How do people see entrepreneurship as fitting into EA? Do you see it as purely an earning to give strategy, or do you see it as having significant other benefits? Are there for-profit entrepreneurial ventures that you regard as particularly EA?
I think that there are pretty strong arguments that entrepreneurship is effective partly because of the actual value that the business creates. For instance, the paper Schumpeterian Profits in the American Economy estimates that entrepreneurs capture on average 1% of the value they create. If it costs about 100x as much to save a life in the US as abroad, that would suggest that half the benefit of EA entrepreneurship is realized through creating value in the US.
(Obviously there’s a huge amount of variance here, depending on things like whether you’re trying to capture value or trying to create value, and whether we believe Nordhaus’s statistics. This is very back-of-the-envelope.)
A specific sub-question: does it make sense for EAs to fund (for-profit as opposed to non-profit) EA entrepreneurs?
Some thoughts on this:
There’s a bonus in making a fellow EA rich, because they’ll donate some of their riches.
However I have a general sense that your investments should focus purely on growing your own capital, and that you should separately optimise for moving as much money as possible to charity, and that you should separate those two things. This is merely a general sense rather than a fully considered position.
In an efficient market, non-EA venture capitalists would already invest in all and only those entrepreneurs whose ventures would in expectation yield positive returns (above those available from alternative investments). We’d want EA venture capitalists to invest in all and only those ventures. Of course, the VC market isn’t perfectly efficient, but I’m not aware of any reason to think that EA VCs are better.
I haven’t thought about this much at all, so these thoughts are all quite tentative.
In an efficient market, non-EA venture capitalists would already invest in all and only those entrepreneurs whose ventures would in expectation yield positive returns (above those available from alternative investments). We’d want EA venture capitalists to invest in all and only those ventures. Of course, the VC market isn’t perfectly efficient, but I’m not aware of any reason to think that EA VCs are better.
EA VCs are going to assign different values to outcomes than a traditional VC would. For a traditional VC, a founder with a 1% change of making a billion dollars is as good as a founder with a 1% change of making a billion dollars and a 100% chance of donating most of that money to cost-effective charities. EAs value the second entrepreneur far more than the first.
So, in a perfectly efficient market, EA VC would evaluate the risks of a startup the same as traditional VCs, but would assign different values to the startups potential success. This might cause EA VCs to make investments that traditional VCs might not make. Two specific examples:
Meal Squares. For a traditional VC, Meal Squares probably does not have the giant exit potential that they need. But, for an EA VC, they have a strong possibility of generating lots of donations and philanthropic value. A traditional VC might pass on investing in them, an EA VC might want to invest.
Wave. Wave creates value both through being a profitable business and by helping people send money from rich economies to poor ones. A traditional VC only values the profit potential, an EA VC values both the profit and the service that the app provides itself.
EA VCs are going to assign different values to outcomes than a traditional VC would. For a traditional VC, a founder with a 1% change of making a billion dollars is as good as a founder with a 1% change of making a billion dollars and a 100% chance of donating most of that money to cost-effective charities. EAs value the second entrepreneur far more than the first.
True, but it depends on how much money an EA founder would donate in expectation, and whether this outweighs better expected returns available from non-EA startups. Meal Squares sounds like it might be a good test case to consider.
As a consideration for, there may be behaviours in the founder-VC relationship that negatively impact the founders (comes up in http://paulgraham.com/fr.html), such as trying to hold off committing as long as possible. EA VCs could try to bypass these to improve odds of startup success.
A key advantage EA VCs have is the “your wins are my wins too” that come from shared goals. It doesn’t matter who is driving more donations, as long as more donations are made. Therefore, the EA VC—EA Entrepreneur relationship is even more positive-sum than a typical VC relationship.
How do people see entrepreneurship as fitting into EA? Do you see it as purely an earning to give strategy, or do you see it as having significant other benefits? Are there for-profit entrepreneurial ventures that you regard as particularly EA?
If you’re interested in this you may want to check out the EA Entrepreneurship Facebook group.
I think that there are pretty strong arguments that entrepreneurship is effective partly because of the actual value that the business creates. For instance, the paper Schumpeterian Profits in the American Economy estimates that entrepreneurs capture on average 1% of the value they create. If it costs about 100x as much to save a life in the US as abroad, that would suggest that half the benefit of EA entrepreneurship is realized through creating value in the US.
(Obviously there’s a huge amount of variance here, depending on things like whether you’re trying to capture value or trying to create value, and whether we believe Nordhaus’s statistics. This is very back-of-the-envelope.)
Not that it matters for your argument, but I think the figure is closer to 2%.
(This must be the most nitpicky comment in the history of this site.)
A specific sub-question: does it make sense for EAs to fund (for-profit as opposed to non-profit) EA entrepreneurs?
Some thoughts on this:
There’s a bonus in making a fellow EA rich, because they’ll donate some of their riches.
However I have a general sense that your investments should focus purely on growing your own capital, and that you should separately optimise for moving as much money as possible to charity, and that you should separate those two things. This is merely a general sense rather than a fully considered position.
In an efficient market, non-EA venture capitalists would already invest in all and only those entrepreneurs whose ventures would in expectation yield positive returns (above those available from alternative investments). We’d want EA venture capitalists to invest in all and only those ventures. Of course, the VC market isn’t perfectly efficient, but I’m not aware of any reason to think that EA VCs are better.
I haven’t thought about this much at all, so these thoughts are all quite tentative.
EA VCs are going to assign different values to outcomes than a traditional VC would. For a traditional VC, a founder with a 1% change of making a billion dollars is as good as a founder with a 1% change of making a billion dollars and a 100% chance of donating most of that money to cost-effective charities. EAs value the second entrepreneur far more than the first.
So, in a perfectly efficient market, EA VC would evaluate the risks of a startup the same as traditional VCs, but would assign different values to the startups potential success. This might cause EA VCs to make investments that traditional VCs might not make. Two specific examples:
Meal Squares. For a traditional VC, Meal Squares probably does not have the giant exit potential that they need. But, for an EA VC, they have a strong possibility of generating lots of donations and philanthropic value. A traditional VC might pass on investing in them, an EA VC might want to invest.
Wave. Wave creates value both through being a profitable business and by helping people send money from rich economies to poor ones. A traditional VC only values the profit potential, an EA VC values both the profit and the service that the app provides itself.
True, but it depends on how much money an EA founder would donate in expectation, and whether this outweighs better expected returns available from non-EA startups. Meal Squares sounds like it might be a good test case to consider.
As a consideration against, the Halo Effect might cloud judgement around odds of success for EA entrepreneurs from the point of EA investors.
As a consideration for, there may be behaviours in the founder-VC relationship that negatively impact the founders (comes up in http://paulgraham.com/fr.html), such as trying to hold off committing as long as possible. EA VCs could try to bypass these to improve odds of startup success.
A key advantage EA VCs have is the “your wins are my wins too” that come from shared goals. It doesn’t matter who is driving more donations, as long as more donations are made. Therefore, the EA VC—EA Entrepreneur relationship is even more positive-sum than a typical VC relationship.