Thu, Feb 24, 1994

Victoria Tisdale,
1865 Moreno Avenue,
Ft. Myers, FL 33901

Dear Ms Tisdale:

I am sending you two things--this letter and a public letter which has gone out to quite a lot of people and been posted on the Rialto and AOL. The latter summarizes the reasons why I believe the Board has acted badly--both in the sense of doing the wrong things and of doing them in the wrong way. In this letter, I will first discuss the specific issue I raised on the phone--the alternative budgets--and then the general situation.

The Board letter mentions three alternative ways of balancing the budget. One is the set of price rises that were actually voted, combined with required membership. For that alternative, the letter and its attachment give numbers representing the board's projection of revenue, membership, etc. Most of my calculations are based on those numbers.

The letter asserts that the price rises alone would not have been enough to balance the budget, and that the alternative to 40% with required membership would have been a 100% increase in membership rates without required membership. If that claim means anything, it means that 100% without required membership gives us about the same projected surplus as the policy actually adopted.

In order to calculate the budget implications of the alternatives, one needs to make some assumptions about what membership will be in each case. I will start with some assumptions that seem like good first order guesses, and then discuss the affect of changing them. If anything in the calculations is unclear, I hope you will feel free to call or write for clarification.

I assume that either price increase, with no required membership, will stop but not reverse our usual growth, so that membership at the end of 1994 will be the same as at the beginning. On this assumption, the 10% increase in the figures attached to the letter is due to required membership. I think this assumption is reasonable for the 40% price hike--it represents a larger effect on membership than the last price hike had, according to a conversation I had with Hilary--but a little optimistic for the 100%. It is, however, a simple starting point.

The calculations comparing 40% with and without required membership, roughly corresponding to those in the attached letter, are:

With required membership: (attachments to the Board letter)

A1: Membership= 25,121 (sum of membership figures in 1994 budget)

A2: Membership revenue: $712,850

A3: Cost of newsletters and TI: $283,023

A4: A2-A3=429,827

Without required membership:

B1: Membership =23,000 (board letter figure for beginning of 1994)

B2: Membership revenue=(23,000/25,121)x$712,850 = $652,663

B3: Cost of newsletters and TI: (23,000/25,121)x$283,023 = $259,127

B4: B2-B3=$393,536

Line A4 shows revenue net of publication costs with required membership, line B4 shows it without. The difference is $36,291. This is the improvement in our net budget position due to required membership, if you assume that the only cost imposed by new members is the cost of providing publications to them.

This assumption substantially overestimate the improvement. In addition to requiring publications, members bring other expenses, such as the cost of processing memberships, employees' time dealing with members, etc. I think a conservative estimate is that half of the $36,291 gain would be consumed in such costs, giving a net budgetary gain (increase in revenue minus increase in expenses) from required membership of about $18,000.

So far, I have assumed that the new members brought in by required membership buy the same mix of memberships as existing members. Since they are people who would not join without required membership, I would expect them to be less willing to pay money than the average of the current membership. If so, a larger fraction of them will be family members, which produce less net gain for the Corporation than the other classes, reducing the figure even farther. I have not taken account of this in my calculations; if I did, the Board's claim would look even worse.

What about the budgetary gain from the alternative policy--increasing membership fees by 100% instead of the amount in the budget? I am lazy and most of our members are sustaining members, so I did the calculation by comparing a 40% increase in rates to a 100% increase, without trying to break it down by membership class. The calculation is fairly simple:

Membership revenue with no price hike= $652,663/1.4 = $466,188

Membership revenue with 100% price hike= 2x$466,188 = $932,376

Improvement in net budget position (I am assuming at this point that the number of members is the same whichever price increase we adopt):

$932,376-$652,663= $279,713

So we have two ways of balancing the budget which the Board, according to its letter, considered as alternatives. One appears to improve the net situation by about $18,000, one by about $280,000.

