Nonprofit Left for Dead

The high-stakes legal battle between OpenAI CEO Sam Altman and tech magnate Elon Musk took a significant turn this week as Altman took the witness stand in federal court in Oakland, California. The core of Musk’s lawsuit hinges on the allegation that OpenAI abandoned its founding, nonprofit mission to become a for-profit entity, thereby misusing Musk’s initial substantial donations. Altman, however, presented a starkly different narrative, asserting that it was Musk, a co-founder of OpenAI in 2015, who ultimately relinquished his commitment to the organization and failed to uphold his end of the bargain.

“We were kind of left for dead,” Altman testified, painting a picture of a nascent AI venture struggling for resources and direction after Musk’s departure. The lawsuit, filed in 2024 by Musk against Altman, OpenAI, and its president Greg Brockman, specifically accuses them of reneging on their pledge to maintain a nonprofit structure and a charitable mission. Musk contends that his approximately $38 million in donations was diverted to commercial pursuits without authorization. Altman, in his testimony, directly refuted this, stating he made no specific commitments to Musk regarding OpenAI’s corporate structure.

The trial has delved into a series of intense negotiations that occurred between Musk, Altman, Brockman, and Ilya Sutskever, another co-founder, in 2017 and 2018. Facing the critical need for significant capital to fund compute resources, the leadership team explored various corporate structures, including for-profit models. These discussions, however, reportedly concluded without a definitive agreement, leading to Musk’s exit from OpenAI’s board in February 2018.

Altman recounted that Musk’s departure initially sowed anxieties among OpenAI staff regarding the company’s financial viability and raised concerns about potential retribution. Yet, he also characterized Musk’s exit as a morale boost for some researchers who felt demotivated by his management style, stating, “I don’t think Mr. Musk understood how to run a good research lab.”

Despite his formal departure, Musk continued to engage with OpenAI leadership throughout 2018, expressing deep skepticism about the company’s prospects. In a December 2018 email, Musk famously wrote, “My probability assessment of OpenAI being relevant to DeepMind/Google without a dramatic change in execution and resources is 0%. Not 1%… This needs billions per year immediately or forget it.” Altman described this comment as “burned into my memory,” highlighting the critical juncture the company faced.

Following Musk’s exit, OpenAI moved to establish a for-profit subsidiary, a venture now valued by private investors at over $850 billion. Musk, in his April testimony, characterized this subsidiary as the “tail wagging the dog” and repeatedly accused Altman and Brockman of attempting to “steal a charity.” Altman, however, pushed back, arguing that Musk’s primary concern was control. He testified that Musk exhibited a strong desire for complete control from the outset, partly due to a perceived lack of trust in others and a preference for exclusively leading companies he controlled. “I was extremely uncomfortable with it,” Altman stated. Musk acknowledged seeking majority control initially but suggested his stake would have diluted over time. He also indicated he was not entirely opposed to a for-profit arm, but its dominance over the nonprofit aspect became problematic.

During the contentious negotiations, Musk proposed merging OpenAI with his electric vehicle company, Tesla, to inject more capital. He even offered Altman a Tesla board seat in an attempt to sway him. Altman, however, deemed the merger unsuitable, fearing it would effectively dismantle OpenAI’s nonprofit mission. “Tesla is a car company, and it does not have the mission of OpenAI,” Altman asserted, adding, “I don’t think we would’ve had the ability to ensure that the mission was acted on.”

Musk’s legal team, led by attorney Steven Molo, sought to undermine Altman’s credibility during cross-examination, questioning his trustworthiness directly. When asked if he was “completely trustworthy,” Altman initially responded, “I believe so,” before amending his answer to a definitive “yes” under Molo’s persistent questioning. Molo also brought up individuals, including Dario Amodei, a former OpenAI employee who later founded rival Anthropic, who had expressed concerns about Altman’s conduct and alleged misrepresentations of investment terms.

The cross-examination also touched upon Altman’s temporary ousting from OpenAI in 2023 by the board, who cited his “not consistently candid in his communications.” Altman described the event as a shocking and deeply upsetting experience, emphasizing his profound dedication to the company and his fear of its potential destruction. He stated he received little explanation beyond the board’s concern about his candor.

With closing arguments scheduled for Thursday, the nine-person advisory jury will weigh the evidence. The ultimate decision will rest with Judge Yvonne Gonzalez Rogers. This high-profile legal dispute continues to scrutinize the very foundations and evolving trajectory of artificial intelligence development and its corporate governance.