7 ms·

I wrote about this too - linked in the article. https://lancewiggs.com/2019/12/01/did-isoc-leave-1-billion-on-the-table/ https://lancewiggs.com/2019/12/01/did-

I wrote about this too - linked in the article. https://lancewiggs.com/2019/12/01/did-isoc-leave-1-billion-on-the-table/ https://lancewiggs.com/2019/12/01/did-isoc-leave-1-billion-o... The travesty is that ISOC has given up a sure-fire stream of $55+ million/year in tax-free income, along with the ability to easily grow that to over $100m/year with price increases - all for just over $1.1 billion. As any r/personalfinance reader can tell you a rule of thumb for endowments is to spend a maximum of 4% of your assets each year. This means $44m from the $1.1bn, which means ISOC is immediately worse off than they were forecasting for this year (~$55m). Alternatively use the Yale method, which in today's low-return market will yield similar or worse results. Moreover it's clear that ISOC are not behaving as the sharpest of investors, so we can imagine that the endowment might be be poorly managed or over-spent.

xwdv 7y ago
There ain’t nothing “sure-fire” in this world when it comes to income son. A bird in the hand is worth two in the bush. Those armchair investors from reddit don’t know the situation .
- formercoder 7y ago
  That's why cash flows are discounted at the cost of capital - it's a quantitative decision.
- kick 7y ago
  Most of your comments on HN today have been extremely condescending. Is 'xwdv a parody account? (Genuine question.)
  - xwdv 7y ago
    It’s a self fulfilling prophecy. I used to get upvotes, but recently I only get downvotes, and now that I feel targeted, the tone of my posts gets more hostile. I wish there was more transparency surrounding downvotes.
    - kick 7y ago
      There is [transparency]: if you're being downmodded, you're either deemed as not contributing to the conversation, or people disagree with you enough to do so. As per Paul Graham: I think it's ok to use the up and down arrows to express agreement. Obviously the uparrows aren't only for applauding politeness, so it seems reasonable that the downarrows aren't only for booing rudeness. https://news.ycombinator.com/item?id=117171 https://news.ycombinator.com/item?id=117171 Forcing users to publicly display their opinion on a person's comment would be negative for many reasons, especially on a site like HN, where many people choose to be eponymous. Also, note: most of the comments on the first page of your profile seem to be in the black, which means they weren't controversial enough to receive many (if any) downvotes.
      - jorvi 7y ago
        HN downvotes can be rather confounding still. Check here: https://news.ycombinator.com/item?id=21653015 https://news.ycombinator.com/item?id=21653015 I responded very matter-of-fact, pointing out that the sharp edges of Tesla's cybertruck are something that makes it more dangerous to pedestrians. I didn't add any flourish or snark or whatever and yet it went into the grey. That kind of voting behavior just gives me a giant question mark.. why would anyone be hostile to explanation via fact? IMO any site with a voting system should attach a heavy cost to downvoting: 1. each downvote you do costs more - with a slow backoff timer 2. the more points you have, the more it costs to downvote 3. the more downvotes a comment has the more points it costs This mirrors the real life cost in social interaction: 1. you can't constantly be negative to everyone 2. high status people can afford to do that more, but not infinitely 3. you can't pile on one person (or rather, with each person adding it nears the threshold of "wow, maybe that's enough, dude") (Yes, I know, talking about voting vis-à-vis HN is discouraged, but it apparently does bother a rather large contingent of users)
        kick 7y ago
