Unlock Editor’s Digest for free
FT editor Roula Khalaf selects her favorite stories in this weekly newspaper.
Elon Musk told a jury on Wednesday that he was a “foolish” for providing early funding for OpenAI, claiming he believed the $850 billion ChatGate maker would remain a non-profit organization.
The billionaire was testifying in federal court in Oakland, California, as the first witness in his lawsuit against OpenAI, Chief Executive Sam Altman and its largest shareholder, Microsoft.
“I was really stupid to give them free funding to build a start-up,” Musk said. “I essentially gave them $38 million of free funding, which they used to build a profitable company.”
Musk brought the case claiming he was defrauded by a “bait and switch” after OpenAI was created as a non-profit with the billionaire’s backing and then launched a for-profit entity, which has since become one of the most valuable start-ups in the world.
Their lawyers on Wednesday showed the jury emails between Musk, Altman and Chairman Greg Brockman, who were both in court.
The 2017 messages included preliminary discussions about forming a for-profit company and a proposed ownership split under which Musk would have owned slightly more than half of the company.
Musk ended the talks after protests from OpenAI employees. He wrote in September 2017, “Guys, I’ve had enough… either do something on my own or continue working with OpenAI as a non-profit.” He also said it was not an “ultimatum” and that the proposed structure was “off the table”.
Altman replied: “I remain excited about the nonprofit structure!”
Cross-examination of OpenAI lawyer William Savitt focused on these discussions and highlighted how Musk withdrew a quarterly $5 million investment after talks broke down.
Savitt asked whether Musk understood that this would create financial pressure on the start-up, which depended on such payments for computing resources.
He responded, “I started having some concerns about their motivations in 2017. I wouldn’t fund anything if I lost confidence in people.”
Musk repeatedly hit back at Savit, accusing him of lying about the simplicity of his questions.
He said, “They are essentially designed to deceive me… I have to give a long answer because any simple answer will mislead the jury.” “If you ask the question whether you have stopped beating your wife, (I can’t answer yes or no).”
Musk said in his testimony that his 2017 emails were meant to convey that the OpenAI founders could not “have their cake and eat it too”. “They couldn’t get the positive halo effect of having a non-profit charity and enriching themselves,” he said.
After Musk resigned from the board in 2018, OpenAI received a $1 billion investment from Microsoft in 2019 with a maximum profit arrangement. Musk said, “At that time there was no basis for me to file a lawsuit because they did not violate non-profit principles.
“I’m not opposed to creating a limited profit subsidiary where the profits flow to the nonprofit,” he said, adding that profit limits have been removed.
The questioning also addressed an OpenAI term sheet outlining the details of the proposed fundraising. Savitt highlighted parts of the term sheet, which Musk said he had not read.
“Why do you need to read beyond ‘the spirit of charity’?”. he asked Savit. “Would you expect the fine print to refute this?”
OpenAI has claimed that Musk waited too long to bring forward its case, thereby exceeding the limits of its claims.
Musk also mentioned a provision in the Microsoft and OpenAI agreement that for-profits would be breached if artificial general intelligence – AI that can equal or surpass human intelligence – was achieved.
The clause was removed in an amendment to their partnership agreement on Monday. The updated deal also stipulates that revenue shares will be subject to a cap until 2030, although the profit cap was removed in October. Microsoft remains OpenAI’s largest shareholder, holding slightly more equity than OpenAI’s non-profit arm.
“With all due respect to Microsoft, do you really want Microsoft to control digital superintelligence?” Musk asked the jury.
The cross-examination will continue on Thursday also.
