The GiveWell Blog

KIPP Houston has a 1.4 million dollar shortfall. How did this happen?

(updated on: ) | by Wendy Knight

KIPP is one of the most well-known and, we believe, effective charities in the United States: it has a long track record of improving students’ performance in school and Secretary of Education Arne Duncan has cited it as a model for education reform. In our recent analysis of KIPP, we’ve been surprised to learn that despite these accolades, some KIPP schools are considering cuts to core parts of the program (such as reducing Saturday school and the number of teachers available for after-school activities) and are being forced to significantly slow down the opening of new schools. KIPP Houston requires approximately $1.4 million to prevent these cuts and could use an additional $12-13 million productively to fund opening 3 new schools.

How does such a successful and acclaimed organization struggle to raise the funds necessary to continue expanding? We think a big part of the explanation comes down to the fact – which we’ve discussed before at length – that the issue of “room for more funding” (the question of how additional funding would affect a charity’s activities – i.e., the impact of the marginal donation, as opposed to the average one) is neglected by givers.

We came across the close to $15 million funding gap at KIPP Houston by probing the “room for more funding” situation for the KIPP Foundation, the national organization that we have been directing donors to. In the course of conversations on this topic, we ended up agreeing with KIPP representatives that

  • The KIPP Foundation itself doesn’t have short-term “room for more funding”: it is committed to executing against its Board approved budget only. This does require a significant amount of philanthropic funding annually, but current needs pertain to future years.
  • Specific KIPP regions do have room for more funding – and the KIPP Foundation doesn’t generally give grants to these regions (doing so isn’t in its model). The KIPP Foundation directed us to KIPP Houston as a specific KIPP region with a funding gap and capacity to expand.

Bottom line:

  • One of the most acclaimed and effective programs in U.S. education needs $1.4 million to avoid cutting core programs and an additional $12-13 million to continue its expansion.
  • This fact highlights the benefits of deeply analyzing “room for more funding,” something we’ve seen very little discussion of elsewhere in the context of charitable giving.

Details follow. (Note that we still recommend international aid organizations above U.S. organizations; this analysis is most relevant for donors who wish to focus on the U.S.)

Donors who want to support KIPP Houston directly can do so using our donate page for KIPP Houston.

Background

Over time, we’ve put more and more time and thought into the question of how to analyze a charity’s “room for more funding”, i.e., the question of how additional funding would affect a charity’s activities.

  • For the early years of our project, our analysis was loose and conceptual, as we looked at basic heuristics.
  • In December 2009, working with our top-rated charity VillageReach, we arrived for the first time at what we considered a “gold standard” room for more funding analysis, showing specifically how VillageReach would change its plans in response to different levels of total unrestricted revenue.
  • During 2010, we started revisiting our recommended charities looking for a similar level of understanding. One of the first charities to provide it was our top-rated U.S. charity, the Nurse-Family Partnership (NFP). NFP told us that existing commitments can sustain the organization through 2015 at which point the organization would likely need additional donations to continue operations.

    We believe that donations to NFP are good: they provide a long-term safety net to an outstanding organization, and they support the cause of more effective and accountable charity more broadly. Nevertheless, we don’t think it’s fair to consider donations to NFP, today, to be the best option if there are other organizations that would use them to fill a more pressing need.

  • The Knowledge Is Power Program (KIPP) is another U.S. charity we rate highly, and in response to KIPP’s question about how it could improve its rating, we responded that we’d like the best possible understanding of its room for more funding. KIPP Foundation representatives agreed to this and were extremely helpful. They were open that while the KIPP Foundation does not have the same type of long-term funding commitments that NFP has, and does require a significant amount of philanthropic funding annually, it does not have a compelling use for additional funds in the short term. But, the KIPP Foundation went on to clarify that, some of the regional networks (i.e., the actual KIPP schools) in the KIPP family do have pressing, if not urgent, financial needs.

    The KIPP Foundation does not have a mandate to directly fund KIPP schools. (For more on what it does, see our review of KIPP.) The KIPP Foundation told us that some of the regional networks have significant room for more funding. The KIPP Foundation referred us to KIPP Houston, which it believed could significantly benefit from additional funding.

