It seems like the main point of the original post and the comments are about how more centralization is helpful. For balance, I want to argue against myself and while I think there are clear benefits to net centralization, there are also some reasons/ways net centralization may be harmful:
You are consolidating legal risk into fewer entities, meaning that one high-level mistake can take a lot of things down (in the wake of FTX this seems extra important… I think this is the biggest drawback to more centralization)
Mainly due to the above but also other factors, larger organizations are much more risk averse and can just do fewer things
Smaller orgs/individuals who don’t have to care about their reputation as much can take bolder risks (this is both good and bad)
Smaller organizations are quicker to act, require less stakeholder sign-off to get things done (this is both good and bad)
Smaller organizations I guess on the margin are more able to shut down with fewer politics if things don’t work out rather than continuing to do something not effective (but on the other hand maybe shutting down more clearly means you are fired and don’t get money whereas in a bigger org maybe you can be moved to a new project?)
I want to illustrate the “larger organizations are much more risk averse” point. When I worked at Rethink Priorities, I felt less freedom to publicly share unpolished and controversial thoughts because that could hurt Rethink Priorities reputation. And the bigger Rethink Priorities grew, the more there was to lose, the more this became a problem. Because of this, articles that I didn’t think were very promising but worth publishing (e.g., aquatic noise) took more time to finish as every claim went through more scrutiny than it would be optimal if I was an independent researcher. Also, I never publicly shared my preliminary findings on things that I didn’t think were promising because it would’ve taken too much time. Finally, it was more difficult to express some bold opinions like Wild Animal Welfare is not very promising because it could hurt Rethink Priorities’ Wild Animal Welfare funding and relationships with some other organizations.
Not just high-level mistakes, either. Imagine you are a religious movement with a dozen congregations, each of which has considerable but not total autonomy. It’s totally plausible that one rogue clergyperson (employee) or congregation (project) could incur enough liability to overwhelm a single corporation’s insurance and consume the assets of the other 11 congregations and the central office.
There are ways to mitigate that risk—for instance, if RP Special Projects grew and/or took on riskier projects, I would at least consider spinning it off into a wholly owned subsidiary of RP. If done correctly (which can be a bit of a pain as I understand it), that should reduce main RP’s exposure to any meltdowns coming out of Special Projects. In many jurisdictions, you can also get substantial protection for donor-restricted funds if you keep them separate and manage your accounting well. So that could help manage certain types of contagion risk within a sponsoring organization like the hypothetical spun-off Special Projects itself.
Of course, I can’t give anyone legal advice but am merely observing that large-org legal risk can be mitigated to some degree if the payoff from being with a large org is big enough.
It’s totally plausible that one rogue clergyperson (employee) or congregation (project) could incur enough liability to overwhelm a single corporation’s insurance and consume the assets of the other 11 congregations and the central office.
Yeah I think this is a really plausible risk to centralization.
~
if RP Special Projects grew and/or took on riskier projects, I would at least consider spinning it off into a wholly owned subsidiary of RP.
This is definitely something we are considering doing.
On the first point, if FTX had happened and there were more large EA organisations, it would have been easier to handle the fall out from that, with more places for smaller organisations and individuals to go to for support.
On the last point it seems like that was a part of why DARPA had success, they had lots of projects and were focused on the best succeeding rather than maintaining failing ideas.
I’d argue that the universe in which FTX exposure was at its lowest is the world in which all grantees were small . . . but were properly incorporated and managed like corporations (no comingling of money, observance of corporate formalities, etc.)
It would be easier to manage a scenario with few big entities, but it’d be a lot easier for John Ray & Co. to manage too—especially because those orgs would be more likely to have non-FTX-derived assets that could be taken to satisfy a judgment.
With proper corporate status, the individuals should have been safe, as a corp-to-its-individual employee transfer seems to be beyond the reach of section 550′s power over subsequent transferees. And the individual grantee corporations would make relatively unattractive targets for several reasons (mainly having little money to net per lawsuit).
In other words, I think the core defect was not structuring grantees appropriately rather than their size per se.
On the first point, if FTX had happened and there were more large EA organisations, it would have been easier to handle the fall out from that, with more places for smaller organisations and individuals to go to for support.
Right, I totally agree with that. I think the way FTX Future Fund pushed their risk onto individuals who were not well equipped to understand and/or handle that was a huge failing and is very sad.
~
On the last point it seems like that was a part of why DARPA had success, they had lots of projects and were focused on the best succeeding rather than maintaining failing ideas.
