The GiveWell Blog

Every time I tried to tell you, the words just came out wrong …

(updated on: ) | by Holden

The latest Blog Carnival asks what donors wish nonprofits knew about them, and vice versa. In a way it’s a strange question: the idea of “wishing” knowledge on someone makes me think of forbidden love, or 8th-grade crushes, or at least Jim Croce. It doesn’t seem relevant when discussing two groups of adults that are supposed to communicate.

But while I’m certainly not too shy to tell nonprofits what I want them to know about me, I find too often that they still don’t know it. Here I’ve written out the claims I make that are most often ignored. And I’m glad I have, because I’m seeing a pattern.

1. I see you as competing with other charities.

All charities are trying to help the world, but they’re trying to do it in different ways. It isn’t enough for me to accomplish some good with my donation – I want to accomplish as much good as possible. That means you’re in competition, and that’s why I need so much information. It isn’t because I question your competence; it isn’t because I want to micromanage you (every donation I’ve ever made has been unrestricted); it’s because I have so many problems – and solutions – to choose from.

And if you think your only competitors are the charities “in your space,” think again. I’m not committed to addressing malaria, or diarrhea, or education. I’m just committed to helping the world. Anyone who does that better than you can win my donation away. And they will. Most importantly, they should.

2. I want to know what you’re doing with my money.

I’m deciding where to give $X, so I want to know what that $X is going to pay for. That means I want to see a budget – and at a higher level of detail than “Program expenses, administration, fundraising.” I don’t just want to know that you’re trying to help underprivileged children – I want to know how you’re trying to help them, how much it costs you, how much weight you’re placing on each of your programs, and what my $X is going to allow you to do that you couldn’t have otherwise.

Even the best organizations often can’t produce the kind of budget I’m talking about … and that just shocks me. Knowing how much you spend on each program – and what you’re purchasing (people? materials?) for those programs – is just common sense. For-profit companies can ask, “How much did we spend on airfare this year?” and conclude, “We should start flying coach.” Why do I have to drag a nonprofit kicking and screaming into telling me how much of its funds went to each continent?

3. No, listen. I want to know what you’re ACTUALLY doing with my money.

“You want numbers? I’ll give you numbers! 5c will save a child! $100 will vaccinate a village! $1000 will disband Al Qaeda!”

Sometimes I’m able to find out where these numbers are coming from. When I do, they invariably leave out necessary administrative expenses, ignore labor bottlenecks, and who knows what else. These gimmicks might fool a lot of people, but they turn off a lot of people too. When I talk to my non-giving friends, the most common reasoning I hear is “What’s my money really going to do? Those numbers in the pamphlets can’t be right.”

Administrative expenses are necessary and important. So is stability – the fact is that sometimes my money is just going to sit in a fund, helping to allow long-term planning. The truth about what my dollar allows isn’t as romantic as “20 children saved from death” … but it’s still worth a dollar.

4. I want the truth more than I want reassurance.

An extension of #3. I’ve come to your nonprofit because I want to do good; if I wanted to feel good, I’d go to a massage parlor. If you don’t think the truth is enough to convince me to give, either you think I’m a much worse person than you, or you don’t really believe in your organization. Neither of those is going to lead to great fundraising.

5. I want to help people more than I want good customer service.

The big one – really, the only one, since #1 through #4 are all ultimately motivated by #5.

As I scour the web looking to read about charity, I find myself reading a lot about marketing. (I’m not sure why this is – are marketers such a high proportion of every industry?) I’ve read a lot about making the customer feel listened to, feel important, and feel appreciated. This customer would prefer that you interrupt me, take weeks to get back to me, and call me a poop face, then demonstrate why your organization is a better avenue for improving the world than any other.

If what I say I want (say, minimal administrative expenses) doesn’t make sense, I want you to tell me why, not say you’re working on it. If my questions are based on bad assumptions, I want you to tell me so, not answer them narrowly. I’m not here for the “total experience” – I will trade 10,000 thank-you notes and 450,000 respectful compliments for a tiny bit of extra good accomplished. That’s what I’m here to do. And I’m concerned that the determination to please me is getting in my way.

Wait till next year

(updated on: ) | by Holden

I’ve talked a fair amount about the question of what a foundation should do with all the money it has left over, after giving all the money it can give for a year. Now Jon B raises an interesting alternative to both investing it traditionally and to investing it in “responsible companies”: loan it to another charity.

There is a version of this idea that could be good – loaning the money to a charity that uses loaned funds only for liquidity (immediate access to capital), not in order to take the interest as donations (directly or indirectly).

A perfect example would be a microfinance organization that just needs to borrow money (to lend to the impoverished), and doesn’t have enough collateral and/or credit to do all its borrowing at a reasonable interest rate. If a foundation has money it won’t be using until next year, it can lend that money to this organization, and plan on getting paid back with a reasonably low interest rate (as though the borrowing organization had solid credit/collateral). There is, of course, a risk of default. In this case the foundation is essentially donating not its money, but its tolerance for risk and its ability to postpone spending. You could think of it like donating shoes: you could sell the shoes and give the proceeds to charity, but if the charity actually needs shoes, giving the shoes directly saves a little bit of transaction cost. That would make sense. If I’m being dumb, I hope my hedge fund friends correct me.