If these numbers are anywhere close to correct, then the claim in the Board letter (and various other statements from the Board) that we had to impose required membership because the alternative was increasing membership rates by 100% is a lie, an invented fact designed to scare people (whether Board members at the meeting or Society members reading the letter) into accepting a change that many of them disapproved of. The real alternatives, on this figures, were 40% with required membership or about 44% without required membership. Either the author of that letter did not bother to calculate the real consequences of the alternatives but simply made them up, or he calculated them and deliberately misrepresented them.

Can we generate more plausible numbers by assuming, perhaps more realistically, that the 100% option decreases membership? The problem with this is that decreasing membership reduces expenses as well as income; the result is that you need a very large decrease in membership to make the numbers come out right.

Again, let us start by assuming that the only expense members impose is the cost of providing them with publications. Each member that we assume drops out due to the price increase takes with him:

Average membership revenue at 100% increase

= $932,376/23,000 members = $40.53 of membership revenue

Average publication cost = $11.27 of membership cost

Net loss per member: $29.26

Number of members you have to assume lost to get our initial figure of a $280,000 gain from doubling membership rates down to $18,000

=($280,000-$18,000)/$29.26= 8,954 = 39% of the membership

So even if you assume that members impose no costs other than the cost of providing them with publications, you have to assume that the price increase would cost us almost forty percent of our members in order to make the numbers justify what the Board letter asserted. If, to be a little more realistic, you assume that a third of the Corporation's other expenses are variable instead of fixed, increasing or decreasing in proportion with the number of members, you have to assume a loss of about 50% of the membership.

To summarize: My calculations suggest that, on any believable assumptions about the alternatives, a 100% price increase would leave us with a much larger budget surplus than 40% + requiring membership. I conclude that the Board letter lied to us and, very possibly, that someone (Tony, Tim, or possibly A.J.) lied to you at the Board meeting. If you can show me numbers that were actually presented at the Board meeting, I would be very happy. Alternatively, I would like to see any plausible set of assumptions you can come up with for which the claim "if we had not imposed membership requirements, we would have had to raise membership rates by 100%" is not a flat lie.

I have spent so much time on this one point because it is one where I believe you can demonstrate to yourself that the Board, in the person of its chairman, has been deliberately lying to the membership. Whether you approve of such action is, of course, up to you.

Before closing, let me try to put the overall situation to you as I see it. I will avoid the vexed questions (discussed in the attached public letter) of whether required membership or additional expenditures are desirable on their own merits, and merely consider what has been happening in terms of the relation between the Board and the Society.

The way the Society has functioned for many years has been with a self-perpetuating Board which considered itself obliged to act for the good of the Society in ways generally consistent with the desires of the membership. On the whole, I approved of that arrangement, as a way of achieving the benefits of democracy, via informal social pressure, without the costs.

At the January meeting, the Board took a series of steps that marked drastic breaks with past tradition, and did so with no advance warning to or consultation with the membership. While there was some attempt to blame this on a sudden emergency, that claim was rendered implausible by the failure of the Board to list any major unexpected expenses that had appeared since the previous meeting. The financial problems reported were simply the result of expenditures that had been decided on over the previous two or three years, according to the public statements of the Board chairman.

Those facts, plus the fact that one of the changes seemed designed to reduce the membership's access to information while increasing the Board's ability to make sure that every member heard its version of every issue, suggested an obvious conjecture. That conjecture was that the Board had decided that it was up to it to remake the Society according to its plans, without either ascertaining or caring about the views of the rest of the membership.

Everything the Board has done since has reinforced that conclusion. The letter that was sent out takes it for granted that it is up to the Board to decide what the Society should be--and then explain to all of us why we will like what it is doing. There is no suggestion in the letter that that assumption needs to be defended, or that there is anything unusual in the way the Board has been acting (as opposed to the particular decisions made)--this despite the fact that, on the face of it, the Board's actions are in flat violation of Corpora and custom. The letter goes out of its way to avoid providing any real information on which members might judge the Board's decisions--it is a piece of public relations, pure and simple.

