This post was interestingâsorry Iâm replying so late. As a community builder on the side of my day-job where Iâm an accountant. I see your table above a bit differently and think it would be better to think of the costs being split into:
* Capital expenditure (ie. an investment into infrastructure that can be used over the long term but unlikely to see a large return in the short term eg. Assets like content that can be referenced at any point in time, infrastructure that people can use to productively contribute) * Operating expenditure (ie. Recurring costs that do not create an asset that can be used at a later date. E.g. Marketing, event expenditure, salaries)
As standard you want to keep your operating expenses as low as you can while still growing and invest as much as you can in infrastructure that enables long term growth.
Interesting, I had not thought about things this way before.
It seems uncontroversial that we should value assets which can be used over the long term more highly then those which canât, all else being equal, but I mostly see people modeling this by amortizing them with some constant discount rate. I am vaguely aware of that accountants instead classify expenses as opex vs. capex but honestly couldnât explain to you why thatâs better.
I guess you are saying that it is useful to do so because, heuristically, you should prefer to cut investment in opex before cutting investment in capex?
Capital expenditure is money spent on an asset which can reasonably be assumed to generate future value for the entity either by increasing productivity or reducing costs. Expenses (including both cost of program/âoutcome and overhead costs) wouldnât really be an investment, itâd be a cost for something that doesnât have the ability to generate future returns or reduce the future marginal expenditure needed to generate the outcome again.
High quality assets like content, software and infrastructure can generate passive impact with minimal maintenance. Eg. 80k and Scott Alexanderâs content are still cited as the most common sources for new GWWC pledges.
Employees arenât usually considered assets for external financial reporting purposes because they are not owned by the shareholders and are free to leave. However, for a movement of people who all share ownership of EA and are not tied to any one cause area or charity, I think they can reasonably be defined as assets and a key insight from 80k is that for those with a motivation to do good effectively, there is a clear incentive to invest in your own career capital (as well as positive sum to invest time multiplying the impact of others).
The highest value assets IMO are EAs that can demonstrate a strong ability to apply the core skills (ie. cause prioritisation, impact evaluation and reasoning about evidence) AND can independently contribute. Iâve been somewhat concerned about the reduction in opportunities for low investment contribution since I donât think passive consumption of content is as effective for building EA knowledge that can be applied on high impact projects. The purpose of providing these opportunities (like wiki contributing, encouraging running events, volunteering etc) is more about investing in future capacity of EAs than the direct impact.
More detailed accounting answer you can skip đđť
Capex isnt an expense as it doesnât go through the income statement (AKA Profit and Loss statement ie. part of the accounts focused on annual finance performance). Capex creates an asset that sits on the statement of financial position (AKA balance sheet ie. part of the accounts focussed on the value of the business/âcharity).
Capex doesnât go through the income statement all at once, rather the costs go through incrementally as depreciation (where there is a clear useful life of the asset like machinery or equipment) or as amortization (this is less useful for charities as itâs mostly for tax purposes). The accounting problem this solves is that putting the full cost of the asset through the income statement all at once in the year of purchase is not a fair representation of the economic reality for the business since it isnât an expense for that one year.
This post was interestingâsorry Iâm replying so late. As a community builder on the side of my day-job where Iâm an accountant. I see your table above a bit differently and think it would be better to think of the costs being split into:
* Capital expenditure (ie. an investment into infrastructure that can be used over the long term but unlikely to see a large return in the short term eg. Assets like content that can be referenced at any point in time, infrastructure that people can use to productively contribute)
* Operating expenditure (ie. Recurring costs that do not create an asset that can be used at a later date. E.g. Marketing, event expenditure, salaries)
As standard you want to keep your operating expenses as low as you can while still growing and invest as much as you can in infrastructure that enables long term growth.