Charity Bank, the site Jon links to, appears to be a confusing blend of this idea and the less compelling idea of donating your interest to charity – which seems to me like just a fancy way of making a direct grant. Opening a (UK) Charity Bank account, you choose between 0% and 2% interest per year – all well below UK market rates – which makes me think that a lot of the value is in effectively donated interest payments. In addition, I can’t find any details about what charities it is investing in. Without this, it is really hard for me to picture whether there is really a need in the nonprofit sector for credit/liquidity, as opposed to good old money.

I still think the whole topic of “responsible investing” or “aligned investing” is overblown, and now I’m writing more about it. Bad Holden.

Hello, world

(updated on: ) | by Holden

Other charity bloggers have been noticing us, and there have been some good discussions going on about GiveWell in other places. There really should be a better system for blog-to-blog communication, such that you can see all the conversations relevant to your blog of choice just by reading that blog’s feed … this is what the trackback system is supposed to do, I think, but it doesn’t work. Internet entrepreneurs, you’re welcome for the business idea. In its absence, here’s a quick roundup.

First off, the discussion over Network for Good’s processing fees caused a mini-stir. Some found our approach obnoxious and “suck[y].” Others defended us. Katya, of Network for Good, wraps up with her thoughts on dealing with customer complaints, which demonstrate an attitude we wish we saw more of.

Then there are those who looked beyond the dispute to check out our actual project. Other bloggers are confirming what we suspected: that no one else seems to be doing what we’re doing. We had some discussion about why that is on the Tactical Philanthropy blog. Of course, we hope others will feel the same needs we do, and enter the ring to address them – though now that we’re rolling, I hope that anyone who wants to put their time into a project like this will find out about us and end up shooting me an email to make sure there’s no time wasted on outright duplication. Meanwhile, Lucy Bernholz, who seems to generate catchy phrases in her sleep, calls us “community-driven, transparent analysis for donors by donors.” I really hope she didn’t pull a Pat Riley and trademark that phrase – we may have to steal it.

Where I’m coming from

(updated on: ) | by Elie

Last August, I decided that I wanted to give to charity, and I started working with Holden and a few other friends researching non-profits. We thought that with a little legwork, we’d be able to find the best organization in a given cause (clean water, say) by asking each organization two very basic questions: 1) what are you trying to accomplish? and 2) what’s your evidence that you can accomplish it?

Last fall, I asked those two questions to about 20 different non-profits working in the generic “clean-water for Africa” cause, and got three types of responses:

1) Hostile: why are you asking these questions? who do you work for? why would you want to know this? do you work for our competitors?

2) Dumbfounded: do you work for a giant foundation – they’re the only ones that ask these questions? I’ve never heard these questions from any private donor before – why do you want to know this?

3) Grateful: These are great questions. I met with the board today, and told them that we need to be able to answer these types of questions. Thanks!

All of these responses are unified by one striking theme: no one was used to answering these two simple questions. That’s how I knew that the GiveWell project wasn’t just going to be a way to make my decision for the year, but something that I needed to do.

After a few months of work, I decided to give to Population Services International because they adequately answered those two questions. PSI is the best I found, but they’re far from perfect. And, as Holden’s written, two of the achievement gap-related organizations we’ve reviewed and he’s donated to, while adequate, still leave a lot to be desired. I don’t want to settle for adequate next December.

Quick update

(updated on: ) | by Holden

Network for Good roundup

I wrote last week about the apparently high fees that Network for Good charges to process donations. Katya Andresen was good enough to stop by and give some clarifying info via comments (which you can see by clicking the link to the post). One of the major differences she pointed to between Network for Good and the simpler, cheaper PayPal is a potential legal issue: briefly, she argued that Network for Good takes care of the state-by-state registration that is necessary to solicit donations from all 50 states.

I did some research into this, starting from links that she sent me, and concluded the following. Warning: I just wrote this up and realized it’s really boring. Feel free to skip to the next section if you don’t care about the intricacies of payment processing.

