Do any charities know what they’re doing?

We think so. In fact, we’re banking on it. GiveWell’s mission is to help steer capital and foster dialogue, and that’s it. We plan to give grants the same way we’ve given our personal donations: look for charities that already have proven, effective, scalable ways of helping people – charities that already know what they’re doing – and give them money. No consulting, no expertise, no program development, and no restrictions. Money.

For-profit sector readers are probably bored right now and wondering whether I’m going to say anything, but I bet the same isn’t true of nonprofit sector readers. From everything I’ve seen, our model of grantmaking is the exception, not the rule. Foundations don’t fund charities, they fund projects; they design programs and agendas, then look for organizations that fit into them; they design project-specific budgets, then make sure each of “their” dollars goes where it’s supposed to.

Part of it may be that foundations consider themselves experts in their fields, and they think they know more than the charities they fund. And they might be right … but that isn’t how we think of ourselves. We have a lot of options, so we demand a ton of information from charities, and we demand that they engage our questions and suggestions intelligently – but in the end, they know way more about their work than we do, and they should be the ones to decide how they do it. The donor’s role is to fund it.

It seems clear to me that this is would be a disastrous strategy if we didn’t pick our charities carefully. Hey – that’s exactly how it works today, with the lion’s share of charitable capital coming from people who have no access to good information (though at least they can get irrelevant financial data and nonsensical metrics).

But imagine if we actually put in the due diligence, and find the charities that already have smart, experienced, passionate people with proven, effective, scalable methods for helping people. Imagine if we find the organizations that have it all except money. At that point, it’s moot how much of our dollar is going to “overhead,” or anything else – sometimes overhead is necessary and sometimes it isn’t, and good people will make those decisions better than we can. At that point, it’s unnecessary for us to “keep the charities in line,” because they’ll keep themselves in line or lose next time around. Accountability, transparency, and competition are harsher taskmasters than any contract can be.

When we find what we’re looking for, we’re looking at an alley-oop … all we have to do is throw them the ball. That’s going to be easier and more effective than doing the driving ourselves.

Disclaimer: GiveWell failed to be named as one of NetSquared’s featured projects. Therefore, if you are incapable of making your own judgments about what you read (based on content rather than author), you should assume that the blog post that follows is just me being “bitter,” and you should load a reputable news site immediately before you read something dangerous. Those who are comfortable differentiating reasonable from unreasonable, feel free to proceed.

As of last Wednesday at ~8pm est,

• NetSquared had recently closed its online balloting to choose the featured projects for its upcoming conference.
• Many concerns had been expressed over the completely open online ballot.
• No one knew yet who had voted, how many people had voted, or how many votes were based in any way on content of proposals (as opposed to emails from friends).
• No one knew which projects had won yet.
• No one knew anything about the projects themselves, beyond what was written up briefly in their proposals.
• There had been close to zero substantive discussion of the proposals.

And here was what people were saying about it:

• Phil proclaimed the vote a “watershed event for democracy.”
• I eagerly anticipated other blogs’ making fun of him for jumping the gun. Phil is a good and thought-provoking writer who is not always what we would call “reserved” in tone.
• Lucy agreed with Phil.
• So did the normally reserved Sean.
• In the wake of criticism, Sean insisted that “NetSquared is already a success” – not because of its voting process (the original thing that had set off Phil), but because the projects that are going to be featured are “great.” (Keep in mind that the sum total of our knowledge on these projects still consists of ~1000 words submitted by their leaders.)

To be clear, I think NetSquared is an exciting idea. But where I come from, people celebrate a new client the day the client signs, not the day they decide to call the client and see if they’re interested. “Great research projects” refers to ideas that have been studied and stress-tested to death and produced returns, not to the ideas we had in this morning’s meeting. So as I’ve made clear, I’ve been pretty surprised by the extent to which people have called paragraphs on a screen “great projects,” and pointed to a “success” and “watershed event” where I saw an online poll that hadn’t even been tallied yet.

And while I can only speak to what I’ve seen, this doesn’t strike me as an isolated incident. The charities I’ve examined constantly use the word “success” to refer to mosquito nets purchased or children enrolled in an after-school program, or even in many cases simply dollars spent or plans made. Much of the literature I’ve read on grantmaking tells stories of “great grantmaking,” stories that end with the funds disbursed. Call me crazy, but for a humanitarian charity I associate “success” with “lives changed.”

Sure, that’s hard to measure. Yes, many of the things we celebrate in the for-profit sector are more concrete. But this post isn’t about the process of evaluation (I’ve written plenty about that, and will write plenty more); it’s about the mentality. When you’re used to seeing the results of your actions, you’re used to the world’s working much less smoothly than your imagination does. You assume a huge chasm between a great idea and a great result. You put the bar for “success” a lot higher, and that pushes you to get a lot better. I wish I saw more of this mentality from the sector whose job it is to bring about the world’s most important (and often most difficult) changes.

In addition to ~20 charity/philanthropy/social-goodliness blogs, I read one blog, TechCrunch, about for-profit Internet startups. I’d say I see about 10x as much negativity, sarcasm, skepticism, and criticism on TechCrunch as on those 20 improve-the-world blogs combined. That’s why I like TechCrunch.

If you check out the front page now, you’ll see TechCrunch questioning Google’s high-priced acquisition of DoubleClick, stating “We all know what sucks about LinkedIn [one of the most successful social networks in the world]”, and responding to Rolling Stone’s plan to create a social network with “The Rolling Stone audience may be too old to get into the social networking scene.” Nobody gets off easy.

Contrast with NetSquared, currently holding a vote to showcase 20 projects “remixing the Web for social good.” While TechCrunch picks only the most promising, highest-profile startups to write about, the ~150 NetSquared nominees were selected as follows: anyone who wanted to nominate a project did so. Yet while TechCrunch is constantly picking at its subjects for weaknesses, you’ll have a tough time finding anyone critical of anyone on NetSquared. Here are a few choice examples of the tone: all the projects are amazing, there is far too much to choose from, etc. Check out the specific discussions of projects and you’ll see the same: criticisms are few and far between, and always prefaced with “This is the most wonderful thing in the world, but …”

I believe the difference in tone is pretty constant between these two sectors – and it isn’t just the people, it’s the way people see charity. I’ve even heard my coworkers say things like “I think all charities are doing wonderful things” (I usually ask if they think the same about all businesses).

The thing is, in the business world it’s obvious to everyone that good isn’t good enough. You need to be the BEST, within your area, or else capital is better spent on your competitors – and you’re going to go under. But I don’t see why this is any less true of the nonprofit sector – all of it except the part about going under. Right now, there’s no mechanism for charitable capital (donations from individuals) to flow to where it’s best used, and that means no mechanism for inferior charities to go under, and THAT means no constant pressure to get better. That’s what we’re trying to change, because we think the people served by charities deserve the same relentless improvement and scrutiny that the people served by businesses benefit from.

We need kind people in the nonprofit sector, but I could go for fewer nice people. Nice people are always encouraging; they think everything well-intentioned is worth doing; they respond to my ideas with “OK” instead of “Wouldn’t it be better to ____?” They make good grandmothers, not good partners.