Direct Work For-Profit Entrepreneurship is Underrated
In a recent post about entrepreneurship, there was emphasis on the earn-to-give capacity of entrepreneurship rather than the direct work. Even in the post, it implied a dichotomy between earning-to-give and direct impact. It states,
“With a 20% annual discount the numbers are not that far off from what I’ve heard as higher-end estimates of the value of direct work, and I expect that there is a fairly strong correlation between being at the higher end of entrepreneurship returns and being at the higher end of direct work, so this doesn’t seem like that strong of an argument for entrepreneurship over direct work.”
The author maybe didn’t realize one could do both (or didn’t have the information). I will argue that direct-impact for-profit startups are underappreciated for having a large impact. I am very familiar with y-combinator (the sample of startups used for the analysis in the post) as I was interested in startups and read the y-combinator advice even before learning about EA (YC is how I was re-reminded of EA and got me into it). Some of the startups do have missions that would align closely with EA problem areas. On the website, the list of startups (found here) there are tags at the bottom left.
Under the “medical devices” tab, which I am most interested in, I found a couple working on medical devices similar to EA goals. The company Ananya Health focuses on a lower cost a cryotherapy medical device for freezing off pre-cancerous lesions for cervical cancer. Current systems are much more expensive and lowering the cost will allow lower income countries to use it. In a map of all DALYs globally in 2019, cervical cancer occupies 0.35% of all global DALYs. Cervical cancer cost 8,955,012.78 DALYs in 2019 and led to the death of 280,479.04 people in 2019 (note: there is overlap)(source ← look under cervical cancer) . Since YC invests in startups that have the potential for a billion-dollar market cap, they believe that Ananya Health has the potential to grow into at least that and that the founder has the interest in that. It does sometimes happen that YC founders pivot into new areas, but Anu Parvatiyar (the founder) started it in May 2020 and was in the YC batch of Summer 2021 which makes it more likely that if there was initial qualms about the market size, it would’ve been worked out. This is an example of a startup doing EA-like direct work and for-profit entrepreneurship.
Another startup related to global health is Shift Labs who are developing lower cost medical devices. While they don’t directly talk about global health, it does mention in the description that they want t0 “serve the fastest growing healthcare markets in the world,” which, to my knowledge, are developing countries. Other startups focused more on general biomedical innovation in medical devices, which is similar to the “biomedical research” benefits of the 80k career profile. There can be seen here.
Besides Global health/ Biomedical Innovation, some of the tags that are EA problems profiles or related problems are: “Climate”, “Healthcare”, “Biotech”, “Digital Health”, “Health Tech”, “Mental Health Tech”, “Telemedicine”, “GovTech”, “AI-powered Drug Discovery”, “Electric Vehicles”, “Telehealth”, “Diagnostics”, “Carbon Capture and Removal”, “Drug Discovery”, “Synthetic Biology”, “Sustainable Fashion”, “Genomics”, “Agriculture”, “NeuroTechnology”, “SleepTech”, “Fertility Tech”, “Oncology”, “Cellular Agriculture”, “Civic Tech”, “FemTech”, “Medical Robotics”, “Alternative Battery Tech”, “Cultivated Meat”, “Cultured Meat”, “3D Printed Foods”, “NanoMedicines”, and “Rocketry”.
Why should one consider doing direct impact for-profit entrepreneurship rather than solely Earning to Give or Non-Profit Direct Impact?
Otherwise Earning to Give Founders should consider Direct Impact For-Profit Startup. While there can be tradeoffs between direct work areas and money, it isn’t a complete tradeoff and the founders can still make alot of money to donate. I haven’t done an analysis on the whether YC founders who focus more on social missions earn less, it can could be argued that it is limiting the options of starting a company can prevent one from selecting the highest valuation one. On the other hand, it does allow one to be forced outside of the group-think of what other people are doing for their startups, which may lead one to discover a secret, as Peter Thiel puts it in the book Zero to One. This increases the counterfactual impact (and from an economic POV, lower competition) by answering the question, “What is an important truth that most people don’t believe?” and in the case of startups “What important startups is no one starting?” YC, at least when investing in for profit startups, expects to invest in companies that have potential for high valuations. Assuming they are somewhat rational in their decision for selecting the startups above, they have a reasonable chance for earning-to-give potential. From the original reference post, if direct work is worth a 20% discount per year, it is very likely that startups who can achieve reasonable size (1-10 Billion in valuation) can punch above their valuation weight class compared to 100B+ valuation purely earning to give founders.
