The GiveWell Blog

Exploring policy-oriented philanthropy

(updated on: ) | by Holden

[Added August 27, 2014: GiveWell Labs is now known as the Open Philanthropy Project.]

Over the last few months, I’ve been working on improving our broad understanding of the role that philanthropy can play in influencing and informing public policy. We feel that this is one of the major categories of philanthropy that we’re currently least well suited to understand.

This is the first in a series of posts. This post discusses:

  • Why we think it’s important to explore policy-oriented philanthropy.
  • What we’ve done so far in this exploration.
  • What our key questions have been.

First, a general note: there are cases in which philanthropists are legally constrained from funding certain types of policy-oriented activities, particularly (a) attempting to influence elections and (b) lobbying. (A summary of these constraints is discussed on page 13 of an Atlantic Philanthropies paper on supporting advocacy.) We haven’t yet focused on thoroughly understanding these issues, whose relevance may be limited since most of our audience has freedom to structure its giving as it chooses (i.e., we aren’t managing an endowment that’s locked into a particular organization type). When we refer to “influencing and informing policy,” we mean this statement to broadly encompass a variety of possible activities from lobbying and advocacy to general provision of information and education.

Why explore policy-oriented philanthropy?
From what we’ve seen, it’s very common for major philanthropists to seek some degree of influence on public policy. This sort of work is quite prominent in the previously discussed list of philanthropy’s success stories, and most of the major foundations we’ve spoken to put a fair amount of emphasis on influencing policy.

One argument we’ve heard for focusing on policy is the sheer scale of government as compared to philanthropy. To give a simple example: the U.S. government alone is estimated (by IHME) to spend more on global health aid than all foundations and NGOs (excluding GAVI and GFATM, which draw much of their support from governments) combined; the discrepancy grows if one considers other governments, multilateral organizations such as the World Bank and World Health Organization, etc. We believe this general pattern to hold across many sectors, such that a relatively small (percentage) impact on government spending could justify a huge expenditure in philanthropic terms. Of course, there are many ways in which the importance of policy can go beyond funding. For example, migration to the developed world appears to be an extremely effective poverty reduction measure, but in most cases, migration faces hard policy restrictions.

For nearly every cause we’ve looked into, influencing policy is one possible path to having as much impact as possible per dollar spent, and in some (such as labor mobility) it is the only clear path to impact.

However, influencing policy is unlikely to be something we can analyze using our traditional approach and criteria. Because it is inherently adversarial – advocating for any given policy change likely means advocating against someone else’s preferred policy – there are unlikely to be proven, repeatable interventions with easily quantified expected impact. We’ve been trying to understand what sorts of things philanthropists can do to try to influence policy, and under what circumstances one might expect these to be effective.

Our process for exploring policy-oriented philanthropy
We’ve come to believe that in the early stages of an investigation, when we often don’t know which questions to ask, the ability to have extended, repeated, friendly, low-stakes interactions to get “grounded in the basics” is crucial, and we’ve largely used referrals from existing contacts to get started. Our investigation has included:

Key questions we’ve focused on
While we’ve largely tried to keep our investigation open-ended, we’ve been particularly interested in the following questions:

  • What are the “tools” of policy-oriented philanthropists? What are the activities one can fund that have a chance of influencing/informing policy?
  • What is the track record of policy-oriented philanthropy? With what probability, and on what time frame, can one reasonably expect to have an impact on policy?
  • What are the best opportunities to make a difference within policy-oriented philanthropy today?

Each will be the subject of a future post.

Geoengineering research

(updated on: ) | by Holden

[Added August 27, 2014: GiveWell Labs is now known as the Open Philanthropy Project.]

We’ve completed a medium-depth writeup on geoengineering research – large-scale interventions in the climate to attempt to reduce climate change or its impacts – focusing on research around efforts to artificially cool the planet. This writeup outlines the basic case for why geoengineering research might be a promising cause for philanthropy, as well as listing all of the funded projects we know of in a spreadsheet. It is a medium-depth, rather than shallow-depth, investigation, in that it involved many conversations and represents our attempt to speak to a broad, representative set of relevant people (rather than the 1-3 conversations that typically constitute a shallow-depth investigation). With that said, it leaves many questions unanswered, and leaves us a fair distance from having a confident view on the value of philanthropic investment in geoengineering.

In this post, we first summarize why we’ve looked into geoengineering, what we’ve learned about it, and what we see as the pros and cons of geoengineering as a philanthropic cause. We then address a series of meta-questions: why are we pausing our investigation here? What would it look like to do a deeper investigation? What is a reasonable goal for a medium-depth investigation? Making progress on these sorts of questions is a key goal of our current ongoing research, which is why we’ve gone ahead with some medium-depth investigations of causes that we’ve had only very preliminary reasons to be interested in.

Why did we investigate geoengineering?
We’ve previously completed a shallow investigation of climate change, which concluded that (a) there is a substantial amount of giving around climate change mitigation; (b) one of the most concerning aspects of climate change is the uncertainty around forecasts of potential effects, which cannot rule out the possibility that climate change could be far more catastrophic than mainstream projections anticipate.

