Ask Paul: September 1 (Premium)

Happy Friday! And, yep, it's really September already. So let's kick off the long Labor Day weekend with a great set of reader questions.
ChatGPT and non-exclusivity
helix2301 asks:

First of all just want to say love all the site updates great to get some of the behind-the-scenes stuff really great and enjoy it.

Thanks. I meant to be more consistent with those posts---maybe once a week until I had hit all the obvious topics---but I got derailed by my digital decluttering work. But this is very important to me, not just because it's in keeping with my transparency preferences, but because the feedback I get is invaluable. It's very rewarding.

My question is what is Microsoft doing with ChatGPT it is the same thing they tried with Cortana putting it everywhere and they failed and lost to Google and Amazon. Why are they doing it again with a product they don't own? I know it's because they don't want to miss the next wave but they have kind of been there and done that and they failed. I don't get the point of it.

You aren't the only one wondering this: Microsoft has invested an incredible amount of money in OpenAI directly---a reported $13 billion so far---but it has likewise invested untold tens of billions more each quarter in products and services that build off OpenAI. The potential here is obvious, with Microsoft clearly betting the future of the company on AI. But the risks are huge, in part because Microsoft doesn't get exclusive access to OpenAI's technologies. The company can---and has---licensed it to others as well. Why is that?

For starters, OpenAI is a privately owned company that isn't for sale, and it has no plans to ever go public. It was formed as a non-profit, but it announced in 2019 that it was creating a "capped profit" company, a "hybrid of a for-profit and nonprofit," so that it could raise the investments it needed to grow its AI technologies without giving up ownership or control. This confusing and unusual arrangement let OpenAI grow rapidly by attracting outside investors, with Microsoft being the big fish in that pond, but it also protected the company from being swallowed up because its investors can never make more than 100 times the money they put into OpenAI. And these investors can't get a seat on OpenAI's board, further limiting their ability to control the company and its strategic direction.

In short, Microsoft did what it could do to help OpenAI grow its technologies as rapidly as possible and to have at least some influence over the company. Microsoft Azure is OpenAI's exclusive cloud partner, for example---everything the company does runs on Azure---and the software giant ensured that would continue to be the case by extending this partnership this past January. "Azure will remain the exclusive cloud provider for all OpenAI workloads across our research, API, and products," OpenAI said at the time.

The word independent is important here. OpenAI is independent as a company, and tho...