User talk:Jimbo Wales

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This is an old revision of this page, as edited by Jimbo Wales (talk | contribs) at 16:51, 26 November 2023 (→‎Another Endowment question). The present address (URL) is a permanent link to this revision, which may differ significantly from the current revision.

    A redirect on metawiki

    Greeting, Jimbo. I find you seldom replied to the comment on your talk page on meta-wiki, you may want to leave a redirect there to here? -Lemonaka‎ 16:29, 18 November 2023 (UTC)[reply]

    The Signpost: 20 November 2023

    * Read this Signpost in full * Single-page * Unsubscribe * MediaWiki message delivery (talk) 09:43, 20 November 2023 (UTC)[reply]

    Another Endowment question

    Currently the Foundation has about $255 million in cash and short-term investments, while the Endowment has about $119 million in long-term investments. Should the Foundation transfer some to the Endowment to presumably secure a larger and safer return? If so, how much? Presumably this would be done after getting the Endowment out of Tides; so my third question is when is that expected to occur? Sandizer (talk) 19:14, 21 November 2023 (UTC)11[reply]

    We are entirely out of Tides. This page details the current investment policy.
    The question of moving money from WMF and into the endowment is different from the question of how money currently with WMF should be invested. I think there's merit in the idea of periodically moving money out of WMF and into the Endowment, with the caveat that we shouldn't run a high risk that WMF might need to dip into the Endowment for an emergency caused by running too short a balance within WMF. I think that using the Endowment to cover shortfalls shouldn't be something that anyone gets comfortable with.
    The question of whether all of WMF's money that's currently in cash and short-term investments should stay that way is also valid. One way that I would approach the question is to start to match the duration of some of the investments to the expected timeline of expenditures, as opposed to simply blindly moving into equity or longterm bonds. (When interest rates rise, long term bonds get crushed, but if the intention is to hold some securities to maturity to meet some expected future expenditure, the the interest rate risk is less relevant. Measures of duration serve a similar function.)--Jimbo Wales (talk) 15:58, 22 November 2023 (UTC)[reply]
    Jimmy, regarding the Sandizer inquiry, I note that the Investment Policy you linked us to mentions this:

    "The Wikimedia Endowment was invested through the Tides Foundation, which is committed to achieving an impact-driven portfolio. The Wikimedia Endowment is invested only in funds that had been reviewed by Tides and meet its environmental, social, and governance (ESG) factors."

    Does that mean that the Wikimedia Endowment continues to invest ONLY in Tides-approved ESG investments? If so, why?! Wikimedia has its own unique objectives, specifically pertaining to the Open Knowledge movement. Although impact-driven investing generally results in lower returns and can have higher risks, it sounds like the WMF Endowment has already committed to that in its Investment Policy. Let's take that as a given; however, an impact-driven portfolio consistent with the goals of the Open Knowledge movement are different than those of Tides. Tides is a donor-fund aggregator whose mission aligns with its investment policy:

    “Tides conduct its investment management process with the recognition that its responsibility includes not only the traditional goals of maximizing return and minimizing risk, but also a focus on utilizing its investment capital to achieve a world of shared prosperity and social justice, founded on equality and human rights, a sustainable environment, healthy individuals and communities, and quality education.”

