# Should small donors focus on small organizations?

I want to donate $500 to an effective charity. Ive been doing research on your site and it seems like PSI is a great choice in terms of helping global health. I have not yet made my decision as to which charity I will donate to, but as I continue to research, I continue to ask myself a fundamental question. How much of my money actually makes a difference in the effectiveness of a large charity? The amount of money that a huge charity has such as PSI makes me feel as if my$500 will be but a penny in a wishing well. Will my money be more effective donating to smaller charities that are in more need of money? Or is the large charity truly the place to find the most effective charitable work, and even if I feel my impact isn’t so strong relative to the size of the charity, it will be the most efficient way to help other people in need?

Our FAQ recommends that small donors with little information give to larger charities, but doesn’t address this angle – the question of whether $500 has more impact when it’s a larger percentage of the budget. My view is that the size of a charity is less relevant here than whether it is operating at full capacity. If a charity is already at an “equilibrium” where its costs are about equal to revenues, and it’s serving everyone its core activities can serve, then it will get questionable value for an extra$500. This is true whether the charity is large or small. It may attempt to expand its activities, start new programs, and serve more people, but a $500 donation seems unlikely to be the key driver behind such an expansion. If a charity has more clients than it can currently afford to serve, or more worthwhile projects on the table than it can currently fund, a$500 donation can help it serve more people (or serve them better) – regardless of how big the charity is as a whole. To use a for-profit analogy, when you give McDonald’s 99c, your contribution is an extremely tiny percentage of its overall revenue, but it still produces an extra burger. McDonald’s, Inc. had no role in endorsing or funding this analogy.

Figuring out the extent to which a charity is “at capacity,” and what the impact of additional funds will be, is something that we struggle with, and we have no easy or fully reliable way of doing it. However, it’s worth noting that a large charity may be better positioned to handle increases in revenue, and use them to expand projects that are already repeatable/scalable, than a small one. And we feel relatively confident that the large charities we recommend are very far from serving everyone they could serve.

For this reason, the “will I make a difference?” question seems to tilt slightly in favor of giving to large charities when making small donations. $500 might be a small percentage of PSI’s revenues, but if you put credence in our estimate that PSI prevents a death for every ~$1000, that donation can be a huge deal in human terms.

• If a donor really wants to see that his/her money is making a difference, I’d suggest looking into KIVA, where you loan your funds to someone in a developing country.

I think asking the question “Will my money make a difference” is a selfish one, because I think the act of giving ought to be altruistic. I understand organizations need accountability and need to run efficiently, but that’s a totally different discussion. Thanks for another interesting blog, Holden.

• JNL: I’m not clear on why this question is a selfish one. If \$500 would make no difference to organization A, but result in an additional person helped / life changed when given to organization B, then the latter seems clearly better from an altruistic (not selfish) perspective.

It’s a question of the impact of a donation, and is different from the question of “Can I see or attribute the difference I make?” More on this contrast (and on our questions about Kiva-style models) here.

• David Micley writes in in response:

WHY “may a large charity be better positioned to handle increases in revenue, and use them to expand projects that are already repeatable/scalable, than a small one?”

Broadly, I’d respond: because most large organizations have been through it before.

Partners in Health (GiveWell review here) runs health centers in several different countries. It has already been through the process of systemizing as much as it can so that its work can be carried out by people other than the original founders of the project – so that the work relies as little as necessary on the labor value of specific individuals. It has already, several times, gone through the process of adapting its basic approach to a new region and population, and shown some ability to do so successfully. Similar analysis applies to PSI (GiveWell review here), which runs and tracks programs in many countries.

When a small organization is successful, this success may depend on specific people working in specific places under specific conditions. I would feel much less confident about its ability to translate this success to expanded programs, often in new regions and with new people, than I would about a large organization already in the business of replication.