I fully agree that attributing the impact is very important as a signaling mechanism. However I don’t get why we should prioritize “who gave the money” over “who identified the opportunity” for this attribution.
Admittedly, I have zero background in non-profit grantmaking. I’m coming from the for-profit world of software products. In my world what counts as impact is counterfactual outcomes, not resources spent.
Imagine that John, the leader of team A, identifies a gap that is turning customers away, gets team B to deliver a fix and as a result the sales double. I’d say that John made the biggest counterfactual impact here, even if he didn’t lift a finger on the delivery part. Without further context, I’d also consider John leveraging team B, rather than his own, as a positive signal, showcasing that he can think outside the box to deliver desirable outcomes.
Yeah, such solution does lead to more credit being claimed in total for the same work across the entire organization. It’s the inherent cost of collaboration on anything non-trivial. There’s very few environments where that cost would outweigh the benefits of collaboration and, at least in my intuition, non-profit grantmaking ecosystem isn’t likely to be one of them.
Sure! Like to be clear, there’s a very interesting meta, strategic question of “how should we conceive of the EA ecosystem? Are we all just on the same team? Should we act like we’re all colleagues of a large for profit org?”
And, it wouldn’t be crazy. I think to date, aspects of EA and AI safety act like this. And there’s something beautiful, admirable about the attitude of the “don’t worry about whose name is first on the paper, or whose getting paid the most, so long as the job gets done”.
But otoh, consider the Coasean question, why do firms exist? Specifically, why are there multiple different firms? The market is efficient because the firms are competing for dollars; in our economy/society, dollars are how we divide up “credit”, how we represent a claim on current or future work by others.
My general thesis is: EA has been historically small and collaborative, almost Dunbar sized. But AI is scaling up fast, and so AI safety needs to scale up; and also, AI money means that the rest of EA can also scale up. And we’ve seen repeatedly that markets are the best way to scale complex collaboration, compared to eg top down central planning. (Thus, we should implement impact markets.)
I think we’re talking past each other on one specific thing: input dollars and output dollars aren’t the same dollars.
Firms compete for earned dollars. That’s the output, and it’s what credits the firm for the value it creates (by spending money, customers signal that they value what the firm provides above its monetary cost). Invested dollars are an input. They happen to share a unit with the output, but that doesn’t mean that they measure the same thing.
I read the recent substack post on impact markets and I think this is where it runs into trouble. An org’s valuation is implied by how much money it raises later. This measures how well a funder anticipated other funders, not the actual impact.
At a surface level this appears congruent with how the for-profit world operates. Startup valuations are also set by the money raised in later rounds. However there’s a crucial difference—the value of firms is ultimately grounded in the expectations of future output in a way that value of non-profits can’t be. Equity prices are guesses about very concrete future cash flows from people buying things the firm offers. The accuracy of those guesses can be ultimately checked against something that isn’t another investor’s opinion. The output is uniform—a dollar earned on a grocery store chain is the same as a dollar earned on an AI company[1].
In contrast, EA orgs aim for “positive impact” which can be quantified only by a very subjective evaluation with multiple assumptions, not by any market mechanism. The output is not uniform. Even if we had perfect measurement (we don’t) I might value 1 human QALY above 1000 shrimp QALYs while you do the opposite.
This results in money invested being a much worse proxy for outcomes in a non-profit world than in the for-profit one. If I invest $1 M in Uber instead of Intel, I signal to everyone that I believe Uber is more likely than Intel to be worth more in some time horizon. If I invest $1 M in AMF instead of AWF, the signal is not clear. I might consider AMF to be more efficient than AWF but I might instead assign a higher value to human lives or simply have funds which are earmarked for GHD.
Coming back to your original post—it considers Money, Taste and Dealflow as separate components, but in our discussion you seem to propose to base the attribution primarily on Money. VC doesn’t do that. Limited Partners supply the capital and get returns proportional to capital. General Partners supply taste and dealflow and get carry. The carry exists precisely because “whose money was it” and “who found the deal” are understood to be different things. A regrantor is a GP, not an LP.
So I stand by my point that it’s more relevant to look at how attribution works inside firms (which also cannot rely on markets here) than to default to the amount of money invested, just because it happens to come in a familiar unit.
At least to a good approximation. Individual investors may choose to price in externalities, e.g. treat a grocery store dollar as “better” than the same dollar coming from an oil or tobacco company.
