A bit of a tangential point, but Iâm curious, because itâs something Iâve also considered:
putting 10% of my paycheck directly in a second account which was exclusively for charity
What do you do with investment income? Itâs pretty intuitive that if youâre âinvesting to giveâ and you have $9,000 of personal savings and $1,000 of donation-investments and they both go up 10% over a year, that you should have $9,900 of personal savings and $1,100 of donation-investments. But what would you (or do you) do differently if you put the money into the accounts, donated half of the charity account, and then ended up with $9,900 in personal savings (a $900 annual gain) and $550 in savings-for-giving (a $50 annual gain)?
I have heard at least three different suggestions for how to do this sort of accounting, but am curious what you go with, since the rest of your perspective self seems fairly intentional and considered!
Thatâs a really interesting question, but I donât invest my charitable giving, though I do tithe my investment income, once gains are realized. My personal best guess is that in non-extinction scenarios, humanityâs wealth increases in the long-term, and opportunities to do good should in general become more expensive, so itâs better to put money towards the present.
Makes total sense not to invest in the charitable sideâIâm generally off a similar mind.[1] The reason Iâm curious is that âconsider it as two separate accountsâ is the most-compelling argument Iâve seen against tithing investment gains. (The argument is basically, that if both accounts were fully-invested, then tithing gains from the personal account to the charity account leads to a total 4:1 ratio between them as withdrawal_time â â, not a 9:1 ratio.[2] Then, why does distribution out of the charity account affect the ârightâ additional amount to give out of the personal account?)
Another way to count it is, if you believe that the returns on effective charity R are greater than private investments returns r and so always make donations asap, then tithing 10%â$X at the start and 10%â((1+r)tâ1)â(90%â$X) after t years is worse for both accounts than just giving say 10%â$X+10%â((1+r)tâ1)(1+R)tâ1â(90%â$X) up-front (and giving $0 of the further investment gains).
Probably this is most relevant to startup employees, who might receive â$100,000 in equityâ 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, donât mean to jump on your personal post with this tangentâam 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 âgiving 18%â than âgiving 10%â!
If the correct baseline is â10% of the exitâ, 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 ârealizes gainsâ frequently with daily trading, but doesnât take any of the money out until after many iterations?
This is a super interesting point, and Iâm completely unsure what it should imply for what I actually do, especially since returns are uncertain and prepaying at a discount under possible bankruptcy /â extinction risk at an uncertain rate is hardâall of which (probably unfortunately) means Iâm just going to keep doing the naive thing Iâve done so far.
Thought-provoking post; thanks for sharing!
A bit of a tangential point, but Iâm curious, because itâs something Iâve also considered:
What do you do with investment income? Itâs pretty intuitive that if youâre âinvesting to giveâ and you have $9,000 of personal savings and $1,000 of donation-investments and they both go up 10% over a year, that you should have $9,900 of personal savings and $1,100 of donation-investments. But what would you (or do you) do differently if you put the money into the accounts, donated half of the charity account, and then ended up with $9,900 in personal savings (a $900 annual gain) and $550 in savings-for-giving (a $50 annual gain)?
I have heard at least three different suggestions for how to do this sort of accounting, but am curious what you go with, since the rest of your perspective self seems fairly intentional and considered!
Thatâs a really interesting question, but I donât invest my charitable giving, though I do tithe my investment income, once gains are realized. My personal best guess is that in non-extinction scenarios, humanityâs wealth increases in the long-term, and opportunities to do good should in general become more expensive, so itâs better to put money towards the present.
Makes total sense not to invest in the charitable sideâIâm generally off a similar mind.[1] The reason Iâm curious is that âconsider it as two separate accountsâ is the most-compelling argument Iâve seen against tithing investment gains. (The argument is basically, that if both accounts were fully-invested, then tithing gains from the personal account to the charity account leads to a total 4:1 ratio between them as withdrawal_time â â, not a 9:1 ratio.[2] Then, why does distribution out of the charity account affect the ârightâ additional amount to give out of the personal account?)
Another way to count it is, if you believe that the returns on effective charity R are greater than private investments returns r and so always make donations asap, then tithing 10%â$X at the start and 10%â((1+r)tâ1)â(90%â$X) after t years is worse for both accounts than just giving say 10%â$X+10%â((1+r)tâ1)(1+R)tâ1â(90%â$X) up-front (and giving $0 of the further investment gains).
Probably this is most relevant to startup employees, who might receive â$100,000 in equityâ 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, donât mean to jump on your personal post with this tangentâam 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 âgiving 18%â than âgiving 10%â!
If the correct baseline is â10% of the exitâ, 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 ârealizes gainsâ frequently with daily trading, but doesnât take any of the money out until after many iterations?
This is a super interesting point, and Iâm completely unsure what it should imply for what I actually do, especially since returns are uncertain and prepaying at a discount under possible bankruptcy /â extinction risk at an uncertain rate is hardâall of which (probably unfortunately) means Iâm just going to keep doing the naive thing Iâve done so far.