        Your answer was an answer to a question that wasn't being asked, and one that was obvious, at that. It seems reasonable that it was downmodded. IMO any site with a voting system should attach a heavy cost to downvoting: I think 'dang has already elaborated as to why this is a bad idea, but: Hacker News depends on downmods for community moderation. Discouraging them would lower the quality of the site. 3. the more downvotes a comment has the more points it costs Not to assume bad-faith, but this was a joke, wasn't it? A bad comment should be downmodded more, and users should not be penalized for that. Flagging, too, should happen if it's extremely bad. This mirrors the real life cost in social interaction: 1. you can't constantly be negative to everyone If a person is only posting negative content, it makes sense that they would get downmodded more often: active users of the site will often see these people's comments more than others. Should they get punished for keeping the quality of the site up? I don't think so. That seems unreasonable. 3. you can't pile on one person (or rather, with each person adding it nears the threshold of "wow, maybe that's enough, dude") That's completely unreasonable: if a comment is bad, it should be downmodded.
  - deleted 7y ago
    [deleted]
forrestthewoods 7y ago
Exchanging 10 to 20 years of potential revenue for a flat check seems like a pretty good deal.
- Scoundreller 7y ago
  Agreed. A p/e of 20 isn't bad. S̶t̶o̶c̶k̶ ̶m̶a̶r̶k̶e̶t̶ ̶i̶s̶ ̶1̶5̶ ̶r̶i̶g̶h̶t̶ ̶n̶o̶w̶,̶ ̶a̶n̶d̶ ̶t̶h̶a̶t̶'̶s̶ ̶f̶a̶r̶ ̶m̶o̶r̶e̶ ̶d̶i̶v̶e̶r̶s̶i̶f̶i̶e̶d̶.̶ Oops, stock market is 20-25 right now. There's so many TLDs today, the ability to raise prices isn't what it was. Though they could 5x prices and even if they lost 60% of their business, they'll come out ahead. I could understand the worries of .org holders.
  - lancewiggs 7y ago
    .org is .org, and they have a lot more pricing power than almost all of the gTLDs (generic top level domains). Their customers, if you think about it, are perhaps more likely to value what the domain stands for. Meanwhile the annual price is currently absolutely trivial versus the expenses of most organisations from higher GDP countries.
    - onion2k 7y ago
      Their customers, if you think about it, are perhaps more likely to value what the domain stands for. Some of their customers perhaps. If you go back and look at what companies were doing with domains 20 years ago most medium and large enterprises bought <company name>.com, .org, .net and some country code tld domain because that's what everyone recommended "in case someone cybersquatted". I think behaviour has stopped now there are hundreds of gTLDs available. Consequently .org is much less likely to sell to businesses, and will find it very difficult to grow.
      - darkwater 7y ago
        .org customers are not businesses, it's the non-profit
annoyingnoob 7y ago
There is a chance that the fire sale price will help keep .org prices from skyrocketing. Maybe they did .org domains a favor.
- syshum 7y ago
  In what universe is that the case? Prices are going to raise by at least 10% per year from now until the end of time. that is doubling every 7 years thereabouts, far far far higher than inflation or cost bais increases would demand
- slantedview 7y ago
  As always, non-profit services cost less than for-profit services for a reason. ISOC could have implemented any price hikes they wanted without the need to pay out a profit as will be necessary for the new owners. This will be a net cost increase, likely a big one (since there are no actual controls), for .org owners.
- lancewiggs 7y ago
  Any investment firm wants to maximise returns for their investors. The incentive is to find the (monopoly) price that maximises income from sales numbers x dollars.
4ntonius8lock 7y ago
I appreciate your excellent write up. When I read the allegations in the original article I kinda wanted more detail. You break it down very well with great attention to detail. I'd like to place this here for those who only read comments: .org registry rights belong to a non-profit - the rights were sold to a private equity group - somewhere between 50% and 90% below market rate. It was based on self dealing of the people given stewardship of the non-profit that manages .org Basically, this is privatization Russian style. Not good. Even if you like privatization, no-bid stuff is just wrong. Want to help support the democratic institutions which hopefully won't fail us? Look here: https://drewdevault.com/2019/11/29/dotorg.html https://drewdevault.com/2019/11/29/dotorg.html
mattrp 7y ago