Curious about your thoughts @Ben_Westđ¸
Recorded talks
Bring your own food
Venues in inconvenient locations
Unconference/âself-organized picnic vibes
Convenient venues
Catered
Coffee/âdrinks/âsnacks
Paid organizers (I think you could argue this is an investment in a future EA leader but it would depend on if thereâs investment in their growth)
One-on-one advice/âcareer coaching
Volunteer-organized meet ups
Maybe some free pizza
A place for people to post things when they feel like it, no active solicitation
Volunteer-based moderation (Investment in a community of active contributors to the EA project)
Engineers and product people who develop the Forum
Wikis
Events functionality
Groups functionality (no need to maintain separate mailing list)
Curated newsletter, highlights
Paid Forum moderators
Limited feature development
Actively organized Forum events (e.g. debates)
Create resources like lists of experts that journalists can contact
Fund publications (e.g. Future Perfect)
Maintenance of EA IP (ie. brand)
Pitching op-edâs/âstories to major publications
Weird the bottom half of the table got cut off
Here it is
A place for people to post things when they feel like it, no active solicitation
Volunteer-based moderation (Investment in a community of active contributors to the EA project)
Engineers and product people who develop the Forum
Wikis
Events functionality
Groups functionality (no need to maintain separate mailing list)
Curated newsletter, highlights
Paid Forum moderators
Limited feature development
Actively organized Forum events (e.g. debates)
Create resources like lists of experts that journalists can contact
Fund publications (e.g. Future Perfect)
Maintenance of EA IP (ie. brand)
Pitching op-edâs/âstories to major publications
Interesting, I had not thought about things this way before.
It seems uncontroversial that we should value assets which can be used over the long term more highly then those which canât, all else being equal, but I mostly see people modeling this by amortizing them with some constant discount rate. I am vaguely aware of that accountants instead classify expenses as opex vs. capex but honestly couldnât explain to you why thatâs better.
I guess you are saying that it is useful to do so because, heuristically, you should prefer to cut investment in opex before cutting investment in capex?
Yes thatâd be my sense.
Capital expenditure is money spent on an asset which can reasonably be assumed to generate future value for the entity either by increasing productivity or reducing costs. Expenses (including both cost of program/âoutcome and overhead costs) wouldnât really be an investment, itâd be a cost for something that doesnât have the ability to generate future returns or reduce the future marginal expenditure needed to generate the outcome again.
High quality assets like content, software and infrastructure can generate passive impact with minimal maintenance. Eg. 80k and Scott Alexanderâs content are still cited as the most common sources for new GWWC pledges.
Employees arenât usually considered assets for external financial reporting purposes because they are not owned by the shareholders and are free to leave. However, for a movement of people who all share ownership of EA and are not tied to any one cause area or charity, I think they can reasonably be defined as assets and a key insight from 80k is that for those with a motivation to do good effectively, there is a clear incentive to invest in your own career capital (as well as positive sum to invest time multiplying the impact of others).
The highest value assets IMO are EAs that can demonstrate a strong ability to apply the core skills (ie. cause prioritisation, impact evaluation and reasoning about evidence) AND can independently contribute. Iâve been somewhat concerned about the reduction in opportunities for low investment contribution since I donât think passive consumption of content is as effective for building EA knowledge that can be applied on high impact projects. The purpose of providing these opportunities (like wiki contributing, encouraging running events, volunteering etc) is more about investing in future capacity of EAs than the direct impact.
More detailed accounting answer you can skip đđť
Capex isnt an expense as it doesnât go through the income statement (AKA Profit and Loss statement ie. part of the accounts focused on annual finance performance). Capex creates an asset that sits on the statement of financial position (AKA balance sheet ie. part of the accounts focussed on the value of the business/âcharity).
Capex doesnât go through the income statement all at once, rather the costs go through incrementally as depreciation (where there is a clear useful life of the asset like machinery or equipment) or as amortization (this is less useful for charities as itâs mostly for tax purposes). The accounting problem this solves is that putting the full cost of the asset through the income statement all at once in the year of purchase is not a fair representation of the economic reality for the business since it isnât an expense for that one year.