Putting the Foundation back in WMF

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Putting the Foundation back in WMF

Lars Aronsson

Already from the start, the word "foundation" in the title of the
Wikimedia Foundation has caused confusion.  In Florida, you
register a corporation, and "foundation" is just part of a name.
In some countries in Europe, there are completely different laws
for corporations, associations and foundations (German: Stiftung).

In short, a foundation (Stiftung) is an immutable long-term,
self-governing holder of money.  A typically example is the Nobel
Foundation, which holds the money inherited from Alfred Nobel, and
every year spends the interest on the Nobel Prizes.

Apparently, the WMF has a problem to foresee how much each year's
donation campaign will bring in, and how the coming year's budget
can be made to fit this.  Perhaps each year will raise less and
less money, and that we already have the best years behind us.  
Is there a way we could reach better long-term stability?  Should
the WMF set up a long-term fund and move some of this year's money
there, as a reserve for future meager years?  If the interest rate
is 4% then a fund which is 25 times bigger than the budget can
support it in whole for ever.  But even a smaller fund might be a
good help.  Should donors be given the option of giving to the
current budget or giving to the fund?  Has this been discussed?

(Some people would claim they can easily earn more than 4% annual
interest.  Obviously, they should start savings banks.)


--
  Lars Aronsson ([hidden email])
  Aronsson Datateknik - http://aronsson.se

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Re: Putting the Foundation back in WMF

Thomas Dalton
> Apparently, the WMF has a problem to foresee how much each year's
> donation campaign will bring in, and how the coming year's budget
> can be made to fit this.  Perhaps each year will raise less and
> less money, and that we already have the best years behind us.
> Is there a way we could reach better long-term stability?  Should
> the WMF set up a long-term fund and move some of this year's money
> there, as a reserve for future meager years?  If the interest rate
> is 4% then a fund which is 25 times bigger than the budget can
> support it in whole for ever.  But even a smaller fund might be a
> good help.  Should donors be given the option of giving to the
> current budget or giving to the fund?  Has this been discussed?

I believe one of the things the auditors suggested with building up a
reserve fund large enough to fund (I think) 6 months of activities. I
think the board did intend to try and do that, but I don't think the
budget includes putting anything towards it...

Being able to fund activities off capital gains would be very useful,
but really it requires large endowments to work. Building up a fund
from small fundraisers isn't going to work.

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Re: Putting the Foundation back in WMF

Gerard Meijssen-3
In reply to this post by Lars Aronsson
Hoi,
If you take last years money and had converted it to euros, the money would
be more valuable in dollar terms then the 4% interest that you indicate.
Also on euro you can get 4% interest. My point is not about the dollar or
the euro; when you spend when you get it, the difference is not that
relevant.  At this moment in time we are raising more money then in the
previous round from donations. We are still growing rapidly in many
projects. Wiktionary for instance is doing really well (check Alexa) :) and
it is not the only project that does really well. There are many untapped
possibilities for getting funding. It needs effort, it needs money to make
money

Last year some people made a lot of ugly noises during the fund drive. It
may be the reason why we do not have matching donations. I think it shows
how irresponsible this has been.

When we are going for the defensive measures you suggest, we will not have
enough money for our current budget. We will not be able to expand into
sourly needed capability. I do not know how to defend the defensive
financing that you propose.
Thanks,
    GerardM

On Nov 16, 2007 10:41 PM, Lars Aronsson <[hidden email]> wrote:

