From an impartial perspective, I think it is also necessary to account for the wallet of the customer, not only of the investor. After all, the only reason why the investor gets their money back, is that customers are paying for the product.
In other words, one could add a row “Financial loss customer” to the decision matrix. For the “Pass & Give Now” Column it would be 0% (there is customer who pays the investor back). For all other columns it would be 100%, I think. That is, once the customers wallet is taken into account, the best world would be if either the investor did not invest but donate to the BACO, or the customer did not buy the App but donate to the BACO instead.
So all things considered, solo and lead impact investing are good, but only 7 and 30% as good as donating to the BACO, respectively. Or am getting this wrong?
It’s absolutely true that the customer’s wallets are worth potentially considering. An early reviewer of our analysis also made a similar point. In the end we are fairly confident this turns out to not be a key consideration. The key reason is that mental health is generally found to be a service for which people’s willingness to pay is far below the actual value (to them). Especially for likely paying customer markets of e.g. high-income country iPhone users, the subscription costs were judged to be trivial compared to changes in their mental health. This is why, if I remember correctly, this consideration didn’t feature more prominently in Hauke’s report (on the potential impacts on the customers). Since it didn’t survive there, it also didn’t make it into the investment report.
I’m not quite sure I understand the point about the customer donating to the BACO instead. That could definitely be a good thing. But it would mean an average customer with anxiety choosing to donate to a highly effective charity (presumably instead of not buying the App). This seems unlikely. More importantly, it doesn’t seem like the investor can influence it?...
In short, since the expected customers are reasonably well off non-EAs, concerns about customer wallet or donations didn’t come into play.
Thanks for the response. My issue was just that the money flow from the customer to the investor was accounted as positive for the investor, but not negative for the customer. I see the argument that customers are reasonably well off non-EAs whereas the investor is an EA. I am not sure if it can be used to justify the asymmetry in the accounting.
Perhaps it would make sense that an EA investor is only 10% altruistic and 90% selfish (somewhat in line with the 10% GW pledge)? The conclusion of that would be that investing is doing good, but donating is doing more good.
I’m still not sure I understand your point(s). The payment of the customers was accounted for as a negligible (negative) contribution to the net impact per customer.
To put it another way: Think of the highly anxious customers each will get $100 in benefits from the App plus 0.02 DALYs averted (for themselves) on top of this. The additional DALYs being discounted for the potential they could use another App.
Say the App fee is $100 dollars. This means to unlock the additional DALYs the users as a group will pay $400 million over 8 years.
The investor puts in their $1 million to increase the chances the customers have the option to spend the $400m. In return they expect a percentage of the $400m (after operating costs, other investors shares, the founders shares). But they are also having a counterfactual effect on the chance the customers have/use this option.
This is basically a scaled up version of a simple story where the investor gives a girl called Alice a loan so he can get some therapy. The investor would still hope Alice repays them with interest. But they also believe that without their help to get started she would have been less like to get help for herself. Should they have just paid for her therapy? Well, if she is a well-off, western iPhone user who comfortably buys lattes everyday, then that’s surely ineffective altruism. Unless she happens to be the investor’s daughter or something, so it makes sense for other reasons.
I think the message of this post isn’t that compatible with general claims like “investing is doing good, but donating is doing more good”. The message of the post is that specific impact investments can pass a high effectiveness bar (i.e. $50 / DALY). If the investor thinks most of their donation opportunities are around $50/DALY, then they should see Mind Ease as a nice way to add to their impact.
If their bar is $5/DALY (i.e. they see much more effective donation opportunities) then Mind Ease will be less attractive. It might not justify the cost of evaluating it and monitoring it. But for EAs who are investment experts the costs will be lower. So this is all less an exhortation for non-investor EAs to learn about investing, and more a way for investor EAs to add to their impact.
Overall, the point of the post is a meta-level argument that we can compare donation and investment funding opportunities in this way. But the results will vary from case to case.
I agree with your statement that “The message of the post is that specific impact investments can pass a high effectiveness bar”
But when you say >>I think the message of this post isn’t that compatible with general claims like “investing is doing good, but donating is doing more good”.<< I think I must have been misled by the decision matrix. To me it suggested this comparison between investment and donation, while not being able to resolve a difference between the columns “Pass & Invest to Give”, “Pass & Give now” (and a hypothetical column “Pass & Invest to keep the money for yourself”, with presumably all zero rows), which would all result in zero total portfolio return (differences between these three options would become visible if the consumer wallet would be included and the “Pass & Invest to Give” would create impact through giving, like the “Pass & Give now” column does).
Anyway, I now understand that this comparison between investing and donating was never the message of the post, so all good.