Otherwise Non-profit founders should consider a Direct Impact For-Profit Startup. While it does limit the cause area to areas where there is a large profit potential, for-profit startups also allow for self funding for sustaining and growth of their mission rather than relying on donations. The founders of Wave stated about private investors, “First, the pressure to grow quickly forces us to make our product better and scale faster, so we help more people by a larger amount. Second, since we’ve done really well by for-profit investors’ standards, we can raise much more money than a nonprofit or social enterprise.” Hiring top-talent is easier with money. While people may say they want to help the world, they may not act in their ideals and give up their FAANG jobs or may need the money for their families. For-profit entrepreneurship enables one the hire those potential people. Non-profit founders may feel guilty for collecting a profit on the good that they provide. Promising to donate nearly all of your profit personally and encouraging employees to donate heavily as well may relieve some of the psychological burden. Also, one may consider that they would’ve had a much smaller impact if they had selected only non-profit status. If one still wants to start a non-profit, it is better to collect revenue and be self sustaining since one isn’t dependent on donors.
We already have one success of direct-impact for-profit entrepreneurship in EA, Wave. They are valued at $1.7 billion dollars and help transfer money in Senegal and the Ivory Coast. While the founders sold to World Remit for $500 million, that is still alot for potential donations if one owned say 10% of the company.
One non-EA success example is Zipline, who’s valuation is $2.75 Billion. They ship medicines in Ghana, Rwanda, and Nigeria, and also the US and Japan as well. I don’t know what portion are in the 3 previous countries, so more knowledge is needed.
Other resources:
(Very Underrated) Information of the impact potential for for-profit companies using Size, Tractability, Neglectedness model and other info: here.
Post from Sendwave founders: here.
Sendwave founders AMA : here.
Analysis of YC giving potential (original quote): here.
Zero to One by Peter Thiel, good book about how startups and philosophy more generally.
EDIT: 80k advice for tech founders: Found a tech startup. I believe somewhere it includes the counterfactual reasoning of the founding of google. Useful for counterfactual evaluations for startups in general.
You’re right that the sentence in my post should have been explicit that I was talking about entrepreneurship for earning to give reasons. I’ve now adjusted that. Thanks for pointing that out!
You might consider adding the 80 K profile on Found a tech startup to your list of resources, as it contains some commentary on direct impact from startups.
Okay Thanks! The link will be added.
I agree with your thesis and want to dive deeper into a few historical examples.
The iPhone was a profitable business idea built by Steve Jobs to make money. While it definitely did that, the iPhone (smartphones) also revolutionized how people communicate, significantly increasing the capability of almost everyone in society. There’s a good argument to be made that the proliferation of good smartphones significantly accelerated poverty reduction efforts globally and likely the EA movement itself.
Another example, that we’re seeing come to fruition this decade, is the transition to clean energy and transportation. While perhaps not an X risk, the earth could never sustain human civilization indefinitely with unsustainable energy sources like fossil fuels—especially since burning said fuels at scale is making life more difficult for everyone over time. Having done a great deal of research into renewables and EVs, it’s clear to me that the primary obstacles to solving this problem are energy storage (with batteries being the primary industry), and generation (wind and solar are intermittent, thus energy storage is required).
I think there’s a very strong argument to be made that one company, Tesla, has achieved its goal of accelerating the energy storage industry and the electric vehicle industry by at least a decade, to the massive benefit of humanity. Before they proved the profitability and objective superiority of electric vehicles (2019-now), almost zero global manufacturers of vehicles were planning to transition away from gas cards before 2040 or 2050.
By far the most important bottleneck in the entire transition is the rate and cost at which energy storage (Batteries) could be produced. By bringing EVs to scale, Tesla has brought down the price of batteries from over $1,000 per kWh to about$100 with plans to reach $60 in a few years.
I followed a lot of the development of both of these companies but I was working on grassroots policy advocacy, green new deal type of stuff from 2018-2020. After a while, I realized that all of my impact at a large scale was completely negligible compared to the massive impacts that Tesla was making while also making a ton of money for shareholders.
Tesla and Apple are only two examples, a lot of the major inventions and companies based on those inventions drastically increased the quality of life for millions or billions of people and should not be discounted against charitable purposes. With some new companies, I think it could be far more impactful to join a profitable company that is building infrastructure for the future than a medium-impact charity, but it’s difficult to quantify that.
The one that comes to my mind is Neuralink, which could prove transformative for the entire human experience within 3 decades. While a profitable company, it’s important that they take care to ensure safety from technical problems and corruption problems when proliferating BCIs as it could go very wrong or right. In fact, I think 80,000 hours would be wise to direct as many effective altruists as possible toward Neuralink. It was, after all, created to help humans cognitively catch up with AI such that we can successfully influence it in positive directions and ‘go along for the ride’. It’s a different approach to reducing AI risk that could also prove transformational to human civilization.
Sorry for the lengthy comment, maybe I should make the Neuralink paragraph its own post. I’d love to know what you all think of Neuralink & working at profitable companies making large (hopefully positive) impacts.
