I want to raise another argument against donating to mega-charities, in favour of those who we are confident are highly cost-effective. Mega-charities, by their nature, run many programs, in many locations. In effect, they draw multiple times from the distribution of interventions by effectiveness. By the Central Limit Theorem, the average of any such samples, if not heavily conditioned on high cost-effectiveness, will be closer to the average of the underlaying distribution. The larger the sample, the closer to the average we can expect. For an individual donor who cannot reasonably choose to support only a single intervention at a mega-charity, we should expect that a donation contributes towards their average cost-effectiveness. The same goes for directed donations, which suffer from high fungibility, as GiveWell mention in this comment. In other words, it’s difficult to be one of the very best on average if you are doing lots of different stuff. Even if some of the interventions you do are really effective, your average effectiveness will be dragged down by the other interventions.
Thus, from a donor perspective, mega-charities are similar to index funds, you aren’t likely to go very wrong by supporting them, and the average ROI is close to the average of all relevant interventions. However, you cannot expect to get the highest ROI by supporting mega-charities. For that, you need an organisation that specialises on one, or a few interventions that comes from the very top of the distribution.
I think it’s a good sentiment, but I strongly disagree with one aspect of this.
I think you can go very wrong by supporting mega charities.
Mega charities often do lots of things really badly, so aren’t really like index funds. In the charity field I don’t see why diversification would mean you would close in on the average. More likely the quality of all your interventions will written and you will do worse overall
Especially if your are just chasing the money like most mega charities, as you move to more and more areas you have less expertise in, your quality is likely to continue to deteriorate, rather than revert to a mean
I want to raise another argument against donating to mega-charities, in favour of those who we are confident are highly cost-effective. Mega-charities, by their nature, run many programs, in many locations. In effect, they draw multiple times from the distribution of interventions by effectiveness. By the Central Limit Theorem, the average of any such samples, if not heavily conditioned on high cost-effectiveness, will be closer to the average of the underlaying distribution. The larger the sample, the closer to the average we can expect. For an individual donor who cannot reasonably choose to support only a single intervention at a mega-charity, we should expect that a donation contributes towards their average cost-effectiveness. The same goes for directed donations, which suffer from high fungibility, as GiveWell mention in this comment. In other words, it’s difficult to be one of the very best on average if you are doing lots of different stuff. Even if some of the interventions you do are really effective, your average effectiveness will be dragged down by the other interventions.
Thus, from a donor perspective, mega-charities are similar to index funds, you aren’t likely to go very wrong by supporting them, and the average ROI is close to the average of all relevant interventions. However, you cannot expect to get the highest ROI by supporting mega-charities. For that, you need an organisation that specialises on one, or a few interventions that comes from the very top of the distribution.
I think it’s a good sentiment, but I strongly disagree with one aspect of this.
I think you can go very wrong by supporting mega charities.
Mega charities often do lots of things really badly, so aren’t really like index funds. In the charity field I don’t see why diversification would mean you would close in on the average. More likely the quality of all your interventions will written and you will do worse overall
Especially if your are just chasing the money like most mega charities, as you move to more and more areas you have less expertise in, your quality is likely to continue to deteriorate, rather than revert to a mean