I’m very worried about Anthropic’s IPO. I expect it to rapidly destroy their safety culture, for the usual reasons that IPO makes a company’s values change: pressure from the market of various kinds, especially fiduciary duty, but there are a range of ways it occurs. There will have never been a more impactful IPO, and despite Anthropic being a PBC, I expect large investors to find ways to exert pressure. I don’t think it would be in those investors’ 10-year interest to do so, but as always, it will be in their short-term competitive interest, and that’s what ends up dominating. Because of this, I think Anthropic should not go public.
Same goes for OpenAI but Sam Altman is in charge of that. Though, I suspect the open market would not sustain OpenAI’s valuation. I’m not a trader though, so who knows.
My claim is based on “It seems to usually change this when IPOs occur”, not eg “I have studied the mechanisms of the stock market in detail”. I don’t really know the details of why; my understanding from a distance was that it’s something about having an enormous pool of rapidly competing investors, activist investors, stuff like that. I can try to elicit Claude on plausible mechanisms, but ultimately my reason for concern is “it seems like IPOs usually cause companies to degrade”. Google is certainly a major example of this in my head, though google has quite an array of problems. My intuitive understanding points to the issues primarily going through replacing “investors trust the CEO’s judgement” with “investors don’t give a crap about the company’s internal mechanisms and just want their short term returns”. But that might be wrong; to establish or reject my impression would involve collecting a large list of companies and looking into what made them degrade or not degrade at various points, and whether IPO really is a major degradation-rate-change event. (But I do expect that it is one and don’t consider this to be weakening my claim.)
I don’t think the “just want their short term returns” applies in many or most cases. I think the influential, large (as in meaningful voting power) tend to take longer term positions. I suspect it comes down more to what the various groups are trying to maximize. Founders and original insiders are probably maximizing a blend of pecuniary and non-pecuniary returns while the post IPO investors tent to be more exclusively focused on the pecuniary returns. But as that pecuniary focused group grows the founder find they have to make more and more compromises to retain control and pursue their initial vision.
But I think you’re right that after IPO the nature of the decision-making and the focus of what to pursue and maximize is going to shift and so relative priority regarding safety likely to shift—exactly how much and in which direction I don’t know but I would not be surprised if it moves in a way you seem concerned about.
A reason might be that the composition of the investor pool and relationships with shareholders will be very different. I think this is kind of a motte though, and would require the OP to be making a more nuanced sort of argument.
(I really just mean ‘might be’; I haven’t thought enough about this to have much of a take, but this is something that occurred to me that I’m slightly surprised didn’t also occur to you.)
My impression is based on “this seems to usually happen when IPOs occur, as evidenced by the degradation of most public corporations”. I don’t have a more detailed understanding to tell you what mechanisms will or won’t be able to cause it, I was hoping others would know if I was right.
don’t forget employee liquidity—post-IPO all the equity that employees have is money, not theoretical future-money based on when and how well the company goes public. This changes the internal perception and motivation quite a bit.
One thing I’m curious about is given SpaceX (containing xAI), Anthropic and OpenAI all going public at a similar time, can the public market financially support all these companies at once? Does this make the competitive effect on culture stronger or weaker? I have no financial expertise so I don’t know what to think about it.
What I’ve heard from coworkers who used to work in investment banking (so are familiar with the IPO process): demand for frontier lab stocks is unprecedented and there will be a lot of selling in non-AI winner stocks to fund purchases of frontier lab stocks.
In terms of structuring your portfolio, as these IPOs approach, I would increase my cash holdings (or only invest in indisputable AI winners if you really want to be in the market). Or buy shares in the frontier labs before they IPO if you can (let me know if you figure out a way pls)
I’m very worried about Anthropic’s IPO. I expect it to rapidly destroy their safety culture, for the usual reasons that IPO makes a company’s values change: pressure from the market of various kinds, especially fiduciary duty, but there are a range of ways it occurs. There will have never been a more impactful IPO, and despite Anthropic being a PBC, I expect large investors to find ways to exert pressure. I don’t think it would be in those investors’ 10-year interest to do so, but as always, it will be in their short-term competitive interest, and that’s what ends up dominating. Because of this, I think Anthropic should not go public.