Thanks for the comment. You are right that large for-profit Non-EA companies can be better than the direct-impact for-profit companies I wrote about. Whatever the best decision for impact is, one should look at all of their options and decide which is best. Arguably Tesla was started with the intention of doing good (like most of the EA startups mentioned) and Apple wasn’t focused as much on the “social good” rather the good to consumers and business (which is still good but not a focused social thesis). EA doesn’t talk much about working for already large EA-esqe companies, such as Tesla, Neuralink, Spacex, etc. There could be alot of good to be done as an engineer or manager at one of those companies.
Absolutely, I think I misunderstood your differenciation between ‘direct for imact’ and ‘high impact in general’ for-profit companies. Althouth there is certainly a line, part of my thinking comes from the idea that most new companies were created to to solve problems of various sorts. So the bigger the problem, the bigger the opportunity for profit while also making an impact.
I think there could be a good case for having more EAs trying to get into decision-making levels of management at non-ea for-profit companies. Such priorities could be especially important at social media companies or companies like Neuralink. Imagine the movement-building benefits of EA’s at the top of major social media companies (I guess Elon Musk might sort-of be considered EA adjacent with Twitter)?
I would worry about moral issues and EA image issues by implementing EA ideas in these companies. I was talking about being a great engineer/manager that increases the level of innovation that aligns with the company’s mission. The employees could convince their manager or upper management of certain issues relating to EA, but it is important for them not to try to hijack their company for EA goals against their company’s wishes.
Edit: also see here from the other resources section about what makes a startup high impact. Counterfactual impact is important to consider and the consumer surplus of the product.
Worth noting that some technologies in these areas could easily be misused or repurposed to cause harm.
In case of developing technologies for general near term harm, one needs to look at the effects their technology is having on the customers and others affected. But, as with all technology, there can be good and bad uses of it. In regard to existential risk, it is hard to know ahead of time what will cause existential risk. Humans are already bad at predicting the future and we can’t expect to stop all technological progress for the sake of some microscopic existential risk not measured empirically. It would be better to have a educated society that is ready to work towards difficult problems at the drop of a hat if it poses a risk to humanity. We have done things in the past to a lesser scale such as the Manhattan project and WWII innovation more generally along with COVID vaccines coming in 1 year instead of the most optimistic prediction at the time of 4 years. Technology in general still has a very high EV in my book.
Thanks for this, it’s an interesting point and made me slightly more optimistic about the potential impact of direct for-profit work. My prior is sceptical of this however, for three main reasons:
In general, an organisation optimises for one thing. That’s normally profit in for-profits, and (ideally) impact for non-profits. My expectation is that an organisation that tries to optimise both at once will not do either as well as it could if it just focused on one.
The tight loop between success (revenue) and growth (investing that revenue) make a powerful engine for for-profits. But in general we should expect that such an engine will be systematically misaligned with providing services to the global poor because you cannot make as much money off them as by providing services to the global rich. A similar (and stronger) argument can be made for animals and future people, both groups which are entirely unable to pay.
The most impactful interventions are unlikely to be the most profitable ones. We should expect this on prior just from there existing an imperfect correlation between these metrics, and from an expectation that both distributions are heavy-tailed (cf. ‘Why the tails come apart’). The likelihood of an intervention being at the extremes of both impact and profitability is low.
Any of these considerations are just general patterns, and so may not apply to a particular case. You’ve pointed out some very promising exceptions, and so even if a sceptical prior is right, the expected value of direct for-profit work may still be underrated, like you say.
It is true that there will be divergence in recourses if profit and impact don’t correlate strongly. In the other resources section for more about profitability, see this here. I would generally advise against the optimization of 2 goals at the same time, but when the mission of the company is aligned either by selling to the beneficiaries or when a technology correlates with a better product and good outcomes (Tesla with EVs), or customers internalize the cost of current products (Tesla customers want green cars), the 2 become aligned. SpaceX is finding how to establish a mars base by selling launch services and internet with the same rockets.
Not all organizations can be for-profit, but when it is possible, it can lead to much bigger growth. One can innovate from high cost to lower cost (such as Tesla). Also middle income countries may have enough for moderate spending. Each business will face the problem and have the learn about the specifics of the situation to know where they can make money and make sure it is aligned with their mission. Not all direct-impact for-profit companies are selling to the poor. Take lab-grown meat, there is potentially a large group of the global rich who would be the first customers.
There should still be non-profits, but my thesis was that direct-impact for-profits are underrated, not that all non-profits should start for-profits. If they have the possibility and it would lead to higher impact, then they should. If one can start something like one of the companies mentioned, or Tesla or SpaceX, then there should be a good bit of attention paid to it in EA, rather than just small non-profits. We can then compare starting/joining a startup that serves a smaller problem but grows naturally vs a non-profit that is serving a large problem but isn’t guaranteed to grow and relient on donors. In the FTX case, I don’t know how many non-profits went out of business because of it, but it could happen again (due to fraud or otherwise).
Thanks for the comment!