Let’s stop saying ‘funding overhang’

[Benjamin_Todd]

Last year people were saying there’s a funding overhang – an excess of funding relative to opportunities – and now it seems to have gone away. What’s going on?

It’s natural to talk in terms of funding overhangs, but I don’t think it’s the best way to think about the situation. I used to use the term myself (which contributed to it being used more widely), but stopped a few months after that post. I’ve tried to write a quick post to explain why.

Tldr: I think it’s better to talk in terms of the funding bar going up or down, and in being more or less funding constrained (relative to other constraints).

Funding ‘overhang’ makes it sound like there’s a ‘correct’ amount of funding, and we can have too little or too much. There are similar issues with terms like ‘funding gaps’, or ‘funding constrained’ if spoken about in a black or white way. It’s very natural to think in terms of absolutes, but in reality, everything is on a continuum.

More funding is always more useful – it’s just that its value diminishes as you have more and more. There’s no single optimal amount.

I think a better concept is the bar – the level of cost-effectiveness at which it’s worth funding or working on an opportunity.

Effective altruism will hopefully exist for many decades, and so the challenge we face is figuring out how many resources to give each year in order to maximise our impact over those decades.

To do that, ideally we could put all the opportunities we’ll face over those decades in order of cost-effectiveness, fund or work on the most effective ones first, and then keep going till the entire pot of resources is allocated.

The bar is then given by the cost-effectiveness of the final grant (the ‘last dollar’) or final job. Any opportunity that’s more effective than the bar should be supported, and all others shouldn’t.

Entrepreneurs should aim to create organisations that are more cost-effective than the current bar – the higher they are above the bar, the easier they will find it to fundraise

If the bar for funding goes down, but the bar for direct work stays the same, then earning to give becomes relatively less attractive. You could then say we’ve become less funding constrained.

Where the bar ends up depends on (i) how many resources we have (ii) how many opportunities we discover.

This means the bar will change from year-to-year depending on changes in expectations about (i) how many new donors entering the community (ii) stockmarket returns (iii) the discovery of new donation opportunities (iv) the world changing to create or remove opportunities.

All this is hard to estimate, but we have to do our best.

For instance, what’s happened recently is that lots more resources entered the community (as tech stocks and crypto went up), so the bar was dropped, and then the market crash decreased the amount of resources available, so the bar was raised a bit. Overall I think the bar is still lower than it was before 2019, but it’s not as low as it seemed 6 months ago.

This is easiest to quantify with GiveWell recommended charities. Around 2015, the cost-effectiveness of the marginal charity was roughly 10x cash transfers. Last year it dropped to 7x, and this year it increased to 8x – the latter was partly due to the market decline and party due to GiveWell discovering more highly effective opportunities than expected.

I think a similar thing has happened within longtermist issues (as opposed to global health), but my sense is the ups and downs are somewhat greater (e.g. maybe it was 10 units in 2015, then dropped to 2 units, and is now back up to 3).

Either way, these ups and downs are part of the normal course of events.

At all points, additional funding has been useful, it’s just that its value has changed somewhat.

And it has never been ‘easy’ to get funding – rather, how difficult it is goes up and down over time.

Most of the time, these differences are not super decision-relevant. The uncertainties involved in effective altruism are so huge, that a change in the bar by a factor of 2 isn’t going to make the difference in many decisions – and so I don’t think much is going to change due to the recent change in the bar.

A change in the bar by a factor of 5 or 10 is much more likely to be decision-relevant, so I think it was important to flag the change from 2015 to 2021.

Given all this, is there a sensible interpretation of the term ‘funding overhang’? You could use it to label situations where a sudden increase in funding has driven the bar down; or perhaps for situations where skill-sets that are complementary with spending money have become a lot more valuable. But overall I think it’s better to avoid the term altogether – it’s so easy to start thinking in black and whites and get confused. Instead, talk about the bar going up or down, and becoming more or less funding constrained relative to other constraints.

For more:

See my post and talk about how the increase in funding has changed the community’s priorities. I avoided using the term funding overhang in it, and instead talked about how the bar had changed and what that means. Given the bar has raised a little bit since then, the conclusions hold more weakly now, but only by a little bit.

