Graduate students are the labor in academic science and engineering

People giving out grants try to derisk them as much as possible

Manufacturing is important and often ignored

The word ‘novel’ is used as an idea bludgeon in academia

All the incentives in research drive towards conservatism

Peer review doesn’t catch duplications

Bell Labs is one of the few examples of an innovation org that was aligned with its money factory

A new professor needs about $1.5m to get going

Academic culture prizes individual recognition

Younger professors have to spend more time getting money

Academics are incentivized to do peer-reviewed publishable work

Things that are not paper-worthy enough for academia and not product-focused enough for a startup

Pay-it-forward tithing could resolve the tension between the potential public-good and potential profit in research.

The idea that academia is for crazy exploration and companies are for low risk exploration is bullshit

Three myths about scientific peer review

A PI needs to provide evidence that they have access to a lab facility

Different axes of where research gets done in the US

What was the real incentive for people to work on the DARPA Grand Challenge?

It is easier to have a multipoint mutation in technology than in evolution

NS Notes on Officers Techniques

Necrobotics illustrates how academia forces engineering

The boundaries between industry government and academia are fuzzy

Startups and Academia are bad at addressing structural constraints

The Architected Innov􏰂ation Institute - Engineering Scientific Revolutions

There are very few senior individual contributors in academia

Is it more impactful to find and train undiscovered diamonds or to unlock well-positioned but constrained researchers?

Wolfgang Merkt conversation 12 Oct 2021

An institution riffing on the ARPA Model could enable paradigm shifts that are not happening

Academic administrators and professors are playing very different games

An Institute for Creative Technology - Riffing on ARPA

Funding structures lead to several layers of indirection on what even gets proposed

Is it possible that we’re actually getting less research because we have more researchers?

Running list of relevant science news?

# §Academia Constraints
- [[Academia is the game where you gain status by getting attention for new knowledge]]

- [[Universities have multiple conflicting missions]]
- [[Universities have been pushed more towards applied research since the end of WWII]]
- [[Academic credit is a first-to-the post system]]
-  [[Graduate students are the labor in academic science and engineering]]
- [[People giving out grants try to derisk them as much as possible]]
- [[Professors do three or more jobs]]
- [[Successful professors are not necessarily the best researchers]]
- [[University professorships are the highest status jobs in academia]]
- [[National labs and other government research centers are a research alternative to universities]]
- [[The game in national labs is roughly the same as academia but with different constraints]]
- [[In academia more grant money leads to more power]]
- [[Academic research is often just the concept half of creating a heuretic]]
- [[Professors are constantly doing the calculation of whether a grant is worth the time to apply for it]]
- [[Most grant money is tagged so unrestricted money is like gold for professors]]
- [[Universities can take more than half of grant money as overhead]]
- [[A PI needs to provide evidence that they have access to a lab facility]]
- [[Physical experiments are expensive]]
- [[Younger professors have to spend more time getting money]]
- [[The government grant process depends on politics and committees]]
- [[Any technology that comes out of a university needs to go through their tech transfer office]]
- [[Months of grant writing is one of the things that makes people think twice about academia]]
- [[Academia incentivizes novelty, not focus]]
- [[Academia is not a good environment for systems engineering]]
- [[Academics are incentivized to do peer-reviewed publishable work]]
- [[Going outside of the approved process can be a black mark against people in academia]]
- [[People proposing work that they have already done is a sign that feedback loops are broken]]
- [[Necrobotics illustrates how academia forces engineering]]
- [[Labs implicitly judge research through the sense of dollars per paper]]

### Related
- [[§Startup Constraints]]
- [[§Corporate R&D Constraints]]
- [[§Philanthropy and Non-Profit Constraints]]
- [[Market Failures in Science]]

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Trust

§Philanthropy and Non-Profit Constraints

Catalytic funding needs to launch into an existing ecosystem to be effective

Small grants are different animals from big grants

What are the specific tactics for PARPA fundraising?

Philanthropists want things to become sustainable

Bottlenecks Workshop June 2021

Astera Lab Meeting Notes

Nobody is running interference for new institutions

Philanthropists want to be the catalytic dollar

Precise why nows seem important for making people feel like they can intervene

I am not sold on the exact implementation or person but am sold on the goal

Comparing VC firms and funding institutions and programs is a useful intuition pump

Many philanthropists theory of change involves influencing the government

Kevin Fischer conversation 28 Jun 2022

Week of 21 Jun 2021

Adam Marblestone conversation 23 Jun 2021

Andrew Carnegie only funded libraries if a city agreed to fund them long term

Philanthropists desire for funding to not be wasted explains the mismatch between the amount of money out there and new institutions ability to raise money

Nadia Eghbal conversation 7 Jul 2021

The dynamics of funding are not the same as dating

Operating partners often want to remain secret

Dinner 16 Jun 2021

The tension around making things legible to a layperson

# §Misalignment between funders and nonprofits in research
- [[Comparing VC firms and funding institutions and programs is a useful intuition pump]]
- [[Trust is a core driver of the funding mismatch]]
- [[Pitching is a competition-driven equilibrium in precommercial scitech]]
- [[Precommercial scitech funding is taste based]]
- [[Funders want to follow other funders]] (probably because of the trust thing)
- [[It is hard for precommercial scitech projects to differentiate themselves]]
	- This suggests that the goal for initial funding is not to show promising results but to show *differentiating* results
- [[Philanthropists want things to become sustainable]]
- ::needs work:: [[I am not sold on the exact implementation or person but am sold on the goal]]
- ::needs work::[[Nobody is running interference for new institutions]]
- ::needs work::[[Precommercial scitech funding falls on spectrums of uncertainty around producing money and amount of control a funder has]]
- [[Philanthropists want to be the catalytic dollar]]
- ::needs work::[[More applications mean less time per application and less technical which biases towards snappy things]]
- Funders want to see their dollars used efficiently, but [[Efficiency biases systems towards false negatives]]
- ::needs work::[[Catalytic funding needs to launch into an existing ecosystem to be effective]]