At the same time, we had read about the possibility of geoengineering: a broad term for large-scale efforts to modify the climate, which (a) was alleged to be overlooked by traditional environmental funders and nonprofits; (b) could be extremely risky but could also conceivably be our best option if facing a far-worse-than-anticipated catastrophe. As of the time when we completed our shallow investigation of climate change, geoengineering research was the most promising-seeming aspect of climate change philanthropy we had identified, based on the combination of having little attention from philanthropists and of having potentially crucial importance in the worst case. Because of this, and because climate change is one of the causes most widely held to be of paramount importance, we decided to put some further time into investigating geoengineering research as a philanthropic cause.

After a number of conversations with experts in the field, and attending a conference devoted to geoengineering research, we feel that our initial narrative of limited funding and potentially large importance continues to hold up. However, there are many questions that we would like to answer before committing funding to the field, and we expect that they will be fairly difficult and time-consuming to answer. We accordingly decided to pause and write up our current views.

What have we learned?
Details are at our writeup. In a nutshell:

  • We focused on a particular category of geoengineering, solar radiation management, that we perceive as riskier, potentially faster and cheaper (and thus more useful in a severe catastrophe), and less well-funded than the other major category (carbon dioxide removal).
  • It appears that this type of geoengineering could bring extreme risks, both environmental and political (through e.g. disputes over who has the right to intervene in the global environment). Funding research into it could conceivably do major harm by causing it to be perceived as a more viable option by policymakers.
  • At the same time, it is plausible that, in the event of a far-worse-than-projected climate-change-related catastrophe, this type of geoengineering could relatively quickly halt or reverse global warming. Better information about the costs, benefits, and best methods of implementation could therefore be highly valuable in such an event.
  • We haven’t found any funders – governmental or philanthropic – spending large amounts in this area now, and the field appears relatively small with relatively little in funding. (Our attempt to identify funded projects and funding sources around the world that explicitly include a significant solar geoengineering component came up with a total of about $11 million/year in funding, though we believe that figure is more likely than not to underestimate the total resources devoted to solar geoengineering research.)
  • There also doesn’t appear to be much in the way of “shovel-ready” funding opportunities, and it isn’t immediately clear how a funder would contribute to the field. Promoting more discussion of whether geoengineering research should be expanded – and how to handle the governance issues (e.g., who has the right to carry out experiments that may affect the global climate) – could be a better strategy than simply funding more research. A funder’s involvement in this area could be in the category of “field-building” – funding and organizing convenings and encouraging more people to enter the field – rather than supporting existing organizations.

Pros and cons of geoengineering research as a philanthropic cause
We see major reasons to be positive on the value of geoengineering as a philanthropic cause, and major reasons to be negative.

Positive:

  • The relative lack of existing philanthropic (and governmental) funding is striking. When comparing geoengineering research to other causes we’ve done shallow investigations on (including those in progress), the total dollars in the area seem very low, and the dollars are spread out among an assortment of funders.
  • Climate change is one of the most compelling global catastrophic risks we’re aware of, and in the event that climate change is far more catastrophic than currently projected, it seems that having better information on geoengineering could make a crucial difference – whether that information enables and improves geoengineering (which could be the only viable option for mitigating global catastrophe) or whether it prevents geoengineering from being carried out (by strengthening the case that the costs outweigh the benefits).
  • As a more minor point, it isn’t necessarily the case that better information about geoengineering will be fully useless in a more “normal” (closer to mainstream projections) scenario. Studying the methods and consequences of intervening in the global climate could produce insights with a variety of applications.

Negative:

  • The experts we spoke with were not uniformly encouraging about the value of getting involved in this space, and in some cases expressed ambivalence on the basis that increased attention for geoengineering could cause harm by (a) making risky geoengineering interventions more likely; (b) lowering the perceived importance of carbon emissions reduction. We’re extremely wary of getting involved in any cause in which some of the people with the most inside knowledge are ambivalent/less-than-enthusiastically-positive about seeing a new funder enter.
  • The case for geoengineering research being important hinges on a highly specific long-term set of conditions. It hinges on the idea that our involvement now would cause more progress on generating useful information than would be achieved otherwise over a very long time frame (a risky proposition since improved technological tools and greater attention to the issue in the future could swamp what can be accomplished in earlier years); that climate change presents enough of a problem in the fairly far future for geoengineering research to be relevant; and that the marginal “useful information generated” by philanthropy over the next few years turns out to be important for policymakers.

Why are we pausing our investigation here?
The general principle we’re trying to follow with investigations is, “Pause an investigation when the effort required to significantly improve our understanding is significantly beyond the effort we’ve put in so far.” For our shallow investigations, we generally talk to 1-3 people; for medium-depth investigation, we generally try to talk to enough people to create a preliminary landscape of the cause. In the case of geoengineering, the cost of achieving the latter relative to the former seemed relatively small, so we went ahead. But from here, substantially improving our understanding would likely have to mean gaining a deep understanding of the scientific and/or political issues, which could take months or even years, and the returns to a few more conversations seem unlikely to be high.

