Looking to advance businesses with charities in the vast majority shareholder position. Check out my TEDx talk for why I believe Profit for Good businesses could be a profound force for good in the world.
Brad West
Karma: 1,385
Using Networks to Facilitate Effective Consumption
I suppose a grand plan might be necessary to begin the incremental development. For instance, someone might announce that they would be an Effective Altruist Producer. They would commit to transparently limiting their personal financial gain from their business to X amount. Then, the EA community would consciously direct whatever business they had in that area through that Effective Producer. The secret sauce here would be that communication would enable Effective Altruists to consciously direct the profits of their consumption.
So, I guess a proof of concept might be a Life Insurance Salesman Effective Salesman in New York. We would have one Effective Altruist transparently contractually commit to devoting the proceeds of his sales to Effective Charities. Then, say that there are 10,000 Effective Altruists in New York who want to buy Life Insurance (just as part of their normal economic activity) which would end up yielding $1.5 million in commission for this Effective Altruist Agent, all but $50k will go directly toward Effective Charities. So, basically, counterfactual, $1.5 million that year of profit would be generated and probably not have gone to Effective Charities.
Once such a proof of concept was done, we as an Effective Altruist community could recruit people in many spheres of economic life to be Altruistic Producers and then, through networking resources, direct as much as possible of our purchasing goods and services through Altruist Producers...
Sure… It could start with just one person who made the commitment and then a network of people who channel their buying of whatever he or she sells through that person.
Guided Consumption: Funding Charities by Leveraging Consumer Sentiment in the Broader Economy
Thanks for reading it and the well-wishes!
Yes, I’m familiar with Newman’s Own and that is definitely an example of a Guiding Producer. It’s great that there’s a charitable trust that benefits from our purchases. In my view, this feature was insufficiently exploited by the company. Initially Newman was intending not to advertise the pro-social ownership (thankfully he was persuaded otherwise). But with the degree of advertising and consumer awareness of Newman’s Own’s mission, I suspect it is not enjoying the degree of advantage that it potentially could if it more explicitly viewed itself as a channel of pro-social Consumer Power. Another issue would be that the product dimensions numerosity may make it not an ideal GP.
If there was a broad effort to inform and empower consumers as well as a broad representation in the economy of Guiding Producers in the economy, I believe GPs could rapidly capture market share. The key would be enabling the convenient “no-brainer” decision for consumers.
Re Dropshipping: why do you doubt people would choose a dropshipper on the basis of charitable alignment? I suspect many people would prefer a charity get the profit over a private individual, especially EAs.
I also think fashion could be a good direction to go, capitalizing on a virtue-signaling advantage while forgoing the “no-brainer” advantage allowed by products with few dimensions of variability. But if you can get an apples-to-apples comparison, why wouldn’t a consumer choose a charity?
Tomer: thank you for reading and the thoughtful response!
I agree with you and ColdButtonIssues that luxury goods, allowing for virtue signaling that could warrant the toleration of higher costs and thus higher margins. However, especially if we’re talking about a long-term in which the general public is familiar with GC, it is unclear why popular profit destinations would not be used to compete in other consumer sectors. The structural advantage conferred by popular ownership is not offset by a corresponding disadvantage, and thus, where there is a meeting of the philanthropic will to create companies that serve causes and a consumer society that prefers the designated cause over a nameless shareholder GCs should tend to dominate. As I had stated in my paper, I anticipate that this advantage would be especially decisive in areas of few dimensions of product differentiation. I would be interested in thoughts as to what I might be missing in this analysis.
I’d take you up on that offer regarding the books. It sounds like they have some insights I could definitely use.
I would say that I have do have a pretty strong belief in Guided Consumption, though my unwavering faith would regard that this phenomenon will eventually become dominant moreso than in my own ability to personally usher it in. Given an insufficiently exploited means of a structural advantage, one of these decades, someone will find a way to effectively use ownership identity to get an edge over the traditional firms. Virtually any charitable cause is more popular than the competition: nameless, rich shareholders. My hope is that the Effective Altruism community can have influence inwhich causes prevail come the advent of the age of consumer power, because they are very thoughtful regarding how to do the most good. In any case, even if there was a low probability of my success, given the magnitude of good that would accompany a successful effort, I will try to tame anything in me that urges me to stop.
I’m really flattered! I I will share this with everyone I know and buy myself some clothes.
I hope to work with you going forward to make a world economy brimming with Misercordias!