KIPP Houston’s Room for More Funding needs as of July 2011

Based on this lead, we reached out to KIPP Houston, and in speaking with John Murphy, KIPP Houston’s CFO, it became apparent that it has a significant and immediate need for more funding. Specifically, KIPP Houston, which relies on money from the state for close to 85% of its annual operating budget, is planning for expected state budget cuts of 6% for the coming school year and 8.5% the following year, which would leave it with a budget shortfall of 4.7 million for the coming year.

Two notes on the data:

  • The actual deficit would be slightly lower in the upcoming year and slightly higher in the subsequent year, but the average deficit over the 2 years is $4.7 million and our understanding is that KIPP would (we believe appropriately) budget for the two years together.
  • We are relying heavily on KIPP Houston’s expectations for future state cuts. A two-year state budget cut of $4 billion has been passed by the legislature and according to a recent newspaper report (archived), a 6% cut across the board is expected in year one, while the subsequent year’s cut has not yet been allocated across schools, and we do not know when that will occur.

KIPP Houston told us that it expects to be able to raise an additional $1.7 million in donations (relative to what it had previously planned, a 50% increase from the previous year) and that it hopes to save $0.4 million by finding areas of potential savings (through operational efficiencies, etc.), thereby filling around $2.1 million of the funding gap itself. It could also use $1.2 million in bond income to fill the gap, though KIPP Houston told us that this would reduce its ability to expand in the near term because it had intended to put these funds toward expansion.

The remaining gap, estimated at $1.4 million, would need to be addressed through some combination of spending cuts to some of the items listed below; the final decision has not yet been made.

Potential cuts to KIPP Houston Operating Expenses in 2011-2012

Expense Maximum amount
“KIPP Unique” Expenses – These include program areas such as, Field Lessons, KIPP Time (extended day) and Saturday school. Specific changes in this area will be left up to the discretion of school leadership. $2.4 million
Putting a hold on the teaching fellows program (resulting in the replacement of fellows with teacher aides). Specific changes in this area will be left up to the discretion of school leadership. $0.5 million
Freezing administrative hiring for expansion of KIPP Houston’s network. $0.75 million
Reducing employee compensation plans, professional development and/or benefits packages. $0.75 million

We asked KIPP Houston what it would do if it were able to raise additional dollars above and beyond its new fundraising goal (and close some of the gap). Mr. Murphy indicated that since many aspects of the state budget are still up in the air, these decisions have not been finalized, but were KIPP Houston able to raise additional dollars towards its budget shortfall, it would likely reinstitute “KIPP Unique” expenses and employee compensation, benefits and professional development packages first (with much of the details left to the discretion of campus directors), items we see as core to KIPP’s operations. In addition, this tightening of their budget and the use of bond income also means slowing down expansion plans in the Houston area, resulting in fewer students being served by the KIPP program than intended. Mr. Murphy explained:

“We recently were able to purchase property for our 24-26th schools and it is literally right in the heart of our more than 7,000-student waiting list. We could start things up there right away, but right now we can’t afford the construction because our capital is minimized. Those three schools could serve approximately 1,600 kids, but right now we just have to hold off and wait.”

Conclusion

As we’ve written, even a charity with proven impact isn’t necessarily a good investment – a key question is the impact of the marginal donation (not just the average one). For years we’ve recommended the Nurse-Family Partnership and the KIPP Foundation to U.S.-focused donors based on their strong case for impact, but as our analysis of “room for more funding” has sharpened, we’ve discovered that neither has a short-term need for more donations – and this in turn led us to find a specific KIPP network (KIPP Houston) that does have short-term room for more funding. (Note that we still recommend international aid organizations above U.S. organizations; this analysis is most relevant for donors who wish to focus on the U.S.).

While donating to the Nurse-Family Partnership or the KIPP Foundation does mean supporting an outstanding organization that relies on philanthropic donations to operate – and therefore is making a positive impact – we think there is a huge opportunity for a U.S.-focused donor to support organizations like KIPP Houston, for which more funds will make the difference between expansion and cutbacks.
Now the question is, how much of that nearly $15 million funding gap can we help close?