>
> Already from the start, the word "foundation" in the title of the
> Wikimedia Foundation has caused confusion.  In Florida, you
> register a corporation, and "foundation" is just part of a name.
> In some countries in Europe, there are completely different laws
> for corporations, associations and foundations (German: Stiftung).
>
> In short, a foundation (Stiftung) is an immutable long-term,
> self-governing holder of money.  A typically example is the Nobel
> Foundation, which holds the money inherited from Alfred Nobel, and
> every year spends the interest on the Nobel Prizes.
>
> Apparently, the WMF has a problem to foresee how much each year's
> donation campaign will bring in, and how the coming year's budget
> can be made to fit this.  Perhaps each year will raise less and
> less money, and that we already have the best years behind us.
> Is there a way we could reach better long-term stability?  Should
> the WMF set up a long-term fund and move some of this year's money
> there, as a reserve for future meager years?  If the interest rate
> is 4% then a fund which is 25 times bigger than the budget can
> support it in whole for ever.  But even a smaller fund might be a
> good help.  Should donors be given the option of giving to the
> current budget or giving to the fund?  Has this been discussed?
>
> (Some people would claim they can easily earn more than 4% annual
> interest.  Obviously, they should start savings banks.)
>
>
> --
>  Lars Aronsson ([hidden email])
>  Aronsson Datateknik - http://aronsson.se
>
> _______________________________________________
> foundation-l mailing list
> [hidden email]
> Unsubscribe: http://lists.wikimedia.org/mailman/listinfo/foundation-l
>
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Re: Putting the Foundation back in WMF

Anthony-73
In reply to this post by Lars Aronsson
On Nov 16, 2007 4:41 PM, Lars Aronsson <[hidden email]> wrote:
> Should
> the WMF set up a long-term fund and move some of this year's money
> there, as a reserve for future meager years?

Not to any significant extent, for at least two reasons.

1) There would be negative tax consequences to doing so.
2) The only remaining check the community has on the power of the
board (the power of the purse) would disappear.

Incidentally, 2 is actually the reason for 1.

> If the interest rate
> is 4% then a fund which is 25 times bigger than the budget can
> support it in whole for ever.

If there's never any inflation or taxation, maybe.  But in the real
world, no, a much larger fund (or a much higher interest rate) would
be necessary to support the foundation forever.

> (Some people would claim they can easily earn more than 4% annual
> interest.  Obviously, they should start savings banks.)
>
Too many regulations, unfortunately.  It is easy to earn more than 4%
annual interest, in US dollars, though.  Even long term treasury bonds
can do better than that.  Use something like prosper.com and you can
probably get at least 8%.  Don't know about other currencies, except
that interest rates vary greatly among them.

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Re: Putting the Foundation back in WMF

Oldak
In reply to this post by Lars Aronsson
On 16/11/2007, Lars Aronsson <[hidden email]> wrote:

>
> Already from the start, the word "foundation" in the title of the
> Wikimedia Foundation has caused confusion.  In Florida, you
> register a corporation, and "foundation" is just part of a name.
> In some countries in Europe, there are completely different laws
> for corporations, associations and foundations (German: Stiftung).
>
> In short, a foundation (Stiftung) is an immutable long-term,
> self-governing holder of money.  A typically example is the Nobel
> Foundation, which holds the money inherited from Alfred Nobel, and
> every year spends the interest on the Nobel Prizes.

In the UK, "an immutable long-term, self-governing holder of money"
would be a fund or a trust. Still in terms of the UK, "foundation" is
a fair description of what the Wikimedia Foundation does. Legal
definitions change between countries, so I'm not sure what your point
is.I don't think a legal term exists in *all legal jurisdicitons* that
would validly describe what the WF does and not cause confusion.

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Re: Putting the Foundation back in WMF

Oldak
In reply to this post by Gerard Meijssen-3
On 16/11/2007, GerardM <[hidden email]> wrote:
> Last year some people made a lot of ugly noises during the fund drive. It
> may be the reason why we do not have matching donations. I think it shows
> how irresponsible this has been.

People did raise objections to the fund drive last year, but you can't
describe those who objected as "irresponsible" or blame them for a
lack of matching donations. A discussion, or dissent, didn't cause
these problems directly - these "ugly noises" could have been ignored
if they had no validity. Obviously, people listened to, and acted
upon, these objecting opinions for various reasons. If you are right,
people dissented and objected, these dissenting opinions were
considered and acted upon (resulting in no matching donations), and we
are where we are now.

Blaming people - and especially blaming people for voicing opinions  -
isn't going to help us or fix anything, and it certainly isn't going
to foster the kind of open, considered debate we should be working
towards.

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Re: Putting the Foundation back in WMF

Gerard Meijssen-3
Hoi,
As I am of the opinion that there is a causal relation, and as I am equally
allowed to express my opinion, I can and do blame. When you are of the
opinion that this is not nice. Well, it only proves that it is not a zero
sum game. I hope we will get enough money to cover the budget if not their
will necessarily be cuts.

