out what a conversion to nonprofit might entail, I will give them the last words, heartily agreeing their closing sentence:

Gary Marcus’ efforts to detach himself from the daily AI news are going poorly.