As little as six months ago, we were in the position of having more funding available than we could spend on opportunities that met our very high cost-effectiveness bar. Today, the opposite is true—we don’t expect to have enough funding to support all the cost-effective opportunities we find.
In this post we will:
provide an update on GiveWell’s projected funding position,
explain how we have been successful in identifying cost-effective opportunities, and
share our initial thoughts about what this update means for GiveWell’s forward-looking grantmaking strategy.
The state of funding
We wrote last year that we would roll over approximately $110 million in funding from 2021 to spend this year. We ultimately rolled over substantially less because we were imprecise in calculating our projected funds in and out (more details available on our mistakes page). But at a high level, it remained true that we received more money than we chose to spend on highly cost-effective funding opportunities.
We expected to be in a similar position this year, rolling over approximately $110 million. We now believe that we will be funding constrained. There are two core reasons for this:
We found a lot more cost-effective opportunities that need funding. Based on our current research pipeline, we think we’ll be able to recommend up to approximately $750 million in grants that are at least 6x as cost-effective as cash transfers.[1] Last year, we identified about $500 million in grants, most of which were at least 8x.
We think we will receive less money than we projected due to recent declines in financial markets. We currently expect to receive $500 to $600 million (though the range of possible outcomes is wide). This is driven by a revision in Open Philanthropy’s 2022 allocation ($350 million, up from $300 million in 2021 but down from the tentatively planned $500 million[2]), as well as expected declines from other donors.
How we have been able to identify more funding opportunities
Our researchers have identified more opportunities across two streams of work:
Core interventions: Core interventions are the programs we know best because we have recommended them for a long time (e.g., malaria nets, deworming, etc.). They are the most cost-effective programs that we know of and are often delivered at scale. This stream of grantmaking currently accounts for approximately three-quarters of our spending and is most commonly spent on top charities. We have been able to grow spending in this stream by encouraging organizations to expand their programs into locations that are underserved. For example, we supported the Against Malaria Foundation’s expansion into Nigeria, the country with the largest malaria burden in the world.[3]
New interventions: New interventions are programs that are newer to us and that we have funded for shorter periods of time. We source new interventions by reading academic papers, talking to subject matter experts, and hearing directly from organizations. We build cost-effectiveness models to determine how to prioritize further work, and make grants to a small number of programs that meet our cost-effectiveness bar. This stream of grantmaking currently accounts for about one-quarter of our spending. Some grantees in this stream may be on a pathway to become a top charity, but this is not the goal of this stream of work—the goal is to fund opportunities if their expected value reaches or exceeds our funding bar. We have grown the number of opportunities in this stream by adding research capacity to investigate more programs. In addition to considering programs we haven’t evaluated before, we have updated our views on cause areas following the release of new academic evidence (e.g., water quality). We have identified programs that lack implementation at scale and invested in incubation partnerships that may lead to future implementation (e.g., Evidence Action’s Accelerator). We have made grants that generate evidence, which may inform future grantmaking decisions (e.g., a grant to support a randomized controlled trial of Bridges to Prosperity’s program).
We are proud that the research team rose to the challenge of identifying more excellent funding opportunities while maintaining the same rigorous standards expected of our research. But, having so many outstanding giving opportunities without the expected income to match it on the other side of the ledger presents a challenge for GiveWell. How should we shift our plans to account for this in a way that maximizes long-term impact?
Our plans for the future
This funding update impacts both our near-term and long-term planning.
In the near term we will:
Increase our cost-effectiveness bar to 10x cash (current best guess, subject to change): Based on our current pipeline of spending opportunities and our projection of funds raised, we will likely increase our bar to 10x cash (up from 6x).[4] At the end of the year, if we end up raising more funding than we expect, we’ll either roll over funding (which we’ll do if we expect that we’ll soon find additional opportunities that are greater than 10x cash) or allocate these funds to opportunities we’ve already identified that are less than 10x cash.
Increase our fundraising efforts: Now that we are funding constrained and have identified highly impactful opportunities that will likely remain unfilled if we do not raise sufficient funds, we expect to increase the amount of fundraising we do. While we don’t intend to radically change our approach (don’t worry, we won’t be bombarding you with pleas and solicitations!), we do intend to very directly ask donors to consider increasing their support.
Over the long term we will explore ways to adapt our grantmaking model so that we can respond to a wide range of funding outcomes. Because it is difficult to predict our funds raised each year, we would like to be able to operate optimally in scenarios where we raise significantly more or significantly less than we project.
Some ideas we will explore include making grants that create options for additional future grantmaking (e.g., providing flexible funding to strong organizations today so that they can sustain operations and establish pathways for future scaling or program spending), and pursuing fundraising models that allow our outreach team to source funding after our research team makes a grant recommendation (rather than setting expectations with grantees that we will distribute funding as soon as we make a funding recommendation).
Conclusion
There is still an opportunity to do a lot of good by giving to global health and well-being. Our impact in 2022 will be limited by how much money we’re able to raise from our generous community of donors to fund the excellent opportunities we have found—we hope this motivates you to increase your support this year and to share the idea of effective giving widely.
—Elie Hassenfeld, GiveWell Co-Founder and CEO
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We compare charities (and funding opportunities within them) using multiples of our estimate for the impact of directly transferring cash to beneficiaries. For example, we describe an opportunity as “6x cash” to indicate that we think it’s six times as cost-effective as giving that amount in cash directly to the beneficiary. There’s an intuitive case for asking whether a program is better than what beneficiaries would buy for themselves using cash. If not, wouldn’t it be better to just give them cash instead? Any program we consider must exceed this standard and be multiple times better than cash in order for us to recommend it.