What would it look like to do a deeper investigation?
It seems to us that a funder in this area would have to make difficult judgment calls about controversial questions, such as whether the benefits of more discussion around geoengineering outweigh the costs. This is the sort of endeavor that we feel is likely to require true subject-matter expertise, and for that reason the next step in investigating geoengineering would likely to be to seek out a full-time employee to specialize in it, or to hire someone who already has considerable expertise. This is consistent with our strategy, described earlier this year, of focusing our efforts on finding causes to recommend developing philanthropic capacity in, rather than on finding projects to recommend funding directly.

We are currently experimenting with working with a consultant (who has a substantial relevant background) to make more progress on this cause.

What is a reasonable goal for a medium-depth investigation?
We’ve been eager to move forward with investigations of causes that seem unusually promising to us, even if they seem promising for highly intuitive and not very thoroughly researched reasons. This is because we are seeking to learn about what to expect from an investigation as much as we’re seeking to learn about the causes themselves.

In this case, we feel that coming to a bottom line on whether and how a philanthropist could accomplish good by supporting geoengineering-related activities would take a great deal more investigation – so much so that it likely requires at least one dedicated full-time person over an extended period of time. In other words, we don’t feel that a medium-depth investigation has been sufficient to identify or assess specific giving opportunities.

However, we think the medium-depth investigation has given us important information that will be useful in determining the value of a deeper (full-time-person) investigation. We’ve established a more confident view that geoengineering is in some sense a “neglected” area of philanthropy; we’ve established that funding it would likely require a “field building” type effort rather than simply supporting existing organizations that are already ready to scale; we’ve established that there is controversy within the field and that an investigation would have to be thorough and careful in order to reach a well-grounded bottom line on whether and how to get involved.

Armed with this level of information about many causes, a funder would be able to make much more informed decisions about which causes to make commitments to (whether in the form of hiring people to investigate them more deeply, or in the form of funding existing organizations, or both). This doesn’t mean that there would be any particular formula for making provably, or quantifiably, optimal decisions, but it does mean that such decisions would likely be more rational than the way most funders choose causes. That’s the goal of strategic cause selection.

Discrepancies between our views and our website

| by Holden

There are times when the views expressed on our website can become out of sync with the internal views of staff. Because of the way we run our process, this effect is most pronounced in October and November, just before our annual recommendations refresh. At that time of the year, we’re generally taking the final steps to make decisions about e.g. adding new recommended charities or downgrading existing recommendations.

While we would ideally like to keep our website and internal views in sync in real-time, this is infeasible for a variety of reasons:

  • It’s often the case that we have an intuition that an investigation will turn out a certain way, but because details can matter dramatically (for example, a small discrepancy in data can lead to a major rethinking of how the data was put together and what it represents), we don’t want to close the investigation until we’ve nailed down all the details we can.
  • Writing up our views, with support, takes time, and we often change our views in the process.
  • We have a general practice of running potentially sensitive content – as well as any content that references not-already-public materials – by the relevant charities before publishing it. This can often lead to substantial delays.
  • Our top charities recommendations are particularly high-stakes, and we believe that a public announcement that we’re even strongly considering a particular change could affect an organization (and thus affect our relationship with it). We’ve made the determination that it’s generally best to feel fairly confident in a change before indicating publicly that it’s taking place; this may mean discussing the change with our Board and others, as well as the charities involved, first.

The approach we’ve chosen to take is to focus on having our recommendations be maximally up-to-date at the time of year when they are maximally relevant (December). This means identifying final contenders in August or September and planning deep-dive activities such as site visits at that time, and focusing in October and November on finalizing and writing up our findings.

In October and November, it’s generally the case that we’re finishing our investigations, and it’s not a good time to take on the work (of carefully communicating and discussing our thinking) that publicly previewing our changes would involve. Once we complete our investigations, our focus shifts.

If we were highly confident in a major change, we would announce it quickly. But generally, the longer it’s been since our last refresh, the more likely it is that we are finalizing some changes that aren’t yet public.

Because of this, we’re adding a note to our top charities page alerting users to this issue and pointing to this post.

Deep investigations of new causes

(updated on: ) | by Holden

[Added August 27, 2014: GiveWell Labs is now known as the Open Philanthropy Project.]

As discussed previously, GiveWell and Good Ventures have identified several philanthropic causes that seem like promising candidates for “deep dives” – investigations deep enough to be headed toward major giving recommendations. (In this post, as in the previous one, “we” should be taken to refer to both GiveWell and Good Ventures.)

