0. Consider only enterprises that wouldn’t be appealing to purely for-profit investors 1. Model the business’s existence as being the creation of a stream of lives saved per year. 2. Model it’s effectiveness by using the philanthropic equivalent of discounted cash-flow analysis 3. Model the cost of investment as the difference between the returns generated by this business and what your money would otherwise have been doing. 4. Divide the present day equivalent by the cost of investment to get the cost-effectiveness.
Below are two toy examples. Opus 4.8 can one-shot the relevant calculations, so I’ll skip their explanations. Use the prompt “What is the Net Present Value of [something valuable] per year, starting Y years from now. If philanthropic, use GiveWell’s current discount rate? (4%). If financial, use a 6% discount rate.”
AMF Vs Social Enterprise
Q: Say AMF saves a life for £4k. A social enterprise could saves 1 life a year forever if you donate £200k to it right now. Which is better?
A: AMF
1 life saved a year = 25 lives right now. 25 lives right now would cost you £4k per life * 25 lives = £100k. Therefore, donating to AMF is twice as good.
AMF vs Startup
Q: Donate to AMF or invest $500k in an a YC startup that, if it works, would return 10x over 5 years and save 100 lives a year every year. If it doesn’t work though, nothing of value is created whatsoever.
A: Probably Startup
YC success rate = 5% 100 lives a year * 5% chance of happening = 5 lives per year saved on average. 5 lives per year, starting from 5 years from now-> 107 lives saved right now. 10x return / 0.05 chance of materialising / 5 year worth of discounting = ~$200k dollars Cost to invest = $500k - $200k = $300k
107 lives for $300k dollars; $2.8k dollars per life. So, better than $4k via AMF.
When you model this out sometimes you find that you are better off dividing the purely profit maximization part of it and the donation part of it, i.e., Warren Buffett + donations to AMF beat Yunus
I think something like this could work:
0. Consider only enterprises that wouldn’t be appealing to purely for-profit investors
1. Model the business’s existence as being the creation of a stream of lives saved per year.
2. Model it’s effectiveness by using the philanthropic equivalent of discounted cash-flow analysis
3. Model the cost of investment as the difference between the returns generated by this business and what your money would otherwise have been doing.
4. Divide the present day equivalent by the cost of investment to get the cost-effectiveness.
Below are two toy examples. Opus 4.8 can one-shot the relevant calculations, so I’ll skip their explanations. Use the prompt “What is the Net Present Value of [something valuable] per year, starting Y years from now. If philanthropic, use GiveWell’s current discount rate? (4%). If financial, use a 6% discount rate.”
AMF Vs Social Enterprise
Q: Say AMF saves a life for £4k. A social enterprise could saves 1 life a year forever if you donate £200k to it right now. Which is better?
A: AMF
1 life saved a year = 25 lives right now. 25 lives right now would cost you £4k per life * 25 lives = £100k. Therefore, donating to AMF is twice as good.
AMF vs Startup
Q: Donate to AMF or invest $500k in an a YC startup that, if it works, would return 10x over 5 years and save 100 lives a year every year. If it doesn’t work though, nothing of value is created whatsoever.
A: Probably Startup
YC success rate = 5%
100 lives a year * 5% chance of happening = 5 lives per year saved on average.
5 lives per year, starting from 5 years from now-> 107 lives saved right now.
10x return / 0.05 chance of materialising / 5 year worth of discounting = ~$200k dollars
Cost to invest = $500k - $200k = $300k
107 lives for $300k dollars; $2.8k dollars per life. So, better than $4k via AMF.
When you model this out sometimes you find that you are better off dividing the purely profit maximization part of it and the donation part of it, i.e., Warren Buffett + donations to AMF beat Yunus