Where you say "these dissenting opinions were considered and acted upon" I
will say "these opinions have cost us both a lot of money and a lot of
goodwill". Because do you really believe that Virgin would be willing to
match donations ?

Thanks,
     GerardM

On Nov 17, 2007 9:40 PM, Oldak Quill <[hidden email]> wrote:

> On 16/11/2007, GerardM <[hidden email]> wrote:
> > Last year some people made a lot of ugly noises during the fund drive.
> It
> > may be the reason why we do not have matching donations. I think it
> shows
> > how irresponsible this has been.
>
> People did raise objections to the fund drive last year, but you can't
> describe those who objected as "irresponsible" or blame them for a
> lack of matching donations. A discussion, or dissent, didn't cause
> these problems directly - these "ugly noises" could have been ignored
> if they had no validity. Obviously, people listened to, and acted
> upon, these objecting opinions for various reasons. If you are right,
> people dissented and objected, these dissenting opinions were
> considered and acted upon (resulting in no matching donations), and we
> are where we are now.
>
> Blaming people - and especially blaming people for voicing opinions  -
> isn't going to help us or fix anything, and it certainly isn't going
> to foster the kind of open, considered debate we should be working
> towards.
>
> --
> Oldak Quill ([hidden email])
>
> _______________________________________________
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> Unsubscribe: http://lists.wikimedia.org/mailman/listinfo/foundation-l
>
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Re: Putting the Foundation back in WMF

Ray Saintonge
In reply to this post by Gerard Meijssen-3
GerardM wrote:
> Hoi,
> If you take last years money and had converted it to euros, the money would
> be more valuable in dollar terms then the 4% interest that you indicate.
>  
It would not be a wise act of management to engage in currency speculation.
> Also on euro you can get 4% interest. My point is not about the dollar or
> the euro; when you spend when you get it, the difference is not that
> relevant.  At this moment in time we are raising more money then in the
> previous round from donations. We are still growing rapidly in many
> projects.
Any plan to depend on growth over an extended period of time will be on
shaky ground.  It can work over a limited time period, but we must not
become addicted to growth.
> Last year some people made a lot of ugly noises during the fund drive. It
> may be the reason why we do not have matching donations. I think it shows
> how irresponsible this has been.
>  
I can't blame Virgin if they don't want to go through the same
experience again.  The True Believers can have a hard time understanding
how being doctrinaire about our principles can be so counterproductive.
> When we are going for the defensive measures you suggest, we will not have
> enough money for our current budget. We will not be able to expand into
> sourly needed capability. I do not know how to defend the defensive
> financing that you propose.
A contingency reserve makes good financial sense.  In the absence of big
endowments a percentage of all net donations can be budgetted into a
contingency reserve until that fund is built to the desired size.  When
it is built up the investment income can be used for other things.

Ec

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Re: Putting the Foundation back in WMF

Ray Saintonge
In reply to this post by Anthony-73
Anthony wrote:

> On Nov 16, 2007 4:41 PM, Lars Aronsson <[hidden email]> wrote:
>  
>> Should
>> the WMF set up a long-term fund and move some of this year's money
>> there, as a reserve for future meager years?
>>    
> Not to any significant extent, for at least two reasons.
>
> 1) There would be negative tax consequences to doing so.
> 2) The only remaining check the community has on the power of the
> board (the power of the purse) would disappear.
>
> Incidentally, 2 is actually the reason for 1.
>  
Of course it would be unwise to not consider the tax consequences.  Any
concrete proposal must be viable in its own right before we even
consider the tax effect.  Once we get that far we need a clear
evaluation of the tax effects and the possible mechanisms to avoid them.

When did the community ever have the power of the purse?
>> If the interest rate
>> is 4% then a fund which is 25 times bigger than the budget can
>> support it in whole for ever.
>>    
> If there's never any inflation or taxation, maybe.  But in the real
> world, no, a much larger fund (or a much higher interest rate) would
> be necessary to support the foundation forever.
>  
Sure, but let's not deal with forever until we get there.
>> (Some people would claim they can easily earn more than 4% annual
>> interest.  Obviously, they should start savings banks.)
>>    
> Too many regulations, unfortunately.  It is easy to earn more than 4%
> annual interest, in US dollars, though.  Even long term treasury bonds
> can do better than that.  Use something like prosper.com and you can
> probably get at least 8%.  Don't know about other currencies, except
> that interest rates vary greatly among them.
I agree that planned investment can do better than 4%, and still be
relatively safe, but needing the funds in the very near future severely
limits investment options.