Currently, the Corporation is refusing to release financial information to members who request it, despite the fact that doing so is in violation of its own bylaws and thus actionable. Last I heard, it was also refusing to provide copies of its form 990 to members who requested them, despite the fact that that refusal is, as I understand the matter, in violation of federal law and grounds for a fine as soon as anyone calls the attention of the IRS to it. The general picture is of an organization that wishes its members to know only the information that it selects to spoon feed them, and is willing to go to a good deal of trouble to keep things that way.

So far I have discussed how the Board's actions look to (I think) most members who are paying attention to them, myself obviously included. Let me go on to discuss the political question of whether these actions will succeed.

At first glance, the Board appears to be in a strong position for two reasons. The first is that the membership has virtually no legal rights. While we (or the royalty) can impeach the Board members, they can choose to acquit each other and thus, in effect, ignore us. Some of those opposed to the Board believe there are further legal steps we could take, but my own guess is that, as a practical matter, they are wrong.

The second strength of the Board's position is the general strength of an organization against its disorganized members. Even if most of the members disapprove of the Board's action, each of them is likely to feel thaht everyone's business is nobody's business. It is not worth his while to go to a lot of trouble, and perhaps risk future sanctions within the organization if he fails, in order to try to oppose the Board.

The reason why these arguments are not sufficient is also the fundamental mistake in the position the Board is taking. The Society is not, and never has been, a mass of customers consuming services provided by the Corporation. The Society is a well organized social structure with its own hierarchies and control structures. When the local group here wishes to put on an event, it does not write to Milpitas for instructions. It does not write a check on an account provided by the Corporation from membership fees. Each local group, in practice, raises its own money and runs its own affairs. The same is mostly true as you move up the feudal hierarchy.

One implication of that is that the Board's action is fundamentally misguided, since it assumes that it is the Board members who are the experts on how the Society should be run--when in fact they are not the ones who are, or ever have been, running it.

A second thing it means is that the Board's tactics are unlikely to succeed. The Board letter is written to convince people who do not know very much about the Society and do not feel that they have any right to decide its direction--reading it, it seems to be aimed at a not very involved, not very experienced member in a fairly isolated group. It may be well designed for convincing such people. By the same token, it appears designed to infuriate most of the people who do the work and actually run the Society--by implying that they are customers not co-rulers. But it is the latter group who will determine what will happen. The people who are used to following instead of leading will follow--but they will follow not the Board, which they hardly know exists, but their local leadership, which is what the Board has just alienated.

If the Board chooses to stonewall--to ignore all evidence that the membership is opposed to what it is doing, ignore impeachment petitions, ignore demands by the royalty--it will be left with the shell of an organization. Before Estrella, I would have predicted that, under those circumstances, at least three kingdoms would leave this year, with more following them later. Now it looks as though most of the kingdoms will leave if the Board insists that it is the true owner of the Society and need pay no heed to anyone else.

Two final points. The argument which many Board members, most notably Tim, seem to have been using is some version of "trust us, we have more information, we know better." That argument is less effective the more knowledgable and experienced the person it is used on. Legal arguments, for example, are a wonderful way of convincing people who do not know much about the law that some policy or other is absolutely essential, however much they may dislike it. They are less persuasive when applied to a member who happens to be an attorney (at least two of the active opponents of the Board's actions) or, in my case, an economist who has spent the last seven years teaching and doing research at law schools. Here again, the policy calms the people whose support the Board does not need, and antagonizes the people whose support it does need.

At this point, nobody has reliable information on how the membership feels. I can, however, report information on a few subgroups that I know about. In doing so, some people will get counted twice, since some fit more than one category. I am not including Board members in these figures, on either side.

I know the views of five dukes and a duchess--among us we total about thirty reigns. All are strongly opposed to what the Board has done. I know the opinions of between a dozen and two dozen members of the peerage orders. Three are in favor of required membership and not opposed to the Board's action; the rest are opposed, I think all strongly.

