5 ms·

This is a tangent, but what's the financial rationale for setting up this kind of an arrangement instead of a donation?

by Niten 6y ago

graiz 6y ago
Loans get paid back... donations don't. An organization that takes donations (like wikipedia) will have to keep asking for donations... while an organization that has a debt can take the time to figure out a revenue model not driven by ads to allow them to repay the debt.
- crusty 6y ago
  Wikipedia's average donation is tiny. That's why they keep asking. The way you've written this it suggests that if instead of giving wikipedia a $2 donation, we have them $2 no-interest loans, weed be helping them prepare for the future and they wouldn't have to ask for more donations (or loans) from us. That's not how it works.
OJFord 6y ago
To whom? To the 'donor' (as it were) it's probably (jurisdiction varies, IANA tax advisor, etc.) a decent inheritance tax avoidance (obligatory 'as opposed to evasion') - helps out a cause he believes in, while leaving the capital (hopefully/in theory) for his inheritants. To the recipient.. I don't know why you'd prefer it to a (stipulation-free) donation, but in general it's probably easier to get big loans than big donations.
- sammax 6y ago
  Since it's 0% interest you could probably make enough profit by investing it in the stock market instead that you could pay inheritance tax and still get more than the initial amount out of it after 50 years. So I would not call this a tax avoidance scheme, it seems more like "help this cause I care about and if it becomes successful enough to be able to pay my children back then that's great".
  - OJFord 6y ago
    Oh absolutely, but we're comparing donations and loans to the same cause, not arbitrary 0% loans and more efficient/profitable 'schemes' right?
- idrios 6y ago
  I think it actually is more helpful to the business to get a loan instead of a donation. With a huge donation you can do whatever you want with it and may overinvest or spend wastefully, until the cash reserves run out. A loan means that the business has X-many years to be self-sufficient. So I think it helps the business's culture as it's developing.
  - crusty 6y ago
    This is like the awful paternalistic version of my thought. Ha. My guess is that there's a implied agreement, "keep to your promises about how Signal will be run and developed and eventually the loan will be forgiven altogether; try to burn me on those promises, like Zuck did, and that'll be a $100 million gamble." And sure, with inflation, the longer they're around, the less daunting the figure will be, but that may be the point, or the loan could be refreshed with more money that just keeps the prospect of repayment a perpetually serious prospect (it was doubled once already).
    - idrios 6y ago
      Oh, I like that explanation better actually. They very well may have an agreement like that where he'll forgive the loan as long as he's still happy with how they're running it
- joshxyz 6y ago
  Sir that's a 300 IQ move, admirable.
- sathishmanohar 6y ago
  > while leaving the capital (hopefully/in theory) for his inheritants. With inflation $100M will probably buy an ice pop in 50 years.
jee1shi 6y ago
In the event of a sale, the loan remains and will either be paid out or carried on to the new owner.
- marricks 6y ago
  This is an extremely good point. So many small idealistic companies are bought out, with the "baggage" of a big loan anyone who did want to buy out Signal for profit would have to now pay 100 million dollars. If I had oodles of money I'd probably do this, "I'm just giving you this money now, but if you got bought up by someone without those same ideals they need to pay up.” Given it’s the former WhatsApp CEO even more reason to be skeptical.
  - 3np 6y ago
    Why the skepticism? Sounds great to me.
    - andreareina 6y ago
      I'm reading it as, "Given it’s the former WhatsApp CEO [who's already been burned once, they have] even more reason to be skeptical [of acquirers holding to the values of the acquired]".
      - 3np 6y ago
        Ah yeah, that makes sense!
        marricks 6y ago
        Yep that was the correct interpretation! CEO being reasonable.
markdown 6y ago
We went on this tangent yesterday in this very same discussion. HN needs better search.

This is a tangent, but what's the financial rationale for setting up this kind of an arrangement instead of a donation?

by Niten 6y ago

This is a tangent, but what's the financial rationale for setting up this kind of an arrangement instead of a donation?

Loans get paid back... donations don't. An organization that takes donations (like wikipedia) will have to keep asking for donations... while an organization that has a debt can take the time to figure out a revenue model not driven by ads to allow them to repay the debt.

crusty 6y ago
Wikipedia's average donation is tiny. That's why they keep asking. The way you've written this it suggests that if instead of giving wikipedia a $2 donation, we have them $2 no-interest loans, weed be helping them prepare for the future and they wouldn't have to ask for more donations (or loans) from us. That's not how it works.

OJFord 6y ago

To whom? To the 'donor' (as it were) it's probably (jurisdiction varies, IANA tax advisor, etc.) a decent inheritance tax avoidance (obligatory 'as opposed to evasion') - helps out a cause he believes in, while leaving the capital (hopefully/in theory) for his inheritants. To the recipient.. I don't know why you'd prefer it to a (stipulation-free) donation, but in general it's probably easier to get big loans than big donations.

sammax 6y ago
Since it's 0% interest you could probably make enough profit by investing it in the stock market instead that you could pay inheritance tax and still get more than the initial amount out of it after 50 years. So I would not call this a tax avoidance scheme, it seems more like "help this cause I care about and if it becomes successful enough to be able to pay my children back then that's great".
- OJFord 6y ago
  Oh absolutely, but we're comparing donations and loans to the same cause, not arbitrary 0% loans and more efficient/profitable 'schemes' right?
idrios 6y ago
I think it actually is more helpful to the business to get a loan instead of a donation. With a huge donation you can do whatever you want with it and may overinvest or spend wastefully, until the cash reserves run out. A loan means that the business has X-many years to be self-sufficient. So I think it helps the business's culture as it's developing.
- crusty 6y ago
  This is like the awful paternalistic version of my thought. Ha. My guess is that there's a implied agreement, "keep to your promises about how Signal will be run and developed and eventually the loan will be forgiven altogether; try to burn me on those promises, like Zuck did, and that'll be a $100 million gamble." And sure, with inflation, the longer they're around, the less daunting the figure will be, but that may be the point, or the loan could be refreshed with more money that just keeps the prospect of repayment a perpetually serious prospect (it was doubled once already).
  - idrios 6y ago
    Oh, I like that explanation better actually. They very well may have an agreement like that where he'll forgive the loan as long as he's still happy with how they're running it
joshxyz 6y ago
Sir that's a 300 IQ move, admirable.
sathishmanohar 6y ago
> while leaving the capital (hopefully/in theory) for his inheritants. With inflation $100M will probably buy an ice pop in 50 years.

jee1shi 6y ago

In the event of a sale, the loan remains and will either be paid out or carried on to the new owner.

marricks 6y ago
This is an extremely good point. So many small idealistic companies are bought out, with the "baggage" of a big loan anyone who did want to buy out Signal for profit would have to now pay 100 million dollars. If I had oodles of money I'd probably do this, "I'm just giving you this money now, but if you got bought up by someone without those same ideals they need to pay up.” Given it’s the former WhatsApp CEO even more reason to be skeptical.
- 3np 6y ago
  Why the skepticism? Sounds great to me.
  - andreareina 6y ago
    I'm reading it as, "Given it’s the former WhatsApp CEO [who's already been burned once, they have] even more reason to be skeptical [of acquirers holding to the values of the acquired]".
    - 3np 6y ago
      Ah yeah, that makes sense!
      - marricks 6y ago
        Yep that was the correct interpretation! CEO being reasonable.

markdown 6y ago

We went on this tangent yesterday in this very same discussion. HN needs better search.