The GiveWell Blog

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.

NYC update: People still have problems

(updated on: ) | by Holden

We met with New Visions for Public Schools on Friday afternoon. The contrast with the Children’s Aid Society meeting was instructive. CAS met us for lunch; New Visions met us in a conference room. (I like food, but I think we’re going to avoid lunch meetings in the future so we don’t end up with all our notes on soup-stained Post-its.) The CAS representatives were all smiles; the conversation with Bob, the President of New Visions, bordered at times on adversarial. When asked about other organizations, CAS stressed how much they talked and worked together, despite not sharing funding; Bob pretty much said the opposite, stressing the practical challenges of partnerships.

I came away pretty impressed with New Visions, and feeling that they did a better job of addressing my concerns in a head-on, all-business way (at least in the meeting – we’ve waiting on followup materials from both). The fact that New Visions generally has a “supporting” role in its projects, working with the Department of Education and with smaller teams rather than running programs itself, had been making it hard for us to understand where the money literally goes; now we have a much better sense of that, and I’ll incorporate it into the New Visions review. What’s so exciting about New Visions is that it is funding, supporting, and getting the government to cooperate in a variety of unconventional and “experimental” approaches, and placing a high priority on collecting evidence of these approaches’ effectiveness. The devotion to and quality of self-evaluation distinguish it from other education-centered organizations; another distinction is that by working in existing public schools rather than starting charter schools or “school choice” programs, New Visions is more likely to affect the students who need the most help.

My biggest concern about New Visions is that it doesn’t seem to be building a centralized “This is what we think works, and this is what we think doesn’t” list. I find its Ten Principles of Effective Small Schools vague; more importantly, this list has been around since its small school initiative started 3 years ago. Dialogue is presumably taking place, but what and where are the conclusions (even if tentative) being reached?

The common thread between New Visions, CAS, and Robin Hood (whom we finally got to start a conversation with today, thanks to GiveWell member Kerry’s greasing the wheels with a donation), is that none of them seem to have many other donors who are interested in the details of their activities and self-evaluations. You can see it from their concern about “overwhelming” us with material (which we keep trying to explain is not a concern) to their lack of detailed funding breakdowns to their lack of precedent for having the kinds of conversations we want (both of our in-person meetings ran over; one was over corn chowder; and the Robin Hood representative seemed genuinely surprised that someone wanted to “look under the hood”). Don’t tell me this is because people are “leaving the details to the experts” – that isn’t what you do when a car dealer, even a nice one, assures you that what you’re about to buy is “all fixed up,” and it isn’t what you do when your President assures you that our military plan is all checked out. Any time there’s high stakes, low information, and multiple options, leaving the details to the experts is a mistake. And though we hope that we’ll eventually become experts on charity-related issues ourselves, we also hope you’ll demand that everything that goes into our recommendations is available for you to check out.

The big question: Is our project 1.0 or 2.0?

(updated on: ) | by Holden

I’d like to open this post by thanking whatever visionary had the idea to start adding “2.0” to the end of everything. Benefits to society already include Web 2.0, Library 2.0, Office 2.0, Business 2.0, and Learning 2.0. I don’t really know what most of these are, but I can only assume that we’re now roughly twice as good at learning and running businesses, which is pretty great.

So when reflecting on the GiveWell project lately, I decided to figure out what version of thing we are. Seems pretty key, no? And the bad news is, I was forced to conclude that we do not fall under the category of Web 2.0, which probably means that we are also not Charity 2.0, Usefulness 2.0, or Awesomeness 2.0. I hate to deliver this news, but if you haven’t already disgustedly flipped away from this page in search of something hipper, I can explain (and provide lots of examples of projects that are Charity 2.0).

To the extent I can see a unifying theme to “Web 2.0,” besides the use of fancy web programming that we definitely lack, it’s the following:

  • Most content is created and submitted not by a central organization, but by a community of users at large.
  • Since none of these users is full-time, their contributions tend to come in chunks of a few minutes or a few hours.
  • Content is then centrally structured and organized to allow highly flexible, customized, personal delivery.