I don’t know if it’s fair to say they could have easily doubled but your point about not acting like investors is fair. In contrast, AAA, USAA, and AARP have chosen to leverage their assets to enter new lines of business while Isoc simply sold their’s off. I am not familiar with what governance issues might be in play here but the simpleton like me would ask, what alternatives did ISOC evaluate before taking a buyout offer from a insider-linked entity that ironically calls itself “ethos”...
- deleted 7y ago
  [deleted]
  - deleted 7y ago
    [deleted]
cameldrv 7y ago
The bigger issue is that org was given to PIR to manage in the public interest. It was not supposed to even be a moneymaker for ISOC, they were just supposed to be the stewards of .org in the public interest. The fact that it’s worth even $1 billion shows that they’re operating it in the interest of the ISOC and not the public interest. ICANN should simply create a new entity that will charge break-even fees for registrations and stop trying to tax .org registrants with mandatory charitable donations to a dubious charity.
- reitzensteinm 7y ago
  Further, the sale of the asset to a third party is essentially laundering the extraction of maximum value. The buyer pays the NPV when operated as a profit focused enterprise, then insulates the ISOC from blowback when it actually does this. The ISOC can then turn around and feign betrayal with the rest of us, its pockets full of money.
  - ohashi 7y ago
    This is the internet. We don't forget things like this. People's names have been attached to it, like Andrew Sullivan (CEO) and Richard Barnes (board member defending it). We know exactly who fucked over everyone here, they admit it publicly. There's no pretending about it, Andrew was more than happy to sell out the non profit space. Just read the interview: https://www.theregister.co.uk/2019/11/29/isoc_ceo_dot_org_sale/ https://www.theregister.co.uk/2019/11/29/isoc_ceo_dot_org_sa...
    - MrEldritch 7y ago
      This is the Internet. Everyone will have forgotten this besides, like, five people before this time 2020.
      - jtbayly 7y ago
        2020/tomorrow. FTFY
      - 7y ago
LegitShady 7y ago
I feel like you're missing some capital recovery factors and alternatives analysis to be so strong with your statement.
- lancewiggs 7y ago
  It’s a pretty simple analysis - but there is clearly, to me, enormous value left on the table.
deepaksurti 7y ago
>> is to spend a maximum of 4% of your assets each year. OT. Isn't 4% also the rule of early retirement, that is if you can live of 4% of your savings you can retire? Can anyone clarify if this rule applies for both individual and corporate? If so, how would be even more interesting to know?
- throwaheyy 7y ago
  Yes. Generally and for the purposes of this discussion, individuals and corporations can both buy investments in the public markets with similar risk/return profiles. Hence the spending ratio works out similar. The 4% spending ratio theoretically varies with market performance but evens out over time. 7-8% typical returns for a total market index/etf, minus a couple % to account for inflation.
- gowld 7y ago
  The % is lower for corporations than for humans, because corporations intend to outlive humans.
- logfromblammo 7y ago
  4% works out for retirement, with the expectation that you will eventually die and no longer need the income. The assumption there is that if the market underperforms for the next 35 years in a row, you run out of money just after you die. An immortal, such as a corporation, has to use a safer number, such as 3%, or 2.5% for operations and 0.5% in fees for the fiduciary management. So the permanent endowment needs to be 40x annual operating costs, and the fiduciary needs to grow it by 3% better than (price) inflation per year. That's relatively easy to do when most of the principal won't be touched within the next 30 years: buy all the publicly-traded stocks that have historically paid regular dividends, and reinvest whatever isn't paid out. On a long enough time scale, that's probably 7% better than inflation. So the fiduciary could possibly be replaced by a robot that only needs 0.05% annually for maintenance, and then you'd only need to endow 34x annual operating costs to run forever.

