Will much of that $3-6M go into renovating and managing the Rose Garden Inn, or to cover work that could have been covered by existing funding if the Inn wasn’t purchased?
Thinking about the exact financing of the Inn is a bit messy, especially if we compare it to doing something like running the Lightcone Offices, because of stuff like property appreciation, rental income from people hosting events here, and the hard-to-quantify costs of tying up capital in real estate as opposed to more liquid assets like stocks.
If you assume something like 5% property appreciation per year going forward, and you amortize the part of our construction costs that didn’t increase the property value over the next 7 years (which seems like a reasonable estimate for how long the venue is going to get used), I get an annual cost of running the Rose Garden of about $1.15M (property value of ~$19MM, ~$3.5M in uncapitalized construction costs amortized over 7 years, plus $700k in annual upkeep and maintenance costs).
This is pretty cost-effective compared to other options of even just providing office space, and I think is my preferred way of thinking about the cost of doing this construction project (most of which came from a loan that we took out specifically to finance the purchase and renovation of the place, which is insured against the Rose Garden property itself, so it didn’t straightforwardly funge against our other funding).
To compare this to other costs, renting two floors of the WeWork, which we did for most of the summer last year, cost around $1.2M/yr for 14,000 sq. ft. of office space. The Rose Garden has 20,000 sq. ft. of floor space and 20,000 additional sq. ft. of usable outdoor space for less implied annual cost than that.
In order to fund this initial capital investment, we did definitely cut into the funding we received in 2022, and we would have a bunch of money in our bank accounts right now if we didn’t do this construction project. On the other hand, our spending over the next few years would also be a bunch larger, since we would have to pay more in rent if we wanted to do anything in-person community shaped, for both events and office space, than we will have to pay in interest and upkeep minus appreciation for the Rose Garden Inn.
This doesn’t take into account the cost of having Jaan Tallinn’s capital tied up in real estate with 5% annual interest from us. In one sense it seems good for Jaan to diversify his funds away from crypto. On the other hand he has probably been making closer to 10%-20% annual returns over the last 10-15 years with his investments. My current guess is the diversification benefits here outweigh the higher potential returns (because man, x-risk efforts sure still are quite tech-stock and crypto loaded and I am very glad about more diversification), but I am really not confident, and this could easily dominate the relevant cost-calculations.
It’s also a bit unclear how to think about rental income from people working on existential risk stuff that we wouldn’t otherwise support, which I expect to also make us back some of these funds.
I could write more about how to think about financing the Rose Garden, but I’ll leave it at this. I think it it mostly makes sense for people to think that roughly $1.5M of our annual budget going forward will be used for our Rose Garden Inn, with ~$350k of that going into very illiquid long-term savings for the organization.
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By far the biggest source of uncertainty about our budget comes from the potential for FTX clawbacks, which explains most of the wide range of our budget. I currently think there are some good arguments that we owe back about $1.5M to FTX creditors, though the exact game theory here is a bit messy (and they might request up to $4M back from us), and I continue to feel quite confused about what the right thing to do here is. We don’t know if and when they will ask for that money.
If so, I’m curious to hear more about the strategy behind buying and renovating the space, since it seems like a substantial capital investment, and a divergence from LightCone Infrastructure’s previous work and areas of expertise.
The purchase of the Rose Garden Inn and really setting the whole renovation project in-motion was made before November last year, and as such before the collapse of FTX, and as is probably apparent from my comments and posts over the last few months (as well as our reasoning for closing down the Lightcone Offices), a lot of our strategy and perspective has shifted since then.
That said, I am actually still quite excited about our plans with the Rose Garden, but I do think it’s an important disclaimer to add that yeah, a lot of our plans for the Rose Garden were substantially changed when FTX collapsed, and our plans for it have become a bunch less straightforward (the original reasoning for it was something much closer to “this makes sense from a finance perspective even if we just compare it to renting office space at our current location”).
