I agree with Michael’s most recent post that it would be hard to overinvest into areas such as WAS given sufficient funding gaps, and at least in the case of WAS I also see a bunch of these funding gaps. But I also think that the strategy Open Phil has been following in funding individual charities is sound. The charities themselves would be ill-advised to rely on Open Phil as their only funder. GiveWell itself once turned down a donation that was too big for its funding gap at the time because it would’ve made itself dependent on the funder.
If Open Phil were to fill funding gaps completely, the charity would have to have absolute trust that Open Phil will support them indefinitely or with a very long period of exit grants. In the interest of cooperativeness, Open Phil would be obliged to do so. Even if Open Phil’s research were mature enough that it could make such a commitment to some charities, it could not fund charities working on problems they can plausibly solve for good. Whether Open Phil wants to change its priorities or the charity wants to switch to a different program, in either case the year-long work of building up a diversified donor base would have gone down the drain and would have to be repeated.
GiveWell may be in a special position in that it has donors who are loyal to beneficiaries rather than charities and will switch their donation targets when GiveWell announces that it has receive a huge grant. But even in the case of charities that are not predominantly funded by EAs, it would be uncooperative of the charity to retain most of its donors when their marginal donations could do much more good with another organization, and then it will be very hard to win them back if Open Phil wants to phase out its grants. So I think its current strategy is sound.
Then again it’s a bit of a moot point in this context since their grants to EA charities, WAS research, etc. are still forthcoming afaik.
About the expertise: On the one hand, charity-picking is a lot like stock-picking, so that would be a point in favor of radical skepticism. And the outcomes are harder to observe and be sure of than on the for-profit market. But since there is hardly anything resembling an efficient market for impact, the current situation for experts is probably closer to that of the first savvy traders to join the stock market some 100+ years ago. They probably had a much easier time finding great investment opportunities than we have today. Even if someone as young as Warren Buffett were born today, he’d probably be much less successful. Still, 2:1 for radical skepticism. Not sure how to weigh the arguments.
Friends of mine are talking a lot about Tedlock, so, fwiw, it’s not as neglected in Berlin. ^^
GiveWell itself once turned down a donation that was too big for its funding gap at the time because it would’ve made itself dependent on the funder.
I don’t think this makes sense—you will always do better with more money than with less money. If you’re concerned about becoming dependent, you can simply use a small portion of the money you’re given and hold the rest in reserve. That way you don’t grow to the point of relying on this new funder, and you’re strictly less dependent on funding because you have bigger reserves.
If you believe the funder could better use the money elsewhere, maybe it would make sense to tell them to donate it somewhere else, but I don’t think this makes sense either. If you have more money than you need, you can give the money to whomever you think needs it most, and this can’t possibly be worse than letting the original funder give the money wherever they want.
Iirc, the funder was Good Ventures in this case, so a smart, value-aligned funder. Often charities may also not have the option to legally forward even unrestricted funding, though that’s probably not an issue in the case of GiveWell.
But even when faced with a dumb funder who wants to fill your funding gap because they like the colors of your logo (and assuming you’re not free to forward the funds), the signaling risk of breaking with cooperativeness should weigh heavily. Trying to walk some middle ground here seems socially risky; it is probably better to strongly signal cooperativeness and follow it blindly than to compromise on a case-by-case basis hoping no one will notice – especially in tight-knit spaces like animal rights activism, WAS, and the like. My impression of the North Korean human rights space is that a lot of charities don’t trust each other, and it’s holding the space back a lot. (See also, once more, The Attribution Moloch.)
It’s a defection against other charities that would be more effective at the margin than your charity. It’s a bit unclear what a funding gap is supposed to be, but let’s use the definition GiveWell uses for itself: “We seek to be in a financial position such that our cash flow projections show us having 12 months’ worth of unrestricted assets in each of the next 12 months.”
Highly effective charities probably have huge ROI, and even the last bits of the above assets, even when they are kept on a bank account, may still reduce risks to the point of being better investments than a stock portfolio. But at least when a donor swamps a charity with so much money that it exceeds even a funding gap as defined above, the charity will need to put the excess money into a portfolio and will earn just the usual ~ 5% p.a.
At this point the marginal utility has dropped so far that it’s likely that another charity would’ve been able to use the money better.
If the funder is known to be capricious and might buy a yacht from the remainder if you don’t lie about your funding gap (a.k.a. use some suitably wide definition), then other charities will understand your predicament. But with a smart, value-aligned funder, such a move will signal defection, and defection is best countered by defection (Robert Axelrod’s tit for tat algorithm) in repeated prisoner’s dilemmata, so that we’ll end up with a space where all the charities are just busy keeping each other down.
In the case of Open Phil, this is mitigated by the abundance of funding that Open Phil has available. The prisoner’s dilemma is a product of relative scarcity, so greater abundance ameliorates it.
If a charity thinks that its excess cash would be better off with another charity than sitting in its bank account, wouldn’t it just give the cash to another charity? And this is at least as good from the charity’s perspective as letting the original donor decide what to do with the excess funds.
Yes, I premised my argument above (in the comment from August 27) on that not being possible. In Germany I think foundations can forward donations like that, but I think it’s more complicated or only possible in some cases for other types of nonprofits. I just saw online that US 501(c)(3) charities can forward donations under certain conditions that didn’t seem too hard to meet. So if the donor is fine with it, that should be a perfectly cooperative option.
Actually, in the case of Open Phil, such things could be discussed beforehand, and if the charity is up for it and can legally do it, then Open Phil–recommended grants could snowball through the space, saving time on the Open Phil side and possibly even reaching a number of highly effective niche charities that would’ve been too small to warrant Open Phil’s attention.
