That’s a really interesting question, but I don’t invest my charitable giving, though I do tithe my investment income, once gains are realized. My personal best guess is that in non-extinction scenarios, humanity’s wealth increases in the long-term, and opportunities to do good should in general become more expensive, so it’s better to put money towards the present.
Makes total sense not to invest in the charitable side—I’m generally off a similar mind.[1] The reason I’m curious is that “consider it as two separate accounts” is the most-compelling argument I’ve seen against tithing investment gains. (The argument is basically, that if both accounts were fully-invested, then tithing gains from the personal account to the charity account leads to a total 4:1 ratio between them as withdrawal_time → ∞, not a 9:1 ratio.[2] Then, why does distribution out of the charity account affect the ‘right’ additional amount to give out of the personal account?)
Another way to count it is, if you believe that the returns on effective charity R are greater than private investments returns r and so always make donations asap, then tithing 10%∗$X at the start and 10%∗((1+r)t−1)∗(90%∗$X) after t years is worse for both accounts than just giving say 10%∗$X+10%∗((1+r)t−1)(1+R)t−1∗(90%∗$X) up-front (and giving $0 of the further investment gains).
Probably this is most relevant to startup employees, who might receive “$100,000 in equity” that they only can sell when it later exits for, say, 10x that. Should a 10% pledge mean $10,000 up-front and $90,000 of the exit (10% when paid + 10% of gains), or just $100,000 of the exit (10% went to the charity account, then exited)?[3]
(Sorry, don’t mean to jump on your personal post with this tangent—am happy to chat if you find this interesting to think about, but also can write my own post about it on my own time if not
The one case where I do think investment can sense is where I want to direct the funding to accelerating the program of a for-profit company, eg in biotech, and the right way to do so is via direct investment. I do think there are such cases that can be on the frontier of most-effective in EV terms (and for them I only count it as effective giving if I precommit to re-giving any proceeds, without re-counting it as a donation for pledge purposes).
Consider receiving $1,000 in salary, splitting it $100 : $900 between the accounts, investing each so they grow 10x and become $1,000 : $9,000, then realizing the personal investment gains and tithing $800 on them. Now the accounts are $1,800 : $8,200, which seems a lot more like “giving 18%” than “giving 10%”!
If the correct baseline is “10% of the exit”, should this be any different from the case of a salary worker who makes the $100,000 in cash and puts it in an index fund until it [10x]s? Or what about a professional trader who “realizes gains” frequently with daily trading, but doesn’t take any of the money out until after many iterations?
This is a super interesting point, and I’m completely unsure what it should imply for what I actually do, especially since returns are uncertain and prepaying at a discount under possible bankruptcy / extinction risk at an uncertain rate is hard—all of which (probably unfortunately) means I’m just going to keep doing the naive thing I’ve done so far.
That’s a really interesting question, but I don’t invest my charitable giving, though I do tithe my investment income, once gains are realized. My personal best guess is that in non-extinction scenarios, humanity’s wealth increases in the long-term, and opportunities to do good should in general become more expensive, so it’s better to put money towards the present.
Makes total sense not to invest in the charitable side—I’m generally off a similar mind.[1] The reason I’m curious is that “consider it as two separate accounts” is the most-compelling argument I’ve seen against tithing investment gains. (The argument is basically, that if both accounts were fully-invested, then tithing gains from the personal account to the charity account leads to a total 4:1 ratio between them as withdrawal_time → ∞, not a 9:1 ratio.[2] Then, why does distribution out of the charity account affect the ‘right’ additional amount to give out of the personal account?)
Another way to count it is, if you believe that the returns on effective charity R are greater than private investments returns r and so always make donations asap, then tithing 10%∗$X at the start and 10%∗((1+r)t−1)∗(90%∗$X) after t years is worse for both accounts than just giving say 10%∗$X+10%∗((1+r)t−1)(1+R)t−1∗(90%∗$X) up-front (and giving $0 of the further investment gains).
Probably this is most relevant to startup employees, who might receive “$100,000 in equity” that they only can sell when it later exits for, say, 10x that. Should a 10% pledge mean $10,000 up-front and $90,000 of the exit (10% when paid + 10% of gains), or just $100,000 of the exit (10% went to the charity account, then exited)?[3]
(Sorry, don’t mean to jump on your personal post with this tangent—am happy to chat if you find this interesting to think about, but also can write my own post about it on my own time if not
The one case where I do think investment can sense is where I want to direct the funding to accelerating the program of a for-profit company, eg in biotech, and the right way to do so is via direct investment. I do think there are such cases that can be on the frontier of most-effective in EV terms (and for them I only count it as effective giving if I precommit to re-giving any proceeds, without re-counting it as a donation for pledge purposes).
Consider receiving $1,000 in salary, splitting it $100 : $900 between the accounts, investing each so they grow 10x and become $1,000 : $9,000, then realizing the personal investment gains and tithing $800 on them. Now the accounts are $1,800 : $8,200, which seems a lot more like “giving 18%” than “giving 10%”!
If the correct baseline is “10% of the exit”, should this be any different from the case of a salary worker who makes the $100,000 in cash and puts it in an index fund until it [10x]s? Or what about a professional trader who “realizes gains” frequently with daily trading, but doesn’t take any of the money out until after many iterations?
This is a super interesting point, and I’m completely unsure what it should imply for what I actually do, especially since returns are uncertain and prepaying at a discount under possible bankruptcy / extinction risk at an uncertain rate is hard—all of which (probably unfortunately) means I’m just going to keep doing the naive thing I’ve done so far.