That said I am still quite excited about our plans. Some concrete things that continue to drive my excitement for our Rose Garden Inn investment:
I continue to think that in-person collaboration is really essential, especially for mentoring relationships. I think there continues to be a pretty substantial bottleneck in people getting oriented to working on AI Alignment that goes a lot better with in-person peers and via in-person mentoring from people who have made real contributions to the field, and investing in infrastructure for that is one of the best ways to drive progress on reducing existential risk from AI.
I really want to create a more distinct and intentionally separate culture both on LessWrong and at the Rose Garden Inn, and I think owning a physical space hugely helps with that. FTX, various experiences I’ve had in the EA space over the past few years, as well as a lot of safetywashing in AI Alignment in more recent years, have made me much more hesitant to build a community that can as easily get swept up in respectability cascades and get exploited as easily by bad actors, and I really want to develop a more intentional culture in what we are building here. Hopefully this will enable the people I am supporting to work on things like AI Alignment without making the world overall worse, or displaying low-integrity behavior, or get taken advantage of.
I am very excited about the setup where we get to have both long-term office space and short-term events in one location. I am hopeful that this will enable us to have a lot of people flowing through the space, and will allow us to interface and experiment with a lot of different approaches to AI alignment and rationality, and then slowly grow by picking a small number of the people coming through to work more long-term from our office space.
To compare this to other costs, renting two floors of the WeWork, which we did for most of the summer last year, cost around $1.2M/yr for 14,000 sq. ft. of office space. The Rose Garden has 20,000 sq. ft. of floor space and 20,000 additional sq. ft. of usable outdoor space for less implied annual cost than that.
I’m sympathetic to the high-level claim that owning property usually beats renting if you’re committing for a long time period. But the comparison with WeWork seems odd: WeWork specializes in providing short-term, serviced office space and does so at a substantial premium to the more traditional long-term, unserviced commercial real estate contract. When we were looking for office space in Berkeley earlier this year we were seeing list price between $3.25-$3.75/month per square foot, or $780k-900k/year for 20,000 square feet. I’d expect with negotiation you could get somewhat better pricing than this implies, especially if committing to a longer time period.
Of course, the extra outdoor space, mixed-use zoning and ability to highly customize the space may well offset this. But it starts depending a lot more on the details (e.g. how often is the outdoor space used; how much more productive are people in a customized space vs a traditional office) than it might first seem.
When we were looking for office space in Berkeley earlier this year we were seeing list price between $3.25-$2.75/month per square foot, or $780k-900k/year for 20,000 square feet.
Very small nitpick, but did you mean $3.25-$3.75? (This was the smallest diff I could think of to make your calculation clear).
When we were looking for office space in Berkeley earlier this year we were seeing list price between $3.25-$2.75/month per square foot, or $780k-900k/year for 20,000 square feet. I’d expect with negotiation you could get somewhat better pricing than this implies, especially if committing to a longer time period.
Yep, if you commit for longer time periods you can definitely get better deals, and there are definitely other ways to save on office space costs. I didn’t mean to imply this was the minimum you could rent office space for.
The $1.2M/yr estimate was roughly what we were paying at the time, and as such was the central comparison point we had. Comparing it to something more like $800k-$900k a year also seems reasonable to me, though I have less experience with the exact tradeoffs faced by doing that. One reason for that comparison is that the price estimate I did in the comment above included utilities and servicing the space, and I don’t have a ton of experience with how much cost that adds to an unserviced office lease, though I still expect it to be a bunch lower than the WeWork prices.
Thank you for such a detailed and thorough answer! This resolves a lot of my confusion.
Based on conversations around closing the wework Lightcone office, I had assumed that you didn’t want to continue hosting office space, and so hadn’t considered that counterfactual cost. But the Inn expenses you mention seem more reasonable if the alternative is continuing to rent wework space.
The FTX context also makes a lot of sense. I was confused how the purchase fit into your current strategy and funding situation, but I understand that both of those were quite different a year or two ago. Given how much things have changed, do you have conditions under which you would decide to sell the space and focus on other projects? Or are you planning to hold onto it no matter what, and decide how best to use it to support your current strategy as that develops?