From an impartial perspective, I think it is also necessary to account for the wallet of the customer, not only of the investor. After all, the only reason why the investor gets their money back, is that customers are paying for the product.
In other words, one could add a row “Financial loss customer” to the decision matrix. For the “Pass & Give Now” Column it would be 0% (there is customer who pays the investor back). For all other columns it would be 100%, I think. That is, once the customers wallet is taken into account, the best world would be if either the investor did not invest but donate to the BACO, or the customer did not buy the App but donate to the BACO instead.
So all things considered, solo and lead impact investing are good, but only 7 and 30% as good as donating to the BACO, respectively. Or am getting this wrong?
Thanks for this comment and question, Paul.
It’s absolutely true that the customer’s wallets are worth potentially considering. An early reviewer of our analysis also made a similar point. In the end we are fairly confident this turns out to not be a key consideration. The key reason is that mental health is generally found to be a service for which people’s willingness to pay is far below the actual value (to them). Especially for likely paying customer markets of e.g. high-income country iPhone users, the subscription costs were judged to be trivial compared to changes in their mental health. This is why, if I remember correctly, this consideration didn’t feature more prominently in Hauke’s report (on the potential impacts on the customers). Since it didn’t survive there, it also didn’t make it into the investment report.
I’m not quite sure I understand the point about the customer donating to the BACO instead. That could definitely be a good thing. But it would mean an average customer with anxiety choosing to donate to a highly effective charity (presumably instead of not buying the App). This seems unlikely. More importantly, it doesn’t seem like the investor can influence it?...
In short, since the expected customers are reasonably well off non-EAs, concerns about customer wallet or donations didn’t come into play.
Thanks for the response. My issue was just that the money flow from the customer to the investor was accounted as positive for the investor, but not negative for the customer. I see the argument that customers are reasonably well off non-EAs whereas the investor is an EA. I am not sure if it can be used to justify the asymmetry in the accounting.
Perhaps it would make sense that an EA investor is only 10% altruistic and 90% selfish (somewhat in line with the 10% GW pledge)? The conclusion of that would be that investing is doing good, but donating is doing more good.
I’m still not sure I understand your point(s). The payment of the customers was accounted for as a negligible (negative) contribution to the net impact per customer.
To put it another way: Think of the highly anxious customers each will get $100 in benefits from the App plus 0.02 DALYs averted (for themselves) on top of this. The additional DALYs being discounted for the potential they could use another App.
Say the App fee is $100 dollars. This means to unlock the additional DALYs the users as a group will pay $400 million over 8 years.
The investor puts in their $1 million to increase the chances the customers have the option to spend the $400m. In return they expect a percentage of the $400m (after operating costs, other investors shares, the founders shares). But they are also having a counterfactual effect on the chance the customers have/use this option.
This is basically a scaled up version of a simple story where the investor gives a girl called Alice a loan so he can get some therapy. The investor would still hope Alice repays them with interest. But they also believe that without their help to get started she would have been less like to get help for herself. Should they have just paid for her therapy? Well, if she is a well-off, western iPhone user who comfortably buys lattes everyday, then that’s surely ineffective altruism. Unless she happens to be the investor’s daughter or something, so it makes sense for other reasons.
I think the message of this post isn’t that compatible with general claims like “investing is doing good, but donating is doing more good”. The message of the post is that specific impact investments can pass a high effectiveness bar (i.e. $50 / DALY). If the investor thinks most of their donation opportunities are around $50/DALY, then they should see Mind Ease as a nice way to add to their impact.
If their bar is $5/DALY (i.e. they see much more effective donation opportunities) then Mind Ease will be less attractive. It might not justify the cost of evaluating it and monitoring it. But for EAs who are investment experts the costs will be lower. So this is all less an exhortation for non-investor EAs to learn about investing, and more a way for investor EAs to add to their impact.
Overall, the point of the post is a meta-level argument that we can compare donation and investment funding opportunities in this way. But the results will vary from case to case.
I agree with your statement that “The message of the post is that specific impact investments can pass a high effectiveness bar”
But when you say >>I think the message of this post isn’t that compatible with general claims like “investing is doing good, but donating is doing more good”.<< I think I must have been misled by the decision matrix. To me it suggested this comparison between investment and donation, while not being able to resolve a difference between the columns “Pass & Invest to Give”, “Pass & Give now” (and a hypothetical column “Pass & Invest to keep the money for yourself”, with presumably all zero rows), which would all result in zero total portfolio return (differences between these three options would become visible if the consumer wallet would be included and the “Pass & Invest to Give” would create impact through giving, like the “Pass & Give now” column does).
Anyway, I now understand that this comparison between investing and donating was never the message of the post, so all good.