Hi John! :‑)
I agree with Michael’s most recent post that it would be hard to overinvest into areas such as WAS given sufficient funding gaps, and at least in the case of WAS I also see a bunch of these funding gaps. But I also think that the strategy Open Phil has been following in funding individual charities is sound. The charities themselves would be ill-advised to rely on Open Phil as their only funder. GiveWell itself once turned down a donation that was too big for its funding gap at the time because it would’ve made itself dependent on the funder.
If Open Phil were to fill funding gaps completely, the charity would have to have absolute trust that Open Phil will support them indefinitely or with a very long period of exit grants. In the interest of cooperativeness, Open Phil would be obliged to do so. Even if Open Phil’s research were mature enough that it could make such a commitment to some charities, it could not fund charities working on problems they can plausibly solve for good. Whether Open Phil wants to change its priorities or the charity wants to switch to a different program, in either case the year-long work of building up a diversified donor base would have gone down the drain and would have to be repeated.
GiveWell may be in a special position in that it has donors who are loyal to beneficiaries rather than charities and will switch their donation targets when GiveWell announces that it has receive a huge grant. But even in the case of charities that are not predominantly funded by EAs, it would be uncooperative of the charity to retain most of its donors when their marginal donations could do much more good with another organization, and then it will be very hard to win them back if Open Phil wants to phase out its grants. So I think its current strategy is sound.
Then again it’s a bit of a moot point in this context since their grants to EA charities, WAS research, etc. are still forthcoming afaik.
About the expertise: On the one hand, charity-picking is a lot like stock-picking, so that would be a point in favor of radical skepticism. And the outcomes are harder to observe and be sure of than on the for-profit market. But since there is hardly anything resembling an efficient market for impact, the current situation for experts is probably closer to that of the first savvy traders to join the stock market some 100+ years ago. They probably had a much easier time finding great investment opportunities than we have today. Even if someone as young as Warren Buffett were born today, he’d probably be much less successful. Still, 2:1 for radical skepticism. Not sure how to weigh the arguments.
Friends of mine are talking a lot about Tedlock, so, fwiw, it’s not as neglected in Berlin. ^^
I don’t think this makes sense—you will always do better with more money than with less money. If you’re concerned about becoming dependent, you can simply use a small portion of the money you’re given and hold the rest in reserve. That way you don’t grow to the point of relying on this new funder, and you’re strictly less dependent on funding because you have bigger reserves.
If you believe the funder could better use the money elsewhere, maybe it would make sense to tell them to donate it somewhere else, but I don’t think this makes sense either. If you have more money than you need, you can give the money to whomever you think needs it most, and this can’t possibly be worse than letting the original funder give the money wherever they want.
Iirc, the funder was Good Ventures in this case, so a smart, value-aligned funder. Often charities may also not have the option to legally forward even unrestricted funding, though that’s probably not an issue in the case of GiveWell.
But even when faced with a dumb funder who wants to fill your funding gap because they like the colors of your logo (and assuming you’re not free to forward the funds), the signaling risk of breaking with cooperativeness should weigh heavily. Trying to walk some middle ground here seems socially risky; it is probably better to strongly signal cooperativeness and follow it blindly than to compromise on a case-by-case basis hoping no one will notice – especially in tight-knit spaces like animal rights activism, WAS, and the like. My impression of the North Korean human rights space is that a lot of charities don’t trust each other, and it’s holding the space back a lot. (See also, once more, The Attribution Moloch.)
How is it uncooperative to accept people’s money when they want to give it to you?
It’s a defection against other charities that would be more effective at the margin than your charity. It’s a bit unclear what a funding gap is supposed to be, but let’s use the definition GiveWell uses for itself: “We seek to be in a financial position such that our cash flow projections show us having 12 months’ worth of unrestricted assets in each of the next 12 months.”
Highly effective charities probably have huge ROI, and even the last bits of the above assets, even when they are kept on a bank account, may still reduce risks to the point of being better investments than a stock portfolio. But at least when a donor swamps a charity with so much money that it exceeds even a funding gap as defined above, the charity will need to put the excess money into a portfolio and will earn just the usual ~ 5% p.a.
At this point the marginal utility has dropped so far that it’s likely that another charity would’ve been able to use the money better.
If the funder is known to be capricious and might buy a yacht from the remainder if you don’t lie about your funding gap (a.k.a. use some suitably wide definition), then other charities will understand your predicament. But with a smart, value-aligned funder, such a move will signal defection, and defection is best countered by defection (Robert Axelrod’s tit for tat algorithm) in repeated prisoner’s dilemmata, so that we’ll end up with a space where all the charities are just busy keeping each other down.
In the case of Open Phil, this is mitigated by the abundance of funding that Open Phil has available. The prisoner’s dilemma is a product of relative scarcity, so greater abundance ameliorates it.
If a charity thinks that its excess cash would be better off with another charity than sitting in its bank account, wouldn’t it just give the cash to another charity? And this is at least as good from the charity’s perspective as letting the original donor decide what to do with the excess funds.
Yes, I premised my argument above (in the comment from August 27) on that not being possible. In Germany I think foundations can forward donations like that, but I think it’s more complicated or only possible in some cases for other types of nonprofits. I just saw online that US 501(c)(3) charities can forward donations under certain conditions that didn’t seem too hard to meet. So if the donor is fine with it, that should be a perfectly cooperative option.
Actually, in the case of Open Phil, such things could be discussed beforehand, and if the charity is up for it and can legally do it, then Open Phil–recommended grants could snowball through the space, saving time on the Open Phil side and possibly even reaching a number of highly effective niche charities that would’ve been too small to warrant Open Phil’s attention.