- Funders feel comfortable making small bets on weird things but small bets are much less useful without tranches 
	- Something about double down problem
	-  Small bets don’t address [[Shadows of the Future]] which creates a chicken-and-egg problem
- How are private funders different than the government? [[Intuition pump]]
	- Unlike the government, private funders do not *have* to fund, which leads to a *high opportunity cost* 
- [[People want to be loved and be lovely]] — no matter how much we convince ourselves that we care about abstract concepts or the future, there are very few 
- [[People have different and unknown caring money thresholds]]
- Feelings of ownership/control can stand at odds to letting people explore the weird
- Many of the sorts of funders who are interested in science and technology bottlenecks are also very metrics driven either from a background in tech and KPIs or from a utilitarian standpoint. A strong focus on metrics *in that sense* stands at odds to a lot of research. 
- We don’t celebrate funders! See the derisive attitude of “rich person’s toys” 
	- [[We do not give enough credit to good philanthropic funders]]
- “Hope” mismatch/ people don’t like funding wicked problems
	- 	People want to se a “clever” solution /[[Precise why nows seem important for making people feel like they can intervene]]
	- But then this incentivizes people to make over optimistic estimates
	-  Funders need to see paths to success — or maybe that’s not right but they need to see some expected value 
	- This thing is vague and hard doesn’t cut it
		- Perception vs reality bottlenecks [[Bottlenecks]]
	- People were excited about geothermal because it *didn’t* seem bottlenecked. Or at least seemed tractably bottlenecked
	- Nobody wants to put money into something that’s hopeless — this is the tension
	-  By contrast, People tend to be excited to intervene in areas where there is a clear intervention — maybe this is the right instinct. 
- Something weird in incentive misalignment where people go “if only we had an answer” and then I and other people are like HERE IS AN ANSWER but then they’re like “oh if only there was an answer”
- Not very much coordination between wealthy individuals
	- Need a coordinator like the [[Sloan Foundation]]
	- Problem is that everybody wants the credit
- Timescale mismatches
- People don’t see science/technology funding as charity
	- Ambiguity over whether a project will be a public good or not
- Almost by definition people trying to create new institutional structures are not creditable; people who have built things before generally get stuck in a different institutional mindset. 
- [[Pay-it-forward tithing is underrated]] — the attitude of “I should do this” instead of “I want to get something out of this” 
- Funders don’t actually use any of their *power* to help
- [[Funding is a zero sum game]]
- [[Funding for new institutions isn’t about the money]]

### Anecdotes
- WorldCoin + [[Sam Altman]] 
	- https://twitter.com/Ben_Reinhardt/status/1409858188971757573?s=20
- There is the anecdotal story of <unnammed billionaire> being willing to put in $100k only if another <unnamed billionaire> puts in $200k. This seems utterly ridiculous, but representative. 
	- From [[Funders want to follow other funders]]
- [[Dynamicland]]!??

### Related 
- [[People aren’t super excited about funding one off science projects]]
- [[Funding unlocked might be a good way to measure the ROI on addressing bottlenecks]]
- [[People like funding winners]]
	- [[Nobody will admit that a field is stuck]]
- [[The only time you can get philanthropies to do interesting things is at the beginning]]

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§Academia Constraints

Charities raise money on a yearly or sub-yearly basis

How does money work in PARPA?

Most people give money to philanthropy to make themselves look and feel good

The traditional non-profit structure is a bad idea for an organization that requires a significant chunk of capital and produces uncertain results on a long timescale

What if there was a clean philanthropy-to-government policy pipeline?

Alex Rider Convo 17-1-2020

The C3SOP structure appears to allow non-profit employees to get stock options

Lots of philanthropy is based on small checks even from big donors

There’s lots of money out there … for good investments

# §Philanthropy and Non-Profit Constraints
Philanthropy is the funding mechanism and Non-Profits are the Organization in an Organization-Funding Diad. ([[Organizations and their funding mechanisms are coupled]])

- Profit in non profits goes back towards the mission
	- Could this involve investing it?
- Non-profits must spend all of their income every year 
	- This can lead to very cyclic activity 
	- Cyclic hiring harms employee’s ability to think long term because there is no buffer to pay them in income draught periods
	- Are universities non-profits? They invest their excess income. 
- Non-profits need to constantly be fundraising 
	- Is this because they need to spend down every year?
	- This means that they can’t do anything that looks bad in the short term 
- What’s the difference between a foundation and a non-profit? 
	- A foundation is a *type* of non-profit. The other type is Public charities.
	- The money for foundations comes from an initial gift from an individual or business and spends out of interest. 
	- Foundations can only spend in ways that adhere with 501(c)(3) of the Internal revenue code
	- Foundations can be operating or non operating
		- A non operating foundation give money to orgs
		- An operating foundation distributes funds to its own purposes
	- Public Charities
		- A charity must receive 1/3 of its contributions from the general public OR at least 10% from general public + subjective test of “support”
		- Public charities have higher donor tax deductibles
			- How much?
		- [[Only charities can receive tax-deductible donations]]
	- 501(c)(3)s all are exempt from paying income tax, but only charities exempts donors from income tax
		- [What rules do charities have to follow? | HowStuffWorks](https://money.howstuffworks.com/economics/volunteer/starting-a-charity/rules-charities-follow.htm)

- [[Funders want to follow other funders]]
- It’s easier for foundations to pay out grants than anything else ([A “Watch-Out” for Private Foundations Offering Prizes](https://ssir.org/articles/entry/a_watch_out_for_private_foundations_offering_prizes))  but  [[People giving out grants try to derisk them as much as possible]]
- [[Charities raise money on a yearly or sub-yearly basis]]
- [[Most people give money to philanthropy to make themselves look and feel good]]
- [[Philanthropies can easily become misaligned with their money factories]]
- [[Philanthropies are forced to show consistent short term progress]]
- [[Most philanthropists give to specific causes]]
- [[Non-profits must meet several requirements to Maintain 503c Status]]
- [[People have different and unknown caring money thresholds]]
- A possible tweak: [[Pay-it-forward tithing could resolve the tension between the potential public-good and potential profit in research.]]

See also: [[§Misalignment between funders and nonprofits in research]]

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Innovation orgs need to be aligned with their money factory

Bell Labs

Alignment requires existential threats

Bell Labs was only profitable in conjunction with AT+T

The incentives inherent to corporate R&D mean that researchers motivated by money leave and those who are motivated by glory are not the best in the world

Why was Bell Labs Different?