xwdv 7y ago

There ain’t nothing “sure-fire” in this world when it comes to income son. A bird in the hand is worth two in the bush. Those armchair investors from reddit don’t know the situation .

formercoder 7y ago
That's why cash flows are discounted at the cost of capital - it's a quantitative decision.
kick 7y ago
Most of your comments on HN today have been extremely condescending. Is 'xwdv a parody account? (Genuine question.)
- xwdv 7y ago
  It’s a self fulfilling prophecy. I used to get upvotes, but recently I only get downvotes, and now that I feel targeted, the tone of my posts gets more hostile. I wish there was more transparency surrounding downvotes.
  - kick 7y ago
    There is [transparency]: if you're being downmodded, you're either deemed as not contributing to the conversation, or people disagree with you enough to do so. As per Paul Graham: I think it's ok to use the up and down arrows to express agreement. Obviously the uparrows aren't only for applauding politeness, so it seems reasonable that the downarrows aren't only for booing rudeness. https://news.ycombinator.com/item?id=117171 https://news.ycombinator.com/item?id=117171 Forcing users to publicly display their opinion on a person's comment would be negative for many reasons, especially on a site like HN, where many people choose to be eponymous. Also, note: most of the comments on the first page of your profile seem to be in the black, which means they weren't controversial enough to receive many (if any) downvotes.
    - jorvi 7y ago
      HN downvotes can be rather confounding still. Check here: https://news.ycombinator.com/item?id=21653015 https://news.ycombinator.com/item?id=21653015 I responded very matter-of-fact, pointing out that the sharp edges of Tesla's cybertruck are something that makes it more dangerous to pedestrians. I didn't add any flourish or snark or whatever and yet it went into the grey. That kind of voting behavior just gives me a giant question mark.. why would anyone be hostile to explanation via fact? IMO any site with a voting system should attach a heavy cost to downvoting: 1. each downvote you do costs more - with a slow backoff timer 2. the more points you have, the more it costs to downvote 3. the more downvotes a comment has the more points it costs This mirrors the real life cost in social interaction: 1. you can't constantly be negative to everyone 2. high status people can afford to do that more, but not infinitely 3. you can't pile on one person (or rather, with each person adding it nears the threshold of "wow, maybe that's enough, dude") (Yes, I know, talking about voting vis-à-vis HN is discouraged, but it apparently does bother a rather large contingent of users)
      - kick 7y ago
        Your answer was an answer to a question that wasn't being asked, and one that was obvious, at that. It seems reasonable that it was downmodded. IMO any site with a voting system should attach a heavy cost to downvoting: I think 'dang has already elaborated as to why this is a bad idea, but: Hacker News depends on downmods for community moderation. Discouraging them would lower the quality of the site. 3. the more downvotes a comment has the more points it costs Not to assume bad-faith, but this was a joke, wasn't it? A bad comment should be downmodded more, and users should not be penalized for that. Flagging, too, should happen if it's extremely bad. This mirrors the real life cost in social interaction: 1. you can't constantly be negative to everyone If a person is only posting negative content, it makes sense that they would get downmodded more often: active users of the site will often see these people's comments more than others. Should they get punished for keeping the quality of the site up? I don't think so. That seems unreasonable. 3. you can't pile on one person (or rather, with each person adding it nears the threshold of "wow, maybe that's enough, dude") That's completely unreasonable: if a comment is bad, it should be downmodded.
- deleted 7y ago
  [deleted]

forrestthewoods 7y ago

Exchanging 10 to 20 years of potential revenue for a flat check seems like a pretty good deal.

Scoundreller 7y ago
Agreed. A p/e of 20 isn't bad. S̶t̶o̶c̶k̶ ̶m̶a̶r̶k̶e̶t̶ ̶i̶s̶ ̶1̶5̶ ̶r̶i̶g̶h̶t̶ ̶n̶o̶w̶,̶ ̶a̶n̶d̶ ̶t̶h̶a̶t̶'̶s̶ ̶f̶a̶r̶ ̶m̶o̶r̶e̶ ̶d̶i̶v̶e̶r̶s̶i̶f̶i̶e̶d̶.̶ Oops, stock market is 20-25 right now. There's so many TLDs today, the ability to raise prices isn't what it was. Though they could 5x prices and even if they lost 60% of their business, they'll come out ahead. I could understand the worries of .org holders.
- lancewiggs 7y ago
  .org is .org, and they have a lot more pricing power than almost all of the gTLDs (generic top level domains). Their customers, if you think about it, are perhaps more likely to value what the domain stands for. Meanwhile the annual price is currently absolutely trivial versus the expenses of most organisations from higher GDP countries.
  - onion2k 7y ago
    Their customers, if you think about it, are perhaps more likely to value what the domain stands for. Some of their customers perhaps. If you go back and look at what companies were doing with domains 20 years ago most medium and large enterprises bought <company name>.com, .org, .net and some country code tld domain because that's what everyone recommended "in case someone cybersquatted". I think behaviour has stopped now there are hundreds of gTLDs available. Consequently .org is much less likely to sell to businesses, and will find it very difficult to grow.
    - darkwater 7y ago
      .org customers are not businesses, it's the non-profit

annoyingnoob 7y ago

There is a chance that the fire sale price will help keep .org prices from skyrocketing. Maybe they did .org domains a favor.

syshum 7y ago
In what universe is that the case? Prices are going to raise by at least 10% per year from now until the end of time. that is doubling every 7 years thereabouts, far far far higher than inflation or cost bais increases would demand
slantedview 7y ago
As always, non-profit services cost less than for-profit services for a reason. ISOC could have implemented any price hikes they wanted without the need to pay out a profit as will be necessary for the new owners. This will be a net cost increase, likely a big one (since there are no actual controls), for .org owners.
lancewiggs 7y ago
Any investment firm wants to maximise returns for their investors. The incentive is to find the (monopoly) price that maximises income from sales numbers x dollars.