Donors who want to support KIPP Houston directly can do so using our donate page for KIPP Houston.

Update on GiveWell’s web traffic / money moved: Q2 2011

(updated on: ) | by Elie

In addition to evaluations of other charities, GiveWell publishes substantial evaluation on itself, from the quality of its research to its impact on donations. This year, we have added quarterly updates regarding two key metrics: (a) donations to top charities directly through our website (b) web traffic.

Money moved

By “money moved” we mean donations to our top charities that we can confidently identify as being made on the strength of our recommendation. This update focuses only on “money moved” that comes through GiveWell’s website; we’ll report on all donations due to GiveWell’s research at the end of the year (when the majority of large gifts occur).

While money moved through the website is only a fraction of overall money moved (and is also far greater in December than in other months), we believe this is a meaningful metric for tracking our progress/growth (as opposed to overall influence).

The charts below show dollars donated and the number of donations by month. While there’s evidence of noise — May was an unusually slow month, June an unusually strong one — overall, growth in 2011 has been strong.


We report annually money moved to each of our recommended charities, but we don’t plan on including this information in quarterly reports because (a) there are some donations that have been made but we can’t yet to attribute to an organization; (b) overall we don’t feel these figures are very meaningful or good predictors of what the year-end allocation will be.

Web traffic

The table below shows quarterly web traffic to GiveWell’s website.

Quarter Visitors Y/Y growth
Q1 2009 20,681 –
Q2 2009 14,974 –
Q3 2009 18,418 –
Q4 2009 45,956 –
Q1 2010 48,027 132%
Q2 2010 33,173 122%
Q3 2010 27,729 51%
Q4 2010 68,870 50%
Q1 2011 89,588 87%
Q2 2011 102,506 209%

The charts below show our web traffic over time, including the latest quarter.


How much time do charities spend participating in GiveWell’s process?

| by Elie

In May, we emailed all the charities we have analyzed in-depth asking them to fill out a brief survey about their experiences with our process.

We asked:

  • How much time did you spend on our process?
  • How clear were you at the outset about what our process would entail?
  • Do you think, looking back, that our process was reasonable?

Note that in our process, we only contact and publish in-depth reviews for organizations we find promising, and this survey only went to those that we found promising enough to take that step. The survey was anonymous (unless the responder chose to disclose their identity.) We emailed 39 organizations; 12 responded. This was the first time we’ve conducted a survey like this. We intend to conduct these more regularly in the future and hope that leads to more responses.

We will use the results of this (and future) surveys to help us improve our process. The data will also help us to give the organizations we contact better estimates of how much time our process will require.

Unsurprisingly, organizations that receive high ratings in our process responded more positively to our survey. Below, we separate results from highly rated organizations (i.e., Gold- or Silver-rated charities) from others. (In the analysis below, we’ve assumed that organizations that submitted a survey but did not disclose their identities were not highly rated.)

Finally, we would guess that the time spent below slightly overstates the average time required for an organization we would contact in the future. The group of non-highly-rated organizations that responded was a select group (~7 / 30) that presumably were particularly motivated to respond, presumably because they spent more time than usual on our process.

Results

Of the 12, all but 1 gave us permission to share their responses in aggregated form, so all averages exclude this organization.

Table 1. Time spent on our process (hours)

Rating Average Median Min Max
Gold/Silver 32 12 10 100
Not Gold/Silver 43 32 1 120
All 38 13 1 120

Table 2. Average time spent, by part of GiveWell’s process

Rating On the phone with GiveWell Creating new materials for GiveWell Gathering/Sending materials for/to GiveWell Reviewing materials (created by GiveWell) for accuracy
Gold/Silver 29% 36% 14% 18%
Not Gold/Silver 23% 39% 28% 9%
All 26% 37% 21% 13%

Table 3. Average time spent, by role at the organization

Rating Executive Director Development staff Program staff Other
Gold/Silver 51% 32% 16% 1%
Not Gold/Silver 14% 33% 38% 14%
All 31% 33% 28% 8%

Table 4. Number of responses to “Overall, did you feel the time spent was: reasonable, somewhat reasonable, or unreasonable?”

