Let me note that there is some truth to what the Straw Man says below. There is very little information that you can get and compare across all charities, and looking at the Straw Ratio (program expenses / total expenses) is probably the single quickest, easiest way to spot the worst of the worst (i.e., Lighting Your Cash On Fire International).

There are a surprising number of charities that fall into the “lighting your cash on fire” category. Websites like Charity Navigator, which evaluate huge numbers of charities using these simple metrics, provide an extremely valuable service to society. They help expose and avoid the worst of the worst, and it’s also worth mentioning that this filter (and the categorization they do) makes work like ours feasible.

To read about the worst, read the Charity Navigator blog. It’s good reading, and eye-opening. But when you’ve knocked out the crooks, you still need to separate the well-intentioned and effective from the well-intentioned and ineffective. For this, the Straw Ratio is useless and even destructive. In the coming weeks, I will go into a lot of detail on why. Right now I’m hungry.

Hi there. I’m the Straw Man, and the purpose of my life is to say things that Holden disagrees with, in exaggerated ways so that Holden can tear me apart. It might not be the most glamorous job, but I’ve come to terms with myself.

So, guess what? I’m really into intelligent giving. It isn’t enough to be generous with your money–you have to make sure it’s accomplishing good. I’m a philanthrocapitalist. I believe in accountability. I like charities that are run like a business. Cool, huh?

Even cooler: I have solved the problem of how to do intelligent giving easily! I have devised a single number–breathtaking in its information content, stunning in its simplicity–that totally tells you what you need to know about a charity, and you can calculate it off data that’s publicly available for every charity in the U.S. Awesome? Are you ready to hear my secret formula? Here it is:

Take the money a charity spent on “program expenses” (designated on its required IRS form 990). Now, divide that number by the charity’s total expenses for the same year. Pow! Now you know how much of your dollar they will actually spend accomplishing good! What a number! I will call it the Straw Ratio.

A couple examples will demonstrate the frightening power of the straw ratio.

1. AmeriCares is a gigantic charity that takes donated medical supplies and delivers them to local organizations. Last year it spent over $1 billion, less than $7 million of which was on overhead, for a near-perfect Straw Ratio of 99.4. Good luck finding a better charity than that!

2. Interplast seeks to provide corrective surgery to people with deformities, through a combination of missions (sending surgeons overseas) and measures to build local capacity, including training and operating local centers. Last year it spent $3.6 million total–but $350,000 of this was on administrative overhead, and another $500,000 was fundraising. The Straw Ratio tells us that for every dollar you give, only about 77c are going to charity. Pretty fishy if you ask me.

This is an awesome number, so it’s no wonder that independent charity evaluators focus on it, from Charity Navigator (the biggest of all) to American Institute of Philanthropy (whose criteria are strikingly similar to Charity Navigator’s, hmm, actually, they seem identical) to the BBB Wise Giving Alliance. And no wonder that charities with high Straw Ratios love to put this info front and center, and those with truly innovative minds–here and here–even manage to achieve PERFECT STRAW RATIOS! Roll that around in your brain for a second. I guess these organizations neither fundraise nor administrate . . . and that means every penny is good!

There couldn’t possibly be any objections to this, right?

I understand that a lot of you have been sitting on the edge of your seats, wondering when GiveWell is going to recommend an organization for fighting diarrheal illness. Your wait is over.

My research on diarrhea began as an interest in the cause of “water.” It’s a very popular cause, and a very marketable one: hard to argue with the idea of giving people water. In my research, the first thing I learned was that the main problem of “water” is lack of clean water (not lack of access to water entirely), and that the main thing contaminating the water is fecal material. And the main problem caused by this, in turn, is diarrhea so severe it can actually lead to death by dehydration.

But the problem goes well beyond water. People lack access to adequate sanitation facilities, as well as sanitation education. Fecal matter gets everywhere (their hands, their food, and their water), and all of this contributes to the death toll of diarrhea.

