The GiveWell Blog

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

Food, friendz, and figuring out how to improve the world

(updated on: ) | by Holden

Elie and I had lunch with three people representing the Children’s Aid Society (CAS) yesterday. At this point we aren’t used to having meetings without a wiki handy for note-taking – and dealing with corn chowder at the same time intensified the challenge – but here are the highlights of what I remember:

  • The meeting started with a more or less total repudiation of the main self-evaluation study we’ve been sent so far, a review of test scores at CAS community schools. I had sent an email on Wednesday summarizing my problems with the study (basically, I think it shows nothing), and we were told that it had been put together on the fly for a donor request and that we shouldn’t focus on it. This is a little disconcerting because:
    • This study was originally sent to me a year ago, in response to my broad request for any and all evidence of CAS programs’ effectiveness.
    • When I repeated the request last October, I was sent basically a re-worded version of the same study (same data, same conclusions, different but equally unconvincing presentation).
    • I think this basically comes down to a disconnect between fundraising and analysis, which I’ll get to in a second.
  • CAS claims that there is another, more rigorous study of community schools in the works, which they will send to us.
  • They also told us that they have designed a much more ambitious, New Visions-like comprehensive study of how their community schools compare to other schools in the city, but they’ve been unable to get the necessary funding for it because most donors aren’t interested in spending a lot on evaluation. They are going to send us the design of this study as well.
  • Jane, who oversees the community schools program, says there is a strong independent research case that the community school model (described here) is the most promising approach to improving education. She has agreed to send us some starting points for looking into this.
  • We also talked about CAS’s relationship with other programs trying to do similar things, including New Visions for Public Schools and Harlem Children’s Zone. We came out of this discussion mostly confused – we were told that the people in these organizations know each other (which we believe) and that they work together (which we were unclear on the details of, especially since they don’t share funding and are generally going aboiut the same problems in radically different ways).

So, a lot of what comes out of this depends on what they email us for followup. The main thing I have to say at this point is that it’s been a long, hard slog through the fortress of fundraising (what CAS calls “development”) to meaningful conversations about why CAS chooses the strategies it does.

I’ve been hounding CAS for information longer than anyone else – they were my first ever real charitable donation back in July 2005 – and this is the third personal visit I’ve had with them. The first was a tour of one of their community centers; it was Halloween, and I was invited to participate in the “haunted house” for the little kids (I declined; I didn’t trust myself to draw the line between “fun, enthusiastic scaring the kids” and “causing heart attacks”). The second was a tour of a community school, where I got to interview little girls about the handbags they were making. From the beginning, I’ve been adamant about their sending me all the details they have of their programs’ impact, yet all I’ve seen is the study mentioned above and a longer community school study that is more encouraging but also is something like 10 years old.

It seems clear to me that the whole donor communication process is designed to deal with people who are basically the opposite of me. If what I was looking for was the opportunity to talk to charming people and look at adorable children, I would be absolutely thrilled because CAS has definitely provided that. But as someone who thinks 1000 words are often worth a million pictures, I’m still wondering why getting in touch with people who could more directly address my concerns (a) took so long to happen (b) had to happen over lunch.

And all that said, CAS is one of the best organizations I’ve seen in terms of being responsive to donor concerns and at least trying to answer the questions I’ve been asking.

If donors wanted meaningful information, donor relations would be set up to provide it. At this point in time, it seems that what most donors want is pleasant conversation, cuties, and asparagus-shrimp ravioli. GiveWell would love to help change that.

Our first content-less meta-post!