§Bell Labs Model

Labs Document Outline

# Bell Labs is one of the few examples of an innovation org that was aligned with its money factory
 [[Innovation orgs need to be aligned with their money factory]] and arguably one of the reasons behind [[Bell Labs]]’s outlier success was that it managed to have a broad scope and long time scale that were both *still aligned* with AT&T.

At the end of the day AT&T’s goal was to maintain its monopoly and increase its business. In order to do that, it needed to enable people to make more, better calls. 

[[“The System” of AT&T]]  had such an expansive scope that it actually benefitted from the whole spectrum of activity happening at Bell Labs. Everything from information theory to novel materials directly fed back into AT&Ts core business. More cables are expensive so information theory actually helps people make more calls. The faster you can switch, the more calls you can route so semiconductor switchers *directly* help with the goals. 

Additionally, [[Bell Labs and AT&T had timescale alignment]] thanks at least in part to AT&T’s monopoly. The monopoly enabled Bell Labs to plan on multi-decade timescales because they didn’t have to worry about a competitor coming along tomorrow. 

AT&T maintained their monopoly only with tacit approval from the government. This approval rested heavily on Bell Labs’ output - both continuous improvements to A&+Ts offerings and open licenses from the lab. [[Regulation drove many of Bell Labs’ actions]]. 

Between the cost reductions and monopoly maintenance, Bell Labs was actually addressing existential risks to AT&T. [[Alignment requires existential threats]]. Even R&D labs that are building new product lines within the scope of a company’s actives rarely address existential threats to that extent.

This alignment in both timescale and focus-scope between an innovation org an its money factory. See [[§Startup Constraints]], [[§Corporate R+D Constraints]], [[§Philanthropy and Non-Profit Constraints]], and [[§Academia Constraints]] for all the lovely ways the misalignment can happen.

## Related
- [[gertnerIdeaFactoryBell2012]]



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People always spend money for a purpose

Philanthropies are forced to show consistent short term progress

Do universities need to get 33% of their revenue from donations per charity rules?

You need to minimize actions that lead to short term glory if you want to emulate DARPA

# Charities raise money on a yearly or sub-yearly basis
[[Charities need to get 33% of their income from donations]] so even ignoring their actual budget needs, they need to raise money regularly to keep their charity status. Of course, the reason they need their charity status is so that they can get donations more easily …

This need to raise constantly is a reason why [[The traditional non-profit structure is a bad idea for an organization that requires a significant chunk of capital and produces uncertain results on a long timescale]]

### Related
- [[§Philanthropy and Non-Profit Constraints]]



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§Misalignment between funders and nonprofits in research

What are the alternatives to grants?

Getting the ball rolling on precommercial scitech funding

# Funders want to follow other funders
The contrast between [[Fast Grants]]’ ability to raise money ([[collisonWhatWeLearned2021]]) and other projects is striking.

`We were pleasantly surprised that so many donors were willing to support a completely unproven project. This might sound anodyne but it’s worth emphasizing: a number of individuals made seven-figure contributions without ever speaking with us.`
Patrick and Tyler don’t say this, but I suspect that a large part of the sight-unseen support for an unproven project had *absolutely nothing to do with the project* (there were plenty of other high-urgency COVID projects).  Perhaps it’s a stretch, but I suspect that the massive blind support also had very little to do with Patrick and Tyler’s reputations as smart people who have thought deeply about how to enable science better (there are plenty of people with that reputation who struggle to raise money). Instead, my hunch is that it had everything to do with the fact that *they see Patrick and Tyler as fellow funders*. Why should that matter? 

I get the impression that there’s also this feeling of being overwhelmed by a giant field of undifferentiated potentiality. [[It is hard for precommercial scitech projects to differentiate themselves]]. In that flat landscape, one of the strongest signals is simply what other people are willing to put skin in the game into. 

There is the anecdotal story of <unnammed billionaire> being willing to put in $100k only if another <unnamed billionaire> puts in $200k. This seems utterly ridiculous, but representative. 

Adam Marblestone also found it much easier to start getting money for FROs once they had gotten a small but public commitment from Eric Schmidt. 

Funders following other funders makes sense in the light of the fact that [[Precommercial scitech funding is taste based]]. Taste dominates when there’s no objective measure and no definition of what ‘works’ means. Most people do not create their own taste from scratch in most things but instead follow other people’s taste. [[People like funding winners]] and when there is no objective measure, ‘winners’ are just what other people think are winners. 

You see the same phenomenon in Venture capital investing where its extremely common to have a bifurcation between oversubscribed “hot” companies and completely ignored companies. It is relatively easy to find investors who will follow-on but very hard to find lead investors. 

Taste as a signal has implications for [[Getting the ball rolling on precommercial scitech funding]] — specifically, that abstracting funding away from funders may be a bad idea. Without the taste signal for funders, projects that need a lot of capital or capital over time will find themselves floundering. Instead, taste making suggests that a productive thing would be to go make it easier or higher status for funders to be ‘champions’ of projects in the same way that Patrick and Tyler did for Fast Grants. 

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Employee-ownership could enable PARPA to align long-term incentives

PARPA could walk the line between profit and non profit

Conversation with Brian von Herzen 5 Nov 2020

# Non-profits must meet several requirements to Maintain 503c Status
1. **Private benefit**. Organizations that apply for tax-exempt status cannot serve the private interests, or private benefit, of any individual or organization besides itself past an insubstantial degree. Therefore, a nonprofit may not permit any of its income or assets to benefit insiders, such as board members, officers, directors and important employees.
2. **Nonprofits are not allowed to urge their members to support or oppose legislation**. They may participate in a small amount of lobbying, but  [lobbying activities](https://www.ncoa.org/public-policy-action/advocacy-toolkit/advocacy-basics/nonprofit-advocacy-rules-regulations/)  may not exceed a certain amount of the organization’s total expenses.
3. **Political campaign activity.** A nonprofit organization may not financially support or endorse any political candidates verbally or in writing. They may not oppose candidates either. This rule applies to candidates at every level — local, state and federal.
4. **Unrelated business income.** Nonprofit organizations aren’t allowed to generate too much income from a purpose that is unrelated to the nonprofit. An organization that regularly operates a trade or business that is unrelated to the nonprofit and makes significant contributions to the organization would need to pay taxes.
5. **Annual reporting obligation.** Nonprofit corporations still have reporting responsibilities, like the Form 990. They may also be responsible for things like tax on unrelated income, employment tax, excise taxes, and certain state or local taxes. Churches and other church-related organizations don’t need to report income.
6. **Operate in accord with stated nonprofit purposes.** An organization that makes a big shift from being unprofitable to making money needs to re-file as a for-profit entity and to pay the applicable taxes.