I fully agree that attributing the impact is very important as a signaling mechanism. However I don’t get why we should prioritize “who gave the money” over “who identified the opportunity” for this attribution.
Admittedly, I have zero background in non-profit grantmaking. I’m coming from the for-profit world of software products. In my world what counts as impact is counterfactual outcomes, not resources spent.
Imagine that John, the leader of team A, identifies a gap that is turning customers away, gets team B to deliver a fix and as a result the sales double. I’d say that John made the biggest counterfactual impact here, even if he didn’t lift a finger on the delivery part. Without further context, I’d also consider John leveraging team B, rather than his own, as a positive signal, showcasing that he can think outside the box to deliver desirable outcomes.
Yeah, such solution does lead to more credit being claimed in total for the same work across the entire organization. It’s the inherent cost of collaboration on anything non-trivial. There’s very few environments where that cost would outweigh the benefits of collaboration and, at least in my intuition, non-profit grantmaking ecosystem isn’t likely to be one of them.
Sure! Like to be clear, there’s a very interesting meta, strategic question of “how should we conceive of the EA ecosystem? Are we all just on the same team? Should we act like we’re all colleagues of a large for profit org?”
And, it wouldn’t be crazy. I think to date, aspects of EA and AI safety act like this. And there’s something beautiful, admirable about the attitude of the “don’t worry about whose name is first on the paper, or whose getting paid the most, so long as the job gets done”.
But otoh, consider the Coasean question, why do firms exist? Specifically, why are there multiple different firms? The market is efficient because the firms are competing for dollars; in our economy/society, dollars are how we divide up “credit”, how we represent a claim on current or future work by others.
My general thesis is: EA has been historically small and collaborative, almost Dunbar sized. But AI is scaling up fast, and so AI safety needs to scale up; and also, AI money means that the rest of EA can also scale up. And we’ve seen repeatedly that markets are the best way to scale complex collaboration, compared to eg top down central planning. (Thus, we should implement impact markets.)
For more on this thesis, see the rest of our newsletter! https://manifund.substack.com/
I think we’re talking past each other on one specific thing: input dollars and output dollars aren’t the same dollars.
Firms compete for earned dollars. That’s the output, and it’s what credits the firm for the value it creates (by spending money, customers signal that they value what the firm provides above its monetary cost). Invested dollars are an input. They happen to share a unit with the output, but that doesn’t mean that they measure the same thing.
I read the recent substack post on impact markets and I think this is where it runs into trouble. An org’s valuation is implied by how much money it raises later. This measures how well a funder anticipated other funders, not the actual impact.
At a surface level this appears congruent with how the for-profit world operates. Startup valuations are also set by the money raised in later rounds. However there’s a crucial difference—the value of firms is ultimately grounded in the expectations of future output in a way that value of non-profits can’t be. Equity prices are guesses about very concrete future cash flows from people buying things the firm offers. The accuracy of those guesses can be ultimately checked against something that isn’t another investor’s opinion. The output is uniform—a dollar earned on a grocery store chain is the same as a dollar earned on an AI company[1].
In contrast, EA orgs aim for “positive impact” which can be quantified only by a very subjective evaluation with multiple assumptions, not by any market mechanism. The output is not uniform. Even if we had perfect measurement (we don’t) I might value 1 human QALY above 1000 shrimp QALYs while you do the opposite.
This results in money invested being a much worse proxy for outcomes in a non-profit world than in the for-profit one. If I invest $1 M in Uber instead of Intel, I signal to everyone that I believe Uber is more likely than Intel to be worth more in some time horizon. If I invest $1 M in AMF instead of AWF, the signal is not clear. I might consider AMF to be more efficient than AWF but I might instead assign a higher value to human lives or simply have funds which are earmarked for GHD.
Coming back to your original post—it considers Money, Taste and Dealflow as separate components, but in our discussion you seem to propose to base the attribution primarily on Money. VC doesn’t do that. Limited Partners supply the capital and get returns proportional to capital. General Partners supply taste and dealflow and get carry. The carry exists precisely because “whose money was it” and “who found the deal” are understood to be different things. A regrantor is a GP, not an LP.
So I stand by my point that it’s more relevant to look at how attribution works inside firms (which also cannot rely on markets here) than to default to the amount of money invested, just because it happens to come in a familiar unit.
At least to a good approximation. Individual investors may choose to price in externalities, e.g. treat a grocery store dollar as “better” than the same dollar coming from an oil or tobacco company.
(Just wanted to say thanks for this exchange, I found your views persuasive and helpful.)