GiveWell spends a lot of time on the question, “Should I give to charity A or charity B?”
One of the things that has surprised us about the world of charity is how many people insist on answering, “Both” or “You can’t/shouldn’t be asking that question.” To them, all that matters is whether a charity does some good, not how much good it does or how it compares to other options.
One statement of the idea comes from none other than the Jeffrey-Sachs led WHO Commission on Macroeconomics and Health (footnote 24):
Many have asked the Commission what to do if the donor money is not made available—in essence, how to triage with less money. We are asked to prioritize millions of readily preventable deaths per year, since we have already narrowed our focus to a small number of conditions that have an enormous social burden and that have low-cost interventions that are at least partially effective. Not only is this kind of triaging ethically and politically beyond our capacity, but it is also exceedingly hard to do in sensible way. Those who hope for a simple answer, for example to focus on the cheap interventions (immunizations) while putting off the expensive interventions (higher-cost prevention programs and antiretroviral therapy needed to fight AIDS) to a later date, misjudge the practical choices we face. The AIDS pandemic will destroy African economic development unless controlled; to fight measles but not AIDS will not begin to meet Africa’s human and economic needs. It would be wrong to go to the other extreme as well, and let the legitimate need to fight AIDS end up starving the cheaper interventions, so we advocate both. Moreover, the infrastructure developed to fight AIDS will support the infrastructure needed to fight measles, especially if strengthening such complementarities is explicitly built into the AIDS control effort. It is vastly more fruitful to design and finance a comprehensive program that addresses many critical health needs than to pick and choose the apparently inexpensive items.
More examples of this mentality can be seen in recent comments to our blog by John, Yael and Steve.
Our response to these comments is simple. Most donors have a certain amount they are willing to give, and that amount is less than enough to fully fund even one of the world’s underfunded humanitarian initiatives.
We don’t believe that any problem that people suffer from should be ignored or trivialized. We do believe that individual donors must choose which to address, and that they should be factoring in questions like “What evidence is there that my money can even do anything to address this problem?” and “How cost-effectively can I create change by giving my money here?”
In their personal and business lives, people constantly make tradeoffs on a limited budget. Imagine if a salesman tried to argue, “How can you choose between this car and that one? They’re both wonderful cars and each would make the other more useful. You should buy them both!”
Yet in the world of charity, the basic and undeniable idea of triage is constantly denied.
It’s not like buying a car.
It would be crazy to buy both cars, but you really can give to two causes, or ten, or a hundred. It’s a lot like an investment portfolio. The main reason not to give to a diversified portfolio of a thousand charities is that none of the necessary supporting infrastructure exists in a satisfactory form.
To sharpen your argument a little, Holden, I would say (and I expect you would agree) that not every charity can or should be supported *equally*.
To a donor who is prepared to support multiple charities, the question is *how much* to give to each. And hopefully not even Jeffrey Sachs would suggest that we give the *same amount* to each charity.
We are left with a choice that no thinking person can deny.
Rather than telling donors that they must choose between A and B, perhaps we can get the message across better by pointing out that they don’t have to give equally.
If A appears to be doing at least 5x more good with its dollars, then let’s encourage at least a 5:1 ratio of giving to A and B. This is not optimal, but it’s clearly better than an even split.
I get this from friends and family a lot. “Why do you have to choose? Why can’t you give to both?” I get this especially on the international/domestic dichotomy. I don’t really understand where this comes from, but I’m all ears for any advice you have on how to counter it. The standard direct arguments don’t seem to make a dent.
These are fantastic thoughts, but I think your post confuses different levels of actors. If I’m giving personal money, it’s not a lot (sadly) – so, as you note, I’ll think about cost-effectiveness, but I will also give toward other issues that are important to me personally. Which I think is fine.
If on the other hand, I have a LOT of money (like Bill Gates), then I agree with you completely – spreading the money everywhere is a waste because you could potentially move the needle on something by focusing. This is the essence of having a strategy – choosing what NOT to do. Larger donors too often throw a bit of money at a ton of things and have nothing to show for it (though I suppose the largest donors, like Gates, can afford to have MULTIPLE strategies…).
The quote from Sachs gets to an even higher level – the field of donors. And I think we get fuzzy again. I’d say HIV/AIDS is “overfunded” compared to something more cost effective like de-worming or vaccinations, but I don’t think that HIV/AIDS should get NO money, nor do I think that’s what you’re suggesting…or is it? da da daaah…
@David J – completely agree – I think this is more about a better resource prioritization rather than strictly triage.
Yi-An, I don’t think giving away a small amount is a good reason to pay less attention to effectiveness. Even small amounts of money can make a huge difference if you’re thinking in terms of helping individual human beings, as opposed to solving giant problems.
It’s the larger funders that are more likely to have good reason to “diversify,” because they can’t effectively spend all their money on the most important problem (and because different programs may contribute to each other). But even these funders do not have enough to fund everything they’d like to, and so they must triage to some extent.
