Capped Profit

= "This model caps the amount of profit that can be distributed to shareholders or reinvested in the business. The excess is typically allocated to societal or environmental causes". [1]

See also: Capped Returns

Example

Upstack:

"Traditional business models are often designed where profit maximization is the key goal. However, there's a different approach that's gaining traction: the capped profit model.

This model caps the amount of profit that can be distributed to shareholders or reinvested in the business. The excess is typically allocated to societal or environmental causes. It's a model that balances profitability with broader social responsibilities. As you explore this concept, consider how it could reshape your understanding of success in business.

When you think about innovative business models, OpenAI stands out with its capped profit structure. This organization, initially established as a non-profit, transitioned to a "capped-profit" entity known as OpenAI LP under the umbrella of OpenAI Inc. This unique structure is pivotal in understanding how they balance ambitious technological advancements with ethical considerations.

The cap in OpenAI's model is set at 100 times any investment. This means that investors can receive returns up to 100 times their initial investment, but beyond this point, excess profits are redirected toward the company's overarching mission of ensuring artificial intelligence (AI) benefits all of humanity. This approach is revolutionary in the tech industry, where profit motives often overshadow broader ethical concerns.

OpenAI's mission centers around developing AI in a safe and beneficial manner. The profit cap is a critical component in this mission, as it aligns the financial incentives of the company with its ethical goals. By capping profits, OpenAI ensures that its focus remains on creating AI technologies that are aligned with human values and the public interest, rather than purely on generating financial returns.

Moreover, OpenAI's capped profit model has implications for its governance and decision-making processes. Decisions at OpenAI are made with a long-term perspective, prioritizing the safe and equitable development of AI technologies. This is in stark contrast to many traditional companies where short-term profit goals can sometimes lead to compromises in ethical standards or long-term vision.

The model also influences OpenAI's collaborations and partnerships. By committing to a capped profit structure, OpenAI positions itself as a leader in responsible AI development, attracting partners and collaborators who share similar values. This has enabled OpenAI to work on groundbreaking AI projects while maintaining a commitment to ethical standards."

(https://www.upstock.io/post/the-basics-of-the-capped-profit-model-a-case-study-on-openai)