Re: [gentoo-project] Is an umbrella organization a good choice for Gentoo?

[Alec Warner]

On Wed, Aug 26, 2020 at 11:33 PM Michał Górny <mgorny@g.o> wrote:

> On Wed, 2020-08-26 at 19:39 -0700, Alec Warner wrote:
> > If the objective is to compare the cost of the Foundation to an umbrella;
> > I'm all for it!
> >
> > My primary critique of the blog post is in the financials and income
> > forecasting. I have two major objections.
> >
> > (1) The foundation makes more than simply individual donations. The
> > methodology where we ignore a large portion of revenue seems rather
> > arbitrary to me.
>
> Any model is 'rather arbitrary' by the very definition of it.  I've
> never claimed it's perfect or precise.  I've explicitly considered
> the worst case scenario.
>
> >  I might work on a more numerical model. Really what I
> > think we want is some moving average of past years (by revenue source)
> and
> > we say things like "well we make an average of Y$ from source Z, and we
> > made this over a period of A years, so we can forecast some of this
> revenue
> > into future years." It would be a discounted model, but I don't think
> it's
> > valuable to discount these extra sources of revenue to 0. Or to put this
> > another way; why don't we discount individual paypal donations to 0 also?
> > The answer appears to be because we have a historical model that says we
> > are likely to get some recurring donation revenue...which then leads me
> to
> > ask why we are not applying this same heuristic to other revenue sources
> > for the Foundation? So in short, I don't agree with only using paypal
> > donations and we should forecast other revenue sources.
> >
>
> I've included all sources in the chart to let people decide. The main
> thing about 'small donations' is that they're distributed over a lot of
> people.  So yes, arbitrarily it makes sense to assume that all of people
> donating to Gentoo won't suddenly stop doing that.
>
> The problem with 'big donations' is that they're bound to a single
> entity.  They're a binary thing.  Either we get them, and we have lots
> of money, or we don't and we don't.  One year a person donates $15000
> and we're rich.  Another year only $5000, and our revenue halves.  Yet
> another year there's no such donation.  Yes, surely you could try
> averaging it and assuming that *maybe* next year there will be another
> $5000 donation and it will even out.  Or maybe not because it was just
> one person donating.
>
> Commission and interest are small enough we can skip them for now.
>
> GSoC money is somewhat constant lately but it all hangs on decision of
> one entity.  Google says we're in, cool.  Google says we're out,
> we don't have that money.  And it's not exactly that our GSoC project
> count is improving.
>

I understand why you modeled things this way. I think my problem is that
when modelling I have two goals.
 - Be accurate
 - Be as simple as possible

I think your model meets goal 2, but not goal 1, because it wildly
underestimates future revenue of Gentoo Foundation Inc and this causes
profound problems in accuracy (as I stated earlier.)

I'll try to propose an alternative that uses moving averages; so we can
better understand.
 - Recurring paypal revenue
 - one-off paypal revenue
 - Large donations
 - GSoC (minus reimbursements)

Again I'm not saying "we will book the same revenue year over year" for
these items, but its unlikely we will book 0$ every year[0]. Sadly when I
discussed this with 2 accountants they basically said there is no real
standard for forecasting revenue. There are common ways to model...but I
can't just recommend some forecasting accounting standard because one does
not exist to my knowledge :(

-A

[0] Down years are fine given our cash reserves. At our current burn rate
we can likely fund Gentoo for 10 years without earning another cent in
income for that entire 10 year period. That is crazy! But it also means we
don't need to care too much about annual fluctuations in revenue because we
have small expenses and large cash reserves. If our cash reserves go down
or our expenses go up, this becomes more of a pressing concern because down
years may cause cash flow problems....but this is not a problem for Gentoo
at this time.


>
> --
> Best regards,
> Michał Górny
>
>