    WMF Endowment's impact-driven investing should NOT be exclusively determined by the goals and values of Tides as stated above. We are not a Tides subsidiary.
    I see that the choice of investment holdings is based on Morningstar Sustainability Ratings per your linked description. Why are we using the identical percentage distribution as Tides. Was there a review conducted where that was determined to be best for our Foundation money?
    I note that 10% of our Endowment will be invested in "funds rated a “three-E;” these funds have an ESG mandate and their lower rating may be due to companies in the fund not being covered by Morningstar analysts (especially in ex-US markets)". That doesn't sound good! Why would we want any of our money to be invested in overseas companies that Morningstar analysts don't even cover? Also, 10% of the Endowment will be invested in "funds that are not rated by Morningstar but have an ESG mandate". So, that means that as of the most current financial statement, approximately $10 million of Endowment funds will be holdings of ESG mutual funds that aren't even rated by Morningstar and another $10 million might be invested in overseas companies that Morningstar doesn't rate. An ESG mandate is not well-defined, i.e. social justice, sustainable environment, and quality education can mean one thing to Tides and something else entirely to others. It would be unfortunate if $20 million of WMF Endowment money were invested with so little control by the WMF.--FeralOink (talk) 23:08, 25 November 2023 (UTC)[reply]
    Dear FeralOink, could we please dial down the heat substantially?
    Of course we are not a Tides subsidiary and it's very odd for you to point is out in Bold text. No one is behaving as if we are a Tides subsidiary, and I can tell you that at the board meetings, I have not heard any board member voice any opinion that would even remotely suggest that we should blindly defer to Tides on anything. The particular ESG ratings we use have nothing to do with Tides. They are ratings developed by Morningstar, Inc.. In terms of the specific allocations they were not determined by Tides, and continue - as the page said - to be determined (ultimately) by the endowment board: "The Wikimedia Endowment will revisit this allocation periodically to make sure it delivers appropriate risk-adjusted returns.".
    Now that we've got the Tides question out of the way, we can of course discuss some questions about the allocation. I don't think it is automatically a given that ESG funds will deliver a lower return (I used to believe this, but the actual evidence is mixed at best), but you seem to accept that it is something we have chosen to do. But you had a stronger question about the international component. Diversification is an important part of wise investment strategy, and investment in non-US companies is a part of that. It is just generally a fact that Morningstar doesn't have as strong coverage of non-US markets, but it isn't something that I would see as especially problematic.
    In my own personal retirement savings accounts, I allocate a percentage to international markets through low-cost Vanguard index funds. I think it's a reasonable thing to do.
    Implicit in your question, though you didn't actually ask it in this way, is whether or not we should adopted some kind of modified ESG strategy where we specifically invest in companies that are particularly aligned with our mission - let's imagine here things like open source software companies, educational resource companies who use free licenses, etc. I think that's an interesting idea although there are not likely to be any ESG ratings in existence of such a thing, nor any dedicated index funds. It would be a pretty wild departure from normal practice if we got into the business of picking individual stocks, and of course would raise all sorts of potential issues.
    Below, I see a question about the percentage of cash and cash equivalents, and my own personal view is that cash should probably only be held for short periods "transactionally" you might call it, as money is entering the endowment or is scheduled to depart (grants, expenses) in a reasonably short time.--Jimbo Wales (talk) 16:51, 26 November 2023 (UTC)[reply]
    Hello, Sandizer. I don't think that the Endowment funds and Wikimedia Foundation funds are readily transferable, i.e. the Endowment isn't generally intended for supporting day-to-day operating costs of WMF. See Endowment FAQ item 2:

    "During times of prosperity, the Wikimedia Endowment will serve as a springboard for growth and innovation. During tough economic times, the Endowment will help fund the most critical operations that keep the Wikimedia projects functioning.

    Jimmy's reply to you is good, as it shows that he is cognizant of responsible corporate governance practices:

    "I think that using the Endowment to cover shortfalls shouldn't be something that anyone gets comfortable with."

    Your point is well-taken though. I too noticed that 2023 WMF salaries and benefits total over $100 million per year, a 20% year-on-year increase, whereas server costs are merely $3.1 million, up from $2.7 million last year.--FeralOink (talk) 23:08, 25 November 2023 (UTC)[reply]
    @FeralOink: What is your opinion of the optimal ratio of Foundation cash and investments to Endowment investments?
    I also want to ask your opinion about the Morningstar ESG ratings. They seem to be a very good idea financially, but I wonder how much of that is due to a circular self-fulfilling prophesy due to their enormous influence over fund flows. I'm not sure it's a great idea to have put 500 Toronto analysts in charge of such a large fraction of the world's equity and corporate debt markets. However, I used to be far more skeptical before Morningstar acquired Sustainalytics, back when the weights of the issues contributing to the ESG rating were proprietary whereas now they publish them on page 3 of their reports:
    Issues driving Morningstar ESG Risk Ratings
    Category Issue Contribution to ESG Risk Rating
    Environmental
    50.8%     		Carbon - Own Operations 19.2%
    Resource Use 10.3%
    Emissions, Effluents and Waste 7.1%
    Occupational Health and Safety 7.5%
    Environmental and Social Impact
    of Products and Services     		6.7%
    Governance
    49.2%     		Human Rights 22.8%
    Corporate Governance 11.9%
    Business Ethics 6.7%
    Human Capital 4.0%
    Community Relations 3.8%
    If you were Head of ESG Products at Sustainalytics, how would you weight those issues?
    As for Foundation staff and budget allocation, my greatest hope is they keep adding more engineers assigned to the Community Wishlist, which has been a breath of fresh air recently. I think governance issues, such as why the Foundation is committed to so much secrecy that they can't lead a letter writing campaign for the jailed Aribic Wikipedia admins, are far more important than staff vs. server infrastructure spending. Sandizer (talk) 04:05, 26 November 2023 (UTC)[reply]
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