Ec

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Re: Putting the Foundation back in WMF

Ray Saintonge
In reply to this post by Thomas Dalton
Thomas Dalton wrote:
> Being able to fund activities off capital gains would be very useful,
> but really it requires large endowments to work. Building up a fund
> from small fundraisers isn't going to work.
Capital gains are not a reliable investment, especially not in the short
term.  Short term capital gains are mostly a matter of good luck.

Ec

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Re: Putting the Foundation back in WMF

Robert Rohde
Endowments and contingency funds are nice, but right now that's all
academic.

After 26 days this drive is at $725k.  Even running the drive for the
planned 2 months, nearly 80% longer than the longest previous drive, it will
be a huge surprise to come anywhere close to the $4.6M the foundation wrote
down for their "budget".
Rather than talking about how to put money away for the future, the
immediate discussion needs to be  A) how to raise money more effectively,
and/or B) how to make do with less.

-Robert Rohde
On Nov 17, 2007 2:31 PM, Ray Saintonge <[hidden email]> wrote:

> Thomas Dalton wrote:
> > Being able to fund activities off capital gains would be very useful,
> > but really it requires large endowments to work. Building up a fund
> > from small fundraisers isn't going to work.
> Capital gains are not a reliable investment, especially not in the short
> term.  Short term capital gains are mostly a matter of good luck.
>
> Ec
>
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Re: Putting the Foundation back in WMF

Thomas Dalton
In reply to this post by Ray Saintonge
On 17/11/2007, Ray Saintonge <[hidden email]> wrote:
> Thomas Dalton wrote:
> > Being able to fund activities off capital gains would be very useful,
> > but really it requires large endowments to work. Building up a fund
> > from small fundraisers isn't going to work.
> Capital gains are not a reliable investment, especially not in the short
> term.  Short term capital gains are mostly a matter of good luck.

Putting the cash in a savings account still constitutes capital gains.
The term doesn't refer just to risky investments.

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Re: Putting the Foundation back in WMF

Thomas Dalton
In reply to this post by Ray Saintonge
> When did the community ever have the power of the purse?

Never. By "community" we usually mean the editors. As far as I know,
most donations come from readers, not editors.

> I agree that planned investment can do better than 4%, and still be
> relatively safe, but needing the funds in the very near future severely
> limits investment options.

The usual method with endowments is to spend the interest, not the
principle. Only the principle is difficult to access in long term
investments.

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Re: Putting the Foundation back in WMF

Thomas Dalton
In reply to this post by Robert Rohde
On 17/11/2007, Robert Rohde <[hidden email]> wrote:

> Endowments and contingency funds are nice, but right now that's all
> academic.
>
> After 26 days this drive is at $725k.  Even running the drive for the
> planned 2 months, nearly 80% longer than the longest previous drive, it will
> be a huge surprise to come anywhere close to the $4.6M the foundation wrote
> down for their "budget".
> Rather than talking about how to put money away for the future, the
> immediate discussion needs to be  A) how to raise money more effectively,
> and/or B) how to make do with less.

A good point. The easiest way I can see to spend less in the short
term is to delay the move to SF. I haven't done the sums, so I don't
know if that would be enough, but it would help. There are a lot of
benefits to the move, but right now it would appear we simply can't
afford it unless things greatly change. The other big expenditure is
the appointment of an ED, but I'm not sure delaying that would be a
good idea - we're never going to have a stable foundation until we
sort out the governance.

