If someone is strongly considering donating to a charitable fund, I think they should usually instead participate in a donor lottery up to say 5-10% of the annual money moved by that fund. If they win, they can spend more time deciding how to give (whether that means giving to the fund that they were considering, giving to a different fund, changing cause areas, supporting a charity directly, participating in a larger lottery, saving in a donor-advised fund, or doing something altogether different).
I’m curious how you feel about that advice. Obviously some donors won’t be comfortable with the idea of a donor lottery and they can continue to give directly. I personally remain very excited about the idea of donor lotteries and think it would be healthy for the EA community to use more extensively.
For example, I think it would be healthy if funds were accountable to a smaller number of randomly selected donors who had the time to investigate more deeply, rather than spending <10% as much time and being more likely to pick based on a quick skim of fund materials and advertising/social dynamics/etc. And it seems like there’s no way to escape from that regress by having GWWC evaluate evaluators, since then the donor must evaluate GWWC’s evaluations. From this perspective a donor lottery is really like a “free lunch” that’s hard to get in other ways.
Using a fund is similar to using an actively managed investment fund instead of trying to pick individual stocks to invest in: in both cases, you let experts decide what to do with your money. This analogy helps explain the structure of a charitable fund, but it likely understates its benefits.
There is also one major way in which it overstates the benefits: for financial investments it is very valuable to diversify across at least dozens of firms and a few asset classes. Evaluating so many investments would take a huge amount of time, and so even if evaluating individual investments was easier than evaluating funds you’d still probably want to invest in a fund. In contrast, a charitable donor needs to find just one charity that they want to support, and so the case for evaluators really rests on it being easier to evaluate an evaluator than to evaluate a charity.
That comparison is most favorable for organizations like GiveWell, whose main role is to produce reasoning that would clearly be valuable to an individual donor trying to evaluate a charity. But “evaluate funds” vs “evaluate charities” is more apples-to-apples when you are primarily relying on funder judgment, since you could just as well rely on the judgment of people who run the charities they support.
(However the point about charities preferring to engage with fewer big funders is still very relevant and suggests using either a fund or a lottery.)
I see the case in favour of donation lotteries as relying on some premises that are often, but not always true:
Spending more time researching a donation opportunity increases the expected value of a donation.
Spending time researching a donation opportunity is costly, and a donation lottery allows you to only need to spend this time if you win.
Therefore, all else equal, it’s more impactful (in expectation) to have a 1% chance of spending 100 hours to decide where $100,000 should go than it is to have a 100% chance spending 1 hour to decide where $1,000 to go.
And donation lotteries provide a mechanism to do the more impactful thing.
Some of these don’t hold for many donors, and there are some additional considerations which undermine the value of lotteries:
Some donors may not feel confident that they can do much better with more time invested. They may even feel averse about the amount of money they’d affect if they won(even if ex-ante they influenced $X either way). They stand less to gain from donations lotteries because of this.
Choosing to donate to a donation lottery is not costless. For example, it may take a similar amount of time/resources to evaluate which fund they think is highest impact, as it would to understand and trust donation lotteries. This takes away some of the advantage of a donor lottery.
For some donors, there’s there may be more advocacy potential in giving to a fund supported by a reputable evaluator, than a donation lottery.
I’d like to flag that I’m a little more reticent about putting too much weight on this consideration. Leaning too much into ‘advocacy potential’ (rather than just doing what’s straightforwardly effective) seems slippery. But I think it’d be a mistake to ignore this consideration.
A substantial amount of our traffic comes from people who are completely unfamiliar with effective altruism (e.g.., people who just googled “Best charities” or just used our “How Rich Am I?” calculator) and I think funds are a better option for most of this audience (though perhaps for EA Forum users, it’s a different story, so I really appreciate pushback here!).
Overall, I think if Giving What We Can changed its default recommendation from funds to donation lotteries, we’d be having less impact.
Though we see funds as the best default option, we would like to provide additional guidance on when it makes sense to choose other options. I’ve made a small edit to the version of this post on our website to acknowledge that donor lotteries could be a compelling alternative. My sense is that donor lotteries would be a better option than funds for someone who:
Understands the arguments in favour of a donor lottery, and also the mechanisms for how it works.