I really want to create a more distinct and intentionally separate culture both on LessWrong and at the Rose Garden Inn, and I think owning a physical space hugely helps with that. FTX, various experiences I’ve had in the EA space over the past few years, as well as a lot of safetywashing in AI Alignment in more recent years, have made me much more hesitant to build a community that can as easily get swept up in respectability cascades and get exploited as easily by bad actors, and I really want to develop a more intentional culture in what we are building here. Hopefully this will enable the people I am supporting to work on things like AI Alignment without making the world overall worse, or displaying low-integrity behavior, or get taken advantage of.
I’m extremely excited by and supportive of this comment! An especially important related area I think is “solving the deference problem” or cascades of a sinking bar in forecasting and threatmodeling that I’ve felt over the last couple years.
Thinking about the exact financing of the Inn is a bit messy, especially if we compare it to doing something like running the Lightcone Offices, because of stuff like property appreciation, rental income from people hosting events here, and the hard-to-quantify costs of tying up capital in real estate as opposed to more liquid assets like stocks.
If you assume something like 5% property appreciation per year going forward, and you amortize the part of our construction costs that didn’t increase the property value over the next 7 years (which seems like a reasonable estimate for how long the venue is going to get used), I get an annual cost of running the Rose Garden of about $1.15M (property value of ~$19MM, ~$3.5M in uncapitalized construction costs amortized over 7 years, plus $700k in annual upkeep and maintenance costs).
This is pretty cost-effective compared to other options of even just providing office space, and I think is my preferred way of thinking about the cost of doing this construction project (most of which came from a loan that we took out specifically to finance the purchase and renovation of the place, which is insured against the Rose Garden property itself, so it didn’t straightforwardly funge against our other funding).
To compare this to other costs, renting two floors of the WeWork, which we did for most of the summer last year, cost around $1.2M/yr for 14,000 sq. ft. of office space. The Rose Garden has 20,000 sq. ft. of floor space and 20,000 additional sq. ft. of usable outdoor space for less implied annual cost than that.
In order to fund this initial capital investment, we did definitely cut into the funding we received in 2022, and we would have a bunch of money in our bank accounts right now if we didn’t do this construction project. On the other hand, our spending over the next few years would also be a bunch larger, since we would have to pay more in rent if we wanted to do anything in-person community shaped, for both events and office space, than we will have to pay in interest and upkeep minus appreciation for the Rose Garden Inn.
This doesn’t take into account the cost of having Jaan Tallinn’s capital tied up in real estate with 5% annual interest from us. In one sense it seems good for Jaan to diversify his funds away from crypto. On the other hand he has probably been making closer to 10%-20% annual returns over the last 10-15 years with his investments. My current guess is the diversification benefits here outweigh the higher potential returns (because man, x-risk efforts sure still are quite tech-stock and crypto loaded and I am very glad about more diversification), but I am really not confident, and this could easily dominate the relevant cost-calculations.
It’s also a bit unclear how to think about rental income from people working on existential risk stuff that we wouldn’t otherwise support, which I expect to also make us back some of these funds.
I could write more about how to think about financing the Rose Garden, but I’ll leave it at this. I think it it mostly makes sense for people to think that roughly $1.5M of our annual budget going forward will be used for our Rose Garden Inn, with ~$350k of that going into very illiquid long-term savings for the organization.
=====
By far the biggest source of uncertainty about our budget comes from the potential for FTX clawbacks, which explains most of the wide range of our budget. I currently think there are some good arguments that we owe back about $1.5M to FTX creditors, though the exact game theory here is a bit messy (and they might request up to $4M back from us), and I continue to feel quite confused about what the right thing to do here is. We don’t know if and when they will ask for that money.
The purchase of the Rose Garden Inn and really setting the whole renovation project in-motion was made before November last year, and as such before the collapse of FTX, and as is probably apparent from my comments and posts over the last few months (as well as our reasoning for closing down the Lightcone Offices), a lot of our strategy and perspective has shifted since then.
