I think the idea of creating a charitable giving portfolio is very promising, especially if it can change donor attitudes and persuade people to donate to more effective charities based on evidence and results which can easily be expressed as a stock price. If you do not have the bank accounts and nonprofit status needed to make this idea possible, I can provide that. I have the framework necessary to accept tax deductible donations, hold them in a bank account or brokerage account, and disburse the funds regularly to charities as this idea would require.
I think your idea is excellent, and to utilize psychology and make people more willing to participate and give, I believe that real money has to be at stake. I believe it would be best if people who successfully predicted nonprofit successes were able to somehow gain greater monetary influence for the charities they supported.
To implement this, I propose a seemingly highly complex system, but one that would be simple for donors to understand and participate in. This idea is a brainstorm, and likely needs some thorough analysis and correction of conceptual errors before it becomes mathematically possible. My idea could be implemented very simply in a Google Spreadsheet before hopefully evolving to a more effective solution. First off, I would like to introduce the concept of an “impact point.” An impact point is equivalent to one dollar sent out to a charity each year for the foreseeable future. There would be a ratio between dollars and impact points, perhaps to the scale of $40 to one impact point initially. This is a rather steep scale, so perhaps it could be highly modified, but i’ll use that as an example for now. if you’re curious how one dollar sent out each year could be sustained, the brokerage account that I have access to could invest all money in stocks or a low risk 2.5% annual return investment so that impact points would perpetually hold value, and maybe even automatically increase in value yearly (or investors would get extra impact points for free) if investments in the brokerage account substantially increased in value. All charities, such as the Against Malaria Foundation, would have a share price which could be determined arbitrarily or set as a ratio between a dollar in the share price and the nonprofit’s approximate total annual budget. If $1 was equivalent to $10,000 in a nonprofit’s annual budget, and AMF’s annual budget was $3,000,000, its share price would be $300. That could be an overly steep entry price, so some adjustment to the formula could perhaps be made, but a higher share price is advantageous because it encourages larger investments in any given stock. Anyways, similar to the stock market, donors would have to bid to “buy” shares in a nonprofit, while sellers would propose an asking price for shares. If there was additional demand to invest in a nonprofit because the nonprofit was successful or GiveWell updated their recommendation status or something, the share price would increase as existing shareholders would want to set their asking prices as high as possible to get more impact points out of their transaction and earn a profit in impact points. If a nonprofit was suddenly downgraded by GiveWell, existing investors might want to switch their impact points into other charity instead, and the stock price would crash as sellers set their asking prices as low as possible to escape the charity. As an add-on idea, if donors wanted to liquidate their impact points, perhaps they could sell their shares in the charity, and then have the stock exchange sponsoring organization exchange their impact points for direct donations to a charity/charities.
With this system, investors would be motivated to select the most promising charities as those promising charities’ stock prices presumably would increase in value over time as the charities became more effective, thus achieving the goal of the system in encouraging donations to effective charities.
Hi Todd,
I think the idea of creating a charitable giving portfolio is very promising, especially if it can change donor attitudes and persuade people to donate to more effective charities based on evidence and results which can easily be expressed as a stock price. If you do not have the bank accounts and nonprofit status needed to make this idea possible, I can provide that. I have the framework necessary to accept tax deductible donations, hold them in a bank account or brokerage account, and disburse the funds regularly to charities as this idea would require.
I think your idea is excellent, and to utilize psychology and make people more willing to participate and give, I believe that real money has to be at stake. I believe it would be best if people who successfully predicted nonprofit successes were able to somehow gain greater monetary influence for the charities they supported.
To implement this, I propose a seemingly highly complex system, but one that would be simple for donors to understand and participate in. This idea is a brainstorm, and likely needs some thorough analysis and correction of conceptual errors before it becomes mathematically possible. My idea could be implemented very simply in a Google Spreadsheet before hopefully evolving to a more effective solution. First off, I would like to introduce the concept of an “impact point.” An impact point is equivalent to one dollar sent out to a charity each year for the foreseeable future. There would be a ratio between dollars and impact points, perhaps to the scale of $40 to one impact point initially. This is a rather steep scale, so perhaps it could be highly modified, but i’ll use that as an example for now. if you’re curious how one dollar sent out each year could be sustained, the brokerage account that I have access to could invest all money in stocks or a low risk 2.5% annual return investment so that impact points would perpetually hold value, and maybe even automatically increase in value yearly (or investors would get extra impact points for free) if investments in the brokerage account substantially increased in value. All charities, such as the Against Malaria Foundation, would have a share price which could be determined arbitrarily or set as a ratio between a dollar in the share price and the nonprofit’s approximate total annual budget. If $1 was equivalent to $10,000 in a nonprofit’s annual budget, and AMF’s annual budget was $3,000,000, its share price would be $300. That could be an overly steep entry price, so some adjustment to the formula could perhaps be made, but a higher share price is advantageous because it encourages larger investments in any given stock. Anyways, similar to the stock market, donors would have to bid to “buy” shares in a nonprofit, while sellers would propose an asking price for shares. If there was additional demand to invest in a nonprofit because the nonprofit was successful or GiveWell updated their recommendation status or something, the share price would increase as existing shareholders would want to set their asking prices as high as possible to get more impact points out of their transaction and earn a profit in impact points. If a nonprofit was suddenly downgraded by GiveWell, existing investors might want to switch their impact points into other charity instead, and the stock price would crash as sellers set their asking prices as low as possible to escape the charity. As an add-on idea, if donors wanted to liquidate their impact points, perhaps they could sell their shares in the charity, and then have the stock exchange sponsoring organization exchange their impact points for direct donations to a charity/charities.
With this system, investors would be motivated to select the most promising charities as those promising charities’ stock prices presumably would increase in value over time as the charities became more effective, thus achieving the goal of the system in encouraging donations to effective charities.
Does anyone have any thoughts?
Brendon
Hi Brendon, thanks for thoughts. I got your email separately and appreciate the conversation.