Even though there are a few cost-effective strategies for reducing diarrheal illness, most of the organizations with which I spoke focused on expensive approaches, something that both former Secretary of the Treasury Paul O’Neill and I find confusing and frustrating. Part of the issue may be that focusing on clean water is more marketable–but less cost-effective–than focusing on the root problem, diarrhea.

But then, I investigated Population Services International. PSI is a large ($260 million budget last year) organization focused on basic health issues in the developing world. To reduce diarrheal illness, they offer Oral Rehydration Therapy (ORT) and water purification at point-of use. Uniquely, instead of distributing the products for free, they sell them through local vendors allowing them to recoup some of their production costs and reduce distribution costs. We estimate that PSI’s ORT program saves lives at less than $50/life. Holden’s made a big deal about numbers like this before (he did grossly understate ORT’s cost at 5c/life), but $50/life is hard to process. $50 … per … life. Jeez.

Along with its focus on the most cost-effective strategies, I’m a big fan of PSI’s evaluation approach – they keep careful records of exactly how much ORT and water-purification solution they distribute and have a research department devoted to evaluating PSI’s work.

Now, PSI isn’t perfect. It didn’t give me a detailed breakdown of its total budget – its diarrheal illness programs only make up about 2.5% – and it doesn’t comprehensively or systematically evaluate each program. Also, it’s been relatively difficult to get information from PSI, even after I made a reasonable donation.

Right now, I’m working on the review, which should be up on GiveWell in the next week.

So, I gave around $9000 ($5000-$6000 actual cost, factoring in taxes) to charity this year. Was it enough? I’ll be the first to admit that wasn’t all I could afford to give. It was as much as I wanted to.

And you know what else I’ll admit? Earlier in the year, when the baseball playoffs came around, I went to four games, spending a total of $400 on tickets alone. According to me, that means I let two children die of malaria so I could watch the Yankees lose in person. Those of you of certain philosophical persuasions could even say I killed two children. Adjusting for taxes, I killed three.

It’s an unnerving thought. But if I wrote that I’m losing sleep over it, I’d be lying. I’m not. I spend more time than most people thinking about the horrible problems in the world, but in an hour and a half what I’m going to be thinking about is how awesome it is when 300-pound men injure each other for my entertainment. And even when I am thinking about the horrible problems in the world, I generally don’t feel that terrible or sad and I definitely don’t cry (which some people consider to be the ultimate sign of an effective charity agent). Honestly, the main feeling I have is excitement that I can do something about them.

If you think that makes me a terrible person, and you’re either (a) giving away every penny you have or (b) staying up all night to jam needles into your eye because you feel so bad, well, cool. If you’re one of the remaining 99.99999% of people who values yourself way above others, I imagine that what I’m saying rings true.

I want to help others, but I have no interest in being a saint or Zell Kravinsky. I’ve got some disposable income, and I spend it on things that feel worth it. Improving the world is one of those things. Others include baseball, beer, and steak dinners. I wouldn’t fault you for doing the same. Just remember: you don’t have to give away everything to give away a lot.

All right! Some of those Christmas bonuses Elie talked about are going to charity, after all! This is awesome–not only are those Wall Street dudes super rich, but they’re super smart too, right? I bet they’re all thinking really carefully about how to accomplish the most good, and focusing on evidence and accountability, like these guys and this guy.

Or, they’re giving to whoever invites them to the coolest parties. One of the two.

I’m not trying to hate on the United Jewish Federation of New York. I know practically nothing about them (their website didn’t help … but I digress). But what percentage of the $21.5 million this party raised from Wall Street–accounting for about 1/7 their annual budget–would have come in if they hadn’t held an awesome casino party? And does this make any sense?

When it comes to evaluating charities, there is a common obsession with making sure your money goes “directly” to the cause, as opposed to overhead and administration costs. I think this is silly and I’ll discuss it more sometime soon … but hey … if you begrudge a charity every penny that it spends on salaries and infrastructure, how do you feel about their throwing an enormous gala to get you in the giving mood? Wouldn’t it be better to save them a little cash by sitting down yourself and figuring out where to give?