Would be able to donate cost-effectively if they spent more time on their decision.
Would be able to spend that time in the event of winning.
I also have a few thoughts about this comment in particular:
For example, I think it would be healthy if funds were accountable to a smaller number of randomly selected donors who had the time to investigate more deeply, rather than spending <10% as much time and being more likely to pick based on a quick skim of fund materials and advertising/social dynamics/etc. And it seems like there’s no way to escape from that regress by having GWWC evaluate evaluators, since then the donor must evaluate GWWC’s evaluations. From this perspective a donor lottery is really like a “free lunch” that’s hard to get in other ways.
Speaking personally, I’d also prefer fewer donors conducting deeper investigations of funds than a larger number conducting more shallow investigations. I think this is a very good consideration in favour of donation lotteries.
Speaking on behalf of Giving What We Can: though our work “evaluating the evaluators” will inform our recommended funds and charities (to provide a stronger basis for our recommendations) we are also motivated to make it easier for donors to choose which evaluators and funds they rely on by providing resources on the values implicit in their methodology + pointing to some potential strengths/weaknesses of their methodology.
Put another way, our vision for next year is to help:
Provide strong default options for donors, with a reasonable justification for those defaults. (i.e., they’re supported by a trusted evaluator who we investigated).
Provide the tools for donors to choose the best fund or charity given their values and worldview.
Im really curious about your work to give donors the tools to choose between evaluators based on their values.
One big difference between investment funds and charitable funds is that lay people can at least evaluate funds on some basic metrics such as market returns versus a benchmark. Both for accountability and for the purpose of aligning charity fund/ evaluator chooses with values, some further tooling seems valuable.
Do you have any comments on the accountability piece?
Finally, I would add another downside of lotteries, which is that donors need to trust that most participants will have similar values to them, and the knowledge / skills to do research. This trust seems easier to grant to evaluators or funds.
I agree that providing accountability to evaluators is a real challenge. I don’t have much more to add right now, other than we really hope our work will help!
As for your last point—at least from a simple expected-value perspective, I’m not sure you should care too much about other lottery participant’s values. The idea is that by donating to the lotter, you’re not increasing the expected amount of money other participants influence. Of course, there could be other reasons to not want to participate in lotteries with people whose values you don’t share.
If someone is strongly considering donating to a charitable fund, I think they should usually instead participate in a donor lottery up to say 5-10% of the annual money moved by that fund. If they win, they can spend more time deciding how to give (whether that means giving to the fund that they were considering, giving to a different fund, changing cause areas, supporting a charity directly, participating in a larger lottery, saving in a donor-advised fund, or doing something altogether different).
I’m curious how you feel about that advice. Obviously some donors won’t be comfortable with the idea of a donor lottery and they can continue to give directly. I personally remain very excited about the idea of donor lotteries and think it would be healthy for the EA community to use more extensively.
For example, I think it would be healthy if funds were accountable to a smaller number of randomly selected donors who had the time to investigate more deeply, rather than spending <10% as much time and being more likely to pick based on a quick skim of fund materials and advertising/social dynamics/etc. And it seems like there’s no way to escape from that regress by having GWWC evaluate evaluators, since then the donor must evaluate GWWC’s evaluations. From this perspective a donor lottery is really like a “free lunch” that’s hard to get in other ways.
There is also one major way in which it overstates the benefits: for financial investments it is very valuable to diversify across at least dozens of firms and a few asset classes. Evaluating so many investments would take a huge amount of time, and so even if evaluating individual investments was easier than evaluating funds you’d still probably want to invest in a fund. In contrast, a charitable donor needs to find just one charity that they want to support, and so the case for evaluators really rests on it being easier to evaluate an evaluator than to evaluate a charity.
That comparison is most favorable for organizations like GiveWell, whose main role is to produce reasoning that would clearly be valuable to an individual donor trying to evaluate a charity. But “evaluate funds” vs “evaluate charities” is more apples-to-apples when you are primarily relying on funder judgment, since you could just as well rely on the judgment of people who run the charities they support.
(However the point about charities preferring to engage with fewer big funders is still very relevant and suggests using either a fund or a lottery.)
Thanks for the thoughtful comment.