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Re: Putting the Foundation back in WMF

Gerard Meijssen-3
Hoi,
Do you not think that people have to be hired and fired with a sufficient
amount of lead time. Do you not expect that we are past the time when we can
come back on this. Do you not think that people have been looking for a new
house ??? My expectation is that we will move as scheduled to SF as there is
no choice in this any more.
Thanks,
    GerardM

On Nov 18, 2007 12:16 AM, Thomas Dalton <[hidden email]> wrote:

> On 17/11/2007, Robert Rohde <[hidden email]> wrote:
> > Endowments and contingency funds are nice, but right now that's all
> > academic.
> >
> > After 26 days this drive is at $725k.  Even running the drive for the
> > planned 2 months, nearly 80% longer than the longest previous drive, it
> will
> > be a huge surprise to come anywhere close to the $4.6M the foundation
> wrote
> > down for their "budget".
> > Rather than talking about how to put money away for the future, the
> > immediate discussion needs to be  A) how to raise money more
> effectively,
> > and/or B) how to make do with less.
>
> A good point. The easiest way I can see to spend less in the short
> term is to delay the move to SF. I haven't done the sums, so I don't
> know if that would be enough, but it would help. There are a lot of
> benefits to the move, but right now it would appear we simply can't
> afford it unless things greatly change. The other big expenditure is
> the appointment of an ED, but I'm not sure delaying that would be a
> good idea - we're never going to have a stable foundation until we
> sort out the governance.
>
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Re: Putting the Foundation back in WMF

Thomas Dalton
On 17/11/2007, GerardM <[hidden email]> wrote:
> Hoi,
> Do you not think that people have to be hired and fired with a sufficient
> amount of lead time. Do you not expect that we are past the time when we can
> come back on this. Do you not think that people have been looking for a new
> house ??? My expectation is that we will move as scheduled to SF as there is
> no choice in this any more.
> Thanks,
>     GerardM

The new jobs have only just been advertised, I doubt it's too late to
cancel the move. I imagine it would be cheaper to pull out now that to
continue with the move, which is what matters (in the short term -
obviously it will cost more in the long term, but there won't be a
long term if we run out of money in 6 months time).

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Re: Putting the Foundation back in WMF

Ray Saintonge
In reply to this post by Thomas Dalton
Thomas Dalton wrote:

> On 17/11/2007, Ray Saintonge <[hidden email]> wrote:
>  
>> Thomas Dalton wrote:
>>    
>>> Being able to fund activities off capital gains would be very useful,
>>> but really it requires large endowments to work. Building up a fund
>>> from small fundraisers isn't going to work.
>>>      
>> Capital gains are not a reliable investment, especially not in the short
>> term.  Short term capital gains are mostly a matter of good luck.
>>    
> Putting the cash in a savings account still constitutes capital gains.
> The term doesn't refer just to risky investments.
Money put into a savings account yields interest income, not capital gains.

A capital gain is the increase in the value of an asset.  When the
market value of a company's share increases from its original cost that
is a capital gain.  When you sell a piece of land for more than you paid
for it without having altered it since you bought it, that is a capital
gain.  If these values go down, it is a capital loss.

Ec

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Re: Putting the Foundation back in WMF

Thomas Dalton
On 18/11/2007, Ray Saintonge <[hidden email]> wrote:

> Thomas Dalton wrote:
> > On 17/11/2007, Ray Saintonge <[hidden email]> wrote:
> >
> >> Thomas Dalton wrote:
> >>
> >>> Being able to fund activities off capital gains would be very useful,
> >>> but really it requires large endowments to work. Building up a fund
> >>> from small fundraisers isn't going to work.
> >>>
> >> Capital gains are not a reliable investment, especially not in the short
> >> term.  Short term capital gains are mostly a matter of good luck.
> >>
> > Putting the cash in a savings account still constitutes capital gains.
> > The term doesn't refer just to risky investments.
> Money put into a savings account yields interest income, not capital gains.
>
> A capital gain is the increase in the value of an asset.  When the
> market value of a company's share increases from its original cost that
> is a capital gain.  When you sell a piece of land for more than you paid
> for it without having altered it since you bought it, that is a capital
> gain.  If these values go down, it is a capital loss.

Ok, perhaps my example wasn't a particularly good one, but my point
stands. The profit made on a Treasury Bill is a capital gain under
your definition, and they are generally considered risk-free (if the
US government defaults on its debts, keeping the WMF running will be
the least of our worries).

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Re: Putting the Foundation back in WMF

Gerard Meijssen-3
Hoi,
If the US government defaults on its debts, there will still be a Wikimedia
Foundation. When it proves no longer possible to be based in the US
(unlikely) we will be based elsewhere. You forget that we are an
international organisation. When we must, we will continue elsewhere.