(updated on: ) | by Holden

I don’t have time for a real post today and I did two yesterday, so here are some scattered comments about what you can expect over the next few weeks:

  • First off, there’s a blog carnival – which is an awful name for what I would prefer to call a “blogozine,” a collection of posts from various blogs on a single topic – on “responsible investing.” Check it out if you care what other people think of the issues I’ve been discussing.
  • I’m not finished with the Straw Ratio. I’ve made the biggest points I want to make, but at some point I want to finish totally tearing it apart.
  • Lately I’ve been very focused on the business strategy end of the GiveWell project; I haven’t had time to do much actual research and learn more about the world’s problems. So a lot of my posts have been on abstract philosophy of giving/evaluation. That will change somewhat over the next few weeks, as I am visiting two Holden Award-winning charities: Children’s Aid Society and New Visions for Public Schools. Elie will probably go with me, and we plan to absolutely grill these people and come back with much more knowledge of what they do. You’ll hear about it.
  • How’s my choice of topics? What’s worth reading and what isn’t? What would you rather I blog about? Leave comments on the blog or email me (holden@givewell.net) to let me know.

One more thing

(updated on: ) | by Holden

“I’ve got a great new charitable venture. What I’m going to do is separate the S&P 500 into socially responsible and socially irresponsible companies. I’ll go long the good companies and short the bad ones.* Of course, I’ll be doing this for altruism, not out of any knowledge of the companies – so I might lose money – but it’s charity! Any losses will be covered by grants.”

*(This means betting on the good companies to outperform the bad–it has the same impact on prices as if you sold the bad companies’ stocks and bought the good companies’ stocks.)

So … does this idea sound as crazy and worthless to you as it does to me? Because it’s exactly equivalent to what people are calling for foundations to do: spend effort going through their investment portfolios so that they may shift their capital from the socially irresponsible investments to the socially responsible investments.

It would be different if someone could construct a well-respected social responsibility index, and convince a large number of foundations to use it. That might arguably be a good charitable activity. But taking a single pool of money, modest- or even large-sized, and devoting it to this would have practically no positive impact. The operation wouldn’t justify its costs.

Hopefully this is a vivid illustration of what I’ve been trying to say: that foundations shouldn’t expend time and resources on “responsible investing,” not because it’s irrelevant, but because there are more important things for them to worry about.

Speaking of which: no more on this topic for a while. Promise.

More thoughts on “responsible investing”

(updated on: ) | by Holden

The debate on responsible investing continues, including some thought-provoking discussion of “blended value.” People are pointing out, rightly, that being profitable vs. being beneficial to society is not an either-or. A charitable foundation can make investments that it expects to recoup partly or fully, and still think of these as part of its charitable activities (an excellent example is Jeff Skoll’s investment in An Inconvenient Truth, which I learned about from this article – Skoll invested in the movie from a combination of altruistic and profit-making motives).

So why shouldn’t a foundation think of its investment portfolio as an extension of its activities?

My answer is that for just about any foundation, it just isn’t worth it. Presumably, a foundation has a limited amount of time and resources for identifying ways to improve the world. It should spend all of these resources on identifying the best possible, highest-impact projects it can fund. Some of these projects may be “investments” in the sense that there may be an anticipated return … but once the foundation has granted all it can and wants to save the rest for later, it should just save it for later. Shifting capital between publicly traded securities would not make any reasonable list of the best ways to use one’s funds for improving the world.

But thinking about this has raised a question that seems much more important to me. Why do foundations want to save so much of their funds for later?

The law requires a foundation to give away 5% of its assets every year, and that’s what most do, even Gates. Most foundations sit around forever–witness the Rockefeller Foundation, which has existed for almost 100 years. Why? Is there a reason to save the money, earning a market return on it, rather than spend it now, and let the good it accomplishes multiply at what is probably a much higher rate (as I argued in this comment)?

One reason would be simply running out of worthy recipients. But is this really what’s going on? Why don’t foundations that have run out of projects to fund send their money to other foundations with similar goals, that haven’t? They’re all trying to accomplish the same things, right? Why doesn’t the money just flow where it’s needed, instead of sitting in the stock market?

Does this make any sense? Millions of people are dying from curable diseases and suffering from underfunded education … celebrities and charities exhort ordinary people like you and me to open our wallets today … all while 95% of your average gigantic pool of money left by a wealthy philanthropist isn’t even being used?

Wow. I’m about 10 times as stumped as I was when I started writing this post. Is this crazy or what?