### Related
- [[A private ARPA requires new legal organization structures]]



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Organizations can get incomes via Contracts, budgets, or products

Has anybody written about how the structure of organizations and their funding are coupled?

# Organizations and their funding mechanisms are coupled
You could almost think of organizations and their funding as diads or tuples.  These diads can be chained because most funding mechanisms have their own organizations built around them. 

Startups and equity funding forms a chain with Venture capital and LP funding which in turn forms a chain with Limited Partnerships and Individual Investments which forms a chain with Institutional Funds and (family money, retirement fees, donations)

## List of coupled organizational structures and funding mechanisms
- Small businesses and debt
- Academic labs and grants
- Startups and equity 
- Venture capital and limited partner funds
- Real estate firms and REITS
- Foundations and massive infusions of capital



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Pay-it-forward tithing is underrated

ICT Distillation

ICT Outline

# Pay-it-forward tithing could resolve the tension between the potential public-good and potential profit in research.
# Pay-it-forward tithing could resolve the tension between the potential public-good and potential profit in research
Companies and individuals who benefitted from public-good should pledge to tithe 10% of their profit to research - especially that which falls outside of traditional institutions. [[It is nebulous a priori which research should produce public goods vs private goods]], especially if it isn’t focused on creating either patents or papers. Pay-it-forward tithing could enable people to embark on research projects focused purely on reaching whatever the goal of the research is without worrying about either needing to create specific ROI *or* making sure to adhere to the optics demanded by open source projects or charities. 

On top of enabling projects that don’t fit well into traditional boxes of non-profit charity or for-profit investment, a culture of pay-it-forward tithing could decorrelate research funding. The vast majority of research funding comes in the form of grants from either the government or large foundations. Putting aside the question of their ability to allocate money, money coming from a small number of similar organizations with a similar set of constraints on that money ([[§Philanthropy and Non-Profit Constraints]], [[§Academia Constraints]]) will lead to more correlated lines of inquiry. Mechanisms to decorrelate research are good because [[More Uncorrelated Mistakes lead to more success]].[^1]

### Related
- [[Decentralized systems are the ideal way to enable many uncorrelated mistakes]]
- [[Uncorrelated samples of an idea space means that some people are working on something that other people would find absurd]]
- [[There are many questions and issues with the idea of pay-it-forward tithing]]

[^1]: More, different, funding sources aren’t a magic decorrelation bullet, of course. There will still be trends and hype cycles.



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Changing paradigms is hard

DARPA Program managers have a tenure of four to five years

People have different and unknown caring money thresholds

Einstein would have been stuck in a patent office - failures of paradigm-shifting science

Grants only go so far

Human capital theory of stagnation

Why would people want to work with PARPA?

NSF Program officers can have multi-decade tenures

High-risk research is a malnomer

Lots of innovation is stifled because of the overhead of going off of the beaten path rather than direct forbiddance

DARPA provides a derisking role for people in other organizations

There are no perceptions of outsized returns to philanthropy

There is a tradeoff between trad creditability and the ability to do something weird

The money from SBIR is barely worth the money

 A case study of the NSF Small Grants for Exploratory Research programme

The Endless Frontier Act

# People giving out grants try to derisk them as much as possible
What does “risk” look like here? It means funding the research that will fail or make you look bad if you fund it.  [[People like funding winners]]. 

This is true for both government and philanthropic grant giving organizations.  In both cases, because [[People always spend money for a purpose]] grants are expected to have a result. In this light, derisking a grant means giving it to people and projects that the grantor thinks is most likely to produce a result.  

 In the case of philanthropy (specifically professionally run foundations) there is [[Asymmetric career risk]] for the employees giving the grants. If they give out grants that have no result, it will impact their career. Additionally, if it is a charity-funded philanthropy they need to raise money every year. The charity needs to show results in order to raise money. Therefore, they are incentivized to give grants that are most likely to show results.

 In the case of the government, the grantors worry about wasting taxpayer money and there are various demands to show that the money is going to good use. 

The least risky research is done by people and ideas with track records. This makes it hard for new people and ideas to get traction. [[To make new things you need to take risks]].  In order to get grants, people without track records are forced to work on ideas that *do* have track records. Therefore, the only people who can get funded  to work on crazy new ideas are people later in their careers. Working in a world tends to shape your worldview around that world so people later in their careers are less likely to come up with breakthrough new ideas. (See [[kuhnStructureScientificRevolutions1962]].) 

Another way to derisk a grant is to give the grant to people you [[Trust]]. Because of the [[Mere-Exposure Effect]] grantors will trust  people who have gone out of their way to interact with the grantors or have just been in the game longer and ideas that they are familiar with. ( Is this related to [[The best due diligence is network based]]?) The importance of trust further serves to direct grants to people later in their careers and well-trodden ideas. One way around this trust issue is simply smaller grants per [[Impetus Grants]], [[Fast Grants]], [[Emergent Ventures]] but [[Small grants are different animals from big grants]]. 

The derisking incentives around grants is one of the reasons why [[The idea that academia is for crazy exploration and companies are for low risk exploration is bullshit]] and [[Lots of innovation is stifled because of the overhead of going off of the beaten path rather than direct forbiddance]].

In reality, a lot of what we call “derisking” is actually making people feel a narrative around the uncertainties inherent in the grant. [[Narratives are how we deal with uncertainty]]. 

### Examples
-  [[National Science Foundation - NSF]] - Grant panelists give out 6 grants for 25 applications. The people who get it are the established groups - they know the program officer, what they’re looking for.