The local group we are spending the year with is a largely student group, with a high percentage of non-members. Of the members I asked to sign the impeachment petition, two declined, six (not counting myself and my wife) signed.

The Rialto has, at a rough guess, between two and four thousand SCA people (non-members and members) reading it, and perhaps a few hundred who post with any frequency (volume currently runs 100 to 200 posts a day). In the period immediately after the Board actions, there were several active posters who offered at least qualified support to the Board, although a large majority expressed opposition. By the time the official letter had reached people and been read, the number of supporters was down to one, who argued that we did not yet know enough to tell if the Board's action was wrong (plus two posts from Aelflaed, who does not ordinarily read or participate in the Rialto).

People who had offered some support for the Board in the early days and have since expressed strong opposition include one recent ex-board member (Ragnar) and one very long term active peer (Ioseph). Master Eric, who I think is or recently was your kingdom Seneschal, was a qualified supporter at the beginning, and stopped expressing support by the time he had read the letter. I believe his current position is that the Board actions show the need for radical reform in the Society's structure, but you probably have as good access to him as I do.

The most relevant respect in which people on the Rialto differ from the general membership is that they are better informed, since although errors are just as likely as in ordinary conversations, they can be and are spotted and corrected a lot faster. I, for example, posted yesterday morning on what seemed to me the inconsistency between the two numbers you were quoted as giving (letters to you and letters to the Board). Yesterday evening I posted a correction, reporting that it appeared, from my phone conversation with you, that the figure for letters to the Board was not an official count but just your rough guess. Most people who read the first post (and the earlier one reporting the conversation with you, on which it was based) will have seen the correction within a day of seeing the first post. The fact that the one large group of members that has had continual access to facts, arguments and counter-arguments as they appeared seems to be overwhelmingly opposed to the Board's actions suggests that opposition to the Board's actions is likely to continue increasing as information spreads through the Society population.

Asking for trust is a tricky matter--as President Nixon discovered. The first time it often works. But the more times you have to say some version of "I know it looks as though I did something wrong, but trust me, it is really all for the best," the fewer people believe it.

The Board proposed required membership in 1992, received what it itself described as an overwhelmingly negative response from those who commented on it, and announced it was dropping the idea. A year and a half later it adopted it with no further comment or discussion. It then sent a lengthy, uninformative, apparently dishonest and entirely unapologetic letter to the entire membership. It then (through the Chronicler) attempted to suppress discussion in SCA publications of what it had done. It attempted to prevent any publication of impeachment petitions as paid ads in the newsletters, and refused to make membership lists (minus addresses, thus useless for commercial purposes) available to those gathering petitions (to be used to check membership numbers)--this despite the fact that impeachment petitions are a procedure set up by the bylaws. It is now refusing to provide financial information. As one very experienced member I talked with put it, they could hardly have done a better job of antagonizing the membership if they were trying.

Throughout this discussion I have referred to "the Board." Your reaction may be that you are on the Board and you have done very few of these things--you did not (I presume) write the letter (although you signed the attachment), instruct the attorney to refuse to provide information, tell the Society chronicler to threaten kingdom chroniclers with loss of their warrants if they published material on the dispute or accepted ads with the petitions, ... . But the letter was sent out, at Corporate expense (about enough, if my estimates are right, to wipe out a year's budgetary gain from required memberships), over the signature of the Chairman of the Board. The attorney and the chonicler, I presume, take their orders from the Board. If you do not wish to be considered responsible for those acts, it is up to you to publicly divorce yourself from them and take actions to stop them.

Enough. I should stop writing and go to sleep (it is past midnight) and you, likely enough, should stop reading and go to sleep.

In Service to the Society

David Friedman
309 Mitchell St.
Ithaca, N.Y. 14850
1 607 273-7168
(Visiting Professor
Cornell Law School)
(Cariadoc of the Bow, KSCA, OL, OP, Duke)

encl: Public Letter