We’ve had a lot of internal discussion about how we might investigate a new cause at this level of depth. Much of our discussion has centered around the idea of a “program officer” or “program director” – a staffer who is dedicated full-time to a particular cause, and therefore can invest very heavily in getting to know the relevant people, organizations and literature. However, at this time, (a) we don’t feel that we can spare any of our generalist staff for a full-time investigation into a particular cause; (b) there aren’t yet any people we’re ready to hire as cause-specific program officers. So we’re thinking about what we can do in the meantime to find potential program officers, as well as potentially make progress on “deep dives” in other ways.

Below are some of the possibilities we’ve considered. Many involve the possibility of expenditures in the range of $100,000 – whether grants or research consulting expenses – and we address this issue in a later section.*

Possible ways to move forward on “deep dives”

  • Consulting arrangements with potential program officers. Along the lines of the “trial hire” approach we’ve mentioned before, we might work with people who seem like potential fits for the “program officer” role (we’re still not sure just what constitutes a good fit, but are generally interested in people who show both interest in the work and background that could be highly relevant to the cause) on a consulting basis – retaining them to source possible giving opportunities and/or outline strategies for sourcing such opportunities. An arrangement like this could lead to a full-time hire.
  • Consulting-only arrangements. We might work with a consulting group in order to develop a strategy for sourcing giving opportunities (and for narrowing our focus) within a cause of interest. This option could be more expensive and less directly connected to finding program officers than the above strategy, but we are interested in trying it, as it appears to be relatively common among major foundations.
  • Funding “working groups.” We might fund several people who have relevant background in a cause to collaborate on a proposed strategy; this is another suggestion that was made by a major foundation.
  • Exploratory grants (in the general range of $100,000, though possibly more or less) to small organizations, startup organizations, academics and others with spare capacity, and/or cause-relevant departments of existing organizations. These grants would not be vetted as thoroughly as our typical recommendations; rather, as with the above options, they would be treated as learning opportunities. If we can find people who have concrete ideas now about how to spend money productively (or who form concrete ideas after finding that we’re open to such grants), we believe that funding them and checking in on their progress could be as good a way to learn about the cause – as well as to refine our views of which people and organizations can most effectively use funding to accomplish good and communicate to us about their progress (the major qualities we’re looking for in a program officer) – as the above options.
  • Exploring key questions ourselves. For some of our causes of interest – specifically malaria control and geoengineering – we’re less interested at this stage in “growing the field as a whole” than in answering particular key questions. In these cases, we might explore these questions ourselves, while keeping an eye out for anyone who is particularly helpful in our exploration and could be retained as a consultant or (down the line) as a program officer.

In general, we aim to take an attitude of

  • Eagerness to experiment: when opportunities arise that seem reasonable and not overly expensive (more on expenses below), we plan to take them without a large amount of due diligence, in the hopes that we’ll learn more from trying than from investigating these possibilities.
  • Selective followup: our guess is that many of the things we try will not lead to much in the way of outcomes or learning, and that if we aren’t selective about how we spend our time, we will risk sinking a lot of time trying to get good information from uncommunicative grantees and/or partners (this intuition is based partly on our past experiences trying to get information from potential top charities). We explicitly reserve the option to stop following up on any given grant, consulting arrangement or other project if we feel that we aren’t learning enough for it to be worth our time. Conversely, if a particular grant or arrangement leads to an important-seeming question, we may open an in-depth investigation.

The financial costs of learning
Most of the above approaches involve funding somewhere in the range of $100,000 per project over the next year (note that we could potentially fund several projects within a single cause). We are comfortable with this, and believe it is appropriate to engage in promising projects along these lines without much hesitation, whether they involve consulting engagements, grants, or both.

If, over the next year, we engage in 50 projects (grants, consulting engagements, etc.) with an average budget of $100,000 each, that would constitute a total of $5 million in grants – a fraction of a percentage of Good Ventures’s projected lifetime giving, alone. If those funds can have any noticeable impact on (a) our learning, and thus ability to find better giving opportunities in the future; (b) helping people and organizations build capacity that can productively absorb later funds, they will be well spent. Note that we see success at (a) and (b) as increasing (and not just improving) our future money moved – we believe that we will have more influence if we are able to point to better giving opportunities.

Currently, we’re very short on capacity – we have more to do than we have people to do it – while the total amount of money being spent is relatively small in the scheme of what is and (hopefully) will be available. Therefore, we think it’s appropriate and important to move further away from our historical insistence on deeply investigating all grants before they’re given, and instead move closer to an attitude of “money that might help us learn and build grantee capacity is money well spent.” We still don’t think it makes sense to spend money where there isn’t at least a reasonably large chance of our following up on it and deriving value from it, but in cases where there are real potential benefits of the kind detailed above, we think it’s appropriate to make grants without much hesitation. And we think that requiring ourselves to deeply investigate and/or write about each grant would sustain the current imbalance between funding (of which there’s more available than we’re using) and capacity (which we’re short on).

