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EDMONTON, CANADA - APRIL 20: An image of a woman holding a cell phone in front of a OpenAI logo displayed on a computer screen, on April 20, 2024, in Edmonton, Canada.
OpenAI’s nonprofit days are behind it
Big changes are coming to OpenAI.
The company behind ChatGPT started as a nonprofit research lab, but its success has led to an identity crisis of late. Does it want to make money or serve a purpose beyond its bottom line?
Until now, the answer was seemingly the latter. But following a series of top executive exits — including chief technology officer Mira Murati — OpenAI is preparing to become a completely for-profit company. That change also coincides with the startup’s plans to raise more money to reach a target valuation of $150 billion.
Sam Altman, the co-founder and CEO who was booted from OpenAI by its nonprofit board of directors in 2023, regained control of the company after OpenAI employees revolted and lead investor Microsoft expressed discontent. The nonprofit board largely resigned afterward and was replaced with one friendlier to Altman. It now looks like Atlman’s reign will be as firm as ever. The executive denied reports that he’s set to receive a 7% stake in OpenAI, worth upwards of $10 billion, but the switch to for-profit might mean less beating around the bush about its money-making ambitions.
OpenAI has been running a for-profit arm since 2019 so it could get billions in investment from venture capitalists and tech investors, who reportedly prefer if OpenAI is a public-benefit corporation, a type of for-profit with a social mission, rather than a nonprofit. Now, it’s seemingly taking that decision to its natural conclusion, putting its focus on creating a sustainable business ahead of its lofty societal promises about protecting humanity from AI.Warren Buffett recently made positive comments about investing in Canada.
Buffett's blessing: Praise of Canada sparks economic hope. Should it?
Comedian Jim Gaffigan recalls seeing the ubiquitous Canadian Tim Hortons coffee and donuts shops in America. “I always have the same thought: ‘Don’t force your culture on us’,” he quipped.
The joke gets a big laugh with Canadian audiences, wary about American influence seeping into their country. Lately, though, a bigger concern is that Canada is in danger of being ignored, particularly by US investors.
That is why comments made by Warren Buffett last weekend were welcomed so enthusiastically by Justin Trudeau’s unpopular Liberal government.
At the annual meeting of Berkshire Hathaway, the Oracle of Omaha said he was looking at new investments in Canada, adding that he has no hesitation about “putting big money” in the country.
“We do not feel uncomfortable in any way, shape or form, putting our money into Canada,” Buffett said, “... it’s terrific when you’ve got a major economy – not the size of the US, but a major economy that you absolutely, you feel confident about operating there.”
Greg Abel, CEO of Berkshire Hathaway Energy and vice-chair of the company’s non-insurance operations, is a Canadian and widely viewed as Buffett’s successor. He said the company is always looking to make incremental investments in Canada “because it’s an environment we’re very comfortable with.”
François-Philippe Champagne, Trudeau's industry minister, tweeted Buffett’s statement, calling it a “vote of confidence” – and the Liberals sure could use that.
Critics have accused Trudeau of lax fiscal and tight environmental policies, and of presiding over “the slow bleeding of Canada.” The worry is that jobs, capital, and head office functions have leaked south of the border for lower corporate and personal tax rates.
In recent years, investors have complained that Trudeau is more interested in taxing than generating wealth – that he’s a leader who believes the private sector is a golden goose that cannot be killed.
The chorus of criticism reached a crescendo in the aftermath of last month’s federal budget that increased spending and raised the capital gains tax on corporations and the wealthy.
David Dodge, a highly respected former Bank of Canada governor, said the tax rise would make Canada a less attractive place to invest, particularly for start-ups that rely on paying people in shares.
Another former Bank governor, Mark Carney (also an ex-Bank of England governor), said the budget did not focus enough on economic growth. “Governments that spend too much and invest too little will eventually pay a heavy price. The countries that nurture, welcome, and celebrate risk-takers will thrive,” said Carney, widely viewed as a potential and more centrist successor to the left-of-center Trudeau.
The prime minister reinforced his social activist credentials, telling VOX that when everything is going well “the wealthy will find lots of ways to make money off a prosperous and successful middle class.”
“I’m not worried about innovation and creativity. I’m worried about people being able to pay their rent and eventually buy a home,” Trudeau said.
