It’s no concern of mine how OP spends its money, but since it’s come up here: I don’t think your cost estimate can be correct.
Firstly, OP doesn’t have the asset, so its resale value is irrelevant to you. It’s all very well to say that proceeds would be used for EVF’s general funding which would funge against OP’s future grants, but (a) there doesn’t seem to be anything stopping EVF from using the proceeds for some specific project which OP wouldn’t otherwise fund and (b) it’s possible to imagine a scenario in which OP ceases to fund EVF and there’s nothing to funge against. It seems to me that OP should just treat it as a grant of £15m (or whatever it was) to EVF. Presumably when you publish a grant report, that’s what it will say.
Secondly, this has been discussed elsewhere, but the cost can’t be a flat few million from EVF’s perspective. Consider for example the case where the project is huge success and the property is held in perpetuity. Ex hypothesi it was a sound grant, but the whole £15m (or whatever) has been expended, plus some further amount for ongoing maintenance.
One possible counterfactual is that EVF buys the property and lets it for income. Gross rental yields in Oxfordshire are 4-5%, so EVF would receive a counterfactual income of at least £600k. In fact a property like that would be difficult to let as is: there are various ways one might generate income from it in practice, including running it as a conference centre for profit, but £600k pa should be an approximate floor on a reasonable commercial income (assuming the sale price to have been fair). By using the property for its own purposes EVF foregoes that income, so the cost to it is at least that much per year, and the total cost will depend on how long it’s held. By definition, the income considered in perpetuity will capitalise at the fair purchase price.
But in fact EVF would never have bought the property for that purpose, for at least two reasons. Firstly, EVF doesn’t endorse investing to give. Secondly, if EVF did want to invest £15m for income, buying a single property in Oxfordshire would not represente a prudent investment strategy. It’s a very niche property and the resale value is going to depend on what purchasers happen to be in the market in the material time. Of course that might work out very favourably, but the opposite possibility is approximately equally likely.
Since in general EVF considers it can do better things with £15m than invest it for 4% yield, the opportunity cost must be higher than £600k pa. In fact EVF should probably know what it’s discount rate is, which would make the calculation straightforward.
It seems to me that OP should just treat it as a grant of £15m (or whatever it was) to EVF. Presumably when you publish a grant report, that’s what it will say.
I think you make reasonable points that OP should consider it to be worth more than the resale difference, but there’s a big range between that and £15m. If there’s, eg, a 10% chance of this significant a break happening in the next 4 years, that would put the costs at 0.9 * resale difference + 0.1 * £15m. Do you think it’s reasonable to put a much higher probability on this?
Plus, EVF provides services to a lot of charities, so the main way I expect OpenPhil would decide they do not want money to remain with EVF would be if they decide that EVF itself is doing a bad job, or EVF otherwise significantly deviates from their values. Which is totally possible! But it seems reasonable to bet against.
I’m afraid I think this is fundamentally the wrong way to look at it. If you make a grant £X to allow another organisation to buy an asset, the fact that the donee ends up with a valuable asset is obviously an argument in favour of the grant, but you’ve still made a grant for £X. You can’t offset the value of the asset, because it isn’t your asset.
It may be that in making the grant for £X, you’re saving yourself making a series of future grants (in the case the cost of hiring venues for the conferences/retreats), and in that sense it may be financially advantageous, but you still have made a grant of £X, which needs to justified on its merits, just as you would have had to justify the counterfactual series of future grants. Fundamentally what seems to have happened here is that value of the events themselves has been taken for granted, even though they were being very significantly prefunded.
How do you put a meaningful probability on this? That 10% number is totally arbitrary.
I could equally say that the growing number of governance problems in EVF discussed in this forum make it 80% likely that it would be disavowed in the coming years. (This number is still meaningless)
This is a pretty uncertain question, and I’m not arguing that there’s a precise or rigorous way to answer it! But you can’t not put a probability on it—ultimately, everything we do is making a decision under uncertainty, and implicitly putting a probability on things. Eg, OpenPhil is implicitly putting a, say, less than 10% probability of EVF taking the money and running.
I’m making 10% explicit for illustrative purposes, and if I were making a grant here I’d be trying to think through the clearest evidence for or against (notably, I think that EVF has a decent track record, even if CEA as a whole doesn’t, has had so for a while, and provides a significant amount of infrastructure to a range of orgs doing good work, so I’d put the probability of such a large break that the money is basically burned as fairly low). And I think it’s generally unwise to make decisions that strongly rest on some specific and brittle assumptions re the right numbers. But if plausible feeling numbers don’t greatly shift the decision, this feels like useful data.