A couple of other notes:

  • We believe that being willing and ready to spend money, in and of itself, could have substantial benefits for our ability to attract potential consultants, program officers, and giving opportunities.
    • Consultants and program officers are likely to be more interested in working with us if they perceive us as ready to put funding into a cause.
    • In the past, we’ve had the experience of having people bring funding opportunities to us based on their understanding of what we’re interested in. On the other side, we’ve looked for funding in the past by seeking out funders that support others in our space.
      By committing funding in a cause of interest, we hope that we’ll make ourselves easier for people interested in this cause to find.
  • Along the lines of being ready to commit funding when it could improve future giving opportunities, we are also looking for cases in which seed grants could help create better giving opportunities by our traditional criteria. If, today, we ran across a giving opportunity like GiveDirectly’s early $100,000 grant via the Unorthodox Prize – a chance to help a potential future top charity get off the ground, and in the process gain benefits similar to those detailed above – we would take that opportunity as well.

*Grants will likely be funded by Good Ventures. There may be cases in which GiveWell is an intermediary.

GiveWell’s funding needs

(updated on: ) | by Holden

Building GiveWell’s staff has long been one of our top priorities, and one of our most difficult challenges. In 2013, we’ve seen progress on this front like never before. Our staff currently stands at 10 full-time (not “trial”) employees, compared to 5 at the start of 2013 and a maximum of 7 at any point prior to 2013.

As a result, our projected expenses have risen significantly, and we now have the largest projected funding gap in our history: we project ~$1.2 million in expenses over the next year, against ~$850,000 in revenue. We have about $900,000 of reserves available, so failing to close the gap would not mean insolvency, but it would mean drawing on our reserves, something we seek to avoid. So fundraising will become a significant priority until the gap is closed (and may continue until we also have a comfortable level of reserves on hand, i.e., ~12 months’ worth).

In some ways, our projected budget may be an overestimate: it allows for a scenario in which we retain all current employees and hire several more. On the other hand, since we expect to keep expanding and since we will need to adjust compensation upward over the long run, we expect our expenses to continue to grow over time.

We take a somewhat unusual approach to fundraising, because we don’t want to take on the credibility risks or potential perceived conflicts of interest that would come with “competing with top charities for donations.” Historically, we have confined our fundraising to a small number of “insiders” – often people who started off as major donors to our top charities, but whom we built relationships with over time and felt comfortable approaching privately for direct support. With our larger funding gap and wider audience, we’re now writing publicly about our funding needs, and we encourage interested parties to consider supporting us , but we are still not creating a prominent ask on our main website.

Summary

This post addresses the following:

  • How and why has GiveWell’s funding gap emerged? In the last nine months, we’ve had more success with making full-time hires than expected, and we recently revisited our financials with this in mind. Because we generally don’t solicit funding in excess of our 12-month projected expenses, we’re set up to experience a gap when our forward expenses change. (Again, this gap does not indicate coming insolvency, as we have reserves to draw on if revenues fall temporarily short of expenses.) More
  • What functions are GiveWell’s new staff performing? We are partly training staff to carry out our traditional work on proven, cost-effective, scalable charities, with the hope that over the long run, they will be able to execute this work with more thoroughness than GiveWell has had in the past. New staff are also crucial for our GiveWell Labs work, which is much larger in scope. More
  • Why can’t GiveWell raise all needed funds from Good Ventures? We wrote about this previously. In a nutshell, we and Good Ventures agree that it is important for GiveWell to have a diversified funding base so that we aren’t overly reliant on one funder. Good Ventures is supporting us to an extent that both organizations feel is on the high end consistent with this principle. More
  • What will happen differently if GiveWell fails to close its funding gap? We haven’t yet determined this. It’s possible that Good Ventures would up its contribution; in this case we would risk becoming overly reliant on Good Ventures and losing credibility and accountability as a group serving large numbers of donors. It’s also possible that we would slow down our attempts to recruit new employees. More
  • Are GiveWell’s projected operating expenses reasonable or excessive in light of its impact? We’ve recently put some thought into how much operating expenses would be reasonable, as a function of our total projected money moved. Based on looking at how much large foundations spend, we believe that spending (15%*money moved) on operating expenses would be within the range of normality, as well as defensible on impact grounds. Our 2012 “money moved” was ~$9.6 million and we expect substantially more in 2013, which would justify (based on the 15% figure) an operating budget in excess of our current planned budget. More
  • What is the “good accomplished per dollar” of a donation to GiveWell and how does it compare to GiveWell’s top charities? Over the long run, we expect to continue to have “money moved” of at least ~$7 for each $1 we spend on operating expenses. The additional spending we’re doing now is largely aimed at improving the progress of GiveWell Labs, which we believe will substantially increase our money moved in the future (though not in the short or even necessarily medium term); it is also aimed at making our traditional work more deep and robust in the future. If revenue remained the same rather than growing, it would significantly slow the progress of GiveWell Labs and lower the probability that our traditional work will grow beyond its current level, though it’s hard to quantify the impact of this on future money moved. More below. More
  • How does GiveWell plan to fundraise? Our primary emphasis will be on directly contacting people who give large amounts to our top charities. In terms of reaching out to others, we are running this blog post and including it in our next email update in the hopes that some people will voluntarily choose to support us, and we will be open to answering questions from interested parties, but we will not actively promote ourselves to the general public beyond that. More
  • If GiveWell closes this funding gap, will it continue to need to raise its revenue after the next 12 months? Almost certainly yes. We hope to continue expanding our staff; in addition, over the long run we will need to raise salaries in order to become a mature organization, including retaining employees at later career stages. We will be writing more about this in the future, but for the moment the focus is on closing our 12-month funding gap. More
  • How can I help? If you’re interested in providing operating support to GiveWell, we would be happy to hear from you and to answer any questions you might have. The more information we have about our donors’ long-term interest in supporting us, the more helpful it is to our planning; clear communication about future plans is more valuable to us (all else equal) than a one-off gift whose likelihood of repeating we can’t predict. More

