How can we deduce a sensible maximum pledge?

Continuing the discussion from Building consensus on crowdmatching options for a single goal:

Continuing the discussion from Defining controlled comparisons:

That question also came up in my discussion with @mray and i have an answer to it.

Since our missing is to fund FLO projects, more money is more important than a larger crowd. But we don’t want money at all cost.

  • We don’t want a small group to reach a dollar goal (project depend too much on each patron)
  • We don’t want a single patron to give so much that the project can’t afford to loose them
  • Having a large crowd, but don’t accumulate enough money also don’t help the project

We can regulate it by adding limits to the amount patrons can pledge.

We discussed it before in Building consensus on crowdmatching options for a single goal, but maybe we can find alignment on it here.

My suggestion is:

  • Minimum pledge is 1$ (less don’t make much sense for funding. people should rather contribute to few projects than to many with a tiny amount that don’t help. that limit has the consequence, that with a reached dollar goal of 1000$, you have up to 1000 patrons. we already have alignment on this, see Building consensus on crowdmatching options for a single goal)
  • Maximum pledge is 5% of dollar goal or 10,000$, whichever is less (so with a successfull goal, you have at least 20 patrons and can’t have patrons that donate more than 10,000$ when 5% is actually more)

The max would mean:

  • With a 100$ goal, patrons can pledge up to 5$
  • With a 200$ goal, patrons can pledge up to 10$
  • With a 1000$ goal, patrons can pledge up to 50$
  • With a 2000$ goal, patrons can pledge up to 100$
  • With a 10,000$ goal, patrons can pledge up to 500$
  • With a 20,000$ goal, patrons can pledge up to 1000$
  • With a 100,000$ goal, patrons can pledge up to 5,000$
  • With a 200,000$ goal, patrons can pledge up to 10,000$
  • With a 1,000,000$ goal, patrons can pledge up to 10,000$ (5% = 50,000$ = more than 10,000$ limit)
  • With a 2,000,000$ goal, patrons can pledge up to 10,000$ (5% = 100,000$ = more than 10,000$ limit)

A project can have buffer for loosing 10,000$ in the next month, but i think more would cause more trouble than having such patrons bring benefit. That might even be too high, but i think now 1000$ is too low.

Maybe projects can change that max amount if they think they can account for such high losses. But should snowdrift be a place where single people/organisations donate more than 10,000$ to a project?

I hope that we can agree on a max limit in this discussion.

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You’re trying to tackle a hard issue here, and I think most of us are on the same page generally.

Not sure the topic title is a good choice. We want both: larger crowds and more dollars, and we are not interested in dogmatically caring only about either – instead we need to find a measure to balance the mechanism so that is does not fall over on one side.

I’m skeptical that any fixed top dollar amount is a good match for a mechanism that is applied to all kinds and sizes of possible projects…

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Yes, both. Here’s my stab at which one to prioritize:

Our goal is to fund projects that serve the public interest. To that end, we want the largest amount of sustainable funding with aligned incentives.

So, I think large crowds are prioritized first, as much as needed to keep things sustainable (low risk of suddenly losing a large portion of funding) and to keep the project incentives aligned with the general public, rather than specific large donors. Once we have those, more dollars are more important.

I don’t have any additional thoughts on limit formulas besides what I mentioned here: Building consensus on crowdmatching options for a single goal

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Feel free to suggest a better title. At least in the text it should be clear that it’s about balance.

Me too. That’s why i suggested that projects can change it at their own risk. But we need big red WARNING and explain what can happen.

But what is large? Can we find a number? Maybe from practical experience or scientific studies?

“How can we deduce a sensible maximum pledge?”

Constraints I see to any answer are:

  • has to work for different sizes of projects
  • has to work for different kinds of patrons (difference in general audience)
  • has to ensure broad independent funding

But the projects themselves are in the position to become the bad player! Giving them the power to decide on those matters is what we see is not working in the way funding is done today. I think we need to put this in the hands of the crowd (hence my PATRON-ONLY mechanism proposal)

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I agree that giving projects the ability to open up enormous max pledges is a bad idea. Either it’s somehow managed by the crowd for a project or by the Snowdrift.coop membership, i.e. the crowd for the snowdrift project (indirectly maybe via the snowdrift Board / team etc) setting a system-wide policy.

We have an interest in making sure that patrons and projects have to recruit crowds and get widespread buy-in rather than cater to a few wealthy donors.

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  • Should projects with bigger goals allow bigger pledges?
  • Should wealthier patrons be allowed to pledge huge amounts?

I would like to question that and bring up the idea, that one limit could be good for any project. (In addition to a general % of goal)

We can say, on our platform, with our funding strategy, we don’t allow higher pledges than X. Most patrons will not see the error since they can’t afford to spend that much in the first place. We talking about a minority here that is used to be able to afford to buy anything. It might be well aligned to our mission to show them boundaries. Here, we make the rules and you can’t buy influence.

I think my proposed solution is good and we just have to decide on good limits. I have not yet checked out how a non-linear function would work in practice (play with numbers) and the dollar limit is also debatable. My previous suggestion was much lower (in the linked thread) and i think this would work for projects of any size. We could still adjust it in beta, it don’t affect the mechanism.

We don’t have objectives guidelines that would allow us to decide with any special authority. I don’t like to put ourselves in a position of power without a clear guide about what the “right” limit is. How could we possibly decide on those matters and not face valid criticism from either side?

