The GiveWell Blog

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.

Network for what now?

(updated on: ) | by Holden

Note: As of 2017, this blog post no longer represents GiveWell’s views on Network for Good.

Help me understand this. For those of you whose browsers don’t support hyperlinks: Charity Navigator processes direct donations to charities using Network for Good, which processes credit cards and applies a fee of 4.75%. Charity Navigator claims that this fee is a good deal, comparable to what the charities themselves would have to pay for processing your credit card, and further states that “Network for Good’s giving system is so efficient and inexpensive that we at Charity Navigator use their service to process online donations to our own organization.”

Sounds good, right, until I started doing a little research of my own into the cheapest way of processing donations online. Turns out: it isn’t Network for Good, it isn’t close, and it took me all of 12 seconds to determine this.

Exhibit A: standard PayPal processing rates. Just looking at the simplest, quickest, no-special-deals, for-profit version of PayPal, it’s 2.9% plus $0.30 per transaction. That beats Network for Good for any donation over $18.75. And that’s using the system that’s available to any schmoe who wants to sell donuts or c1@lis or whatever. Anecdotally, I’ve heard and read about way lower fees offered by PayPal for nonprofit organizations, not to mention for doing more volume.

And that’s PayPal: the most recognized, subscribed-to brand on the web (though to be clear, people without accounts can still use this service to process their credit cards). Google Checkout offers an even cheaper option, and it seems safe to say that prices will continue to fall in the extremely competitive online-merchant sphere.

So what’s the advantage of Network for Good? After scratching my head over this for some time, I Googled my way to this (from here): “While JustGive and PayPal offer nonprofit organizations the ability to collect donations online, Network for Good is the only organization with a substantial media presence. Through the generosity of our corporate partners – and two of the largest Internet properties – AOL Time Warner and Yahoo!, we are able to promote our site and service via millions of ad banners and links on these Web sites. This traffic to our site results in increased awareness of charitable giving, volunteerism, and the issues that organizations like yours support. No other resource can provide as broad a reach and can deliver as many funds.”

Read that over again and see if you can make sense of it. If I didn’t know any better, I’d intepret it as follows:

“While JustGive and PayPal do the exact same thing we do for lower fees, we have so much money and backing that we can advertise ourselves a lot! That means we can convince you to use us instead of the better deal! After all, who’s heard of PayPal? We’re Network for Freaking Good! Wait, you’re not convinced? Well consider this: let’s change the subject and say some vague stuff about increased awareness of charities. Now you don’t even remember what we’re talking about, do you? That’s the power of well-financed marketing! Now use our service!”

If I didn’t know any better, I would say that we’re looking at an extremely well-financed and -backed nonprofit organization, set up explicitly to serve charities and serve the public good, charging its clients over twice what they would pay a standard for-profit merchant operating with none of the tax breaks or charitable contributions. If I didn’t know any better, I would say that Network for Good even appears to recognize this, and rather than concede to the more efficient for-profit organizations for the public benefit, is giving a completely smoke-and-mirrors argument that it’s hard to describe as anything but a swindle of the organizations it was created to serve. If I didn’t know any better, I would conclude that Charity Navigator, an organization created expressly to ensure accountability and financial efficiency and help people avoid swindles, is among the swindled.

And I don’t know any better. If you do, please help. Otherwise, when we start setting up our own online donation program, we’re going to use one of the many cheap and reasonable options that’s been set up by for-profit corporations rather than “charities,” and we’re not touching Network for Good with a ten-foot pole.

Note: after discussing this with Katya from Network for Good, I’ve concluded that the issues are more complex than this post implies. It still seems to me (though others disagree) that PayPal is more efficient than Network for Good, but the “swindle” accusation is definitely off base. See the conversation for details.