Americans often don’t pay much attention to Canada. But if there is an impression after Trudeau’s eight and half years in charge, it is probably that the Great White North has veered toward quasi-socialism – or that its citizenry is even more reliant than ever on welfare.
That might be a bigger disincentive to investment were the Biden administration not even more addicted to taxing and spending. Canada has a slightly higher corporate tax rate at 26.21%, compared to America’s 25.77%, but President Joe Biden’s State of the Union address proposed to raise the US level to 28% and to increase the top individual income and capital gains tax rates. The Trudeau government has been criticized for a budgetary deficit that is 1.4% of GDP – small potatoes compared to the US’s 6.3% shortfall.
So, despite criticisms and the perception that it is antagonistic toward business, the Canadian government has been remarkably successful at luring inward investment in recent years. Foreign direct investment is at healthy levels, and Canada has established itself as a key player in the global electric vehicle end-to-end battery supply chain, announcing multi-billion-dollar manufacturing and assembly plants by Honda, Stellantis/LG, and Volkswagen, among others, in recent months.
Thanks to Biden’s Inflation Reduction Act, the effort has cost Canada dearly in terms of subsidies – the terms of the Stellantis and Volkswagen deals stipulated that Ottawa match incentives offered to battery makers in the US under the IRA.
Canada’s Parliamentary Budget Office has estimated that the federal government will take 20 years to break even.
But as Tyler Meredith, a former economic adviser to Trudeau, said, Canada’s auto industry is “an amazing story of industrial renaissance.”
During the financial crisis of 2009, it looked like Canada’s auto sector might go the way of Australia and lose domestic production altogether. It has not only maintained production, but it is building the next generation of electric vehicles. “It is super attractive because it has the natural resources, talent, and subsidies,” Meredith said.
The area that even the government’s strongest supporters like Meredith concede there is work to do is the decline in the capital investment base in the resource sector. In 2014, the year before Trudeau became prime minister, it was around $73 billion; today it is around half of that.
The collapse of commodity prices is largely responsible, but the price crash was
compounded by the new government introducing a more rigorous environmental assessment process that increased political risk and lengthened timelines for project reviews. Since then, the oil and gas sector has seen a 43% drop in investment value (in 2015 dollars). Critics contend that a Liberal government hostile to fossil fuels put hurdles in the way of future development and hoped the US shale revolution would price Canada out of the oil market.
But it is not only the oil and gas sector that has seen investment dip. The clean tech industry has also seen a 27% drop since 2017, and even the critical minerals sector, on which so many of the government’s EV hopes are resting, has atrophied, with nickel, cobalt, lithium, uranium, zinc, lead, and platinum all recording double-digit declines, according to a new report by the Macdonald Laurier Institute think-tank.
Contrary to the claims of the opposition Conservative leader, Pierre Poilievre, Canada is not “broken.” It continues to rank highly (though not as highly as it used to) in the World Competitive Index in the 15th spot. It has a well-educated workforce, modern infrastructure, an abundance of energy, and a strong banking sector – and it is relatively easy to start a business.
Meredith says that while people associate Trudeau with poverty and emissions reduction, “he also has an enviable economic investment record” – including the newly completed Trans Mountain pipeline expansion, EV plants, and AI clusters in Toronto, Montreal, and Vancouver. “All those things happened because of intentional government decisions and will serve Canada well over the long term,” he said.
But if the business environment is not as bad as the opposition claims, neither is it an investment Babylon.
Finance Minister Chrystia Freeland admitted as much when she hired another former Bank of Canada governor, Stephen Poloz, to figure out ways to convince Canada’s pension funds to invest more locally, rather than transferring four-fifths of their wealth overseas.
But, as David Dodge pointed out, the job of a pension fund is to raise money to pay pensioners so they invest where they get the highest returns. They are making long-term bets in places privatizing airports and ports, and building toll roads, which suggests that Canada is not as attractive as an investment destination as the government, or even Warren Buffett, thinks.
A student of National University of Malaysia walks past displays of the country's "Stripes of Glory" flags at its campus in Bangi outside Kuala Lumpur August 22, 2007.
Hard Numbers: Microsoft takes Malaysia, Massive (and unknown) startup, Safety first, Don’t automate my news
2.2 billion: Microsoft has its eye on Southeast Asia. The computing giant announced it’ll pour $2.2 billion into Malaysia’s cloud infrastructure over the next four years and will establish a national AI center with the government. This investment is the latest in a string of Microsoft infusions in local economies to help develop AI: In the past month, the company announced a $2.9 billion investment in Japan, $1.7 billion in Indonesia, and a new data center in Thailand, plus a $1.5 billion stake in the UAE firm G42.