I agree. Commenting on the animal welfare side:
We should, as a community, encourage veganism but direct some attention to effective charities as well as an extremely conservative basis for meat-eaters to offset their negative impact on animal welfare. I think it would be worth developing a fund managed by people who study animal welfare and can best assess what organizations are, in expectation, going to have the best impact on the victims of factory farming. Then compute a conservative amount (which would probably depend a lot on how many chicken products one consumes) and encourage meat eaters (or vegans for that matter) to contribute some multiple of that to the fund.
If offsetting is easy, it could probably be sold to even many outside the EA community.
I am thinking a good direction for the Consumer Power Initiative is going to be aggregating and making people become aware of Guiding Producers such as BOAS. I want to have something similar to BOAS for the States called The Giving Store.
Once we have enough awareness and get a movement going, get some experts studying the market areas where Guiding Producers would have the greatest advantage, and then fundraise to either buy out firms for charities or create our own.
Red Team Responses:
1 and 2. Sorta beside the point: I can cede the point that becoming rich IS a major motivator for people to work hard, develop innovative ideas, and otherwise do great things that translate into companies that are immensely profitable. But we don’t need to be reinventing the wheel with a brand new invention or innovation (other than Guided Consumption), we can rather just be entering a competitive market equilibrium, buying one of its participants, and disrupting that equilibrium by imbuing it with an almost costless powerful weapon (I say costless because the charitable investor is not paying more than a private investor would to obtain capital, yet has a weapon in its identity that the private investor does not have.) Thus if the pre-acquisition company was worth $100 million, the post-acquisition company would be worth $100 million + X, where X is the value attributable to consumer preference toward the charity. The founder brilliance was probably what allowed that company to get to its pre-acquisition value and had made that founder immensely rich. Essentially, greed being a powerful motivation that enables excellent company performance is wholly compatible with Guiding Producers being incredibly lucrative. These objections sorta presume that the only way Guiding Producers could arise is if we had a game show pitting angelic altruistic entrepreneurs vs. a bunch of Gordon Gekko entrepreneurs.
3. You seem to be presuming again that a Guiding Producer would be a new company rather than an acquired company. I think there might be good reasons to begin new Guiding Companies given a robust social movement having taken off and good market sector research to indicate that a given sector is a robust one, but there is no requirement that a GP would have to start from scratch and could not be the product of a buyout or a leveraged buyout by a group of charitable investors.
4. You could match the features of a successful company by buying it out, keeping its existing features in place, and advertising that you should buy its products because it helps the global poor, for instance. (don’t take these answers to mean that I don’t think starting new Guiding Producers would necessarily be a bad idea- I think in some contexts- like sales- the differentiation that profit destination would provide could be enormous. I think the potential for Guiding Producer Real Estate Agents or Life Insurance Salespeople could be obscenely lucrative).
5. This is a real issue, but one that is almost certainly resolvable through corporate finance. Charities could borrow against their inflated equity to support their projects. There could also be a 5-10% allowance for private ownership for liquidity and price discovery purposes. Furthermore, if Guiding Producers are spread across enough different industries that the risks associated with them are idiosyncratic, they could form insurance pools that facilitates greater leveraging in borrowing, allowing more funds in relation to equity to be available through borrowing. Periodically, debts could be serviced and equity reestablished by dividends.
6. Hmm it strikes me as rather crazy if there was a CEO of a Guiding Producer for like a an electronics company that made $20 mil/year and a CEO of a competitor normal Producer making $20 mil a year that this umbrage at the Guiding Producer’s CEO’s compensation would cause them to screw over the charity by going with the normal Producer and thus enrich the wealthy shareholders. I think in this conversation, the real villains, if any, would be the Normal Producers.
7. Yes, Guiding Producers would have the same constraints normal Producers would have in this regard. Normal producers sometimes cash out too much to their shareholders/owners and compromise the financial stability of the business. This isn’t really an objection to Guided Consumption so much as a business reality that still applies.
8. Still this thinking that Guiding Producers have to be built from the ground-up… let the founders, angel investors, and venture capitalists do their thing, unless there is a particularly auspicious GC opportunity. Then disrupt established equilibria through the magic of a special investor who magically gets better returns (I say magical because it kind of is in that the same cost investment would yield a different return for charitable investors than other investors).
9. I call it non-psychopathy. The Consumer Power Initiative is trying to get to the point where the consumer has a virtually identical product at an identical price and the only choice is whether to help a worthy charity or line the pockets of an anonymous moneybags.
10. Totally agreed. There needs to be transparency as well as partnerships with those trusted in many communities that Guiding Producers are doing what they say they are.
11. I agree. I think the focus of CPI should be on pure Guiding Producers. There is also a concern that gamesmanship could allow for firms that donate 100% of “profit” to charities, but a deliberate effort to actually distribute almost all the money generated to key employees, with a pittance for the charity they supposedly serve. CPI will have a key role in credentialing for that as well.