The notion that we are dependent on the performance of the US government is
absolutely wrong.

Thanks,
    GerardM

On Nov 18, 2007 1:33 AM, Thomas Dalton <[hidden email]> wrote:

> On 18/11/2007, Ray Saintonge <[hidden email]> wrote:
> > Thomas Dalton wrote:
> > > On 17/11/2007, Ray Saintonge <[hidden email]> wrote:
> > >
> > >> Thomas Dalton wrote:
> > >>
> > >>> Being able to fund activities off capital gains would be very
> useful,
> > >>> but really it requires large endowments to work. Building up a fund
> > >>> from small fundraisers isn't going to work.
> > >>>
> > >> Capital gains are not a reliable investment, especially not in the
> short
> > >> term.  Short term capital gains are mostly a matter of good luck.
> > >>
> > > Putting the cash in a savings account still constitutes capital gains.
> > > The term doesn't refer just to risky investments.
> > Money put into a savings account yields interest income, not capital
> gains.
> >
> > A capital gain is the increase in the value of an asset.  When the
> > market value of a company's share increases from its original cost that
> > is a capital gain.  When you sell a piece of land for more than you paid
> > for it without having altered it since you bought it, that is a capital
> > gain.  If these values go down, it is a capital loss.
>
> Ok, perhaps my example wasn't a particularly good one, but my point
> stands. The profit made on a Treasury Bill is a capital gain under
> your definition, and they are generally considered risk-free (if the
> US government defaults on its debts, keeping the WMF running will be
> the least of our worries).
>
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Re: Putting the Foundation back in WMF

Dan Rosenthal
If the US government defaults on its debts, the rest of the world's  
economy is in trouble.

-Dan
On Nov 17, 2007, at 8:12 PM, GerardM wrote:

> Hoi,
> If the US government defaults on its debts, there will still be a  
> Wikimedia
> Foundation. When it proves no longer possible to be based in the US
> (unlikely) we will be based elsewhere. You forget that we are an
> international organisation. When we must, we will continue elsewhere.
>
> The notion that we are dependent on the performance of the US  
> government is
> absolutely wrong.
>
> Thanks,
>     GerardM
>
> On Nov 18, 2007 1:33 AM, Thomas Dalton <[hidden email]>  
> wrote:
>
>> On 18/11/2007, Ray Saintonge <[hidden email]> wrote:
>>> Thomas Dalton wrote:
>>>> On 17/11/2007, Ray Saintonge <[hidden email]> wrote:
>>>>
>>>>> Thomas Dalton wrote:
>>>>>
>>>>>> Being able to fund activities off capital gains would be very
>> useful,
>>>>>> but really it requires large endowments to work. Building up a  
>>>>>> fund
>>>>>> from small fundraisers isn't going to work.
>>>>>>
>>>>> Capital gains are not a reliable investment, especially not in the
>> short
>>>>> term.  Short term capital gains are mostly a matter of good luck.
>>>>>
>>>> Putting the cash in a savings account still constitutes capital  
>>>> gains.
>>>> The term doesn't refer just to risky investments.
>>> Money put into a savings account yields interest income, not capital
>> gains.
>>>
>>> A capital gain is the increase in the value of an asset.  When the
>>> market value of a company's share increases from its original  
>>> cost that
>>> is a capital gain.  When you sell a piece of land for more than  
>>> you paid
>>> for it without having altered it since you bought it, that is a  
>>> capital
>>> gain.  If these values go down, it is a capital loss.
>>
>> Ok, perhaps my example wasn't a particularly good one, but my point
>> stands. The profit made on a Treasury Bill is a capital gain under
>> your definition, and they are generally considered risk-free (if the
>> US government defaults on its debts, keeping the WMF running will be
>> the least of our worries).
>>
>> _______________________________________________
>> foundation-l mailing list
>> [hidden email]
>> Unsubscribe: http://lists.wikimedia.org/mailman/listinfo/foundation-l
>>
> _______________________________________________
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> [hidden email]
> Unsubscribe: http://lists.wikimedia.org/mailman/listinfo/foundation-l


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