- 

### Related
- [[§Academia Constraints]]
- [[§Philanthropy and Non-Profit Constraints]]



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Precommercial scitech funding falls on spectrums of uncertainty around producing money and amount of control a funder has

Week of 18 Jan 2021

What is the minimum viable PARPA organization?

Patreon or Substack might be a way to build a group of bought-in people for PARPA

Conversation with Andy Matuschak 17 Jan 2021

# People have different and unknown caring money thresholds
Everybody seems to have a set of threshold values below which they can spend money on something and not give it a second thought and above which it is *an important purchase*.  Clearly these thresholds differ significantly between people — some people think spending $50 on a nice dinner is no big deal and some people feel physically ill thinking about it. These thresholds also differ significantly within the same person for different categories of products. The same person (me) who will agonize when cabbage prices go from $0.69/lb to $0.89/lb will buy a $500 phone without thinking about it.

 I’m *sure* there’s work on this phenomena in psychology or economics! However, the salient feature of this phenomena I haven’t seen discussed is how this phenomena behaves when instead of purchasing a product or service you are giving the money to someone else either as an investment or as charity. In this situation, importance usually manifests as involvement. Below the threshold, you invest/donate the money and sometimes literally forget about it. Maybe occasionally you check in on how a stock you bought is doing, read an update email from an angel investment, or look at someone’s updates on Patreon. Above the threshold, the feeling totally changes. You want to do a ton of due diligence. You want guarantees. You want to be *involved*. You want to see more progress. If you don’t see regular updates, you are bothered. Again, these thresholds differ wildly between people - for some people its $50, and for some it’s $50,000.  

Two particularly interesting features of what I would call “caring thresholds”: first, the thresholds differ *significantly*  depending on whether people think they can get a monetary return on it; second, people don’t actually know how their own thresholds before giving the money. 

People’s caring threshold for investments seems to be  *much* higher than it is for charity. The same person who will write a $50k angel check to a startup after hanging out with the founder for an hour and literally forget about it will agonize about a $5k check to a philanthropy and later breathe down their necks constantly. These differences don’t seem to clash with intuition, but they are intriguing. One explanation might be that in an investment, even though you might lose all your money and despite telling your brain that it should assume the money is zero, your brain still thinks of an investment as being money in your possession. By contrast, in charity, the money is clearly gone and your brain sees it as *a purchase*. And you get something for purchases.  Speculatively, the investment/charity gap might have something to do with [[Knightian Uncertainty]]. Any possible outcome for an investment, no matter how uncertain, is going to be a dollar value.[^1] This means that the “possibility” space 

People not knowing where their own caring thresholds lie manifest in both investment and charity. “It’s no big deal” they tell themselves or the founder. But then they turn into the investor or patron that is constantly emailing and asking how it’s going. Money from these people is often not worth it. At best they’re distractions. At worse, they’re dangerous to organizational goals and priorities, exerting enough influence as to actually change outcomes. These latter scenarios can happen through soft influence because the organization depends on the donor/investor for future cash (or just cares a lot about what they think) or through hard influence if they e.g. take a board seat. 

### Anecdotes
`People are more risk averse than they think or say they are, by at least a factor of 2.` — unsolicited comment from someone starting a nonprofit

### Related
- [[Philanthropies can easily become misaligned with their money factories]]
- [[People giving out grants try to derisk them as much as possible]]
- [[Most people give money to philanthropy to make themselves look and feel good]]
- [[Philanthropies are forced to show consistent short term progress]]

[^1]: Assuming it’s not a Ponzi scheme that lands you in a legal shitshow. Which is in fact illustrative. Consider how your thought process about an investment would change if you learned that it was of questionable legality. You would need *much* more certainty that it was going to work or the possibility of a *much* larger return, all else held constant. 

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Narratives are how we deal with uncertainty

# Philanthropies are forced to show consistent short term progress
Unless you manage to get a ton of money up-front (as a foundation as opposed to a charity) you need repeated influxes of cash, which usually come with expectations of progress.  [[People always spend money for a purpose]].

The progress expectations in the non-profit world often are shorter than in the for-profit world. [[Charities raise money on a yearly or sub-yearly basis]].  When someone makes an investment with a future return, it’s clear that they are buying future money. As long as you trust that in the future you’ll get a return, what happens do your money in an investment doesn’t matter. That concept of buying a future good doesn’t seem to carry over to buying reputation or warm fuzzy feelings, which is what people buy with philanthropy. 

These short appearance-based feedback loops make philanthropies good at continuous, short term work - directly helping people who need help in obvious ways, but may make them less-suited towards long-term high-risk projects.  Arguably, you could say that philanthropy is well-suited towards Type II progress.[[The things that entail type II progress are knowable]].

There are notable exceptions 
- Foundations that are funded by the proceeds from endowments 
	- [[Howard Hughes Medical Institute (HHMI)]] etc.
- (speculatively) Organizations that have built enough *trust* through their leadership or previous actions. Warren Buffet’s passing money to the Gates foundation without thinking about what it was for comes to mind. 

### Related
- [[Innovation orgs need to be aligned with their money factory]]

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# Philanthropies can easily become misaligned with their money factories
[[People always spend money for a purpose]] and people usually give to philanthropies to make themselves feel good or increase their reputation. Both reputation and ego are such complex, fragile ‘products’ that it’s easy for an organization to take actions that do not deliver - especially risky or controversial actions. 

Wealthy individuals can also be fickle, promising long term support but then pulling it on a whim.

In a worst-case-scenario philanthropies can fall into the trap where as an institution they continue to strive to survive beyond their use. [[The default state of an institution is to become a permanent thing dedicated to its own self preservation]] and this is particularly pernicious among philanthropies devoted to a specific cause that is no longer relevant. The philanthropy becomes incentivized to maintain the very thing that it was fighting against so that it can stay relevant. If people are donating to it in order to fight against whatever it’s supposed to be fighting against  this is the ultimate misalignment. It sounds malicious but it can come about just through optimizing metrics. 