  • The legal issues are very hazy. You do need to register with most U.S. states in order to solicit from their residents, but there is no clear legal precedent or consensus on whether putting a “Donate” link on your website amounts to soliciting from all these states. Very few nonprofits are actually registered with all relevant states at this point … so it seems unlikely that this is a major short-term concern. However, it isn’t clear, and it’s probably wise for a nonprofit to cover its bases.
  • If this registration is necessary, it is still far from clear whether using Network for Good “takes care of” this registration for you. I’d guess that it doesn’t – a “Donate” link is a solicitation to donate to your organization, not Network for Good, even if the funds go through Network for Good. (If it were a solicitation for Network for Good, that would be a whole different legal can of worms.)
  • So I doubt this particular concern is relevant to PayPal vs. Network for Good … however, there is a larger issue that it brought up, which is that nonprofits have their own set of legal issues to deal with, and PayPal really isn’t set up specifically to serve their needs. This was confirmed by my attempt to get them to answer a legal question: I got passed through 5 people before finally getting a mailing address for their legal department, and being told I would have to use that channel. Not helpful. So there is an argument for using a processing agent that exists to serve nonprofits and deal with their legal concerns.
  • But that said … why does the processing agent have to be a nonprofit itself?
    • This seems to add so much unnecessary confusion – when considering Network for Good vs. JustGive, I can see that JustGive charges lower fees, but are they filling in the gap by getting more private donations that could be going to help people all over the world instead? I have no idea. And that’s what I really care about – not how much of a given transaction goes to the processing agent, but how efficient the agent is overall, which affects how much total money is left over to do other good things.
    • Any time a business can feasibly charge to cover its full costs, it should do so, rather than undercharging and having Kevin Bacon (among others) help fill in the gap by fundraising from philanthropists. Network for Good and JustGive don’t serve the poor; they serve nonprofits that can afford to pay them.
  • Conclusion: I’d still probably use PayPal over JustGive, and JustGive over Network for Good, but there are at least arguments for all three, counter to my original post. What I really want to see is a for-profit existing to serve nonprofits with their payment processing needs.

I am guessing Katya is rocking a Google alert, so I’m hoping she’ll correct anything inaccurate here.

Tactical Philanthropy makes me happy

Sean Stannard-Stockton just published a post that I think gives a really great characterization of us. He calls us the “pissed off donor model,” which I hadn’t thought of, but it’s accurate: GiveWell grew straight out of our attempts to donate, and our realization that the resource we wanted and needed doesn’t currently exist. It’s cool to see someone else describing the project in a way that really gets to the heart of what we’re about and what we believe in – and his claim that foundations should not do everything in-house, but instead should conduct “aggressive marketing campaign[s] to make sure other foundations can learn from their mistakes” – is exactly the mentality we wish we saw more of.

Stay tuned

My next post (Tuesday or sooner) will be a story of nonprofit incompetence that will shock and amaze you. I am currently deciding whether to give the name of the nonprofit in question – I think at this point it would be distracting and also might get me knifed in an alley, so I’m leaning against, but feel free to send me emails calling me a wuss in the hopes of changing my mind.

Enough about lives – how many dollars can we save?

(updated on: ) | by Holden

I think most discussions of charity are way too fuzzy. Your standard fundraising proposal has several adorable pictures, a couple disturbing ones, and one or two numbers that seem to have been shouted in a moment of impassioned inspiration, with nary a source to be found. Then, though, there is the occasional economist/mathematician/cyborg who comes along and decides enough is enough – no more guessing and generalizing, we’re going to get everything down to one number come hell or high water. This annoys me even more than excessive fuzziness. At least when someone’s crying incoherently, I can tell they’re human.

There’s a common insistence on stating the cost of, say, malaria in terms of impact on GDP. You can see a great example here … with a footnote to an academic paper that I’m guessing put a sick amount of effort into coming up with these numbers. Frankly, I don’t want to think about this effort, let alone read about it, because this number is meaningless.

Allow me to explain. According to these guys, malaria costs Africa about $12 billion per year. … What does that tell you? Does that help you understand anything about the impact of malaria? Well, maybe you just need some context, so here, I’ll put it in context for you. It’s about half the cost per year we would incur by dismantling Citigroup, a little more than dismantling AIG (here’s my very questionable source for those claims), 1/1000 the annual output of the United States, 1/50 the annual output of Brazil, and half the annual cost of racism (OK, I made that last one up). The death of Alex Rodriguez would cost the world about $25 million next year, or the same as the death of 315.14 college professors. We’re totally clear now?

To whom does “$12 billion” mean more than “2 million people”?

Maybe the problem is that this number just isn’t complicated and counterintuitive enough. That must be what the World Health Organization was thinking when they put together Disability Adjusted Life-Years. Read that formula. Then tell me what “5 Disability Adjusted Life-Years” means to you.

Of course, the fact that something is complicated doesn’t mean it’s a bad idea. I’m a fan of the VORP metric in baseball, for example, because having read the description of how it’s calculated, I feel reasonably confident that if one player’s VORP is way higher than another’s, he’s probably a more valuable hitter. Putting all causes in the same terms tries to do for charity what VORP does for baseball: let us compare everything in the same terms.

The problem is, it just can’t be done. Deciding whether fixing education or malaria is more important involves a ton of philosophical judgment – enough that you can’t reasonably entrust that decision to an “expert” with a calculator. Once people start trying to make major philosophical decisions with formulas, they come out with numbers that no longer tell you what you want to know.

Our goal at GiveWell is to measure what we can measure, compare what we can compare, and acknowledge when we reach the point at which decisions become philosophical judgment calls. That way the donor doesn’t have to trust our reasoning … and that way we can make sure we’re still talking about people.