I noticed that financial returns on investment weren’t deducted from the costs in the cost-effectiveness analysis. Is the idea that the funding would basically be donated, and we wouldn’t own any shares in the company?
If you wanted to include them, you would want to consider opportunity costs somehow, maybe by taking the difference with the expected market returns or the returns from charity (i.e. if charities have compounding returns on investment, you would apply that compounding rate to the initial investment and take the difference). This could substantially reduce the net costs, and could even flip their sign if it were the case that the expected returns on investment from the company were higher than the expected returns of every other option, although this seems unlikely.
Having investors concerned with animal welfare with majority or near-majority shares in the company might be important to balance profit vs helping animals. Maybe you can’t run a for-profit this way, though?
Also, the founders would in some sense be earning-to-give as startup founders, although at much higher risk than many earning-to-give jobs and perhaps worse EV, since they’d probably take a lower salary, the shares are riskier, and the job isn’t chosen specifically for earning-to-give potential. So the opportunity costs of the founders should be partially offset by their shares, assuming they have any, and (part of) their salaries, assuming paid for (in part) by non-EA-aligned private investors.
You make a lot of interesting points in your comments, some of which I hadn’t considered. As a general point before replying to any specifics, I found it really difficult to model a CEA for a for-profit company so this is definitely by no means perfect as I had to make a lot of weird assumptions to try and make it work, such as assuming that all of the funding would be donated by EA funds rather than met by investors etc. and that we wouldn’t own any shares in the company.
I think you make a good point, though, that financial returns probably should be included in this. Also, again I think you’re right that we could have taken a more in-depth look at the counterfactuals of the co-founders as they definitely could earn-to-give in this position, though as you said they would likely take much lower salaries than the average start-up founder. Both of these factors would make this intervention more cost effective, though I am unsure by how much. Thinking about this, this just makes me more excited for plant-based start-ups to focus on plant-based seafood! Though I still don’t think that CE would be best placed to help this start-up, I think the market would do a much better job.
I think it’s much more likely the company would fail anyway if most of its funding had to come from donations. It would be a bad sign if you couldn’t get investors on board. And the fact that a company like this doesn’t already exist doesn’t mean that no one would invest in it.
There are also groups whose investments focus largely on this space, and I’d guess you could get investment from them. These are three that I’ve come across without specifically looking:
https://straydogcapital.com/ (Sentience Institute is going to have them on their podcast, so it might be worth suggesting some questions to Jamie Harris)
So, perhaps rather than displacing EA donations, you should think of their investments as displacing the average investment from one of these companies. If plant-based seafood in Asia happens to be at least an order of magnitude more cost-effective in its welfare impact than the average investment, then the opportunity costs of investment could basically be ignored. (However, ROI for the investors also matters, since it can allow them to do more impact investing, even if each investment has lower impact, or maybe they’ll donate more. There’s also the question of whether or not the investors donate to EAA charities or could be convinced to and to what extent, if any, their investments compete or could compete with donations.)
If this was something CE wanted to pursue, it could start as a joint project between CE and GFI (with CE focused on selecting founders and training them on entrepreneurship generally?), and then it would be handed off to GFI and investors. Some funding could come from CE and GFI, but I’d expect it mostly to come from the investors, maybe almost all of it.
I noticed that financial returns on investment weren’t deducted from the costs in the cost-effectiveness analysis. Is the idea that the funding would basically be donated, and we wouldn’t own any shares in the company?
If you wanted to include them, you would want to consider opportunity costs somehow, maybe by taking the difference with the expected market returns or the returns from charity (i.e. if charities have compounding returns on investment, you would apply that compounding rate to the initial investment and take the difference). This could substantially reduce the net costs, and could even flip their sign if it were the case that the expected returns on investment from the company were higher than the expected returns of every other option, although this seems unlikely.
Having investors concerned with animal welfare with majority or near-majority shares in the company might be important to balance profit vs helping animals. Maybe you can’t run a for-profit this way, though?
Also, the founders would in some sense be earning-to-give as startup founders, although at much higher risk than many earning-to-give jobs and perhaps worse EV, since they’d probably take a lower salary, the shares are riskier, and the job isn’t chosen specifically for earning-to-give potential. So the opportunity costs of the founders should be partially offset by their shares, assuming they have any, and (part of) their salaries, assuming paid for (in part) by non-EA-aligned private investors.
Hi Michael, sorry for the belated response.
You make a lot of interesting points in your comments, some of which I hadn’t considered. As a general point before replying to any specifics, I found it really difficult to model a CEA for a for-profit company so this is definitely by no means perfect as I had to make a lot of weird assumptions to try and make it work, such as assuming that all of the funding would be donated by EA funds rather than met by investors etc. and that we wouldn’t own any shares in the company.
I think you make a good point, though, that financial returns probably should be included in this. Also, again I think you’re right that we could have taken a more in-depth look at the counterfactuals of the co-founders as they definitely could earn-to-give in this position, though as you said they would likely take much lower salaries than the average start-up founder. Both of these factors would make this intervention more cost effective, though I am unsure by how much. Thinking about this, this just makes me more excited for plant-based start-ups to focus on plant-based seafood! Though I still don’t think that CE would be best placed to help this start-up, I think the market would do a much better job.
Thanks for the responses!
I think it’s much more likely the company would fail anyway if most of its funding had to come from donations. It would be a bad sign if you couldn’t get investors on board. And the fact that a company like this doesn’t already exist doesn’t mean that no one would invest in it.
There are also groups whose investments focus largely on this space, and I’d guess you could get investment from them. These are three that I’ve come across without specifically looking:
https://straydogcapital.com/ (Sentience Institute is going to have them on their podcast, so it might be worth suggesting some questions to Jamie Harris)
https://kbw-ventures.com/
https://newcropcapital.com/
So, perhaps rather than displacing EA donations, you should think of their investments as displacing the average investment from one of these companies. If plant-based seafood in Asia happens to be at least an order of magnitude more cost-effective in its welfare impact than the average investment, then the opportunity costs of investment could basically be ignored. (However, ROI for the investors also matters, since it can allow them to do more impact investing, even if each investment has lower impact, or maybe they’ll donate more. There’s also the question of whether or not the investors donate to EAA charities or could be convinced to and to what extent, if any, their investments compete or could compete with donations.)
If this was something CE wanted to pursue, it could start as a joint project between CE and GFI (with CE focused on selecting founders and training them on entrepreneurship generally?), and then it would be handed off to GFI and investors. Some funding could come from CE and GFI, but I’d expect it mostly to come from the investors, maybe almost all of it.
It could also be worth reaching out to Scott Weathers, who had been thinking about something like this a couple of years ago and now works at GFI. Or just talk to GFI generally. I think they’d have more useful feedback.