The Money for Good study’s headline finding is that “few donors do research before they give, and those that do look to the nonprofit itself to provide simple information about efficiency and effectiveness.”

That conclusion syncs up with our own experience talking to donors, but we aren’t discouraged by the results. That’s because where the Money for Good study answered the question “how do most donors behave?” we’re interested in answering a different question: is there a market for giving based on evidence of impact and how big is that market?

Hope Consulting shared their raw survey data with us, and we’ve done a rough estimate of the size of the potential “GiveWell market” by extrapolating the percentages in the survey to the size of the overall giving market. We estimate:

• $4.1 billion from donors who report having done research to compare and evaluate multiple organizations (as opposed to researching a single organization or researching how much to give).
• $3.8 billion if we further narrow the above set by looking at what factors are important to them, and eliminate any donors that rank what we consider “factors irrelevant to impact” (e.g., “ability to get involved with the organization” or “public recognition of my donation”) higher than what we consider “factors relevant to impact” (e.g., “organizational effectiveness”)
• $554 million from donors who both did research to compare organizations (i.e., fit in the first group above) and reported that “amount of good organization is accomplish” was the most important piece of information sought in their research.

We still don’t have a great sense of the potential market size for GiveWell-style research, but it certainly hasn’t been established that the market is small.

Ultimately, we think it’s important to take the study’s conclusions with a grain of salt. If you polled all TV watchers on what they want, you’d conclude that only a very small percentage want something like The Wire, yet that show wasn’t exactly a failure. In fact, for most successful businesses I can think of, it’s still the case that most people aren’t customers of them.

Our goal isn’t to create a product that the majority of people like; it’s to create a product that some minority market loves. From what we’re seeing now, it’s still possible that the minority of donors interested in impact-focused research is quite large.

The Chronicle of Philanthropy and NPR note that charities don’t seem to have spent large percentages of the funds raised for Haiti to date. Here we (a) lay out the numbers, using the Chronicle of Philanthropy’s helpful public survey data; (b) discuss what it means for donors that most of the money raised seems to be reserved for long-term as opposed to immediate relief.

The numbers

The Chronicle of Philanthropy’s survey data gives a total of over $1.6 billion raised, and seems to include nearly all of the “big name” charities working in disaster relief. We have collected the data, for all charities that provided comparable “raised” and “spent” figures (i.e., either both worldwide or both non-worldwide), into this Excel file.

The chart below summarizes this data by sorting the charities in order of how much they’ve raised. Each bar represents a listed charity; the total length of the bar corresponds to funds raised, while the blue part corresponds to funds spent.

Notes:

• 38 of the 48 charities have spent under 75% of the money they’ve raised; 29 of the 48 have spent less than half the money they’ve raised; and 22 of the 48 have spent less than a third.
• The Mennonite Central Committee reports spending far more than it has raised, but its numbers are confusing (it is the only listed charity whose “worldwide” money raised figure is lower than the other figure it provides) and there is no summary of how it’s spent the funds.
• The Entertainment Industry Foundation reports raising and spending exactly the same amount ($66 million). There is no summary of how it’s spent the funds.
• Only two other charities, Population Services International and Fonkoze, report spending over 90% of what they’ve raised. Both cases involve relatively small amounts (around $2 million for Fonkoze and $211,000 for Population Services International). Update: this Fonkoze figure is for Fonkoze USA, not for Fonkoze as a whole.

Overall, about 38% of the ~$1.6 billion raised has been spent. In fact, the amount spent – around $627 million – is not much greater than the amount ($560 million) that was raised in the first 9 days after the earthquake hit.

Why this matters: “speed relief” vs. longer-term relief and recovery

We don’t believe that spending money slowly indicates irresponsibility. Shortly after the earthquake hit, we expressed doubts about whether there was “room for more funding”, and the Chronicle’s coverage implies that at this point there largely isn’t.

However, we do feel that it’s important for donors to note how much of their donations are likely paying for longer-term, as opposed to immediate, relief, because this has implications for what one should look for in a disaster relief charity in the future.

Immediately after the earthquake hit, many (including us) were stressing the importance of a charity’s existing capacity on the ground and its ability to respond quickly and efficiently. When we think about longer-term relief, though, we wish to focus less on capacity/speed and more on the things we usually focus on:

• Is the organization clear about where the money is going?
• Does the organization formally assess whether and to what extent its work is succeeding? (For disaster relief, in particular, we’d hope to see evidence that the organization is actively getting and acting on feedback from beneficiaries.)
• Does the organization focus on activities that help as many people as possible, as much as possible, for as little money as possible?

In assessing disaster relief organizations, we plan on focusing on what they’ve accomplished over the longer term, because that’s what donations in these situations are most likely to be paying for.

We are members of the Alliance for Effective Social Investing, and the Alliance is currently determining whether/how to accept new members. We are passing along the following message on the Alliance’s behalf. If you’re potentially interested in membership, please read the message below.

The Alliance for Effective Social Investment is collecting feedback from current members and other stakeholders in effective social investment to better define the Alliance’s strategic priorities and membership policy. Please take a few minutes to share your thoughts and help shape the way ahead for the Alliance for Effective Social Investment.

The Alliance for Effective Social Investment

We are in favor of scaling up proven programs, but against the Promise Neighborhoods initiative.

As far as we know, the only evidence that the Harlem Children’s Zone (or any similar approach) has been effective is the relatively recent study showing impressive effects on test scores at its charter schools. We discussed this study in a four-part series and concluded that:

• The effect demonstrated was extremely impressive and unusual.
• There are serious questions about how “real” the effect is (to what extent did it come from narrow “teaching to the test?”), how likely it is to be sustained as opposed to temporary, and how significant it is in terms of likely effects on actual life outcomes.
• These questions aside, there are also major questions about just what aspect(s) of Harlem Children’s Zone are crucial and whether they can be replicated at all, let alone at a reasonable cost.

Given this situation, we don’t feel it’s time to attempt a replication in 20 communities at once, at a cost that seems likely to stretch into the billions if and when these replications are fully carried out.

We’re not just concerned about mis-spending money. We’re concerned about overreacting to evidence, overpromising results, and thus damaging the credibility of future proposals along these lines. We’re concerned that the funds will be allocated, the Promise Neighborhoods will be rolled out, and 10 years from now we’ll check back and see no narrowing of the achievement gap.

We hope that someday, there will be a truly replicable program with an extremely strong case that it can put a significant dent in the achievement gap. If and when that day comes, a failed Promise Neighborhoods scale-up – and any other oversold programs – will come back to haunt us.

We feel it is appropriate to pursue some replication of, and experimentation with, the Harlem Children’s Zone model. We feel a rollout of this magnitude would be a mistake.