Notes on the budget figures used in this post:

  • We present core operating expenses and revenue available for core operating expenses, which are distinct in several ways from the figures on our audited financial statements and tax returns. Most importantly, they exclude restricted donations intended for the support of our top charities, and also exclude the grants we make using such donations. The figures also exclude non-core, Good Ventures-supported expenses based on the framework laid out previously. (Specifically, they exclude ~$100,000 in projected specialized research consulting expenses.)
  • There is usually a delay between the end of a month and our producing complete financial records for that month. So the budget we present is for the twelve months starting in August 2012, the most recent month for which we’ve completed financial records.

How and why has GiveWell’s funding gap emerged?
Our 2012 expenses were ~$550,000, against ~$630,000 in revenues (see Attachment C from our May 6 Board meeting). From August 2013 through July 2014, by contrast, we project ~$1.2 million in expenses, against ~$850,000 in revenues. What changed?

The following table gives a summary. Details of our current forward-looking financials are available at our budget spreadsheet (XLS / ODS).

Expense category 2012 expenses (actual) Aug 2013-Jul 2014 expenses (projected) Change Notes
Compensation: co-Executive Directors $187,516 $249,587 $62,071 All compensation lines include payroll taxes, health benefits
Compensation: other staff $276,399 $772,113 $495,714 More discussion below
Office space $12,062 $96,000 $83,938 Moved from co-working to more professional, dedicated office space
Other $73,081 $88,000 $14,919 Includes travel, accounting, website; details at budget spreadsheet

Some of the rise in expenses comes from increases in the pay level for staff, including Elie and myself. These increases are not a major driver of our current funding gap, but we expect increases to continue and believe they are worth addressing. We will be writing more about the path of staff compensation in the future.

The overwhelming driver of the rise in expenses is the fact that we’ve significantly expanded our staff.

  • In 2012, we employed 5 full-time people throughout the year, and two starting at mid-year. (We had two departures at the end of 2012, leaving us with 5 people total for the start of 2013.)
  • For the next 12 months, by contrast, we project retaining our entire current 10-person staff and leaving space in the budget to hire up to 4 more people in the next year.

We’ve made five full-time hires this year – two sourced via referrals, one sourced via our jobs page, one sourced via an interview I did with 80,000 Hours and one former intern. All five have gone through an internship or “trial hire” period; while this doesn’t guarantee a long-term fit, it makes our confidence much higher than for employees hired simply on the basis of resumes and interviews. Looking forward, we are leaving room in the budget to hire four more, two at a senior level and two at a junior level; we are relatively unlikely to do this much hiring, but given the results of the past eight months, it is a distinct possibility.

Revenue has not changed as much. We had ~$813,000 of unrestricted revenue in 2012 (see our audited financial statement); ~$180,000 came from three donors that were giving for idiosyncratic reasons and that we knew would not renew their support, leaving ~$630,000 in revenue that we could reasonably expect to repeat. Today, our 12-month-forward revenue projection is $856,433, and the main gain between then and now is the $190,000 in increased projected support from Good Ventures.

The reason our revenue has not grown much is simply that we haven’t solicited more operating donations. We’ve had a general approach of not asking for operating support beyond what we foresee needing to balance our budget over the next 12 months; many of the people we solicit from are deciding whether to give to GiveWell or its top charities, and they generally prefer to support top charities when no funding gap is projected.

When we both (a) drive ourselves to expand when we can and (b) don’t do fundraising beyond what we need to close the 12-month funding gap at a given time, the inevitable consequence is that we’ll have situations – such as this one – in which our expenses rise much faster than our revenues, and a substantial funding gap appears. We believe we have identified this funding gap and started taking action with ample lead time for good decision-making. Since we have ~$900,000 in reserves, we can operate as planned over the next twelve months as long as we feel that we’re making sufficient progress on fundraising for our budget to be sustainable.

As a side point, we would guess that many nonprofits address these sorts of issues differently, raising as much as they can (even when no particular plans can be outlined for the funds) and hiring only when they’re confident of being able to afford it. Assessing room for more funding for a group that operates in this manner could be quite challenging.