## Related
[[Innovation orgs need to be aligned with their money factory]]
## Reference
[[Email to Sam Molyneux]]
           


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# The C3SOP structure appears to allow non-profit employees to get stock options
![](../BearImages/C8A9D843-F02D-46BD-8624-D27A143D07C1-64634-000E17C25C1ACCBF/8633096-26283187-thumbnail.jpg)

So if you have a for profit holding company, non-profit employees are allowed to get shares in it without violating non-profit requirements? [[Non-profits must meet several requirements to Maintain 503c Status]]

Is this a legit thing? It looks like only one company has done it. 

How does this differ from [[OpenAI LP - Post]]?

[Nonprofit Innovations (The C3SOP) | The sustainable nonprofit | Columns | PND](https://philanthropynewsdigest.org/columns/the-sustainable-nonprofit/nonprofit-innovations-the-c3sop)

[C3SOP - What is a C3SOP?](http://www.c3sop.com/)

### Related
- [[There are no first principles for legal structures]]
- [[Legal structures are intimately tied to the question of how money works in an organization]]
- [[Employee-ownership could enable PARPA to align long-term incentives]]
- [[A private ARPA requires new legal organization structures]]
- [[§Philanthropy and Non-Profit Constraints]]
- [[Non-profits must meet several requirements to Maintain 503c Status]]



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A private ARPA requires new legal organization structures

Brian von Herzen conversation 5 Nov 2020

# The traditional non-profit structure is a bad idea for an organization that requires a significant chunk of capital and produces uncertain results on a long timescale
A non profit can be organized as either a charity or a foundation. Each has different constraints, but in both cases non-profit structures are more at the whim of the entities giving them money than in the case where they are providing a good or service. It just comes down to leverage.  

Charities enable donors to write off their donations as tax deductible (yay!) however, [[Charities need to get 33% of their income from donations]] and those donations need to come from ‘small donors’ who are each giving <= 2% of their total funding. Because of the funding rules, [[Charities raise money on a yearly or sub-yearly basis]] so they also need to give people a reason to give on that short timescale. Uncertain results on a long timescale don’t lend themselves to the sorts of updates that encourage people to give on short timescales. Additionally, the short-term donations mean that organizational funding can be quite volatile, which poses obvious problems for long term research. You can’t really let a researcher go for a year until funding conditions get better.

Foundations don’t have the requirement for regular small donations, so they are not as susceptible to the whims of a large group of people.  Instead of regular small donations, foundations instead need to convince a few donors to give a lot of money. Big checks always come with strings attached. While the “check size” might be higher, it’s often distributed over time, so an unhappy donor can pull out. These donors also get lower tax write-offs, so one only has to imagine that they feel more ownership over the organization. So while the constraints on foundations are different, they still need to keep donors happy, which could push the organization towards shorter term, more sexy projects. [[Most philanthropists give to specific causes]].

Of course, these are both worst case scenarios.  However the fact that [[Philanthropies can easily become misaligned with their money factories]] makes it dicy to rely only on donations for long-term projects.

Taste in projects is more flighty than the desire for return on capital. As a result, [[Philanthropies are forced to show consistent short term progress]]. People usually want closer involvement when the money is buying a more ill-defined good than “more money.”  In short, [[§Philanthropy and Non-Profit Constraints]] make the traditional non-profit structure a shaky foundation for an organization that requires a significant chunk of capital and produces uncertain results on a long timescale.

### Related
- [[Most people give money to philanthropy to make themselves look and feel good]]
- 



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# There’s lots of money out there … for good investments
I frequently hear “Why aren’t ‘we’ funding more ambitious projects? There’s lots of money out there!” Ignoring the fact that the ‘we’ probably doesn’t include anybody in the conversation, it’s important to add nuance to the idea that “there’s lots of money out there” not to be pedantic but to create knowledge that enables actions. 

Another way to look at it is that if the statement “there’s lots of money out there” is true, it creates a contradiction with the fact that there are many excellent projects that scrape by or don’t exist because they can’t get funding which needs to be explained away. 

First let’s look at where the statement comes from in the first place. 
- The stock markets are at all-time highs
- Interest rates are extremely low
- Technically the money supply is huge

Then let’s look at who controls that money and what their incentives are. 
- Pension funds control a massive amount of assets - in 2018 pensions funds managed [15 trillion dollars](http://www.oecd.org/daf/fin/private-pensions/Pension-Funds-in-Figures-2019.pdf) in the US. 
- Another massive pool of money is in endowments. Endowments were [1.7 trillion dollars](https://capitalresearch.org/article/how-much-money-is-in-nonprofit-endowments-in-america/) in 2017. 
For comparison the total US stock market capitalization was [36 trillion dollars](https://siblisresearch.com/data/us-stock-market-value/) in 2020. 
And total AUM in 2018 is $43T according to [this McKinsey report](https://www.mckinsey.com/~/media/McKinsey/Industries/Financial%20Services/Our%20Insights/Beyond%20the%20Rubicon%20Asset%20management%20in%20an%20era%20of%20unrelenting%20change/Beyond-the-Rubicon-NA-asset-management-2019.pdf)
[Retirement Assets are $33.1 Trillion in 2020](https://www.ici.org/research/stats/retirement/ret_20_q3)
![](../BearImages/EE0F3D66-7F25-4EFB-BE9E-B79B3CEACFB9-692-0001D9260A63B300/6825_Figure1.jpg)
There doesn’t seem to be a great way to do the full accounting, but just by orders of magnitude the vast majority of that money is controlled by pension funds and endowments. One might think “great! Endowments and pensions are long-term thinking institutions, so they would be ideal to invest in things that wouldn’t pay out for a while.” The trick  is t

Finally let’s look at the nature of the projects that aren’t being funded. 

Perhaps it’s unfair, but this is probably never coming from people who own or deploy that money. 

### Related
- [[Luke Constable Podcast]] 
- [[§Philanthropy and Non-Profit Constraints]]
- [[There is a significant class of innovations that would create drastically less value for the world if their value had been captured by their creators]]
- [[Precommercial scitech funding is taste based]]



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The way to get around journals is to focus on non-paper artifacts

PARPA needs a constitution with checks and balances

Mark Johnson the Elder Conversation 4 Jan 2021

Possible PARPA Missions

PARPAs ideal legal structure comprises both a nonprofit and a for profit

# Things that are not paper-worthy enough for academia and not product-focused enough for a startup
There are many heuretics (discoveries/inventions/innovations/ideas etc.) that don’t fall within the constraints of the institutions we expect to support them. “Things that are not paper-worthy enough for academia and not-product focused enough for a startup” is shorthand for one class of these heuretics. Note that there are many others! 