The process by which one should determine how to direct his donations seems pretty obvious and simple to me (at least in principle). For each dollar you wish to donate, determine the application of that dollar that will produce the most marginal good. Repeat for all available dollars. This may mean donating everything to one cause, or it may mean spreading your donation between several causes. Of course, it’s the “determine where a marginal dollar produces the most marginal good” part that is difficult, but that’s what GiveWell is for. 🙂
Andrew, think about what you’d do with an investment portfolio. Would you put all your money in the investment that gives the highest marginal return? You wouldn’t, because there are various kinds of risk that need to be taken into account, including the risk that your assessment isn’t correct. So you diversify.
Doesn’t the same reasoning apply for philanthropic giving?
David, actually, no, the same reasoning doesn’t apply to philanthropy, excepting the largest donors. Allow me to explain why.
In finance, it’s important to diversify because you don’t want to get pesonally hit by changes in the price of a particular asset. If, for example, you put all your money in ANCI one year ago, then today you would discover that you had lost 70% of your holdings, which would seriously impede your personal savings goals.
Just because you lost 70%, however, doesn’t mean that the endeavor of finance was in trouble during this time: The NASDAQ, for example, was up 42% in the last year.
I think you can start to see the difference with philanthropy. Taking the same numbers, if your personal donation yielded a social return of -70% (i.e., most of the money was wasted), but the field of philanthropy overall was successful, then that would be a huge triumph. For example, I don’t think you would care if your particular de-worming project failed but Malaria were mostly cured during the same time period.
So the lesson here is that diversification is important in finance to protect individual investors from an atypical loss, but in philanthropy we don’t really care whether public improvements come from one donor or from many. Thus diversification is not so important.
Let me know if this wasn’t clear or if I missed something.
I basically agree with Ian here – the way I’d put it is that I don’t see any good reason to be risk-averse about the impact of one’s donations, whereas I do see good reason to be risk-averse about the return on one’s investments.
Abstractly, I agree with Andrew’s framework. In practice, maximizing the impact of “each marginal dollar” can mean giving to many different places, if you’re giving so much that you hit diminishing returns with any one place. However, for an individual donor giving under $250,000, it seems likely that the highest-impact gift is a single concentrated gift to a proven, cost-effective, scalable charity.
Ian, I see where you’re coming from. I agree that we should be more willing to take risks in philanthropy than in investing, for the reason you give.
However, if one is giving away a substantial portion of one’s income (10%, 50%), it’s harder to be cavalier about the possibility of failure. Ian, in your example I would be quite disappointed if my de-worming project failed. I would be happy about the success of curing Malaria, but that would have happened regardless of me. I would bitterly regret my own choice and wish I had supported something else.
Also, it’s hard to put your way of thinking into practice. Example: has the field of philanthropy overall been successful in 2009 or in the past decade? I’m not aware of any good way to tell. However, for carefully chosen recipients, e.g. GiveWell top charities, I expect GiveWell will tell me if they’ve been successful or not.
Finally, if we are uncertain about our estimates of value, and our prior is that people’s estimation errors are correlated, then the optimal individual policy is some degree of diversification.
One way to address these issues and get donors to give in a more risk-neutral way is for donors to give to an umbrella organization who can then report on the success of their portfolio. Of course, the umbrella organization should be fully open and transparent about their processes.
Please amend “wish I had supported something else” to “wish I had supported a broader set of causes” 🙂
Note that we’re talking about the effect of risk-taking on aid recipients. If the donor has a personal need to see changes attributed to his or her contributions, then a different calculus applies and the donor should become risk-averse. Presumably this accounts in some part for the donate-to-everything strategy, whereby the donor gives $20 (and no more) to any charity who asks.
If we’re focusing on aid recipients, it’s not clear to me why the size of the gift as a percentage of donor’s income should matter. If you are giving $1000, why does it make a difference if it’s your life savings or if you are a millionare? Donation size as a percentage of the total donations to the recipient project type seems to me to be a more relevant measure.
As far as evaluating the success of charities’ impact, the reason that GiveWell exists is that it’s really hard to tell. Diversification doesn’t really change that, however; it’s still the optimal strategy to pick the best charity you can find and give them everything. Even if you find two charities to be indistinguishable, there’s no difference to giving to one versus splitting your donation to each.
If I’m missing something, maybe you can explain further what you mean by your second-to-last paragraph.
My perception on “umbrella organizations” is that they make giving harder, not easier. In order to understand the organization, you now have to understand every one of its programs, which is considerably more effort. If your goal is to delegate away the task of finding the best charities, then you’re better off giving to the clear fund.
I think David is referring to risks to the giver, not to the recipients.
My question for you, David, is whether your fear of failure rises to the level of risk aversion. I imagine that you would be quite upset if a project you funded underperformed, and quite pleased if it overperformed. Would you be more upset about failure than you would be pleased about success?
If not, it seems that you should simply donate to maximize expected value. If so, diversification could have benefits.
In the realm of personal finance, it makes sense to me that losing $X is more damaging than winning $X is helpful. In the realm of charity, though, it doesn’t make as much sense to me. Risk preferences are personal values, but I have a little trouble seeing why one would be risk-averse in this way.
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