Agreed. That’s part of what I’m trying to do with Rethink Priorities. But I think there are many ways in which we fail to live up to that, and my guess is that other big orgs maintain cost-ineffective projects due to inertia or political pressure because it’s really hard to be ruthless about these sorts of things.
It seems like the main point of the original post and the comments are about how more centralization is helpful. For balance, I want to argue against myself and while I think there are clear benefits to net centralization, there are also some reasons/ways net centralization may be harmful:
You are consolidating legal risk into fewer entities, meaning that one high-level mistake can take a lot of things down (in the wake of FTX this seems extra important… I think this is the biggest drawback to more centralization)
Mainly due to the above but also other factors, larger organizations are much more risk averse and can just do fewer things
Smaller orgs/individuals who don’t have to care about their reputation as much can take bolder risks (this is both good and bad)
Smaller organizations are quicker to act, require less stakeholder sign-off to get things done (this is both good and bad)
Smaller organizations I guess on the margin are more able to shut down with fewer politics if things don’t work out rather than continuing to do something not effective (but on the other hand maybe shutting down more clearly means you are fired and don’t get money whereas in a bigger org maybe you can be moved to a new project?)
I want to illustrate the “larger organizations are much more risk averse” point. When I worked at Rethink Priorities, I felt less freedom to publicly share unpolished and controversial thoughts because that could hurt Rethink Priorities reputation. And the bigger Rethink Priorities grew, the more there was to lose, the more this became a problem. Because of this, articles that I didn’t think were very promising but worth publishing (e.g., aquatic noise) took more time to finish as every claim went through more scrutiny than it would be optimal if I was an independent researcher. Also, I never publicly shared my preliminary findings on things that I didn’t think were promising because it would’ve taken too much time. Finally, it was more difficult to express some bold opinions like Wild Animal Welfare is not very promising because it could hurt Rethink Priorities’ Wild Animal Welfare funding and relationships with some other organizations.
Not just high-level mistakes, either. Imagine you are a religious movement with a dozen congregations, each of which has considerable but not total autonomy. It’s totally plausible that one rogue clergyperson (employee) or congregation (project) could incur enough liability to overwhelm a single corporation’s insurance and consume the assets of the other 11 congregations and the central office.
There are ways to mitigate that risk—for instance, if RP Special Projects grew and/or took on riskier projects, I would at least consider spinning it off into a wholly owned subsidiary of RP. If done correctly (which can be a bit of a pain as I understand it), that should reduce main RP’s exposure to any meltdowns coming out of Special Projects. In many jurisdictions, you can also get substantial protection for donor-restricted funds if you keep them separate and manage your accounting well. So that could help manage certain types of contagion risk within a sponsoring organization like the hypothetical spun-off Special Projects itself.
Of course, I can’t give anyone legal advice but am merely observing that large-org legal risk can be mitigated to some degree if the payoff from being with a large org is big enough.
Yeah I think this is a really plausible risk to centralization.
~
This is definitely something we are considering doing.
On the first point, if FTX had happened and there were more large EA organisations, it would have been easier to handle the fall out from that, with more places for smaller organisations and individuals to go to for support.
On the last point it seems like that was a part of why DARPA had success, they had lots of projects and were focused on the best succeeding rather than maintaining failing ideas.
I’d argue that the universe in which FTX exposure was at its lowest is the world in which all grantees were small . . . but were properly incorporated and managed like corporations (no comingling of money, observance of corporate formalities, etc.)
It would be easier to manage a scenario with few big entities, but it’d be a lot easier for John Ray & Co. to manage too—especially because those orgs would be more likely to have non-FTX-derived assets that could be taken to satisfy a judgment.
With proper corporate status, the individuals should have been safe, as a corp-to-its-individual employee transfer seems to be beyond the reach of section 550′s power over subsequent transferees. And the individual grantee corporations would make relatively unattractive targets for several reasons (mainly having little money to net per lawsuit).
In other words, I think the core defect was not structuring grantees appropriately rather than their size per se.
Right, I totally agree with that. I think the way FTX Future Fund pushed their risk onto individuals who were not well equipped to understand and/or handle that was a huge failing and is very sad.
~
Agreed. That’s part of what I’m trying to do with Rethink Priorities. But I think there are many ways in which we fail to live up to that, and my guess is that other big orgs maintain cost-ineffective projects due to inertia or political pressure because it’s really hard to be ruthless about these sorts of things.