First, let’s address some misconceptions about what falls into this category.  Wacky ideas and long-term projects are two things that many people assume don’t get supported in universities or startups. This is not true.
	- Long-term projects get support *if* they hit consistent milestones *and* they’ll be able to capture a lot of the value they create if they succeed. 
	- Wacky ideas get support *as long* as they don’t threaten paradigms too badly *or* someone thinks they can make money off of them. 
	- Research projects that require a lot of people or coordination *as long as* the final product is a paper they can all put their names on. See the LHC. 
	- Research projects that require some engineering effort *as long as* the engineering effort resembles something that has been done before: building a bigger telescope/particle collider/linear accelerator/space probe, etc.

The reasons that ideas are not paper-worthy or product-worthy *make sense* given the incentive frameworks in their relative institutions.  [[Most people are not malicious or stupid]]. 

### What makes something not paper-worthy?
‘Paper-worthy’ is meant as shorthand for ’things academics are incentivized to do.’ So things that are not paper worthy are those that don’t obey [[§Academia Constraints]].  It’s important to explicitly call those implications out because that call-out can shine a light on where to dig for hidden gold. 

1. **An idea isn’t paper worthy if not considered “novel enough” or “not a contribution to the literature” by peer reviewers.** [[The word ‘novel’ is used as an idea bludgeon in academia]] and weeds out many classes of ideas. 

A non-exhaustive list of what gets shot down by peer review: 
- New approaches to old “solved” problems, 
- Better implementations of an existing idea that’s already been implemented, 
- Efficiency improvements along a different metric than the ones the field normally cares about, 
- Scaling existing techniques, 
- Creating something for a very specific application as opposed to a general principle/purpose, 
- Further work on things that have already gotten to proofs of concept
- System integration of several already-existing ideas.

For more see:  [[Academia is not a good environment for systems engineering]]. [[Academia incentivizes novelty, not focus]].  [[Academic research is often just the concept half of creating a heuretic]]. 

2. **An idea generally isn’t worth writing a paper about if it’s not expected to get a lot of citations.** Even if it’s published, low-citation ideas languish in obscurity. It’s valid to ask ‘are there things that are valuable that don’t get a lot of citations?’ 

I would argue yes, valuable projects that wouldn’t get many citations include:
	- Projects that are intermediate steps to a larger vision without a strong conclusion besides “we did a thing!”
	- Engineering work in a theory-heavy field or theory work in an engineering-heavy field.  More generally, work in a field that the field doesn’t think is valuable. 
	- Ideas that are far enough out of mainstream won’t get many citations because people don’t have the bandwidth to dig in and see if it’s worthwhile and the default answer is “no” (see #3 below) 
	
3. **It’s hard to publish ideas that are too outside of the approved way of doing things.** [[Paradigms outline a set of questions and the rules around answering them]].  Ideas can go too far outside of accepted paradigms when when you’re asking different questions, or measures success differently than standard ways. [[Antedisciplinary Science]] often falls into this trap as well, when it’s too much like discipline X to be published in a journal for discipline Y but it’s too much like discipline Y to be published in a journal for discipline X.  This situation is of course tricky because many (most?) ideas that go outside of paradigms are legitimate crackpottery. [[Anyone on the knowledge frontier is a bit of a crackpot]]. 

4.  **It’s hard to write a paper if you can’t even get the money to do the research to write the paper.**
The requirement to align with current funding priorities is particularly pernicious because [[The government grant process depends on politics and committees]]. Additionally, one reason to write papers is to continue playing the game, so if a paper doesn’t hint at your continued ability to do work that aligns with funding priorities, you’re incentivized not to work on it. [[People giving out grants try to derisk them as much as possible]].

5.  **A project is unlikely to lead to a paper if it’s not within scope for a PhD student or untenured professor.** 
[[Graduate students are the labor in academic science and engineering]]. In exchange for cheap labor, grad students expect to produce research within a 4-7 year time frame that can help them move on to the next rung of the academic career ladder. (Despite the fact that [[There is an increasingly wide gap between the number of graduate students training for PhDs and academic positions for them to fill]].) While a tenured professor might be willing to work on something crazy that will take 10 years and might be a complete dud, no grad student would rationally work on it.  The incentive for PhD students to produce high-impact papers for the sake of their careers serve to amplify all the other constraints, and add the timescale constraint. Additionally, PhD students in science get most of their funding via research grants, so research they work on is especially susceptible to #4. 

6. **Projects that produce a lot of structured data or reusable code don’t led themselves to papers.** Academic papers are built around the paradigm of scientific inquiry, where collecting data and writing code are only in service to producing an abstract model or theory - the more generalizable the better. There is little reward to producing high quality, reusable datasets or code, despite the value they can create. 

7. **A project is unlikely to lead to a paper if it involves a lot of coordination.** Academia emphasizes individual agency. This is a good thing, but if a project cannot be effectively modularized it will end up requiring a lot of grungy coordination work that doesn’t count as a contribution unless you’re in charge of the project. A big reason to go into academia in the first place is to avoid having a boss and because you like doing your own thing, your own way. Obviously there are exceptions like the LHC, but that is a situation where the experimental particle physicists are locked into a paradigm and have no other option. 

Coordination aversion hits hard projects that don’t fit into a particular disciplinary bucket or require integration between components built in different labs. Projects of a particular scale require coordination by their very nature. See[[A new structure for scalable research]] for a much deeper dive.  

### What makes something not product-focused enough for a startup
‘Product-focused’ is meant as shorthand for ’things startups are incentivized to do.’ So things that are not product-worthy are those that don’t obey [[§Startup Constraints]].  It’s important to explicitly call those implications out because that call-out can shine a light on where to dig for hidden gold. 