Same goes for OpenAI but Sam Altman is in charge of that. Though, I suspect the open market would not sustain OpenAI’s valuation. I’m not a trader though, so who knows.
Why does being public change any of this? They already have a ton of investors
My claim is based on “It seems to usually change this when IPOs occur”, not eg “I have studied the mechanisms of the stock market in detail”. I don’t really know the details of why; my understanding from a distance was that it’s something about having an enormous pool of rapidly competing investors, activist investors, stuff like that. I can try to elicit Claude on plausible mechanisms, but ultimately my reason for concern is “it seems like IPOs usually cause companies to degrade”. Google is certainly a major example of this in my head, though google has quite an array of problems. My intuitive understanding points to the issues primarily going through replacing “investors trust the CEO’s judgement” with “investors don’t give a crap about the company’s internal mechanisms and just want their short term returns”. But that might be wrong; to establish or reject my impression would involve collecting a large list of companies and looking into what made them degrade or not degrade at various points, and whether IPO really is a major degradation-rate-change event. (But I do expect that it is one and don’t consider this to be weakening my claim.)
I don’t think the “just want their short term returns” applies in many or most cases. I think the influential, large (as in meaningful voting power) tend to take longer term positions. I suspect it comes down more to what the various groups are trying to maximize. Founders and original insiders are probably maximizing a blend of pecuniary and non-pecuniary returns while the post IPO investors tent to be more exclusively focused on the pecuniary returns. But as that pecuniary focused group grows the founder find they have to make more and more compromises to retain control and pursue their initial vision.
But I think you’re right that after IPO the nature of the decision-making and the focus of what to pursue and maximize is going to shift and so relative priority regarding safety likely to shift—exactly how much and in which direction I don’t know but I would not be surprised if it moves in a way you seem concerned about.
A reason might be that the composition of the investor pool and relationships with shareholders will be very different. I think this is kind of a motte though, and would require the OP to be making a more nuanced sort of argument.
(I really just mean ‘might be’; I haven’t thought enough about this to have much of a take, but this is something that occurred to me that I’m slightly surprised didn’t also occur to you.)
My impression is based on “this seems to usually happen when IPOs occur, as evidenced by the degradation of most public corporations”. I don’t have a more detailed understanding to tell you what mechanisms will or won’t be able to cause it, I was hoping others would know if I was right.
Do any of the Anthropic founders have supervoting shares?
don’t forget employee liquidity—post-IPO all the equity that employees have is money, not theoretical future-money based on when and how well the company goes public. This changes the internal perception and motivation quite a bit.
I think this is a more important factor than investor pressure, since there’s already plenty of investor pressure even as a private company.
One thing I’m curious about is given SpaceX (containing xAI), Anthropic and OpenAI all going public at a similar time, can the public market financially support all these companies at once? Does this make the competitive effect on culture stronger or weaker? I have no financial expertise so I don’t know what to think about it.
What I’ve heard from coworkers who used to work in investment banking (so are familiar with the IPO process): demand for frontier lab stocks is unprecedented and there will be a lot of selling in non-AI winner stocks to fund purchases of frontier lab stocks.
Selling might be exacerbated depending on how much cash institutional investors are sitting on. That is a good metric to track https://giftarticle.ft.com/giftarticle/actions/redeem/e9c85cba-dbe0-41c3-94e3-fb524c8da3b8
In terms of structuring your portfolio, as these IPOs approach, I would increase my cash holdings (or only invest in indisputable AI winners if you really want to be in the market). Or buy shares in the frontier labs before they IPO if you can (let me know if you figure out a way pls)
Thanks for this info—very useful datapoint, I have strong-upvoted.