Does It Make Sense to Make Multi-Year Donation Commitments to One Organization?
The following is my answer to a question posted in the January open thread:
Do you think it is better to decide each year where to donate, or to give organizations multi-year commitments of what you expect to donate?
Short Answer
It’s better to decide each year where to donate if you’re donating less than several thousand dollars per year, and you don’t have very high confidence where to donate. If you donate several thousand dollars per year, or in excess of that, and you don’t believe your donation preferences will change much, it may make sense to let organizations know you expect to donate to them for several years.
Long Answer
The following answer is based on my experience as having previously worked for a charity fundraising company, been a regular monthly donor to World Animal Protection, and the experiences of myself and other supporters of effective altruism as donors.
Donations In General
Based on work and personal experience, it seems most charities, and non-profits, are much more concerned with their short- and medium-term operation and goals. That’s because the continuance of the organization is based on meeting these goals, and achieving long-term goals is based upon the organization still existing, e.g., several years from now. Thus, my impression is that most charities and non-profits are relieved enough that their base of donors lets them know they’ll continue to donate on a monthly basis, never mind an annual one.
Of course, organizations want this information because it gives them a confidence interval for much funding they’ll receive, which in turn dictates their budget for operations and projects. The biggest donors to an organization will have the greatest impact on an organization’s budget, and its expectations of future funding. These donors are the ones organizations will focus on getting information on donation plans from on a year-to-year basis. Ask yourself: are you among the biggest donors to an organization?
As an example, the Machine Intelligence Research Institute publishes a list of its top donors over its history. A ‘top donor’ is someone who has donated =>$5000 USD to the MIRI. Animal Charity Evaluators also publishes a list of its own top donors, one of their ‘top donors’ being someone who has donated =>$1000. The MIRI has existed longer than ACE has, and also has a greater operating budget. So, what would qualify you as a ‘top donor’ varies by organization. If you believe you fall into the category of ‘top donor’ to an organization, and will do so in the future, making a multi-year commitment may make sense. If you don’t know the answer to the question, you can always ask the organization.
Just ask them, out of curiosity, what percentage your donation makes up of their total operating budget, and how much your regular donations impact their medium-term budget planning. At this point, you have no obligation to disclose you’re considering a multi-year commitment to donating to the organization in question.
Donations and Effective Altruism
I believe the concerns of donors influenced by effective altruism make it so making a multi-year commitment to an organization that you expect to donate to them is not as good an idea.
First of all, effective organizations, such as Givewell-recommended charities, may run into room for more funding issues. This means organizations may hit a point at which the marginal donation to that organization will do less good than the same amount donated to a different organization. For example, at the end of 2013, Givewell believed its normally top-recommended charity, the Against Malaria Foundation, hadn’t distributed enough malaria bed nets, or had the capacity to effectively allocate funds, such that Givewell recommended GiveDirectly as its top charity over Against Malaria Foundation for most of 2014. This was controversial within effective altruism, as several individuals, and also Giving What We Can, disagreed with Givewell’s analysis and conclusion on regarding the AMF.
Anyway, similar issues may be raised in the future. Now, in a way, most of us don’t believe ourselves as capable or experienced as Givewell or Giving What We Can to evaluate charities. So, we trust them to do so on behalf of the movement. If, as an individual, you make a multi-year commitment to organization, it may be awkward in future years when a charity evaluator you trust no longer recommends that organization as the ‘best place to donate’. Given that effective altruism focuses on supporting the most effective organizations for any present time, what’s considered ‘the best place to donate’ may change relatively quickly. This would render a multi-year donation commitment sub-optimal, and may make a relationship with an organization more awkward.
Of course, some of us donated lots of money to the Against Malaria Foundation in 2013, then switched to GiveDirectly in 2014, and will resume donating to the AMF in 2015, now that it’s Givewell’s top recommendation again. Still, the opportunity for such flexibility is still a point against a multi-year commitment.
Some causes areas are popular within effective altruism because to some they seem very neglected, or hold lots of value, even though they’re not as tractable as global poverty. Such cause areas include animal advocacy, or existential risk reduction. By ‘tractable’, I mean to what extent we’re confident what we do in the present will lead to desired goods in the future. Sometimes figuring if a cause area is tractable is difficult because the evidence to reach a conclusion hasn’t been collected or evaluated yet, or because building an evidence base just seems too difficult.