Rating Reasonable Somewhat reasonable Unreasonable
Gold/Silver 4 1 0
Not Gold/Silver 1 3 2

Table 5. Number of responses to “How well did you understand the criteria / steps in the process / time required to assess your organization?” (Data is in the form of “very well + reasonably well | not particularly well + not well at all”.)

Understanding our process Criteria Process Time required
Gold/Silver 4 | 1 4 | 1 4 | 1
Not Gold/Silver 3 | 3 3 | 3 1 | 5

Feedback from charities

One organization submitted feedback which was critical about our process.

  • “Process is very flawed. Information is provided, then goal posts are moved. Givewell not in a position to analyze or understand information that is provided to it. Dealt with different people internally at Givewell, and have very little faith in process from Givewell’s end. Appeared new people did not know of earlier info provided – seemed to be ticking or crossing boxes, rather then engaging with the material. End result is that Givewell’s assesment process seems to be more of an assesment of Givewell’s ability to assess, than a real snapshot of organisations it is dealing with. Ie internal limitations of Givewell are the core factor in deciding ratings – I don’t think this is reflected in the way Givewell positions itself.”

We are not surprised to hear that an organization perceives the “goal posts moving” in our process. We tailor our analysis to the specific activities of the organization, which often means learning about what types of information the organization does/does not have available as our process is underway. And, as we find more outstanding organizations, the standard an organization must meet to qualify for our highest ratings does move. (We’ve written about this before here.)

The above organization submitted this feedback anonymously. If the representative who submitted this is reading our blog, and you are willing to speak further, please contact us at info@givewell.org. I’d appreciate the opportunity to learn more about the issue that it “appeared new people did not know of earlier info provided – seemed to be ticking or crossing boxes, rather then engaging with the material.”

A note on the organizations we contacted: We chose not to email the organizations we only had contact with during our first grant-focused process in 2007 because (a) the grant process we used then is very different from the process we use now and (b) it was so long ago that we thought it unlikely they’d recall relevant information.

Guest post from Eric Friedman

(updated on: ) | by Guest

This is a guest post from Eric Friedman about how he decided what charity to support for his most recent donation. We requested this post along the lines of earlier posts by Jason Fehr, Ian Turner and Dario Amodei.

In 2003, I decided that I wanted to increase the amount of money I gave away, shortly after a two-week trip to India. It was there that I saw a level of poverty beyond the scope of anything I had ever seen in America, and I privately vowed that I could not stand by idly.

When I returned home to Chicago, I tried to figure out the most effective way to give and the best organizations to support. Before my trip to India, I had made a few $100-$200 gifts that I later regretted, and this time around I was not going to give away a dime until I was convinced that my donation would be used well. Unfortunately, I was not able to find the information I needed to be comfortable making a donation. Despite the promise I had made to myself, I gave nothing.

Fast forward a year, and the big tsunami hit east Asia in December 2004. The images on tv motivated me to give $1,000 to an organization well-known for disaster relief, and that reminded me that I had not done what I planned on doing after returning from India. Although I restarted my research to find an organization I wanted to give more to, I couldn’t figure out which organizations were strong. Everything seemed like fluff, and there was no “Consumer Reports” for nonprofits. I barely gave anything in 2005.

By 2006, I came to realize that there wasn’t much high-quality information on which nonprofits performed best, so if I wanted to give, I’d have to make do without it. Inaction was unacceptable, so I developed a plan. I started with the American Institute of Philanthropy, which rates organizations on financial efficiency metrics such as percentage of costs that go towards fundraising and overhead. This provided a starting point to identify organizations that might be good, then I reviewed their websites to pick three that I liked. I knew that this was not a particularly rigorous screen, but it was the best I knew how to do at the time. In 2006, I gave $2,500 to CARE, $2,500 to Africare, and $1,000 to Freedom from Hunger.

