The OpenAI Problem Is About To Become OUR Problem

OpenAI AI has not been having a great year.

OpenAI is completing its metamorphosis from a nonprofit organization operating for the good of humanity to a shareholder-focused company gearing up for one of the biggest IPOs in history.

OpenAI is facing legal challenges over the fair use of intellectual property, its governance, and the safe use of its tools.

OpenAI is experiencing talent churn amongst its top developers.

OpenAI has significant reputational damage amongst effectively all of its stakeholders.

Fully autonomous AI killbots and mass surveillance systems do not sound like they are improving the future of humanity.

OpenAI is burning billions of dollars every month on top of trillions of dollars in future spending commitments with no clear answer for how it's going to get that money.

Just last week, Amazon, Nvidia, and SoftBank announced a record investment of $110 billion in additional funding for OpenAI.

OpenAI had talked about almost $1.4 trillion in investments.

The case for OpenAI can continue to be justified to mega investors if it maintains extremely strong user growth, demonstrates customer retention, and remains a viable contender for developing genuinely world-changing super intelligence.

The OpenAI can show investors that a large group of people are willing to pay a recurring subscription fee for their services, it is a good indication that there may be a path to profitability in the future.

OpenAI is currently losing a lot of money for every customer they serve, even those in the top subscription tiers.

The game plan for tech companies is to start with a really useful and cost-effective service, get people used to using it, drive out all competition, and once that is done, raise prices, cut costs, and integrate other revenue streams like ads to profit off the user base they have cornered.

Anthropic, the company behind Claude and OpenAI's chief rival, pushed back against the Department of War over using their technology for fully autonomous armed drones and mass surveillance.

Just a few hours after Anthropic's stance, OpenAI signed a similar deal with the Pentagon, effectively announcing that they were willing to forgo extremely basic AI safety guardrails if it meant securing a lucrative government contract.

Following the Pentagon deal, many people are actively boycotting OpenAI's products and considering alternatives, with Anthropic being the biggest winner so far.

For the past two years, OpenAI has been able to command an investment premium in part because it was the first thing that people thought of when it came to large language models.

Knowledge leaks make it more likely that AI will just become a commodity that any somewhat competent business can create rather than a centralized product that people need to pay for the privilege of using.

Big investors can keep justifying the money they spend on OpenAI AI so long as their investors see the potential for the technology, or at the very least see the opportunity for the hype to generate some a return on their investment as they sell their stake off to the next person in line.

When Facebook went public in 2012, it put up 15% of its stock to raise an inflation-adjusted $22 billion.