1. **There’s no convincing story for how the project’s output produce a massive and competitive ROI on a reasonable timescale for a VC-funded startup** 
*Massive ROI* Venture capitalists need to believe that any investment in their portfolio could potentially return the fund. 
*Competitive ROI* Investing isn’t just about absolute returns - any investment is in leu of another investment. So if the stock market is absolutely crushing it, there’s less incentive to invest in higher risk technology. Even within the VC realm, many atom-based technologies have the same risk or higher than a software startup but expected return is lower (especially when you take timeline into account) or farther in the future. From the cold hard numbers SaaS is often just a better investment.  
*Timescale* [[J.C.R. Licklider]] started work on the ARPA project to build what we would consider “modern computing” in 1962 and perhaps the first real ‘value capture’ event based on it was Apple’s IPO in 1980. [[Venture capitalists need to fund things that increase valuation in a few years and return in 5-7 years]] so this trajectory would have been untenable as a startup. Venture timescales often lead to projects being pushed to focus on a specific application or being acquired before achieving the technical goals they set out to hit. There is nothing wrong with either of these routes per se, but they can lead to technologies failing to live up to their potential. 
2. **It will take a lot of development work to sell anything for a bootstrapped startup**
Startups do not *need* to raise money from VCs. However, that does mean that if the founders are not extremely wealthy ([[SpaceX]], [[Blue Origin]]) the startup needs revenue early on. If the project will take a lot of development work before it can sell anything the startup needs to get revenue somewhere. Some bootstrapped startups use consulting work to create revenue to fund development. Unless it’s wildly profitable, the consulting approach severely limits the amount of time and money that can be spent on development, possibly dragging it out forever. [[Some projects need effort above a certain threshold to move forward]]. [[SBIR]] grants can provide another option, but they are relatively small (order $1m over several years.) 
3. **It’s hard to capture the value the project creates**
Markets are great, but there is no law of economics that people can always capture the value they create if they are clever enough. (See [[Schumpeterian Profits in the American Economy - Theory and Measurement]].)  Research often falls into this trap because [[Innovation requires multiple people]]. Often the person who figures out how to make a lot of money off of a discovery or invention is not the person who created it, nor are they even in the same organization.  “But what about intellectual property ?” There are *many* reasons intellectual property does not ensure everybody involved in an innovation capture the value they create but a short list includes: many people in many organizations contribute to most innovations, patents only work for a narrow set of innovations, and patents have massive downsides - including potentially capping how much value an innovation can create. 

A more subtle issue than the question of value capture itself is that trying to capture the value created by an innovation can severely hamstring the total value it creates. Consider the [[Graphical User Interface]] and other personal computing innovations created at [[Xerox PARC]]. Arguably they’ve created trillions of dollars of value for the world. Would that be the case if Apple had a patent on the GUI and mouse? Probably not. This situation is not unique. 

[[It is hard to capture value from research]]

4. **The project is changing one or more components of a bigger system or process** 
A startup that is trying to improve or change a component of a bigger system needs to either convince whoever runs that system to adopt the change (which is especially hard when no particular entity runs the system) or the startup needs to build the entire system themselves with the change incorporated. 

Obviously, the change needs to happen eventually, but many paradigm shifts (especially in complex systems) initially *lower* performance, at least on traditional metrics. [[Metrics can cause paradigm lock-in]]. Change happens either when the new paradigm gets enough reps to catch up to the old way of doing things or people see the new paradigm in action and accept that the traditional metrics weren’t capturing all the important features of a system. Both of these situations are hard for a traditional startup to achieve because both approaches take a lot of time and resources before showing ‘traction’ and the potential customers (the people running the systems or consuming their outputs) will assert that the idea is dumb up until its not. 

See [[fillerFundamentalManufacturingProcess2020]] for more.

5. **Innovations that can’t be encapsulated into a product**
There are some innovations that it’s just hard to productize. Process innovations often fall into this category - especially those that don’t depend on new technology per se, but on a new way of doing the same thing with basically the same tools. The [[Bessemer Process]], for example, used basically the same crucibles but you put different things in them. Social process changes (like Kaizen[^1]) are even harder to productize. 

In these situations, the vast majority of the value generally accrues to the end-product producer or consumers. The naive advice would be “start a firm that’s doing the end-to-end thing” and outcompete the incumbents. While that should theoretically work, it often runs into the reality of extremely complex products that you would need to reinvent from the ground up (like if you had a better way of making passenger jets), heavily regulated industries where it would take massive lobbying just to use a new process, and other scenarios. A startup doesn’t usually have the time or resources to tackle these scenarios. The alternative approach is to take on a change-management consulting role, which usually doesn’t capture enough value to be VC-fundable so it needs to be profitable early on. Additionally consulting runs head-long into the issues in point #4 above. 

In some ways this point is intertwined with #4. 

6. **Startups shouldn’t tackle market, channel, AND technical risk** 
New technological paradigms usually come with all three of technical, market, and channel risk. You simultaneously need a lot of work to get the technology to a point where it’s competitive with alternatives, to figure out who wants to use it, and to establish how they’re going to buy it. 

It’s common wisdom among VCs that it’s not a good idea to invest in companies that are taking on two, let alone three of these risks. This heuristic isn’t misguided.  The chance of failure goes up *dramatically* when an organization tries to tackle tow, let alone three of those risks. Startups should only tackle one (or *maybe* two) of these.  The reason therapeutics focused startups can exist is that they have almost no market or channel risk - there is a well established pipeline to being acquired by a pharma company and insurance companies are guaranteed to pay for drugs that go through FDA approval and target big conditions.

At the end of the day, the work you need to do to drive adoption of a technology is often very different from getting it to a certain performance level. The work priorities drive the type of organization you create. As much as we like to think that startups are about building technology, they are actually about selling technology and adopting it for specific markets so that they can do that better. 

### Related
- [[§Academia Constraints]]
- [[§Startup Constraints]]
- [[§Corporate R&D Constraints]]
- [[§Philanthropy and Non-Profit Constraints]]
- [[Systems research requires a lot of work that is expensive and uninteresting]]

[^1]: [[Kaizen is Toyotas process for continuous business process improvement]] 



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Benʼs working notes

§Philanthropy and Non-Profit Constraints

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