I figured that donations of this size might draw enough attention to have a serious discussion with their staff. I spoke with each organization, but was unsatisfied with all of the conversations. Whenever I asked them about how to provide the most help for people or evaluate them against other organizations, their responses were inadequate. They were filled with anecdotes about individuals they’ve helped and inspirational stories, but not much information that would genuinely help answer my questions. I was quite surprised when some of them actually asked what I liked most among their set of programs (e.g. education, clean water, healthcare, emergency relief, etc). Weren’t they supposed to be more knowledgeable than me about which of these is most effective?

I asked if other donors asked these types of questions, and they said that it was rare. I asked if big, sophisticated foundations ask these types of questions. They didn’t either. I found that to be exceptionally odd. (Ed note: this was similar to GiveWell staff’s experience before starting GiveWell. See Elie’s blog post from February 2007) (Since then, I’ve asked several different nonprofits about the grant-making process and post-grant relationships they have with big foundations, and there appears to be a surprisingly small amount of value-added in the process. In some cases, the foundations are actually requiring the nonprofits to spend the grants on things the nonprofits don’t think will best help the intended recipients.)

I also spoke with a couple of philanthropy consultants, who I expected to be better at evaluating organizations and selecting priorities. I was disappointed. Usually they would turn the question on me and ask what types of programs and organizations interested me. I explained that I wanted to support programs that were most effective at helping people and organizations that were best at executing those programs, and I was looking for information on how to do that. Other than that, I didn’t really care what type of program or organization it was. While that seemed relatively basic to me, it appeared as if I was speaking a different language. One told me that I needed to figure out what my objectives were, though I thought I had stated them clearly. A couple were somewhat condescending—implying that they were the experts and I was the one who needed help. Their responses to my questions didn’t give me much confidence in their expertise. I wondered if I was the only donor trying to structure my giving around what the world needed rather than my personal interests. (Ed note: for more, see this Tactical Philanthropy post on the rarity of issue agnostic giving.)

Maybe I was being too critical. I knew that I wasn’t asking easy questions, but they also didn’t seem unfair. I wasn’t expecting an objectively perfect answer, but just something better than I got.

A turning point happened a few weeks later. My contact at Freedom from Hunger called me to see if I wanted to meet their CEO, who was going to be in my hometown for a conference. We had a great discussion for about an hour and a half in a hotel lobby, and it became clear to me that he understood what I was trying to do and thought about many of the same issues when running Freedom from Hunger. While I still didn’t know how to evaluate the quality of programs at different organizations, I found one that had shared many aspects of my philosophy. In 2007, I donated $25,000.

Based on the information I had at the time, there was no organization I believed in more than Freedom from Hunger.

In early 2007, my life took a turn for the better: I met the woman who is now my wife. In 2008, Freedom from Hunger offered us the opportunity to join them (at our expense) on a site visit to some of their programs in Ghana. During our time there, we spent a significant amount of time with some of their senior staff (including the CEO), three board members, program staff, and their clients. We saw the programs in action, which increased our conviction in what they do.

We gave another $28,000 to Freedom from Hunger in 2008.

I started following GiveWell in 2009. It was clear from their blog that we shared similar values, and I loved what they were trying to do. But I disagreed with some aspects of their approach. Their emphasis on measurement seemed excessive. This approach had a built-in bias towards smaller, single-program organizations that could measure their impact more precisely. I wasn’t convinced that there weren’t economies of scale in international development. And their focus on scaling up existing solutions and excluding funding unproven innovations seemed incomplete. While I liked what they were doing, I still had more conviction in my own ability to pick organizations.

We gave Freedom from Hunger another $27,000 in 2009.

As I continued to follow GiveWell’s blog in 2010, I became more persuaded toward their views on areas where I previously disagreed. There were still differences of opinion, but I was also coming to realize that their skill in selecting organizations far exceeded mine. It was humbling to realize that someone else is better at something I had put so much thought into.

At that time, GiveWell had not evaluated Freedom from Hunger. For the first time in several years, I wasn’t sure where to donate to. I had a very candid conversation with Freedom from Hunger about this predicament, and they offered to have GiveWell evaluate them. GiveWell was also willing to do the evaluation—they already wanted to learn more about Freedom from Hunger independent of me.