It’s no concern of mine how OP spends its money, but since it’s come up here: I don’t think your cost estimate can be correct.
Firstly, OP doesn’t have the asset, so its resale value is irrelevant to you. It’s all very well to say that proceeds would be used for EVF’s general funding which would funge against OP’s future grants, but (a) there doesn’t seem to be anything stopping EVF from using the proceeds for some specific project which OP wouldn’t otherwise fund and (b) it’s possible to imagine a scenario in which OP ceases to fund EVF and there’s nothing to funge against. It seems to me that OP should just treat it as a grant of £15m (or whatever it was) to EVF. Presumably when you publish a grant report, that’s what it will say.
Secondly, this has been discussed elsewhere, but the cost can’t be a flat few million from EVF’s perspective. Consider for example the case where the project is huge success and the property is held in perpetuity. Ex hypothesi it was a sound grant, but the whole £15m (or whatever) has been expended, plus some further amount for ongoing maintenance.
One possible counterfactual is that EVF buys the property and lets it for income. Gross rental yields in Oxfordshire are 4-5%, so EVF would receive a counterfactual income of at least £600k. In fact a property like that would be difficult to let as is: there are various ways one might generate income from it in practice, including running it as a conference centre for profit, but £600k pa should be an approximate floor on a reasonable commercial income (assuming the sale price to have been fair). By using the property for its own purposes EVF foregoes that income, so the cost to it is at least that much per year, and the total cost will depend on how long it’s held. By definition, the income considered in perpetuity will capitalise at the fair purchase price.
But in fact EVF would never have bought the property for that purpose, for at least two reasons. Firstly, EVF doesn’t endorse investing to give. Secondly, if EVF did want to invest £15m for income, buying a single property in Oxfordshire would not represente a prudent investment strategy. It’s a very niche property and the resale value is going to depend on what purchasers happen to be in the market in the material time. Of course that might work out very favourably, but the opposite possibility is approximately equally likely.
Since in general EVF considers it can do better things with £15m than invest it for 4% yield, the opportunity cost must be higher than £600k pa. In fact EVF should probably know what it’s discount rate is, which would make the calculation straightforward.
I think you make reasonable points that OP should consider it to be worth more than the resale difference, but there’s a big range between that and £15m. If there’s, eg, a 10% chance of this significant a break happening in the next 4 years, that would put the costs at 0.9 * resale difference + 0.1 * £15m. Do you think it’s reasonable to put a much higher probability on this?
Plus, EVF provides services to a lot of charities, so the main way I expect OpenPhil would decide they do not want money to remain with EVF would be if they decide that EVF itself is doing a bad job, or EVF otherwise significantly deviates from their values. Which is totally possible! But it seems reasonable to bet against.
I’m afraid I think this is fundamentally the wrong way to look at it. If you make a grant £X to allow another organisation to buy an asset, the fact that the donee ends up with a valuable asset is obviously an argument in favour of the grant, but you’ve still made a grant for £X. You can’t offset the value of the asset, because it isn’t your asset.
It may be that in making the grant for £X, you’re saving yourself making a series of future grants (in the case the cost of hiring venues for the conferences/retreats), and in that sense it may be financially advantageous, but you still have made a grant of £X, which needs to justified on its merits, just as you would have had to justify the counterfactual series of future grants. Fundamentally what seems to have happened here is that value of the events themselves has been taken for granted, even though they were being very significantly prefunded.
How do you put a meaningful probability on this? That 10% number is totally arbitrary.
I could equally say that the growing number of governance problems in EVF discussed in this forum make it 80% likely that it would be disavowed in the coming years. (This number is still meaningless)
This is a pretty uncertain question, and I’m not arguing that there’s a precise or rigorous way to answer it! But you can’t not put a probability on it—ultimately, everything we do is making a decision under uncertainty, and implicitly putting a probability on things. Eg, OpenPhil is implicitly putting a, say, less than 10% probability of EVF taking the money and running.
I’m making 10% explicit for illustrative purposes, and if I were making a grant here I’d be trying to think through the clearest evidence for or against (notably, I think that EVF has a decent track record, even if CEA as a whole doesn’t, has had so for a while, and provides a significant amount of infrastructure to a range of orgs doing good work, so I’d put the probability of such a large break that the money is basically burned as fairly low). And I think it’s generally unwise to make decisions that strongly rest on some specific and brittle assumptions re the right numbers. But if plausible feeling numbers don’t greatly shift the decision, this feels like useful data.