I was wondering about how your ROI or “adjusted money raised” translates to other GH metrics, such as GW’s “multiples of cash”.
If an EGI in OP’s portfolio has a average of 6x adjusted return on donation, and assuming the average GW top charity is around 10x as cost effective as direct cash transfers—does that mean you believe an EGI is equivalent in cost-effectiveness to 60x cash? Or is there a downward adjustment that needs to be made when cross-comparing metrics? Would love to hear your thoughts
Thanks for your question! As a first pass, your assumption is correct in that, since our 1x benchmark is against GW charities (and charities of similar expected cost-effectiveness), an adjusted ROI of 6x is in expectation ~60x cash. That being said, we think the real number is likely lower than that, which is why we hold our EG grantees to a bar of at least 2x (and higher for more established efforts). Specifically, we think a 2x multiplier bar seems justified because (i) “meta” funding opportunities that are more distant from impact seem more likely to overestimate cost-effectiveness by failing to adequately account for additional efforts required by other actors to achieve impact, and (ii) intuitively, we aren’t excited about supporting opportunities that could spend an additional $1 to generate only slightly more than that for high impact charities, even after a counterfactual adjustment. Supporting these opportunities would mean small errors in our calculations could result in negative impact, and risks falling into a meta-trap.
This seems great!
I was wondering about how your ROI or “adjusted money raised” translates to other GH metrics, such as GW’s “multiples of cash”.
If an EGI in OP’s portfolio has a average of 6x adjusted return on donation, and assuming the average GW top charity is around 10x as cost effective as direct cash transfers—does that mean you believe an EGI is equivalent in cost-effectiveness to 60x cash? Or is there a downward adjustment that needs to be made when cross-comparing metrics? Would love to hear your thoughts
Hi Ezra,
Thanks for your question! As a first pass, your assumption is correct in that, since our 1x benchmark is against GW charities (and charities of similar expected cost-effectiveness), an adjusted ROI of 6x is in expectation ~60x cash. That being said, we think the real number is likely lower than that, which is why we hold our EG grantees to a bar of at least 2x (and higher for more established efforts). Specifically, we think a 2x multiplier bar seems justified because (i) “meta” funding opportunities that are more distant from impact seem more likely to overestimate cost-effectiveness by failing to adequately account for additional efforts required by other actors to achieve impact, and (ii) intuitively, we aren’t excited about supporting opportunities that could spend an additional $1 to generate only slightly more than that for high impact charities, even after a counterfactual adjustment. Supporting these opportunities would mean small errors in our calculations could result in negative impact, and risks falling into a meta-trap.