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Capital always wins out, and the AI industry is no exception
By Katharina Pistor  |  Dec 15, 2023
Capital always wins out, and the AI industry is no exception
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In a world where capital is king, OpenAI’s efforts to buck the trend by putting innovation over profits fell short. The company thus had to compromise to survive, leading to the recent firing and rehiring of CEO Sam Altman, as Columbia Law School Prof Katharina Pistor elaborates.

NEW YORK - Already on a long winning streak, capital has just scored another big victory in a clash over the ethics of artificial intelligence (AI). In the drama over the sudden hiring and firing of OpenAI’s chief executive officer (CEO) Sam Altman, a non-profit company with a mission to prioritize AI safety over profits has failed spectacularly to keep its for-profit offspring on a leash.

OpenAI, Inc. was founded in 2015 with the goal of ensuring that artificial general intelligence (AGI) - autonomous systems that can outperform humans in all or most tasks - does not become uncontrollable if and when it is ever achieved. AGI’s potential raises the same dilemma that Mary Shelley introduced in her famous novel Frankenstein. Humanity’s creation might lead to its destruction, but who can stop anyone from pursuing the fame, power, and wealth that ‘success’ will confer? The Altman saga offers one answer: One cannot count on ethical rules, corporate governance structures, or even principled governing board members to keep people safe. Much to their credit, they did try, but it still was not enough.

Originally, OpenAI sought to raise enough funds through donations to compete in a fast-developing and highly competitive domain, but with only USD130 million generated in three years, it fell far short of its USD1 billion goal. To survive, it had to turn to private capital, while trying to preserve its original mission within an elaborate governance structure.

That meant creating two for-profit subsidiaries, with one wholly-owned limited liability company (LLC) serving as the general (managing) partner of its sibling within a limited partnership. Since limited part

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