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Open Philanthropy made tentative plans to allocate $500 million to GiveWell’s recommendations in both 2022 and 2023. It now expects to allocate $350 million in 2022.
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According to the World Health Organization, Nigeria accounted for more than one-quarter of all malaria cases and deaths worldwide in 2020. World Health Organization, World malaria report 2021, pp. xv-xvi.
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This means that our current pipeline of approximately $750 million of funding opportunities that are 6x cash will change. We will likely pause investigations that are clearly below our 10x bar, given that there is a low chance they will be funded.
I’m obviously biased but I do see this as another clear sign that instead of worrying about a perceived funding overhang EA should invest heavily in increasing and diversifying its fundraising capabilities.
Don’t think in terms of fundraising ‘overhangs’ – all there is in a marginal funding bar.
That bar will go up and down over time depending on how much money is available, and how good the opportunities are that we discover.
The main reason there’s less funding now is due to bear market – this isn’t something that’s easily avoidable, and it’s not clear it would be worth avoiding: since EA investors are more risk-neutral than the average market participant, EAs should take more risk than others, which means our available resources will down more than average during market crashes (and hopefully up more than average during bull markets). That’s exactly what’s happened.
I agree it would be nice to be more diversified about of crypto and facebook stock, though figuring out what’s optimal given all the other constraints gets pretty complicated, and a risk-matched exposure to global equities would have fallen a similar amount.
I agree with you that we should stop saying “funding overhang”. I’m also not advocating for Sam or Dustin to sell their stocks and put their money into supposedly safer assets.
What should be done in my opinion is to work harder on diversifying and increasing the amount of money available to EA causes and make sure that GiveWell et al. have to decrease “the bar” faster and more consistently (makes stuff more predictable and therefore probably more effective). One way (out of many) to do so that seems pretty obvious to me would be to put even more money into the effective giving landscape to convince millions of people in the world to give more effectively (again, I’m biased). A decent chunk of that would come from income and not equities. Still correlates with the global markets but much less so.
To a certain extent effective giving organizations are already receiving considerably more money than a couple of years ago but as long as several have a counterfactual multiplier (donations raised / cost of raising donations) of > 10 I think we should be much more aggressive since it kind of pays for itself many times over (and also to hedge against a possible prolonged bear market).
See also Benjamin Todd’s post: Let’s stop saying ‘funding overhang’ - EA Forum (effectivealtruism.org)
You allocate 1⁄4 to new interventions (presumably higher-risk/higher-reward) - do you agree with OpenPhil’s post you link to and are you going to fund those preferably given the funding shortfall?
Do you agree OpenPhil that Givewell’s interventions have ~the same CBA during economic crises? For instance, AMF is now expanding to Nigeria, where GDP/capita gone down to 2008 levels and generally Malaria deaths are up ~10% due to Covid. Does this increase the CBA of your core interventions? Relatedly: $150m seems quite a large reduction—OpenPhil considered using mission hedging at the last year’s EAG—have you considered this for your assets?
This news seems like it increases the value of marginal donations this year relative to what we expected. Are 2022 donations also likely to be (much) more valuable relative to 2023? Is donating in December 2022 too late to take advantage of this effect?
Strong upvote because this question is action relevant.
Maybe Alexander Berger’s thoughts are helpful?
GiveWell could answer more confidently but FWIW my take is:
-December 2022 is totally fine relative to today.
-I currently expect this increase in marginal cost-effectiveness to persist in future years, but with a lot of uncertainty/low confidence.
Nathaniel/Imma, we agree with Alexander that giving in December 2022 would not be significantly less impactful than giving now. We think the cost-effectiveness of opportunities we’ll support in 2023 will probably be similar to those in 2022. If you expect to give in only one of those years, we’d suggest giving in 2022, so that donation can start having an impact earlier, but this decision would be largely up to your individual giving plans.
This may be an issue for other EA organisations. For instance, New Harvest recently called an “emergency town hall” because of “this recent economic downturn” where they need to shift “from a growth mindset to survival mode” and “staff cuts are unavoidable.”
Thanks for such an open and honest report. Not surprised the recent downturn in asset markets (esp. crypto) has hurt funding abilities.
Could there be some merit in planning ahead for the next few years, in terms of getting donation pledges contingent on certain assets recovering? For example, crypto investors at this point are expecting a long, frustrating year or two of sideways price action before the next bull run—which is when some very large fortunes might be made.
This might be a good time to build relationships with the people most likely to be able to make large donations in the 2-4 year time span, but who might not have much cash on hand at the moment.
In other words, consider the strongly cyclical nature of some of these more speculative assets, and plan donation and grant strategy accordingly.
I find your mistakes page awe-inspiring. This is a standard of transparency I think all of EA should aspire to.
I often think and ask about how the community, and not just trustees or individual donors, should be able to scrutinize decisions by EA orgs. And this is exactly what I’m talking about.
Thanks, Guy; we appreciate your positive feedback!
Appreciate the transparency! Feeling a bit of whiplash from such a strong change in tone/approach. It’s pretty disappointing to see Open Phil decrease their allocation so substantially: they state in the original announcement of their commitment that “we could revisit either direction if there were material updates to our available assets, our “bar”, or other opportunities we discovered,” and this seems like they’re going in the opposite direction—more opportunities, but they’re giving less.
According to OpenPhil’s linked post, there were two changes: more opportunities, but their assets decreased.
Maybe EA should try to make itself less dependent on volatile things like cryptocurrencies and Facebook stock? (I’m really not knowledgeable about this).