The evaluation resulted in a “notable” rating, which is better than the vast majority of the organizations GiveWell considers, but also not nearly as strong as Gold.

My wife and I liked the people at Freedom from Hunger and had become personally connected with them, especially with the site visit to Ghana. They are extraordinary people who have devoted their lives to helping others, and they are really good at what they do. They might be the best at their specific niche in the nonprofit world. Despite this, GiveWell’s review suggested that there might be organizations in different niches that have a greater possibility of generating results. If helping others was a sport, Freedom from Hunger is good enough to qualify for the Olympics, but it didn’t win the Gold.

My wife and I had several conversations about what to do. Freedom from Hunger did nothing wrong and we had no regrets about our prior donations. They were our friends, and we had enough of a relationship with them that if we shifted our donations elsewhere, we’d have to explain why.

Eventually, we decided that there was one fundamental principle we should apply: giving was primarily about helping the less fortunate, not our friendships or personal interests. Breaking up with Freedom from Hunger would be hard. I explained our reasoning and they took it in stride, demonstrating that they care more about the less fortunate than their own institutional growth. They are a good group. But in 2010, we gave about $31,000 to GiveWell’s donor advised fund to ultimately be distributed as they recommended.

I imagine that there are other donors who read this blog, but donate to many organizations that are not recommended by GiveWell. While I don’t want to oversimplify the decision-making involved with large charitable gifts or pretend that I have all the answers, I will offer two pieces of advice.

First, know what you’re trying to do. I’ve heard many people say that philanthropy is very personal. I understand that view, and my own giving is close to my heart. But if giving is primarily about helping others, then that the most important component of giving should be about other people. That is, the donor’s personal friendships, interests, and passions should take a back seat. Although you may feel a close connection to a school you attended, an illness that affected a family member, or a community you live in, those may not be the areas positioned to provide the most help for others. Instead, donors primarily focused on helping others should identify the greatest areas of need and the most effective solutions. It can be tough to put other people’s needs over ours, but, ironically, it makes most donors feel better about giving in the end. I certainly do.

Second, know when someone else has more expertise than you. I originally viewed Freedom from Hunger as the best organization I could identify based on the information available to me at the time. And I had thought about it a lot. So it was personally challenging for me to acknowledge that GiveWell is better at evaluating charitable organizations. Neither my wife nor I agree with every aspect of GiveWell’s philosophy and approach—I doubt there is anyone who does—but the strengths they have seemed more than enough to outweigh any weaknesses we perceived. There is a certain pride of ownership many donors (including me) have as they develop their own philanthropic paths, and I’d encourage them to critically self-evaluate to make sure pride of ownership doesn’t get in the way of incorporating the expertise of others.

I am extremely appreciative for the work GiveWell has done to provide resources that were not available at the time I started giving. I get more personal satisfaction from knowing that my giving is doing more to help others, and I will have fewer reservations about opening my wallet wider in the future. To be completely frank, one thing that confuses me is why foundations and mega-donors making million-plus dollar gifts apparently make little use of GiveWell. I hope and expect this to change over time.

GAVI appears to be out of room for more funding (good news)

(updated on: ) | by Holden

We’ve always been interested in GAVI, a large funding vehicle for immunizations (which we consider to be one of the best interventions out there for accomplishing good).

Until recently, GAVI projected a need for $3.7 billion between 2011-2015 (archived). However, yesterday there was an announcement that GAVI had raised $4.3 billion, more than enough to cover this need (archived).

In the past, we’ve refrained from recommending GAVI because we have trouble fully understanding its activities, but we’ve been continuing to revisit it and think about how we might gain better understanding. Now we are fairly confident in not recommending GAVI because it appears to have all the funding it needs (which, given its area of focus, we consider very good news).

This situation illustrates one of the trickier room for more funding-related challenges of individual giving. Even if a nonprofit has significant funding needs today, are there big donors right around the corner about to swoop in and render your donation irrelevant?

