CEO, Veddis Foundation
agdfoster
Karma: 707
It’s my understanding that in company valuation the discount factor is generally more the opportunity cost than the different value in the future. e.g., you might discount 2% as that’s what you’d get in the bank and then you know the valuation is discounted against a safe investments op cost. Don’t know if that’s new info at all.
For charities I suppose you wouldn’t use interest but how much more the money is valuable to them today vs next year?
Particularly for higher impact charities, I should think their funding momentum is far more valuable than any return their donors could make in EV through investing.
This is an excellent collection—thank you!
Nice article
EA Meta Fund Grants Report: Nov 18
Finally a decent report on Impact Investing! Thank you so much Hauke and John. Will be sending this to a fair few people.
Only wish there was a more clear division between ESG ($trillions), socially-minded angel/VC ($hundreds of billions) and those that are technically social enterprises but for all intensive purposes look like charities with business models ($hundreds millions).
I feel like most the donor conversations I have about impact investing are about the latter, even though the vast majority of the market is represented by the former.
Thank you so much for writing this up, I’m sure it will be really valuable for teams considering a similar move, whether right for them or not, in the future.
looking forward to this! Thanks for organising, Marek
>Last year I mentioned that EA Long Term Future Fund did not seem to be actually making grants. After a series of criticism on the EA forum by Henry Stanley and Evan Gaensbauer, CEA has now changed the management of the funds and committed to a regular series of grantmaking. However, I’m skeptical this will solve the underlying problem. Presumably they organically came across plenty of possible grants – if this was truly a ‘lower barrier to giving’ vehicle than OpenPhil they would have just made those grants. It is possible, however, that more managers will help them find more non-controversial ideas to fund.
The last sentence is one of the key reasons it was refreshed. It’s also worth noting that I believe the new managers do not have access to large pots of discretionary funding (easier to deploy than EA Funds) that they can use to fund opportunities that they find. I could be wrong about that.
EA Meta Fund AMA: 20th Dec 2018
I’d be interested to know, if it can be disclosed publicly, whether non-advisor team members also control alternative pots of discretionary funding.
I would say that current thinking is primarily to contribute towards our best estimates of the highest value funding gaps, with some adjustment for fungibility and how time expensive it will be for senior management to fill their funding gap.
However, the team are also keen to fund a variety of things each round and we have agreed to aim to have some spread each round between larger orgs and smaller orgs.
I would expect that we continue a trend of larger checks to larger orgs and smaller checks to smaller orgs.
We do not have any specific general set of criteria for evaluating opportunities. I’d say we’re probably all agreed that we are trying to use the best reasoning, evidence available and relying on intuitions more, or less, depending on the level of confidence that we are able to have in our opinions.
Different team members also have some specific techniques they use for different types of meta orgs. E.g., I have a simple model I use to help me evaluate money-mover (improving capital) type orgs.
Quantitative analysis doesn’t currently look worth it for evaluating GPR or talent-focused groups (an exception is 80k’s own metrics which are really impressive, but there aren’t really any similar groups to compare those metrics with).
Thanks for the kind words Tee! Agreed and hopeful. I do also think that it’s very valuable for some pots of funding to not be very public as there are some bad incentives and restrictions caused by public work.
E.g., I’m (currently) quite happy currently that EA Grants doesn’t have to justify each grant publicly. This allows them to take gut-calls on early stage projects and to fund lots of small things without having to hire a large number of staff.
Whatever level of transparency each grant making body decides is appropriate for their strategy, in general I think more of the benefits of grant making (and research in general) compound when done publicly and transparently. I’m just glad that there are some pots of capital coming together that can make quick decisions and back lots of early stage projects.
This said, I’m of course not all that confident in this view.
Two of the team members already spend a significant portion of their day job investigating and evaluating meta groups (Luke and myself). For Luke this is about 50% of his time for his own philanthropy and I spend maybe 10-20% of my time depending on what other projects I have on the go. In general, a core criterion for choosing us for the team was (I believe) that we all spend quite a bit of our non-day job thinking about or evaluating meta orgs. Matt and Denise have been very active, and strategic, donors in the space for many years and Tara whilst only making a switch to earning-to-give last year, thought very hard about this while she was on the other side of the table as COO and CEO of CEA. I also find her views on how to evaluate community efforts are particularly valuable. We all come across a variety of opportunities from our existing activities and expect anything we miss to come our way once we open up public applications (coming soon).
Re time spent discussing: we are trying to minimise the amount of time we spend on group calls, probably only 3-6 a year as they are generally less efficient than a-synchronous communication. We have internal email threads and a private forum that we are using for collaborating on research and swapping arguments / opinions.
Roughly, our process is that someone from the team looks into a funding opportunity, they then put it to the rest of the team in an email thread or in the forum with their research / arguments and the rest of the team then reply with their comments, questions, opinions. Then, ahead of a granting period, we come together to discuss the various proposals and over the next week or two each decide in a Google Sheet how we would want to split the available funds. There is a simple algorithm that averages and rounds, obeys our general rules for grant minimums etc., and we discuss / negotiate each other’s decisions and change our allocations until we all agree the outcome looks like a) a sensible outcome and b) represents the group’s views.