Now, the MIRI, and ACE, are organizations working within cause areas for which it’s much more difficult to discern how effective and positive financial and other support in the present will be. However, I believe that the novel introduction of greater effectiveness to cause areas may change them such that evaluating their tractability will be more possible. At such a point, you as an individual, or the effective altruism community at large, may conclude organizations within your selected cause area are more or less effective than you once though. So, this could shift your donation priorities within a couple of years. Thus, I believe accounting for this level of uncertainty about the effectiveness of a given organization over time is another mark against making multi-year commitments.
As someone who isn’t very confident in which cause area, let alone which charity, may be the most effective target for donations, I wouldn’t be making a multi-year commitment for donation even if I currently had the funds to justify such a thing. If you’re extremely confident a single organization is the best, or confident in a single organization within the best cause area, a multi-year commitment could still make sense. However, keep in mind you may be biased if you’re (one of) the only supporters of effective altruism with such high confidence in this organization.
Conclusion
In conclusion, I believe from the perspective of effective altruism, making a multi-year commitment to organizations is usually not the best plan of action. However, I wrote this post as an example of going through different considerations, not an ultimate guide. I believe considerations will vary with each individual, who should use their own discretion, and seek input from their peers and mentors. If you’re reading this, and have had a hand in managing a non-profit organization, or were a donor to one organization for multiple years on end, please come forward with your own perspective in the comments.
Making a multi-year commitment is pretty close to borrowing from your future self in order to donate more now.
It’s not exactly that, since the funds can’t be spent immediately (and the recipients will have less than absolute confidence that you will follow through). But if the recipient charities are constrained by the size of their financial buffer then the effect to the charity may be very close to a larger donation up-front. And relative to actually borrowing money to do this you get a better interest rate.
If this reasoning would push you to preferring a multi-year commitment, I don’t see why that would change with the size of donation.
Below points don’t rebut your claims. Rather, they’re a clarification.
By “commitment”, I meant either making public an intention of multi-year donations, and/or notifying the charity in question of this intention. For regular donations of sufficiently small amounts, the impact on the organization’s budget would be negligible. e.g., If I donate ten dollars each month to an organization receiving several million dollars each year, I’m sure they appreciate it appreciates that, but it’s hardly something to contact one of their directors about. If one intends to donate relatively large sums to an organization monthly or yearly, informing them for their own sake seems wise. Knowing what capacity they can operate for the next year when making a budget helps organizations, and if a single donor provides 10% of the funds, a heads-up would be nice.
I’m assuming donors associated with effective altruism may be funding smaller organizations, e.g., the AMF rather than UNICEF. Also, they may want a closer relationship with the organization they’re funding to track effectiveness over time. So, we as donors may have more special relationships with effective charities, impacting how we communicate our intentions to them.
Good point about how the optimal charity can change. I think there’s even more to it than this though: not only does charity estimated cost-effectiveness change exogenously over time, but making multi-year commitments can make it worse. If charities can rely on long-term funding, they have less incentive to act in accordance with donor’s wishes. Conversely, by instead providing repeated short-term finances, donors can ensure the charity does not stray too far from their intentions.
In markets this is not required because shareholders do actually have control over the corporation through their right to elect the board of directors. But donors rarely have this right, so need to rely on other mechanisms to ensure their capital isn’t wasted.
This might not seem to be a huge issue with some charities that basically just do one thing, but other charities have changed their focus considerably over time, in many times against the wishes of some prior donors, whose funds are thereby expropriated.
I appreciate these points. In the future, I intend to post to this blog guides for how donors can maintain good relations with charities, and visa-versa. I’ll try remembering to include your points in that guide. For the record, the guide(s) will probably not be up for at least a month.
Sounds like a good topic for a post; I look forward to it.
How could we measure the impact of this extra certainty on planning and effectiveness? Ask the charities in question? GWWC? Can’t really think of how to resolve this until this question is answered, then to compare it against the expected difference between the current best charity and the future charity, which would be a (partially bounded?) guestimation..
I’m not adept at quantitative analysis, so I’m not prepared to model this problem. So I’m unsure of how that impact would be measured. However, based on how rather abstract notions seem quantified well by Givewell, 80,000 Hours, and Giving What We Can, I think someone we know could figure it out. It seems important.