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Thanks for writing this. After reading this, I want EA to be even more "cause first". One of the things that I worry about for EA is that it becomes a fairly diffuse "member-first" movement, not much unlike a religious group that comes together and supports each other and believes in some common doctrines but at the end of the day, doesn't accomplish much. 

I look at EA now and am nothing short of stunned at how much it is accomplishing. Not in dollars spent. But in stuff done. The EA community was at the forefront of pushing AI safety to the mainstream. It has started several new charities. It's responsible for a lot of wins for animals. It's responsible for saving hundreds of thousands of lives. It's about the only place out there that measures charities, and does so with a lot of rigor. It's produced countless reports that actually change what gets worked on. It creates new charities every year. It changes what it works on pretty well.

I think caring about its members is an instrumental goal to caring about causes. The members do, after all, work on the causes. EA does recognize this though and with notable exceptions, I think it does a very good job of it.

Just found this post but strong agree. I have previously suggested (like 3 years ago) that EAs should not hold facebook stock (now META) and that we should probably have something like rolling 1 year put options. That's easier to do in public markets and we can just ask some wealthy EAs or some other organization to put this position on. What I mean here is that we can hedge out our specific facebook risk (and long the market, other tech/social media companies and figure out other hedges we want).

Hedging a private company is much, much harder. We could have shorted $FTT futures but this is insanely risky and could blow up before you get the benefit of your hedge (better for us to just have gotten whatever amount of FTT we could get and liquidate it) and this runs into problems you spoke about.

Hedging against a market downturn (lots of EA net worth was lost here) is just very difficult as well.

Good post.

I think it's worth noting that fraud can be a grey thing. Which of the following are fraud:
A) Two founders raise $2M at a $20M valuation. They pay themselves $500k each for two years (a bit higher than their previous FAANG salaries), don't work that hard, write a bit of code but not enough for the product. They ultimately try to raise more but fail to do so and dissolve the company giving investors nothing back (all the money is spent).
B) Companies collect credit card details on a 7 day free trial of their product where only shipping needs to be paid. Immediately after 7 days, they charge the credit cards $1000 and send product saying that in the fine print they had to cancel within 7 days or they would be sent the product. The customers would never pay for the product, comparable products cost $100 for what was sent and the company refuses to provide any refund. They spent a lot on the advertisement and got 5000 people to take the 7-day free trial, 4500 of whom did not cancel.
C) Medical startup administers more tests than is necessary charging health insurance providers (Medicare and private insurance). Rarely a test finds something that otherwise would have been missed but was definitely not required given symptoms.
D) Company X raises $500k at a $5M valuation. They spend $250k reasonably on product development. They then need $500k for a mold for manufacturing. They look for financing in the form of bridge loans, raising additional capital, going back to investors telling them they need another $250k, etc. and don't manage to do so. CEO of Company X decides that this mold is pivotal for the company and is a good poker player. 
i) He takes the $250k to the poker table and doubles the money.
ii) He loses $150k and then decides to save the other $100k
iii) He loses the $250k
E) Company X raises a seed round and builds an MVP. They then go on to raise a series A, showing investors a beautiful exponential curve of new users. The company allows the first use of an account to be for free and subsequent use costs $5. Founders purposely make signing up for new accounts very easy such that they know multiple people are making several accounts to use the product for free.
F) Company X gets funded by YC and takes the $125k and $375k cheques for 7% and the MFN safe. They never intend to raise another round since they are already profitable but they need to in order to satisfy the MFN clause. They get a family friend to invest $100k at a $1B valuation forcing YC to take those terms. Maybe they later buy out the friend for $105k a few months later.

I don't know which of the above legally qualifies as fraud but I sure think all of them are at the very least wrong. I'd probably call all of them fraud since they are deliberately deceiving people for financial gain by being credited with false accomplishments/qualities. I also think reasonable people can disagree with me.

Answer by MarcusAbramovitchDec 22, 202265

One of the biggest hindsight revelations regarding this FTX crisis is the relative amount of money given to charity vs the amount spent on political campaigns, marketing etc. I am pretty sure this is all the grants that the FTX future fund made. It totals around $100M. If needed, you can ask the people who resigned from the Future Fund.

I'm not going to make a comment on whether the Abbey was a good purchase or not but 2.4% rent yield is terrible for a real estate purchase. You aren't factoring in maintenance costs, property taxes, cost of capital, etc. which usually end up being around 5%

When looking at an investment, you always have to look at the counterfactual. 
Let's look at 15M GBP invested at an ~8% annual return for 8522 days (23.34 years) while withdrawing $88,000/year to pay for 50 days/year of $1760/day of renting a venue. https://docs.google.com/spreadsheets/d/1g8GLrt1xQNolDaYTOG8aTsaIh-bm53jQg5rWzYH5O5s/edit?usp=sharing

We end up with ~$82.7M. Conversely, a reasonable growth rate for a piece of real estate is something in the realm of 2-5%/year. So buying the Abbey, using it, paying no taxes(I don't know about this) and paying no maintenance (unrealistic) and no financing (since we put the money in up front), the Abbey will be worth $23-46M upon which we sell it.

It is Equivalent of buying a house or renting one. Of course you would buy one if you had the funds without causing your personal finances to break.

This just isn't true many factors come into this and on the whole it is definitely not a general rule to buy>rent.

Lastly, I don't think we want Open Phil, CEA or EVF to be making (financial) investment decisions. The decisions need to be based on some sort of cost-benefit analysis of utility or social (not financial) returns.

Side note: A lot of people will mistakenly believe that real estate is an amazing investment, likely because 
1. Their parents (I'll assume the bulk of EAs are between 20-30 and thus their parents are 40-70 years old) will have done extremely well on their real estate purchases.
2. Society portrays this as some magic investment where the asset appreciates and you get a payment every year (stocks do this too) and as a magic gateway to the middle class or above.

The reason that your parents did really well on their home purchases was because they took on a lot of leverage (through loans/a mortgage) at a time where interest rates were at historical lows and sustained there for a lot of time. Most of that time, from 2002-2021, interest rates were below 2%, often just over 0% and real interest rates were negative. These conditions are an anomaly and it is quite unlikely they will hold for the foreseeable future and definitely not with enough certainty upon which to base a multi-year investment.

It makes a good amount of sense that real estate will yield less than stocks because real estate is a static asset which mainly increases in value due to inflation, increase in population (demand increase) and interest rate changes, not generating anything new while stocks represent ownership of businesses which makes goods and services and sells them at a profit and you get a percentage of that profit. This is born out by looking at long run returns of assets where stocks will outperform real estate significantly. Real estate earned an average real return of 1.3% and stocks returned 5.2% from 1900 to 2007.

Should grantees wait to be asked for the money or should they do so proactively?

This implies that something we should be doing is giving committed, highly engaged EAs something like a $2M unconditional grant for personal use so they could focus on whatever they thought was most valuable. 

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