That said, I am actually still quite excited about our plans with the Rose Garden, but I do think it’s an important disclaimer to add that yeah, a lot of our plans for the Rose Garden were substantially changed when FTX collapsed, and our plans for it have become a bunch less straightforward (the original reasoning for it was something much closer to “this makes sense from a finance perspective even if we just compare it to renting office space at our current location”).
That said I am still quite excited about our plans. Some concrete things that continue to drive my excitement for our Rose Garden Inn investment:
I continue to think that in-person collaboration is really essential, especially for mentoring relationships. I think there continues to be a pretty substantial bottleneck in people getting oriented to working on AI Alignment that goes a lot better with in-person peers and via in-person mentoring from people who have made real contributions to the field, and investing in infrastructure for that is one of the best ways to drive progress on reducing existential risk from AI.
I really want to create a more distinct and intentionally separate culture both on LessWrong and at the Rose Garden Inn, and I think owning a physical space hugely helps with that. FTX, various experiences I’ve had in the EA space over the past few years, as well as a lot of safetywashing in AI Alignment in more recent years, have made me much more hesitant to build a community that can as easily get swept up in respectability cascades and get exploited as easily by bad actors, and I really want to develop a more intentional culture in what we are building here. Hopefully this will enable the people I am supporting to work on things like AI Alignment without making the world overall worse, or displaying low-integrity behavior, or get taken advantage of.
I am very excited about the setup where we get to have both long-term office space and short-term events in one location. I am hopeful that this will enable us to have a lot of people flowing through the space, and will allow us to interface and experiment with a lot of different approaches to AI alignment and rationality, and then slowly grow by picking a small number of the people coming through to work more long-term from our office space.
I’m sympathetic to the high-level claim that owning property usually beats renting if you’re committing for a long time period. But the comparison with WeWork seems odd: WeWork specializes in providing short-term, serviced office space and does so at a substantial premium to the more traditional long-term, unserviced commercial real estate contract. When we were looking for office space in Berkeley earlier this year we were seeing list price between $3.25-$3.75/month per square foot, or $780k-900k/year for 20,000 square feet. I’d expect with negotiation you could get somewhat better pricing than this implies, especially if committing to a longer time period.
Of course, the extra outdoor space, mixed-use zoning and ability to highly customize the space may well offset this. But it starts depending a lot more on the details (e.g. how often is the outdoor space used; how much more productive are people in a customized space vs a traditional office) than it might first seem.
Very small nitpick, but did you mean $3.25-$3.75? (This was the smallest diff I could think of to make your calculation clear).
Yes, thanks for spotting my typo! ($2.75 psf isn’t crazy for Berkeley after negotiation, but is not something I’ve ever seen as a list price.)
Yep, if you commit for longer time periods you can definitely get better deals, and there are definitely other ways to save on office space costs. I didn’t mean to imply this was the minimum you could rent office space for.
The $1.2M/yr estimate was roughly what we were paying at the time, and as such was the central comparison point we had. Comparing it to something more like $800k-$900k a year also seems reasonable to me, though I have less experience with the exact tradeoffs faced by doing that. One reason for that comparison is that the price estimate I did in the comment above included utilities and servicing the space, and I don’t have a ton of experience with how much cost that adds to an unserviced office lease, though I still expect it to be a bunch lower than the WeWork prices.
Thank you for such a detailed and thorough answer! This resolves a lot of my confusion.
Based on conversations around closing the wework Lightcone office, I had assumed that you didn’t want to continue hosting office space, and so hadn’t considered that counterfactual cost. But the Inn expenses you mention seem more reasonable if the alternative is continuing to rent wework space.
The FTX context also makes a lot of sense. I was confused how the purchase fit into your current strategy and funding situation, but I understand that both of those were quite different a year or two ago. Given how much things have changed, do you have conditions under which you would decide to sell the space and focus on other projects? Or are you planning to hold onto it no matter what, and decide how best to use it to support your current strategy as that develops?
I’m extremely excited by and supportive of this comment! An especially important related area I think is “solving the deference problem” or cascades of a sinking bar in forecasting and threatmodeling that I’ve felt over the last couple years.