(Briefly: we got into this via a loose monetary policy involving lots of printing mana for bonuses and subsidies, in order to encourage engagement. But there’s historical precedent for this—eg Paypal famously gave away $10 to every user to get their network effects started)
I think our monetary situation is actually fine. It’s tempting to look at things from a cash balance perspective because it’s simple, but that’s pretty naive. This post from CommonCog has informed my thinking of these kinds of things:
”People with limited understanding of business think that business is all about making profits. But those who actually run businesses know that running a business is all about managing cash flows.”
Manifold users don’t actually cash out that much, so we shouldn’t actually need that much cash on hand. Another point Zvi raised is that very few online sportsbooks maintain enough cash on hand to fully pay out all users—it just doesn’t make business sense to do this, you grow more slowly if you commit to holding extra cash.
The equity value of Manifold dominates the cash considerations (we last raised at $40m valuation), so from our business perspective we can eventually back assets just by raising more. The point of this pivot is to drive enough interest & mana purchases to get us to a Series A, after all.
Shrug, as above, I don’t think we’ve really historically screwed up; I’m in the weird position of simultaneously trying to talk my cofounders out of this 1000:1 thing and trying to publicly explain our actions at the same time...
Yeah, I agree the short notice is very bad. I think the rationale is that the Google Form for loans below will basically be given to anyone who reasonably applies, so our users shouldn’t be that badly affected.
Yeah, I was already pretty unhappy when I first heard the proposal to be 200:1; 1000:1 seemed much worse. Idk, again, I think it’s a bad idea.
Yes, although this was much more OK with play money than it would be with quasi-cash. Especially since Manifold’s heavy use of the play-money printing press wasn’t a secret.
I tend to agree with your co-founders on this one.
Manifold users don’t actually cash out that much, so we shouldn’t actually need that much cash on hand.
I am not sure that the behavior of past Manifold users in a play-money economy where the only cash-out was to charity is a reliable guide to how future users will react to in a ~real-money environment.
Another point Zvi raised is that very few online sportsbooks maintain enough cash on hand to fully pay out all users—it just doesn’t make business sense to do this, you grow more slowly if you commit to holding extra cash.
When we’re talking about play money potentially redeemable for charitable donations, that is one thing, especially where the vast majority was ~freely obtained (as opposed to being purchased with cash. If people can’t donate play money they were largely given for free, that doesn’t keep me up at night too much. It’s something different where the quasi-cash was largely purchased with real cash (or obtained in wagers of quasi-cash that was largely purchased with real cash). In the latter case, I think you have to be prepared for the risk of a bank run.
The equity value of Manifold dominates the cash considerations (we last raised at $40m valuation), so from our business perspective we can eventually back assets just by raising more.
Maybe, but conditioned on there being a run on the bank, Manifold equity would not provide a solid backstop for customer claims. If you are in a bankrun situation, there is a pretty decent possibility that Manifold equity is either illiquid or ~worthless. You might be hard-pressed to find buyers either because of the underlying facts that led to the bankrun or due to skepticism about the value of a business whose customers are in a panicked rush for the door.
Moreover, the base rate of young startup failure is pretty high, so there could be a number of scenarios in which a run makes sense. If I thought Manifold might be going under soon, and my quasi-cash was backed only to a limited extent, I think I’d rather exchange my quasi-cash for real cash ASAP.
Perhaps you could get an irrevocable line of credit for the next ~2 years backed by a certain amount of equity? If you can, then that could back the quasi-cash liabilities. If you can’t, is evidence that you can’t get a sophisticated lender to accept the equity as collateral also evidence that Manifold users shouldn’t accept it as backing?
I guess another way of saying this is that I think Manifold should treat quasi-cash holders as ~depositors, and thus should be unwilling to expose them to more than a tiny risk of loss due to anything other than bad trades on Manifold.
(Briefly: we got into this via a loose monetary policy involving lots of printing mana for bonuses and subsidies, in order to encourage engagement. But there’s historical precedent for this—eg Paypal famously gave away $10 to every user to get their network effects started)
I think our monetary situation is actually fine. It’s tempting to look at things from a cash balance perspective because it’s simple, but that’s pretty naive. This post from CommonCog has informed my thinking of these kinds of things:
”People with limited understanding of business think that business is all about making profits. But those who actually run businesses know that running a business is all about managing cash flows.”
Manifold users don’t actually cash out that much, so we shouldn’t actually need that much cash on hand. Another point Zvi raised is that very few online sportsbooks maintain enough cash on hand to fully pay out all users—it just doesn’t make business sense to do this, you grow more slowly if you commit to holding extra cash.
The equity value of Manifold dominates the cash considerations (we last raised at $40m valuation), so from our business perspective we can eventually back assets just by raising more. The point of this pivot is to drive enough interest & mana purchases to get us to a Series A, after all.
Shrug, as above, I don’t think we’ve really historically screwed up; I’m in the weird position of simultaneously trying to talk my cofounders out of this 1000:1 thing and trying to publicly explain our actions at the same time...
Yeah, I agree the short notice is very bad. I think the rationale is that the Google Form for loans below will basically be given to anyone who reasonably applies, so our users shouldn’t be that badly affected.
Yeah, I was already pretty unhappy when I first heard the proposal to be 200:1; 1000:1 seemed much worse. Idk, again, I think it’s a bad idea.
This omits why Manifold users didn’t cash out much: return rates were unsustainably high. Ponzi schemes manage cash flow at the expense of profit
Yes, although this was much more OK with play money than it would be with quasi-cash. Especially since Manifold’s heavy use of the play-money printing press wasn’t a secret.
Not the only reason though. The only way to cash out was donations and some people didn’t want to.
I tend to agree with your co-founders on this one.
I am not sure that the behavior of past Manifold users in a play-money economy where the only cash-out was to charity is a reliable guide to how future users will react to in a ~real-money environment.
When we’re talking about play money potentially redeemable for charitable donations, that is one thing, especially where the vast majority was ~freely obtained (as opposed to being purchased with cash. If people can’t donate play money they were largely given for free, that doesn’t keep me up at night too much. It’s something different where the quasi-cash was largely purchased with real cash (or obtained in wagers of quasi-cash that was largely purchased with real cash). In the latter case, I think you have to be prepared for the risk of a bank run.
Maybe, but conditioned on there being a run on the bank, Manifold equity would not provide a solid backstop for customer claims. If you are in a bankrun situation, there is a pretty decent possibility that Manifold equity is either illiquid or ~worthless. You might be hard-pressed to find buyers either because of the underlying facts that led to the bankrun or due to skepticism about the value of a business whose customers are in a panicked rush for the door.
Moreover, the base rate of young startup failure is pretty high, so there could be a number of scenarios in which a run makes sense. If I thought Manifold might be going under soon, and my quasi-cash was backed only to a limited extent, I think I’d rather exchange my quasi-cash for real cash ASAP.
Perhaps you could get an irrevocable line of credit for the next ~2 years backed by a certain amount of equity? If you can, then that could back the quasi-cash liabilities. If you can’t, is evidence that you can’t get a sophisticated lender to accept the equity as collateral also evidence that Manifold users shouldn’t accept it as backing?
I guess another way of saying this is that I think Manifold should treat quasi-cash holders as ~depositors, and thus should be unwilling to expose them to more than a tiny risk of loss due to anything other than bad trades on Manifold.