How would we even come to a consensus on our side?
How sustainable is our effort to manually decide highly questionable hard limits for each single project?

I don’t see easy answers to those questions. I don’t see ourselves being constant judges over that.

An idea:
What if there is no limit whatsoever on any pledge – as long as the part that actually turns into a donation is within certain limits? That only pushes the problem a bit to the back – but at least is a bit less restrictive.
That “certain limit” in that could be a factor like 10x of the median pledge (where the median makes sure that a few really big pledges don’t have an impact, as the average would receive)

I would suggest that we would have to wait for real-life data to see how easy patrons would hit that limit.

We in turn could fine-tune that formula so that it only hits pledges that in our case can be considered actually harmful.

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There is a misunderstanding. I’m not proposing either of those as a requirement, I just say that I has to work under those conditions as well.

Those are just two edge cases for any balancing:

  • Projects that attract wealthier donors, but have overall few donors. A great imbalance can rather quickly be achieved.
  • Projects with maybe very very large crowd that donate just a few bucks might easily tag a bit more sizable donation as an unwanted imbalance.

If I understand you right X is a fixed amount.
That solution X might be reasonable within certain bounds, but not all.

Say X is 4000€ – and that’s just too much in our eyes.

  • a 5000€ limit might make sense when payed out – in relation to a small crowd that in a combined effort does not even get that much in total.
  • a 5000€ limit might not make sense – in relation to a huge crowd paying much more in total than that.
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I don’t want to stop trying to answer the general form of this question, but as far as our initial answers to this question go, I think we can simplify it for ourselves by limited the maximum that projects may receive per month total. E.g. no project may receive more than $25 000 per month.

We would choose the maximum number based on legal concerns. Like, if we are handling more than a certain amount of money per month, we should probably be doing a higher level of due diligence. We can relax the restrictions later when we are prepared to handle higher amounts.

We have authority because it is our platform. The right limit is the one that solves the problem without creating unwanted side-effects. If someone don’t like it, they can discuss it. We have reasons to have such limits.

I think the high dollar limit will not affect 99.9 (maybe a 9 more) of the patrons. So we really should not waste too much time with this. The worst thing that can happen is that we loose a wealthy patron, that don’t accept our rules. That might be a good thing.

For me a 1000$ or 5,000$ pledge might be wanted, maybe even 10,000$. So we might allow it. But more than that can cause real harm (project can’t pay employees). So we might not allow it. That are the both ends and i think any value within would be OK as limit. What do you thing about these numbers? Does it sound reasonable?

And again, within alpha and beta, people should expect things to change, so we can just change it when it causes problems. It will just affect people that try to pledge a higher amount. We can even log such attempts!

too much complexity. no real solution

i think a realistic median for average projects might be 5 or 10$. so 100$ is the limit? i think 1000$ should be possible. 2000 might also be resonable for some big projects

we can just have my suggested limits in place and log any error with the pledge amount

the problems i try to solve don’t include imbalance of pledges

When a project has a 200,000$ goal, 18 patrons pledge 5$ and 2 10,000$, the goal is not reached, but the 2 have way more impact on the goal than the rest. should we also consider that a problem?

Maybe even more dramatic: 200,000$ goal, 10x 10,000$ pledge, 90x 5$. so 10% of the patrons provide 99.55% of the total pledged amount. we might consider that a problem. the risk to loose 10 patrons is quiet high. maybe 1000$ has to be our dollar pledge limit (in relation to a realistic common median of 5 or 10, so 100x) but that would still be 95% of total pledges

i don’t see a problem there when the big crowd provide the majority of the funding, so the one pledge has not too much impact

yes. the 1000$ or 10,000$ in addition to the % of goal limit

i don’t think that is a good solution to this problem.

when a projects sets a 100$ goal, someone would be able to pledge 25000$?

that is something we should discuss in another issue. lowering our risk is a good idea in general

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No, I mean the goal must be $25k or lower, so we will never process too-large amounts of money (for how much liability we can handle at this early stage), and then choose what maximum pledge values make sense based on that.

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Maybe to avoid processing fees, there’s some level of setting donations so that anything above a certain level gets handled differently so it has no or low fees, such as some fixed-fee arrangement. Giving up 3% to Stripe for a $10,000 donation is stupid. So, that’s another factor for really high levels.

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You are missing my point: what are the guides for our reasoning to conclude one specific limit it “the right one”? If you can come up with a process to find the exact limit that everybody consents to – fine. But I guess even then it would be better to enshrine it in the mechanism – instead of official Snowdrift judges making a call.

I’m interested in a mechanism that works in principle. Failing sometimes is still failure. That’s not a good argument no matter how much you water it down. How we handle edge cases is important, projects are interested in knowing what they sign up for. Messing around with the mechanism later on might be a possibility to rectify things, but we should avoid doing that if possible. Now is the time to talk about a mechanism that handles even edge-cases.

WE don’t lose patrons, projects do. And there is nothing good about a project plus its patrons are mad about us for not allowing financial support, because it would be “too good” in our eyes.

I think you are trying to just skip the problem of the limit and not face it on any serious level to mitigate the problem. Over all you seem to just want to find a quick and simple solution that works as long as we apply it manually. I’m not on the same page regarding this view. I’m under the impression that we talk about creating a mechanism that takes care of problems, not about getting started quickly with whatever and fix it manually.

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