FTX as a funding source also had plenty of non-fraudulent failure modes. Having “banked on receiving millions from FTX over the coming years” to the extent that not receiving those funds created a crisis seems like a serious misjudgment. That being said, it isn’t clear to me the extent to which FTX’s donation amounts would have tied into short-term fluctuations in crypto values.
I can imagine that EV could probably withstand a sudden halving in funding from a major donor, by reallocating funding between projects, which is probably what’s alluded to here.
The extent to which donations could be reallocated is unclear to me; it is possible for a donor to restrict donations to a specific purpose in a legally binding way. At least in some jurisdictions, those restrictions can often be binding even against the charity’s creditors if the charity manages its finances correctly.
I read Zach to mean that projects need to have enough funding on hand to shut down in an orderly enough way—which includes a way that does not create problems for sister projects—in a near-worst case scenario. This could be a problem, for instance, if a project had financial commitments that bound EV but could not be satisfied out of resources allocated to the project.
There are, however, limits on what good financial controls can do for you if there’s a massive funding shortfall and/or a massive unplanned liability. If (e.g.) a 50% revenue loss (not of a short-term nature) wouldn’t seriously disrupt a charity’s work, then that charity is probably too conservative on its spending or is raising excessive amounts of money that should go elsewhere.
FTX as a funding source also had plenty of non-fraudulent failure modes. Having “banked on receiving millions from FTX over the coming years” to the extent that not receiving those funds created a crisis seems like a serious misjudgment. That being said, it isn’t clear to me the extent to which FTX’s donation amounts would have tied into short-term fluctuations in crypto values.
The extent to which donations could be reallocated is unclear to me; it is possible for a donor to restrict donations to a specific purpose in a legally binding way. At least in some jurisdictions, those restrictions can often be binding even against the charity’s creditors if the charity manages its finances correctly.
I read Zach to mean that projects need to have enough funding on hand to shut down in an orderly enough way—which includes a way that does not create problems for sister projects—in a near-worst case scenario. This could be a problem, for instance, if a project had financial commitments that bound EV but could not be satisfied out of resources allocated to the project.
There are, however, limits on what good financial controls can do for you if there’s a massive funding shortfall and/or a massive unplanned liability. If (e.g.) a 50% revenue loss (not of a short-term nature) wouldn’t seriously disrupt a charity’s work, then that charity is probably too conservative on its spending or is raising excessive amounts of money that should go elsewhere.