During the calls we have someone taking minutes and the offline discussions are all in text form, someone takes the initial proposals, minutes and offline discussion texts and turns those into write-ups. We each then give a round or two of feedback on the write-ups before submitting the decision and writeups to CEA for execution.
Exactly how much time this takes up for each of us is currently unclear as we all seem to be thinking about and replying to threads both inside and outside our day jobs.
Three main sources:
1) Via the application form: This is [hopefully] coming soon. The plan is for two of us to monitor the applications and then send proposals to the group same as the process for anything that comes from intro’s (see reply to the comment above from @lukeprog). I must note that reviewing applications can be very time consuming and I’ve personally found it generally requires much less energy to review projects that come in via intros than what comes in via open application forms.
2) Via intros. From my time in early stage businesses I felt this model was adopted by almost all venture capital orgs for good reasons and I have some trust in the method. I’ll put a little more on my own view on this in a separate comment.
3) Existing knowledge. Between us we made quite a long list of opportunities we already knew of in our first meeting. Even just the funding gaps on that list would be enough to absorb the whole fund for some time to come, however it does seem prudent to keep looking for even more promising projects.
I also quite like:
Upstream orgs that improve the quantity and quality of available talent, capital and insight.
It’s snappy, easy to remember and gets to the heart of the cause area.
I don’t think it’s as clear what it means though and perhaps shouldn’t be used by itself without further explanation.
I’ve forwarded this data to the team—thanks for sharing it, I missed it when it went up on the forum.
How to take data like this into account is an interesting and tricky question. I can have a go at a few points that seem relevant:
I’d rather see opportunities as projects and funding gaps rather than asking ‘who received what funding already?’. Point made only to clarify, I realise this isn’t what you were suggesting.
EA Meta as a cause area does have a larger requirement for funding than is currently available. The only two donors to meta orgs I know of that are not already donating at their own full capacity are my employer and Open Phil. However, both are deploying capital as fast as they can limited by other restrictions (risk, talent, appetite of principal etc). Certain key groups have performed particularly well and fundraised well so they are making decisions based not on maximising their ‘impact per dollar donated’ but on maximising their absolute impact given some other bottleneck/s. It does not necessarily follow that an org in the latter category is lower impact per dollar donated than an org that isn’t. I think some more simply expressed version of the above would be more useful than discussing whether orgs / cause areas are funding constrained (outside of evaluating counterfactuals when making career decisions).
The operations of some orgs are also far more scalable than others and in general I want to reward this. While we mostly speak about relative returns (impact per dollar) we should also keep in mind absolute returns. In particular, it’s worth nothing that reaching a certain size and scale of operation opens an org up to large grants from large foundations, accessing capital that otherwise wouldn’t have gone into the cause area. An adage used in venture capital is that it “takes founders just as long to raise $100k as it takes to raise $1m”. This does seem to hold true for non-profits as well so long as there is enough mid-stage and late-stage capital available.
The general approach I take is to only challenge an orgs declared room for funding if it seems surprisingly large, small or poorly justified. Potentially, given that in many cases funds one org receives come at the cost of those same funds going to another org, room for funding and budget declarations should be more heavily scrutinised. i.e., It’s OK to stretch a high return business model slightly into it’s diminishing returns so long as it remains more effective than smaller marginal groups whose funding they might be restricting. In other words: we should probably be encouraging EA meta orgs to avoid being wasteful with their resources.
This said, funding is only zero sum for some donor segments. Some donors are restricted by , for example, Open Phil’s rough 50% rule or a donor’s limited time and confidence requirements causing them to prioritise larger capital deployments.
I have seen at least two examples of larger orgs directly taking into account the flexibility of donor capital that they receive and spending some time trying to replace that donor with someone less flexible with lower opportunity cost. To me this seems highly commendable.
How a group have used previous funding plays an important role in evaluating their likelihood of using new funding well.
Some orgs are a cluster of valuable projects that could just as easily be evaluated project-by-project and we wouldn’t want to be guilty of something akin to gerrymandering.
It seems like where orgs are a collection of projects, ideally we would be able to evaluate each of those projects individually, as well as evaluating the group as a whole. It would be helpful if these cluster orgs were better able to track the progress of their projects individually. 80k are particularly good at this.
Better frameworks for evaluating community building or spreading important ideas. It’s really hard and involves a number of highly sensitive input assumptions. Whilst this is of course very relevant for CEA-type groups and prioritisation research groups, it’s also relevant for groups like Founders Pledge. In poverty charity evaluation one question has been whether long-term flow through effects actually dominate the equation. Similarly, it might be the case that for money moving groups that the community building or important-idea-spreading functions might dominate the equation. This would be an important realisation for funders but potentially more so for those orgs themselves. A big issue is that it might be too case dependent to generalise. I don’t think a model would be very helpful, but a well thought through list of considerations to evaluate with some estimates on how much to weight each one could potentially be very useful.
Better frameworks for thinking about fungibility. See my points from above reply to Tee. The reasoning used for these currently is pretty ad-hoc and potentially it’s better that way, but it does seem like it could be important enough to warrant further research. I think I saw a while back that it was on GPI’s research agenda.
Great post Jeff