What functions are GiveWell’s new staff performing?
GiveWell’s new staff are all Research Analysts, and we believe they combine the analytical skills and passion for GiveWell’s mission necessary to contribute to our work on a broad array of fronts, such as:

  • Taking over some of GiveWell’s traditional work on proven, cost-effective, scalable charities. We wrote previously that we are “sticking to the essentials” for this work until we can expand the capacity available for it, in order to make more progress on GiveWell Labs. If newer staff can take over much of this work, the quality and thoroughness will improve even as the time that the co-Executive Directors allocate to it falls. The process for moving in this direction is gradual, as outlined in a previous post. Currently, non-senior staff do most of the work behind our charity updates. In preparation for this year’s giving season, we are experimenting with having such staff do much of the work behind (a) assessing new candidates for “top charity” status; (b) reviewing the evidence on interventions that we’re seeking to learn more about; (c) refreshing our existing reviews on LLIN distribution, cash transfers, and deworming. Over time, staff who prove highly capable for this work may take on management roles within it, as well as expanding its scope (e.g., doing deeper dives on recommended and potential recommended charities, and looking for charities that provide donors with more options even if they don’t fully meet the standard of our top charities).
  • Providing capacity for GiveWell Labs. The challenge we’ve taken on with GiveWell Labs is enormous in scope. Even conducting one high-quality shallow investigation or medium-depth investigation of a cause is highly challenging, and we have a growing internal list of nearly 100 causes that we’d like to investigate at some level. In addition, conversation notes require serious time investment, and as our volume of conversations has gone up, we’ve allocated many staff hours to them.
  • Communications and outreach. We’ve experimented with having newer staff handle communications with new donors and take speaking engagements. We think it is likely to take a long time to absorb enough knowledge of GiveWell’s work to be able to communicate effectively about it, but staff who did so could increase our capacity for outreach on many dimensions.
  • Management and recruiting. Longer-standing hires have taken on management- and recruiting-related roles, thus “expanding capacity for expanding capacity” – one of the most challenging and crucial things we do. We are trying to move staff in this direction, while recognizing that it may be a reasonably long path to get there.

Why can’t GiveWell raise all needed funds from Good Ventures?
Good Ventures makes substantial financial contributions to GiveWell. Its total support over the next 12 months is projected at $340,000, of which $240,000 is core support (about 20% of the “core budget”). (The other $100,000 is our projection for specialized research expenses covered by earmarked grants, as discussed previously).

Both GiveWell and Good Ventures believe it is not a good idea for GiveWell to rely on Good Ventures for more support than this. We discussed the reasoning behind this view previously. In brief, if too high a percentage of our core operating expenses came from Good Ventures, this would cause a couple of problems: it would put GiveWell in an overly precarious position (such that we wouldn’t have a realistic way of dealing with losing Good Ventures’s support, and would thus have more difficulty maintaining our independence), and it would mean that our incentives would not be aligned with our mission of serving large numbers of donors.

What will happen differently if GiveWell fails to close its funding gap?
It would take a good deal of conversation and deliberation – internally among staff, with our Board, and with supporters – to decide on the answer to this question. We find it more efficient to try to close the gap before having the conversation about what we would do if we couldn’t. With that said, some possibilities:

  • We might solicit more support from Good Ventures. If we did so, and if Good Ventures were to provide such support, we would become highly reliant on Good Ventures, and this would cause us to have difficulty maintaining our independence and to rethink the priority we place on serving Good Ventures vs. individual donors. This would, in turn, likely mean less emphasis on our traditional work (proven, cost-effective, scalable charities); it could mean investigating causes that Good Ventures finds more promising than we do. While we would continue to highly value transparency (as Good Ventures does), we might design our communications more for staffed foundations and less for use by individuals.
  • We might reduce the time we allocate to recruiting and refrain from making additional hires until we raised more in operating support. We believe we could make up most of the gap in this way, and would not need to resort to funding-based layoffs.

Some subtler potential consequences:

  • The more difficulty we have closing our funding gap, the more time we will spend on fundraising-related matters instead of on growing the organization and doing research. Fundraising time will mostly come from myself and Elie, and will directly cut into time spent on our other priorities.
  • The more difficulty we have closing our funding gap, the (rightly) less workable our model will appear to those contemplating similar endeavors.

Are GiveWell’s projected operating expenses reasonable or excessive in light of its impact?
We address this question from two angles: first from the perspective of what would be a “normal” amount to spend given our level of money moved, and second from the perspective of how much value-added one has to believe our research brings in order to justify our level of operating expenses.

To address the question of what a “normal” level of operating expenses is, we put together a spreadsheet summarizing expenses from other foundations (XLS / ODS). In a nutshell:

  • We collected data on grants and operating expenses for major foundations as well as foundations with grantmaking in the $1-10 million range (the latter is the range that our current money moved sits in). We found that the average ratio of operating expenses to grants is around 15%. Many of the foundations in this set have reputations for being highly impact-oriented, so we don’t believe that these figures are necessarily excessive. See our spreadsheet for this data (XLS / ODS).
  • The analogy between “money moved” and “grants” seems strong to us, and so we believe that if our operating expenses were equal to 15%*(projected money moved), we would be at a roughly “normal” level of operating spend relative to money moved.
  • Total money moved for 2012 was ~$9.6 million, which (by the above reasoning) would justify up to $1.44 million in operating expenses. We anticipate significantly higher total money moved for 2013.