Web 2.0 isn’t about creating something in one place and distributing it; it’s about providing a structure for people to communicate with others like them. Classic examples are YouTube, Flickr, Digg, and the appropriately named Del.icio.us. And part of the wave of Web 2.0 sites has been a sub-wave of new giving sites that I would classify as “Charity 2.0.” There are a ton of them. Off the top of my head, I can think of ChipIn, GlobalGiving, GiveMeaning, DonorsChoose, Helpalot (check the video on this one for a wild ride of Entertainment 2.0), Great Nonprofits, the new Change.org, and SixDegrees.org.

The first four of these are all basically matching donors and recipients, by letting the recipients put in their info and leaving the whole decision up to the donor. The latter four are matching donors and donors, i.e., encouraging people to promote the causes they like and find the causes their friends (or favorite celebrities) like. I have no problem with any of this (except maybe the celebrities – taking their word on the best charities seems a lot like taking their word on the right politics, and also seems a lot like eating paste), but I want to note how fundamentally different it is from what we are doing.

We are trying to build a centralized, organized information set about what the best causes and charities are. We’ve put features on our site – and are working on more – to facilitate open dialogue, allowing anyone to share opinions and add information to what we have. But in most cases, understanding a nonprofit takes money (to make them communicate with you) and hours of hard work (to go through what they send and question them effectively). We have found no sources that explain causes and organizations at the level of depth we want – understanding who is being helped, what other problems they have, what is being done for them, what activities the donations are financing, and what reasons there are to expect these activities to be effective. We hope others will help us find this information, but we expect to do a lot of it ourselves. And in the end, we are building one set of reviews. Not MyFacts – the true facts. Not MyCharities – the best charities.

Social networking is appealing partly because for most decisions you have to make in life, personal referrals are a great way to go (as a recent Monblog post reasons). But the reasons personal referrals work largely break down when it comes to charity. Most things you spend money on are things that you get to directly see and enjoy; therefore, when you get a friend’s opinion, you know you’re getting an opinion based on direct experience and knowledge. With charities, by contrast, the only way someone else’s opinion is useful to you is if they’ve done additional research work above and beyond simply “consuming the product” (donating).

And with most expenditures, you’re trying to please yourself – so it makes sense to talk to people like you and see what they like. With charity, you’re trying to improve the world; your personal values play a role, but it’s less like figuring out the best restaurant to eat at (in which case it matters a lot whether a referrer has similar tastes to yours) and more like figuring out how to build the best bridge (what matters is that it works).

For these reasons, making charity more personal and customizable is not the most promising way to improve it. It’s much more important to centralize our knowledge of what your dollars actually accomplish, and what the facts of your options are – something that doesn’t depend on who you are and what music you like.

So we seem to have run into a paradox. GiveWell is awesome, yet it is not 2.0. I think we can all agree: the only possible conclusion is that we are Charity Vista.

Straw man? Or 75% of the population?

(updated on: ) | by Holden

I’ve been ranting about how ridiculous it is to judge a charity by the % of its funds that go to administrative expenses, which I’ve dubbed the “Straw Ratio” because I was too lazy to find a prominent advocate of it so I just invented a Straw Man.

Well, it turns out there quite a lot of human men (and women) who make this mistake. Specifically, according to a recent study that I found out about from Gift Hub, 75% of high-net-worth households say they would give more to charity if less were spent on administrative expenses.

This aspect of charity got by far the strongest response out of anything the households were surveyed on. High-net-worth households care more about their money going to administration than they do about having more access to research (34%), or being able to determine the impact of their gifts (60%). See page 7 of the actual study if you think I’m lying.

Meanwhile, frustrated with the incompetence and disorganization I’ve seen in the nonprofit sector, I’ve practically been begging these guys to spend more on administrative expenses.

If these survey numbers are to be trusted, we’ve got quite a conundrum here. How do we convince people that this seductively easy-to-measure number is no more meaningful for a charity than for a company? How can we make people care more about accomplishing something than about pinching pennies from executives?

My initial ideas:

  • Yell
  • Blog
  • Insist on calling the program expenses / total expenses the “Straw Ratio,” banking on the negative connotation of straw
  • Start a project to collect all the meaningful information about charities that we can find in one place
  • Hold a protest! We could march around with straw hats on – it would be so symbolic!
  • Social networking