I think there’s a strong theoretical case in favour of donation lotteries — Giving What We Can just announced our 2022/2023 lottery is open!
I see the case in favour of donation lotteries as relying on some premises that are often, but not always true:
Spending more time researching a donation opportunity increases the expected value of a donation.
Spending time researching a donation opportunity is costly, and a donation lottery allows you to only need to spend this time if you win.
Therefore, all else equal, it’s more impactful (in expectation) to have a 1% chance of spending 100 hours to decide where $100,000 should go than it is to have a 100% chance spending 1 hour to decide where $1,000 to go.
And donation lotteries provide a mechanism to do the more impactful thing.
Some of these don’t hold for many donors, and there are some additional considerations which undermine the value of lotteries:
Some donors may not feel confident that they can do much better with more time invested. They may even feel averse about the amount of money they’d affect if they won(even if ex-ante they influenced $X either way). They stand less to gain from donations lotteries because of this.
Choosing to donate to a donation lottery is not costless. For example, it may take a similar amount of time/resources to evaluate which fund they think is highest impact, as it would to understand and trust donation lotteries. This takes away some of the advantage of a donor lottery.
For some donors, there’s there may be more advocacy potential in giving to a fund supported by a reputable evaluator, than a donation lottery.
I’d like to flag that I’m a little more reticent about putting too much weight on this consideration. Leaning too much into ‘advocacy potential’ (rather than just doing what’s straightforwardly effective) seems slippery. But I think it’d be a mistake to ignore this consideration.
A substantial amount of our traffic comes from people who are completely unfamiliar with effective altruism (e.g.., people who just googled “Best charities” or just used our “How Rich Am I?” calculator) and I think funds are a better option for most of this audience (though perhaps for EA Forum users, it’s a different story, so I really appreciate pushback here!).
Overall, I think if Giving What We Can changed its default recommendation from funds to donation lotteries, we’d be having less impact.
Though we see funds as the best default option, we would like to provide additional guidance on when it makes sense to choose other options. I’ve made a small edit to the version of this post on our website to acknowledge that donor lotteries could be a compelling alternative. My sense is that donor lotteries would be a better option than funds for someone who:
Understands the arguments in favour of a donor lottery, and also the mechanisms for how it works.
Would be able to donate cost-effectively if they spent more time on their decision.
Would be able to spend that time in the event of winning.
I also have a few thoughts about this comment in particular:
Speaking personally, I’d also prefer fewer donors conducting deeper investigations of funds than a larger number conducting more shallow investigations. I think this is a very good consideration in favour of donation lotteries.
Speaking on behalf of Giving What We Can: though our work “evaluating the evaluators” will inform our recommended funds and charities (to provide a stronger basis for our recommendations) we are also motivated to make it easier for donors to choose which evaluators and funds they rely on by providing resources on the values implicit in their methodology + pointing to some potential strengths/weaknesses of their methodology.
Put another way, our vision for next year is to help:
Provide strong default options for donors, with a reasonable justification for those defaults. (i.e., they’re supported by a trusted evaluator who we investigated).
Provide the tools for donors to choose the best fund or charity given their values and worldview.
Thanks for this great response.
Im really curious about your work to give donors the tools to choose between evaluators based on their values.
One big difference between investment funds and charitable funds is that lay people can at least evaluate funds on some basic metrics such as market returns versus a benchmark. Both for accountability and for the purpose of aligning charity fund/ evaluator chooses with values, some further tooling seems valuable.
Do you have any comments on the accountability piece?
Finally, I would add another downside of lotteries, which is that donors need to trust that most participants will have similar values to them, and the knowledge / skills to do research. This trust seems easier to grant to evaluators or funds.
I agree that providing accountability to evaluators is a real challenge. I don’t have much more to add right now, other than we really hope our work will help!
As for your last point—at least from a simple expected-value perspective, I’m not sure you should care too much about other lottery participant’s values. The idea is that by donating to the lotter, you’re not increasing the expected amount of money other participants influence. Of course, there could be other reasons to not want to participate in lotteries with people whose values you don’t share.
Re: value alignment, that’s a great point, it looks like I fell victim to a bit of loss aversion! (I imagine I’m not alone)