19 billion: There’s a $19 billion AI startup that you’ve likely never heard of. It’s called CoreWeave, and it started as a small crypto company that stockpiled powerful graphics chips. Now, it runs data centers that are in high demand from AI companies that need to access those chips to run their models. It’s a company that has quickly “come out of nowhere,” as its cofounder said, to play a major role in the booming AI economy.
2: AI safety research comprises only 2% of total research about artificial intelligence, according to a new report from Georgetown University’s Emerging Technology Observatory. That’s dwarfed by global research into subjects such as computer vision (32%), robotics (15%), and natural language processing (11%).
42: In the run-up to the 2024 presidential election, 42% of Americans are concerned that news organizations will create stories with generative AI, according to a new poll from the Associated Press and the American Press Institute. While news organizations have been using AI to write simple stories — such as earnings-related stories and sport recaps — for years, those that have turned to generative AI in recent years to replace human-written stories have received public pushback and condemnation.
Are markets becoming immune to disruptive geopolitics?
There’s no escaping the intricate link between economics and geopolitics. Today, that link has become a crucial factor in investment decision-making, and who better to speak to that than Margaret Franklin, CEO of CFA Institute, a global organization of investment professionals? Franklin sat down with GZERO’s Tony Maciulis at a Global Stage event for the IMF-World Bank spring meetings this week.
Economists once predicted that sovereign debt would overwhelm global markets. But now, having been through the pandemic, the advent of AI, and wars in the Middle East and Ukraine, “there's almost a level of immunity,” she says, “to the dramatic nature of it until something really cataclysmic happens.”
And then? “The response, generally speaking, has been pretty positive,” Franklin says, with central bank intervention saving markets and building resilience.
In much the same way, the World Bank is trying to boost investor confidence by making changes that leverage private sector capital for public sector goals by better evaluating what level of risk the private sector will accept.
Individual investors should do the same, Franklin advises. “Really evaluate your risk profile … making sure you diversify,” she says, noting that fixed-income offerings have become more attractive. Younger investors, meanwhile, need to be cautious with getting their information on social media, she adds.
For more of our 2024 IMF/World Bank Spring Meetings coverage, visit Global Stage.
Global investment manager and business executive Mark Wiseman, seen here in 2017.
Mark Wiseman on smart choices today vs. eating gruel tomorrow
As business and world leaders converged on Davos this week, we learned that the WEF’s Chief Economists Outlook saw more than half of chief economists predicting the global economy will weaken this year. What does today's global uncertainty mean for business leaders? For your retirement plan? GZERO caught up with Mark Wiseman, a global investment manager, business executive, and expert in private equity, alternative investments, long-term investments, and sustainability, at Davos for some answers. Wiseman is also a senior advisor with Boston Consulting Group and sits on the Board of NOVA Chemicals.
This Q&A has been edited for length and clarity.
GZERO: Often the criticism of Davos is that it's a gathering of the wealthy and powerful that produces few results. What's your sense? Is this year different?
Mark Wiseman: Everything's changed in the last 1,000 days.
Think where we were 1,000 days ago. We were still in the pandemic, trying to understand what that meant for the world and society. China and the US were only in the early innings of decoupling. There wasn't a major kinetic war taking place on the European continent. It looked like peace in the Middle East was closer than ever.
Today, it looks closer to a complete breakdown of society and all-out war.
In the shadow of the last 1,000 days, this particular Davos, which is the first real one post-COVID, geopolitics are incredibly important, but the geopolitical players, by and large, are not here like they used to be.
Davos has become a business forum. Businesses are worried about politics. Businesses are worried about the US election. Businesses are worried about commodity prices. Businesses are worried about China.
But the politicians are not here in the numbers they've ever been in the past.
There's something wrong. We've got this massive geopolitical overhang and it's a lot of business people talking to each other about geopolitics, whereas the actual participants aren't by and large in the room.
GZERO: What do you attribute that to?
Wiseman: More than a little bit of it is the liberal elite rap that Davos has received. Today, if Trudeau were to show up at Davos, it would be a front-page story about him being part of the elite in the Swiss Mountains, and he can't afford that press.