The issue, it seems to me, is that many people think of giving the same way they think of eating broccoli: they feel obligated to, they know they should, but they’d rather not. So charities, smartly, treat them like 5-year-olds: they try to trick them into it. If there were millions of dollars riding on getting some kid to eat his broccoli, the wisest move would probably be to get one of those chocolate-covering machines and douse the stuff until it’s unrecognizable.

This phenomenon isn’t the charities’ fault, it’s the donors. And it means that where the money goes has way less to do with who’s accomplishing the most good than with who does the best fundraising and party-throwing.

But a funny thing happens as you grow up. You realize broccoli isn’t half bad. With a little garlic, it can be flat delicious. Seriously, try it if you don’t believe me. And it’s especially good when you’ve had more than enough chocolate for the moment and you’re feeling just a little sick.

You also start to appreciate the fact that chocolate-covered broccoli is, by any measure, pretty gross.

(Just realized that talking about medicine and sugar would have made more sense as a metaphor here. Screw it, “broccoli” is a funny word and I’m sticking with it.)

OK, maybe I got a little carried away in my last post, as Elie is more than happy to point out. I’ve been screaming about “low prices,” when the truth is that curing an obstetric fistula or cleft can be worth the extra $-per-person for a variety of reasons.

Something you’ll see a lot of on this blog is me ranting/raving/foaming at the mouth about the cause of the day, even if it isn’t my personal favorite. That’s because I think there are a lot of great causes that might appeal to different people, and I want to promote all the good ones. But something that’s very important–and that I think most people don’t do nearly enough of–is deciding between the many good things you can do with your money.

I think it’s crazy to make 10 small donations when you could make 1-2 big ones. None of your small donations will solve the problems they’re attacking (i.e., there will still be plenty of the problem left), so why not spend all the money on the most important one? Plus, big donations get you attention: they give you the opportunity to tell a nonprofit what you do and don’t like, and have them listen. The most important reason to concentrate your giving, though, is exactly the reason that most people don’t want to: it forces you to make hard decisions. And that forces you to raise the stakes, learn more, and think harder. And that leads to better decisions and totally sweet websites.

So, after raving about the great deals on malaria and cleft and diarrhea and fistula like a kid in a (nightmarish) candy store, let me put my 2006 giving decisions front and center. There are a lot of great places to give. These are the ones I determined (based on about .01% of the information I wish I had) to be the best.

$5000 to New Visions for Public Schools. As cheap as it is to save lives in Africa, I see improving U.S. education as the most difficult and important problem of all. This country is rolling in it. It should be a utopia, for crying out loud, and it isn’t close. Poorer countries are eventually going to be this wealthy, but unless we figure out how to promote true equality of opportunity, that wealth isn’t going to translate into what it should. And New Visions has the most promising approach I’ve seen in this area: go straight at the public schools (eliminating the selection bias of charters), and go at them with extreme systematicity and rigor. Read the review for details.

$2000 to Interplast. Cleft was the cause I specialized in researching over the last few months, so this was partly a relationship-building donation. But I also think corrective surgery is the cheapest and most concrete way I’ve seen to convert a full life of misery to a much more reasonable (if still poverty-stricken) one. There’s a good chance I’ll change my mind as I learn more about fistula, child slavery, etc., but this is what I’m confident in for now.

$1000 to the Children’s Aid Society, also promoting equality of opportunity in the U.S., though in a very different way from New Visions. They’ve received my biggest donations in the past; they’re good (though New Visions now excites me more); and I want to maintain a relationship because they could be great if they did a better job tracking their activities and results.

$256 each to four smaller causes: two with personal connections, one as a thank-you to Alliance for Smiles for being open and helpful (though I ultimately went with Interplast), plus alma mater.

And that’s it. $9000 in tax-deductible donations (so between $5000 and $6000 of actual money). I could have protected people from malaria, helped fight global warming, fed the hungry, saved the children, or even bought some books for affluent communities. I chose to support two organizations trying to break down inner-city obstacles to opportunity, and one correcting deformities for those who can’t afford it. And I’ll be the first to admit that I didn’t give every penny I have. So, how did I do? For my take, tune in next time. For yours, post a comment.