[Vaidehi Agarwalla]

I think this post doesn’t explicitly mention some relevant context, especially for people newer to the community. While Ben mentions that he used to use this term, he doesn’t mention that he previously wrote a highly upvoted and engaged-with post that contributed to wider usage of the term.

I raise this because I’ve noticed that it is part of a larger pattern. The pattern goes something like this:

80,000 Hours introduce an idea or concept in a public, non-targeted (intended for mass consumption) and engaging (interesting to read /​ introducing easy-to-understand concepts) blog post such as:

• Why and how to earn to give (note: I don’t think this is the only post here, or that 80K was the only actor to promote earning to give—others also promoted it during this period)

• Management consulting (for skill-building & earning to give) - Career review

• Why you should focus more on talent gaps, not funding gaps − 80,000 Hours

• Is effective altruism growing? An update on the stock of funding vs. people

These posts sometimes end with a few very specific calls to action for a fairly small subset of the post’s readers, e.g. whether to pursue a particular (competitive) career, or becoming a researcher, grantmaker or entrepreneur.

Then, some time later, 80,000 hours publishes a post suggesting that the community is maybe going too far in one direction and that we should reverse course:

• 80,000 Hours thinks that only a small proportion of people should earn to give long term

• Before committing to management consulting, consider directly entering priority paths, policy, startups, and other options − 80,000 Hours

• Think twice before talking about ‘talent gaps’ — clarifying nine misconceptions

• Let’s stop saying ‘funding overhang’ - EA Forum

These posts sometimes mention that 80,000 Hours previously held this view but often don’t acknowledge the role that this prior communication played in contributing to the problem.

I think this points to some important questions that deserve more discussion, since communications have a strong hand to play in shaping community discourse.

[Benjamin_Todd]

Hey Vaidehi,

I didn’t mean to give the impression I didn’t contribute to the use of the term ‘funding overhang’. I thought that was covered by the paragraph where I say that I used to use the term (plus would be obvious to forum readers interested in this article). I’ve now added link to the “is EA growing” post and a small edit.

(I think in the other three cases you list, earning to give, consulting and talent gaps, I was pretty explicit about how I contributed to the problem.)

I also agree there has been something in the direction of this general pattern, and I would like to get better at predicting the ways my posts will be misunderstood in advance, though I do find this hard.

I’d be curious if you think a strategy of, say, posting half as often (but trying to vet more ahead of time) would be better than posting more often, and then writing follow ups about common misunderstandings & questions that arise, in more of a dialogue.

I could say a bunch more about the specific examples mentioned. One quick observation is that I think earning to give was both the earliest and the most damaging example. ‘Funding overhang’ seems like a different class of problem (e.g. I don’t think people have taken the wrong career due to it) - I just wrote this post since I think the concept of ‘degree of funding constraint’ and ‘the bar’ are clearer, and wanted to get Forum readers using them more. The main points of the original post still stand (available funding has increased a lot, which has implications for priorities).

Edit: Maybe it’s also worth saying that the large majority of 80k’s key positions (i.e. those listed in the key ideas series, career guide, list of problems) haven’t been retracted in this way.

[Kirsten]

I strongly upvoted this comment not because I have strong feelings about it, but because I think it’s excellent as a comment: it makes one clear, novel point with good formatting, useful links and appropriate evidence. If there was still a “comment prize” I’d nominate this one.

[Vaidehi Agarwalla]

Thanks! A lot of credit goes to my friends for helping me hone the point and work on the framing.

[Andrea_Miotti]

For more information on the current funding situation, here is OpenPhil’s latest update indicating that their assets are down ~40%, limiting growth in their commitment compared to previous projections, and GiveWell’s latest funding projection update indicating that they “don’t expect to have enough funding to support all the cost-effective opportunities [they] find”.

[Owen Cotton-Barratt]

Hmm, I think “funding overhang” has some helpful connotations that you don’t describe here. It evokes (for me) a sense of: not being in equilibrium on current spending; of the elasticity-of-activity-with-funding being very low; of discount rates being higher for labour than money.

I think all of those are basically accurate at the moment in traditionally longtermist areas. Perhaps most importantly, I like how it evokes “if you can find a great idea and people to implement it, there’s probably funding available for it that isn’t directly trading off against other projects people are implementing now”.

