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When Sam Altman was president of Y Combinator, he advised founders: stay close enough to profitability that you could get there before your next funding round if you had to. As he told the Wall Street Journal<\/em> in 2014, keeping \u201cprofitability in grasp\u201d was a key lesson.<\/p>\n My late Harvard colleague Clayton Christensen would have recognized immediately some of the hallmarks of good money thinking: keep costs low, test whether real customers will pay real prices, don\u2019t let your cost structure outrun your revenue model.\u00a0<\/p>\n OpenAI\u2019s S-1 reportedly projects $14 billion in losses for 2026 alone. Profitability is not expected until 2030 at the earliest. A few years ago, Altman told investors that once OpenAI built artificial general intelligence, they would ask it to figure out how to generate a return. He was at least partly joking. The framework suggests he shouldn\u2019t have been.<\/p>\n OpenAI is not even first to the door. Anthropic, the lab founded by its own defectors, confidentially filed this week at a near $1 trillion valuation.\u00a0<\/p>\n The question none of these roadshows will answer is the one that actually matters: does this company have a viable path to profitability it could activate if it needed to?<\/p>\n Christensen and his collaborator Michael Raynor developed the \u201cGood Money\/Bad Money\u201d theory for exactly this scenario.<\/p>\n The framework\u2019s insight is simple: it\u2019s not whose money you take that shapes a company\u2019s strategy \u2014 it\u2019s the expectations attached to it.\u00a0For a new-growth venture, the best kind of money is \u201cpatient for growth but impatient for profit.\u201d Such capital forces founders to test quickly whether actual customers will pay good prices for a real product. It keeps costs low enough to preserve strategic flexibility. And it shields the venture from unexpected shifts in the funding environment.<\/p>\n So-called bad money is the opposite. Capital that is impatient for growth but patient for profit sounds generous because it ostensibly gives you runway. But there is an insidious quality. When investors demand rapid growth, a venture gets channeled toward the largest, most obvious markets \u2014 precisely those where deep-pocketed incumbents also want to invest. As costs ramp up in anticipation of revenues, the cost structure begins to dictate strategy, making the small, unglamorous opportunities that might actually work seem unattractive. Scaling a losing formula doesn\u2019t fix it. It magnifies the losses.<\/p>\n Going public at a $1 trillion valuation is, almost by definition, accepting money that must be impatient for growth. Enormous expectations are already priced in. The pressure to grow faster, enter newer and bigger markets, and justify the number never lets up.<\/p>\n When I teach the framework in my MBA class, reactions are weird. Sometimes, students think it\u2019s the course\u2019s most compelling idea; other times they despise it. I puzzled over their reactions for years until I realized that they seemed to track the capital-market environment almost perfectly. When money was abundant and cheap, students hated the theory. But when money was scarce and expensive, they loved it. The theory didn\u2019t change \u2014 the world around it did. That\u2019s kind of the point of the theory.<\/p>\n Watch how the total addressable market narrative expands. SpaceX started as a rocket company in 2002. Then it added Starlink satellite internet in 2019. Then, after merging with xAI earlier this year, it became a rocket-internet-and-AI company. Now the S-1 describes orbital AI compute satellites by 2028. Each new layer of ambition justifies a higher valuation, but the economics have not yet caught up with the narrative. The analyst Anand Sanwal memorably described this pattern as a \u201cPonzi scheme of ambition\u201d: a growth company that hasn\u2019t yet dominated its first market keeps painting ever grander pictures of new ones to keep the capital flowing and the valuation rising. Every S-1 has a risk factors section. Almost nobody reads it until it\u2019s too late.<\/p>\n The theory acknowledges that a \u201cget big fast\u201d strategy can make sense \u2014 for example, when real network effects and switching costs create true winner-take-all dynamics. But those conditions arise far less often than founders and their backers claim.<\/p>\n Amazon is the counterexample everyone reaches for \u2014 the growth-prioritizing company that famously refused to turn a profit and still won. But Amazon, maybe not on day one but certainly early on, had a viable profit formula inside the business. It simply chose to prioritize growth. Not every company burning cash has profitability in grasp. The question is whether it could get there if it had to.<\/p>\n Altman once cared about the difference. The S-1 can\u2019t answer whether OpenAI has a\u00a0<\/p>\n viable path to profitability it could activate under pressure. Neither can the roadshow.<\/p>\n My students are a constant lesson to me that the theory doesn\u2019t change. The world around it does. Right now, money feels abundant. It won\u2019t forever.<\/p>\n \u201cThe Good Money\/Bad Money framework was developed by Clayton Christensen and Michael Raynor in The Innovator\u2019s Solution.\u201d<\/em><\/p>\n The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of <\/em>Fortune.<\/em><\/p>\n<\/div>\n #good #money #bad #question #SpaceX #OpenAI #investors #arent<\/p>\n","protected":false},"excerpt":{"rendered":" When Sam Altman was president of Y Combinator, he advised founders: stay close enough to profitability that you could get there before your next funding round if you had to.… <\/p>\n","protected":false},"author":1,"featured_media":5964,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[536,1972,2663,66,92,2400,27,735,1412,748,1843],"class_list":["post-5963","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-news","tag-anthropic","tag-arent","tag-bad","tag-good","tag-investors","tag-ipos","tag-money","tag-openai","tag-question","tag-sam-altman","tag-spacex"],"_links":{"self":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/5963","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5963"}],"version-history":[{"count":0,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/5963\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/media\/5964"}],"wp:attachment":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5963"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5963"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5963"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\nGood Money, Bad Money<\/h2>\n
The Ponzi Scheme of Ambition<\/h2>\n
The Altman Problem<\/h2>\n