The above argues that our projected expenses are well within the range of “normal,” compared to the practices of others. Another question one could ask is whether these expenses are excessive in the sense that they would do more good as donations to our top charities. This question is addressed immediately below.

What is the “good accomplished per dollar” of a donation to GiveWell and how does it compare to GiveWell’s top charities?
This is a very difficult and judgment-laden question, but we anticipate that many of our readers will want our take on it.

One simplified way of answering this question is to presume that, over the long run, GiveWell will spend $15 in operating expenses for every $100 in money moved (consistent with the ratio discussed in the previous section), and to focus on the question, “How much more good do ‘money moved’ dollars do, compared to how much good they would do in the absence of GiveWell?”

If the answer is “15%” (that is, the dollars given on the basis of GiveWell’s recommendation are 15% more effective than they would be in the absence of GiveWell), then this implies that the average dollar spent by GiveWell over its lifetime does the same amount of good as the average dollar of its money moved. (On average, that is, every $15 spent by GiveWell causes another $100 to be spent 15% more effectively.)

We intuitively believe that we are easily clearing this standard, but because of the difficulty of evaluating the “good accomplished per dollar” of non-recommended charities, it is difficult to pin down just how much we are improving the effectiveness of donations. If you believe that our “money moved” does twice as much good as it would do in our absence, this implies that the average dollar donated to GiveWell does 3-4x as much good as it would if donated to recommended giving opportunities.

This analysis excludes benefits that accrue from GiveWell’s work that go beyond the direct impact of “money moved.” It also focuses on the average dollar given to GiveWell, as opposed to the marginal dollar. At this stage in our development, we would guess that the marginal dollar does an unusually large amount of good, since we are still a relatively young project, and the funds we raise now will help us to do work that will hopefully greatly expand our money moved over time. If we were to fail to close our funding gap, we would still operate, but we might change our emphasis and incur the costs described above, which could have long-term consequences for how much we’re able to increase our money moved.

Determining just how much good the marginal dollar spent by GiveWell accomplishes is a substantial judgment call, and we feel we’ve provided as much information as we usefully (and relatively easily) can in order to assess it.

One can approach this question from another angle, by noting that donations to support GiveWell are, to some extent, fungible with donations to GiveWell’s top charities. Because we tend not to solicit operating support when we don’t project a funding gap, helping to close the funding gap can mean allowing other donors to redirect their giving to GiveWell’s top charities. We believe that in the past, there has been substantial fungibility of this kind, i.e., at the relevant margin each dollar donated to GiveWell caused another dollar (from another donor) to be reallocated to top charities rather than to GiveWell. We believe it may be fair to imagine that if you give to GiveWell rather than to recommended charities, the total number of dollars given to recommended charities will remain the same (relative to what it would be if you gave to top charities), but there will be the added benefit of reducing the time we spend on fundraising and improving our ability to plan. (This logic only holds if we eventually succeed in closing our funding gap.)

How does GiveWell plan to fundraise?
Our primary emphasis will be on directly contacting people who give large amounts to our top charities. We will also disseminate this blog post via our next email update (as well as via Facebook and Twitter, as with all blog posts), in the hopes that some people will voluntarily choose to support us.

We believe that more aggressively advertising ourselves to the general public – by, for example, emphasizing the “donate to GiveWell” option on our main website – would be unlikely to raise much additional money and could incur substantial credibility costs.

If GiveWell closes this funding gap, will it continue to need to raise its revenue after the next 12 months?
At this time, we feel a great need for more capacity, and we hope that we will continue to be able to expand our team. In addition, over the long run we will need to raise staff compensation in order to be competitive with other mature organizations and in order to support staff who will be supporting families. For both of these reasons, we expect our operating expenses to continue rising in the future, and we expect to continue fundraising to keep up with this. However, now and in general, our focus is on closing our 12-month funding gap.

How can I help?
If you’re interested in providing operating support to GiveWell, we would be happy to hear from you and to answer any questions you might have. The more information we have about our donors’ long-term interest in supporting us, the more helpful it is to our planning; clear communication about future plans is more valuable to us (all else equal) than a one-off gift whose likelihood of repeating we can’t predict.

Donate to GiveWell or Contact GiveWell

Book about giving by GiveWell supporter Eric Friedman

| by Elie

Eric Friedman, a long-time GiveWell supporter, recently authored a book, Reinventing Philanthropy, about effective charitable giving. I read an early draft of the book in the spring of 2012, and especially appreciated Mr. Friedman’s focus on “issue-agnostic giving,” a value we share. For donors looking for more material that’s aligned with our perspective on charitable giving, we recommend checking out Mr. Friedman’s book.