And although you say it’s better not to think of blacks and whites, I do think there’s something binary about this dynamic according to whether funding is a significant bottleneck on more good work happening right now (with a decent size grey area in the middle). And in longtermist EA we’ve been fairly firmly at the “funding overhang” end of the spectrum for the last three years, even while the bar moves around a bit.

So overall I think the issue is not using the term “funding overhang” but the connotation that if there’s a funding overhang the value of marginal funds is zero (which I think is badly wrong). So I’m kinda wondering if we can keep the term “funding overhang” and just get rid of that association … it feels like it should be achievable … OTOH there are few cases where it’s necessary to talk about (I don’t think talking about the funding bar just does the same work, but it’s not too hard to find other ways to frame it).

[Owen Cotton-Barratt]

I realized I seemed to be understanding the term very differently than you—e.g. this sentence didn’t resonate for me …

Funding ‘overhang’ makes it sound like there’s a ‘correct’ amount of funding, and we can have too little or too much.

… so I wrote an explanation of how I’d use the term funding overhang. It might still be correct to stop using the term (and have a different term for the thing I’m calling funding overhang), but I do think there’s a valuable concept there and we can have a better version of the conversation if we have common knowledge of what that is.

[Benjamin_Todd]

I agree it’s pointing at something – in the penultimate paragraph I say:

Given all this, is there a sensible interpretation of the term ‘funding overhang’? You could use it to label situations where a sudden increase in funding has driven the bar down; or perhaps for situations where skill-sets that are complementary with spending money have become a lot more valuable. But overall I think it’s better to avoid the term altogether – it’s so easy to start thinking in black and whites and get confused.

That said, I think it’s usually better to describe this as “becoming less funding constrained” rather than “there’s a funding overhang”, because it makes it sound more like a continuum.

(Or even better “less funding constrained and more constrained by X”.)

So I’ve made some edits to the original post to suggest replace funding overhang with either (i) talking about the bar changing or (ii) talking about becoming more or less funding constrained. Thank you for the prompt!

[Owen Cotton-Barratt]

So I think the state of affairs right now for some key work is “barely funding constrained at all”. I think that’s helpful to be able to talk about, and it doesn’t seem egregious to me if people round it off as “not funding constrained”. But I’m worried that that has more (incorrect) connotations of “extra money isn’t helpful” than “funding overhang”.

The issue is that we need to be able to talk about two different things:

1. The value of deploying funding now for getting marginal work to happen right now;

2. The all-things-considered value of funding.

These are obviously related, but they can vary separately. I want to be able to express that #1 is very low (where it’s unproblematic if people approximate it as zero), but I’m definitely not OK with people approximating #2 as zero. In a different world #1 could be high while #2 was relatively low (in this case borrowing-to-give would be a good strategy).

[A very rough figure I’d be OK with people using for #2 is 100 nanodooms averted /​$M (for funding that isn’t significantly correlated with other future EA funding sources; lower if correlated).]

[Owen Cotton-Barratt]

I’m now noticing I’m unsure whether you disagree that it’s okay to approximate #1 as zero. I read your post as arguing against approximating #2 as zero, but maybe that’s just because that’s something I agree with, and you actually intended to cover both 1+2.

[Harrison Durland]

A semi-quick chain of thoughts (caveats/​nuance dial set to low):

1. I’ve frequently thought that the variable you mention (e.g., “we have a *funding * overhang” vs. “*talent * underhang”) should be whatever you want the emphasis to be on in the immediate conversation: if your point is “we need more talent/​ideas” then make the focus on that, then if it’s relevant you can mention “the limiting factor here is not money.”

2. However, sometimes your point may be “we are short on lots of different things relative to money (e.g., talent, information, ideas, connections),” in which case it might it’s seemed to me like it may be simpler to just say “funding overhang”—especially if the point/​question is “ how can we use funds to reduce shortfalls in other enablers?”

3. Still, I’ll grant that “overhang” might be misleading or have negative connotations, making it worthwhile to use different language even in situations like (2). But I don’t know! Personally, I never thought the term was that big of a deal.

