Openai is the child of AI Revolution’s indisputable posters and the company that made the world pay attention to the launch of ChatGpt. But behind the scenes, hopeless and extremely expensive fights are raging, and the costs of maintaining the company’s genius within the company are becoming astronomical.
According to a recent report from informationOpenai has revealed to investors that equity-based compensation for employees has skyrocketed to an astounding $4.4 billion last year, more than five times its last year. That number is not just a magnitude. This exceeds the company’s total annual revenue, accounting for a staggering 119% of total revenue of $3.7 billion.
This is an unprecedented person, even in Silicon Valley. For comparison, Google’s stock compensation was only 16% of its earnings before the IPO. On Facebook, it was 6%.
So, what’s going on? In short, Openai fights for life in an unprecedented war of talent, and its main rival, Meta, is offensive. Mark Zuckerberg personally courts top AI researchers in large compensation packages, poaching several important minds from Openai’s core team. This reportedly forced the crisis in Openai, forcing them to “realign compensation” and promise an even more rewarding wage package to prevent catastrophic brain drain.
Stock-based compensation does not immediately burn a company’s cash reserves, but it creates significant risk by diluting the value of the stocks held by investors. For every billion dollars of shares handed over to employees, this means that the slice of pie, owned by major backers such as Microsoft and other venture capital companies, will be smaller.
Openai is looking to sell this strategy as a long-term vision. The company predicts that the massive expenses will fall to 45% of revenue this year, falling below 10% by 2030. Additionally, Openai reportedly has discussed future plans for employees to own about a third of the rebuilt company, and Microsoft also owns a third. The goal is to turn employees into deeply invested partners.
But the “meta effect” throws a wrench into these neat projections. Aggressive poaching and subsequent wage bumps mean Openai’s costs are likely to remain empty.
Openai’s Stakes
This high stakes financial strategy puts Openai in a volatile position. The company is already spending billions of dollars a year as it spends heavily on the computing power needed to run the model. Adding billions of dollars of stock compensation will dramatically increase revenue before investors are surprised and put a lot of pressure on the company to find a way to profitability.
Microsoft seems to have been locked up for a long time, but other investors may be tired of diluting their ownership very much. This forces the company’s countdown timer to provide large financial benefits to justify the costs.
Openai was founded on the mission of building artificial general information (AGIs) “which benefit all humanity.” This costly war of talent, supported by capitalist competition, puts great pressure on its establishment ideals. When billions of people are burned to prevent top minds from participating in the competition, it becomes difficult to prioritize safety and ethics.
Ultimately, Openai is betting these billions to ensure the best talent to win the race to create the world’s first true emergency. If they succeed, the financial costs seem trivial. If they fail, or if their competitors get there first, they’re spending themselves in the hole for anything.
Openai did not respond immediately to requests for comment.