Before we recommend a charity, we seek as good an understanding as possible of its room for more funding, and this includes asking it about what revenue it expects in the future. This is the best way we know to avoid recommending a charity just before its funding gap is closed by megadonors, but we don’t think this approach is foolproof. We continue to find the issue of room for more funding – and in particular, the possibility of a GAVI-like situation – to be very difficult to deal with.

Why we should expect good giving to be hard

(updated on: ) | by Holden

We’ve written before about a couple of consistent worldview differences we encounter:

When discussing any specific charity, I can usually think of specific reasons that the charity’s mission is difficult, and specific ways that it might be failing. Here I’m going to try to give a more general argument for why it’s hard to accomplish a lot of good with your donation. I’m not presenting this as a rigorous, evidence-backed argument; I’m just further clarifying my worldview and where I’m coming from.

When you want to help people as a donor, you have to get in line behind all of the groups below:

  • For-profit companies. I believe that most of the things you can do that make strangers’ lives better are things you can get paid for. Every day people help each other send packages, prepare food, recover from illness, etc. via market transactions. This may seem like a trivial and obvious point, but it’s the reason we are so focused on helping the very poor. When you’re trying to help people who aren’t poor, you’re competing with for-profit enterprises.

    And even the very poor get a lot of help from for-profit services. For example, when people started realizing that cellphones could be useful to the very poor, the result was expansion of for-profit cellphone service into the developing world. There were some nonprofit attempts to contribute to this dynamic, but we’re skeptical that they added much value on top of the profit-driven ones.

    I am certainly not saying that all profit-making enterprises are helpful, nor that all forms of help are profitable. But a lot of the easiest help to provide – even for the poorest – is already being provided by people who are doing it to make money.

  • Governments. When a market failure is clear and severe, the government often steps in. Many feel it does not step in enough or that it does more harm than good, but the fact remains that much of the “lowest-hanging fruit” for helping people where markets won’t is covered by governments. Low-income people in the U.S. get free education with high teacher attendance rates, free emergency medical care, and cash among other things. People in the developing-world get far less from their governments, but most governments still provide a good deal of free medical care.
  • Local philanthropy and community. When it comes to market failures that the government has failed to address, there are still often local nonprofits – and just local people – who are well placed to step in quickly and effectively. This is not an endorsement of small community-based organizations as giving opportunities for individual donors outside the community. If you’re outside the community you’re trying to help, you’re going to have trouble figuring out what the real problems are and who ought to be funded to address them; the people in the community will often be better placed to help, by donating and otherwise, than you are.
  • Big foundations. There are opportunities to help that are missed by for-profits, governments, and locals. There are many extremely well-funded and well-staffed foundations looking for just these opportunities.
  • Other donors. If you want your donation to have an impact, you need to find opportunities that have been missed not only by all the groups above, but by other individual donors. Our focus on room for more funding is an attempt to deal with this situation.

In my view, the wealthier the community, the more effective the first three items above (for-profits, government and locals) will be in addressing their problems. Therefore, if you want to find opportunities to provide help that isn’t already being given, you probably need to look at the world’s poorest communities – but doing that probably means helping people who are very far away and very culturally different from yourself, and you have to find opportunities that haven’t already been found by the big foundations or other donors.

When a donor says, “I have $1000 that I’d like to use to help someone,” it may not sound like they’re asking for much. But on reflection, I think they’re really saying, “I’m looking for someone who needs help that they can’t get from a company, their government, their community, or any other donor big or small – and I expect to provide this help just by sending a $1000 check, despite having very little experience or knowledge of the situation.”

Put this way, the donor’s request sounds somewhat exorbitant, and it seems that we shouldn’t expect them to be able to accomplish much with their $1000. Yet as it turns out, I believe that (if they take the rare opportunities that we highlight at GiveWell) they can often use that money to save a life. I think this is a somewhat shocking observation and that it reflects serious problems with the nonprofit ecosystem.

I also think we shouldn’t expect this to be the situation indefinitely. I hope that as the world gets better at providing help to those who need it, all the opportunities to save a life for $1000 will be snapped up more quickly. That will leave GiveWell customers – individual donors looking to help people they’ve never met and know little about – with much less exciting options, and that’s how it should be.