(Apologies if I’m just missing the point somewhere, I didn’t spend much time worrying about this possibility)

[brb243]

I broadly agree (with 3) that we should not worry about terms but focus on meaning. Re: 1: One’s perspective should not change depending on the conversation. For example, one should not say ‘there is funding overhang’ when they want someone to work on a non-fundraising project and elsewhere specify ‘talent overhang’ when they seek funding. The changing narrative should not be enabled by language, such as ‘the moving bar’ (I do not think that this post aims for such—vice versa, seeking to avoid conveying meaning unwelcoming to high impact funders).

Simultaneously, it can be true that we currently do not have the capacity to deploy existing funding in a way to achieve the impact we’d like to and that this capacity can be gained by changing the funding framework or attracting talent. Or, it can simply mean that now funding should be invested into developing talent. Thus, funding overhang does not mean ‘we do not need (additional) funding’ but ‘we need to change the way it is spent.’

So, re: 2: it actually can make sense to use the ‘stressful’ term ‘funding overhang’ among some audiences, including donors, because the capacity to effectively deploy funding needs to be developed (and people should prioritize thinking about it).

[Matt Boyd]

Commonly in health economics and prioritisation (eg New Zealand’s Pharmaceutical Management Agency) you calculate the cost-effectiveness (eg cost per QALY) for a given medication, and then rank the desired medications from most to least cost-effective. You then take the budget, and distribute the funds from top until they run out. This is where your rule the line (bar). Nothing below gets funded unless more budget is allocated. If there are items below the bar worth doing then there is a funding constraint, if everything has been funded and there are leftover funds then there is a funding overhang. So it depends on how long the list of cost-effective desirable projects is as to whether there is a shortfall, right amount, or overhang, and that depends on people thinking up projects and adding them to the list. An ‘overhang’ probably stimulates more creativity and thought on potential projects.

[Benjamin_Todd]

But what determines what is ‘worth doing’ in those cases? You should be able to find ways to keep improving health, just at ever decreasing levels of cost-effectiveness.

[Matt Boyd]

Yes, absolutely, and in almost all cases in health the list of desirable things outstrips the funding bar. The ‘league table’ of interventions is longer than the fraction of them that are/​can be funded. So in health there is basically never an overhang. The same will be true for EA/​GCR/​x-risk projects too. So I agree there is likely no ‘overhang’ there either. But it might be that all the possibly worthwhile projects are not yet listed on the ‘league table’ (whether explicitly or implicitly).

[Benjamin_Todd]

I don’t think there can ever be an overhang in that sense, since the point at which something is ‘worthwhile’ or not is arbitrary.

Let’s say all the worthwhile interventions produce 10 utils per dollar.

If you have enough money to cover all of those, now you can fund everything that produces 1 or more util per dollar.

Then after that you can fund everything that produces 0.1 util per dollar, then 0.01, and so on for ever.

[Matt Boyd]

That’s true in theory. But in practice there are only a (small) finite number of items on the list (those that have been formally investigated with a cost-effectiveness analysis). So once those are all funded, then it would make sense to fund more cost-effectiveness analyses to grow the table. We don’t know how ‘worthwhile’ it is to fund most things, so they are not on the table.

[brb243]

I think a better concept is the bar – the level of cost-effectiveness at which it’s worth funding or working on an opportunity.

I agree. This diverts the focus from the relative amount of funding, talent, and other resources to understanding the particular opportunity at hand. It does not matter if funding is generally available but whether the grant funding applicant meets the bar.

the higher they are above the bar, the easier they will find it to fundraise … Where the bar ends up depends on (i) how many resources we have (ii) how many opportunities we discover.

Should the bar then be adjusted according to the expectations of future funding amount and opportunities’ development, both of which are dependent on the cumulative funding allocation before any time? The possibility to fund a changing proportion of ‘direct impact’ and ‘fundraising’ projects would suggest that the bar could be to an extent given externally.

At all points, additional funding has been useful, it’s just that its value has changed somewhat.

It makes sense to fund projects in the order of cost-effectiveness. One could argue that normative development, such as the (long-term) focus of the global community on highly positive impact, is both the constraint and objective. But, it cannot be directly bought by funding or gained by talent. Rather, atmosphere has to be changed. I do not suggest the term ‘atmosphere undercling’ but funding overhang with respect to talent is not accurate.