But it's too bad, given how important dialogue about geopolitics is between corporate leaders and political leaders right now.
“Building trust takes years while losing trust takes a moment.”
GZERO: The overarching theme of Davos this year is rebuilding trust. An AP poll last year found 88% of Americans said they had little or no trust in banks and financial institutions. What are your views about how to repair that public relationship?
Wiseman: Building trust takes years while losing trust takes a moment. I think that we've had lots of moments and we haven't had enough years, consistently, to rebuild trust in financial institutions. And part of that is the underlying profit motive that seems to drive everything in many of our financial institutions.
Obviously, there is an issue of trust in terms of the public writ large having to step up time and again to bail out financial institutions that have taken unwarranted risks. It's not just a US phenomenon. It's Credit Suisse here in Switzerland. It's some of the property players in China. Both banks and regulators need to do a better job in also understanding the role of financial institutions in society – in terms of providing capital for economic growth and the benefit of everyone.
And because we've had so many moments of mistrust, the pendulum has swung also among regulators in terms of de-risking the system.
And so the regulators, because of a not-unwarranted response from the public, are essentially solving for a single variable, which is systemic risk. We're going to avoid systemic risk because God knows we don't want to have to bail out another bank.
And in reality, yes, you wanna control systemic risk, but you also want to assure capital formation and you want to ensure access to savings products and insurance products that are fairly priced for individuals so that they can mutualize risk.
GZERO: There are a lot of folks in developed countries who are in their 30s, they've been working for a decade and are finding they have to make hard trade-offs now financially. What do you see as the outlook for people that are, let's be frank, approaching middle age and are not in the same position as earlier generations when it comes to building wealth?
Wiseman: The baby boomers have just benefited immensely from the disproportionate post-war growth and bull market. But that's an outlier. If you were in the 1940s, you would have had the same issues about buying a house and if you were in the 30s, you'd be worried about feeding yourself for most people in society.
I do think the one major change though is retirement. You will in all likelihood live significantly longer than your parents lived. Your children will live significantly longer than you live. That means that you and your children will in all likelihood have to rely on your retirement savings for a longer period.
And Social Security is … like a woolly mammoth in the room. One that American politicians are not addressing and it's coming very, very quickly, and the fact is, unless you're looking after yourself, there's not going to be enough there for you.
“ … the choice you made today was actually a choice as to whether you wanted a nice private retirement home with your own nurse or living in a government facility, eating gruel.”
GZERO: What should governments be doing to avoid a situation in which the younger generations are supporting older generations in an unsustainable fashion?
Wiseman: China is actually interesting, very similar to the US because you've got the national Social Security Fund, which essentially is underfunded and has some of the same issues as US Social Security.
The only reason why China is arguably better off is because it's got a high savings rate. People don't have 23 credit card companies dropping new cards in your mailbox every day.
Americans don't save, they consume, which has been driving the economy. I used to do this little speech, and I'd hold up a cell phone. Often it was a bunch of people coming to work for the firm. They’d be maybe 20 years old, and I'd ask “How often do you change your cell phone?” and they would say “every year” or “every 18 months.”
I said, “Boy, that's a pretty big cost, it's $600 or $700. What if you changed your phone every 2 1/2 years instead of every year?” And by the way, I've got one that still has a little push button on the bottom; I do take my own advice.
If that's 700 bucks that you save instead and then compound that out, you can think about the choice you made today as actually a choice as to whether you wanted a nice private retirement home with your own nurse or living in a government facility, eating gruel. That was the decision you made when you bought your phone. That's a huge decision, but no one thinks that way.
For more from Mark Wiseman, check out his article about the fundamentals of investing: risk and return.
China issues new rules to review foreign investment on national security grounds
SHANGHAI (REUTERS) - China has drawn up new rules that will allow authorities to review foreign investment on national security grounds, the country's state planning agency said on Saturday (Dec 19).
China says US should stop unreasonably suppressing Chinese firms
China's foreign ministry made similar comments last week.
Indonesia closer to setting up first sovereign wealth fund
Regulations on the establishment of Indonesia's first sovereign wealth fund (SWF) will be ready in two to three weeks, and discussions on possible joint investment with foreign SWFs in Indonesian projects have been held with the Abu Dhabi Investment Authority, Singapore's GIC, and the US International Development Finance Corporation (DFC).