4ntonius8lock 7y ago

I appreciate your excellent write up. When I read the allegations in the original article I kinda wanted more detail. You break it down very well with great attention to detail. I'd like to place this here for those who only read comments: .org registry rights belong to a non-profit - the rights were sold to a private equity group - somewhere between 50% and 90% below market rate. It was based on self dealing of the people given stewardship of the non-profit that manages .org Basically, this is privatization Russian style. Not good. Even if you like privatization, no-bid stuff is just wrong. Want to help support the democratic institutions which hopefully won't fail us? Look here: https://drewdevault.com/2019/11/29/dotorg.html https://drewdevault.com/2019/11/29/dotorg.html

mattrp 7y ago

I don’t know if it’s fair to say they could have easily doubled but your point about not acting like investors is fair. In contrast, AAA, USAA, and AARP have chosen to leverage their assets to enter new lines of business while Isoc simply sold their’s off. I am not familiar with what governance issues might be in play here but the simpleton like me would ask, what alternatives did ISOC evaluate before taking a buyout offer from a insider-linked entity that ironically calls itself “ethos”...

deleted 7y ago
[deleted]
- deleted 7y ago
  [deleted]

cameldrv 7y ago

The bigger issue is that org was given to PIR to manage in the public interest. It was not supposed to even be a moneymaker for ISOC, they were just supposed to be the stewards of .org in the public interest. The fact that it’s worth even $1 billion shows that they’re operating it in the interest of the ISOC and not the public interest. ICANN should simply create a new entity that will charge break-even fees for registrations and stop trying to tax .org registrants with mandatory charitable donations to a dubious charity.

reitzensteinm 7y ago
Further, the sale of the asset to a third party is essentially laundering the extraction of maximum value. The buyer pays the NPV when operated as a profit focused enterprise, then insulates the ISOC from blowback when it actually does this. The ISOC can then turn around and feign betrayal with the rest of us, its pockets full of money.
- ohashi 7y ago
  This is the internet. We don't forget things like this. People's names have been attached to it, like Andrew Sullivan (CEO) and Richard Barnes (board member defending it). We know exactly who fucked over everyone here, they admit it publicly. There's no pretending about it, Andrew was more than happy to sell out the non profit space. Just read the interview: https://www.theregister.co.uk/2019/11/29/isoc_ceo_dot_org_sale/ https://www.theregister.co.uk/2019/11/29/isoc_ceo_dot_org_sa...
  - MrEldritch 7y ago
    This is the Internet. Everyone will have forgotten this besides, like, five people before this time 2020.
    - jtbayly 7y ago
      2020/tomorrow. FTFY
    - 7y ago

LegitShady 7y ago

I feel like you're missing some capital recovery factors and alternatives analysis to be so strong with your statement.

lancewiggs 7y ago
It’s a pretty simple analysis - but there is clearly, to me, enormous value left on the table.

deepaksurti 7y ago

>> is to spend a maximum of 4% of your assets each year. OT. Isn't 4% also the rule of early retirement, that is if you can live of 4% of your savings you can retire? Can anyone clarify if this rule applies for both individual and corporate? If so, how would be even more interesting to know?

throwaheyy 7y ago
Yes. Generally and for the purposes of this discussion, individuals and corporations can both buy investments in the public markets with similar risk/return profiles. Hence the spending ratio works out similar. The 4% spending ratio theoretically varies with market performance but evens out over time. 7-8% typical returns for a total market index/etf, minus a couple % to account for inflation.
gowld 7y ago
The % is lower for corporations than for humans, because corporations intend to outlive humans.
logfromblammo 7y ago
4% works out for retirement, with the expectation that you will eventually die and no longer need the income. The assumption there is that if the market underperforms for the next 35 years in a row, you run out of money just after you die. An immortal, such as a corporation, has to use a safer number, such as 3%, or 2.5% for operations and 0.5% in fees for the fiduciary management. So the permanent endowment needs to be 40x annual operating costs, and the fiduciary needs to grow it by 3% better than (price) inflation per year. That's relatively easy to do when most of the principal won't be touched within the next 30 years: buy all the publicly-traded stocks that have historically paid regular dividends, and reinvest whatever isn't paid out. On a long enough time scale, that's probably 7% better than inflation. So the fiduciary could possibly be replaced by a robot that only needs 0.05% annually for maintenance, and then you'd only need to endow 34x annual operating costs to run forever.