12. Definitely needs to be some thought on the tax end of things. Think these issues are ultimately tractable through creative legal forms, etc. Needs to be investigated further.
13. Very interesting issue… I guess if a Guiding Producer needed to adopt the practices in its sector to be competitive, you could argue that it is still better than the counterfactual normal producer in its place. Needs to be grappled with as Guided Consumption develops.
14. Probably people care about certain ineffective and effective charities more than they do normal shareholders. There is an issue that once we reach the Age of Consumer Power, ineffective charities may be competing against effective charities for market share of their Guiding Firms. This is one of the reasons I would be interested in getting the Effective Altruist community in on this new frontier of Consumer Power.
15. They’ll figure it out eventually. I hear they’re supposed to be pretty smart.
16. The problem is that I have very little to effectively signal that I have something to say that is worth spending an hour of one’s time. The analytics page, as of the writing of this post, show that 16 uniqute devices have spent more than 5 minutes on this page. Th
Notes on positive things
Yeah, really could promote a good mission culture. You can be a life insurance salesperson, cashier, etc. any part of a Guiding Producer, big or small, and you’re working for a very noble purpose. I really think this could potentially open the Earning To Give door very widely.
Yeah, once they start to realize what’s going on, I suspect there is the good will among many philanthropists to get the “early phase” going. Once that is wildly successful, it’s going to be the wild west as the wealthy try to weaponize Consumer Power to their will.
Yup.
Exactly, using the prosocial nature of Guiding Producers could give them even unfair market advantages.
Really need to look into the tax stuff at some point. Hopefully some good opportunities.
Exactly… we could have like campaigns about the median wealth or income of investors in the competitor. Do you want to help the 1% or someone who makes less than $2.50/day?
Yeah, in some prosocial industries this could be an even greater superpower.
Yeah, I wasn’t fair to Newman’s Own. It just really gets to me that this ethic of not promoting discussion in the charitable discourse (such as the donative decisions one makes) strikes me as super toxic. I’m glad the EA community is so committed to discussing charity.
Yeah, at the very least NCCO’s jobs will be easier. I still think there will be a function in facilitating the ease of consumers channeling consumption through GCs.
Yep.
I think your method is the most competitive form of GC (capital agnosticism), but I still think that there may be a value in steering consumers toward super effective causes that are still popular. Also, might strengthen the message if the impact is concentrated rather than diffuse against a portfolio of charities.
Agreed
I suppose I would be worried about Guiding Producers creating monopolies in some sectors where there aren’t many other dimensions firms can effectively compete. That would be a nice problem to have.
Yeah, cryptos are fraught with some reputational issues, but there’s definitely some possibilities there.
Anyway, I need to get to sleep for our 7:00 A.M. (my time call)!
Just what I needed to hear. It’s easy to become discouraged, but often finding an EA who can help you in your project to work toward a better world (and finding someone whose project you can help) is a numbers game. Like you say, developing resilience and empathy regarding gaps in perspective is critical toward advancing others’ good ideas and finding help for yours to be advanced by others. This is definitely something I’m acutely struggling with.
Being able to not only inhabit strange and fascinating worlds, but to see them through fresh lens is immensely enjoyable and liberating in the broadest sense of the word.
The issue is that it is hard to see the indirect benefits of reading for enjoyment as an efficient way to do good. And unfortunately, I can sympathize with speed readers and listeners who view a more mercenary treatment of literature as sensible given the time it frees up to otherwise effectuate their values. The time of an EA is a precious resource that can often be leveraged to, in expectation, cause the greatest good throughout space and time when not maximizing for the welfare of said EA agent.
If an EA enjoys deep reading more than the suite of other activities he or she could engage in for fun and unwinding, that could be a good reason to spend time deep reading. And perhaps in some cases, deep reading can further critical skills which have benefits from an EA perspective.
It’s just that it’s no longer a broad case for deep reading, but rather a case that it might make sense depending on your tastes/circumstances.
Making Trillions for Effective Charities through the Consumer Economy
The question isn’t whether consumers would oppose high CEO pay of a Guiding Company/Producer, but rather whether they would choose that company over a normal company that serves normal shareholders and also has high executive pay. If you’re a consumer and you’re choosing a normal company’s product over a Guiding Company’s product due to high executive pay, you’re cutting off your nose to spite your face, because you are enriching shareholders instead of charities.
It may even be they Guiding Companies can compete better for executive talent because of the social cache of leading an organization that generates $100 million/year for effective charities. Sure, normal fortune 500 companies can offer 10 figure yearly compensation, but a major Guiding Company could not only pay well (perhaps not quite as exorbitantly) but also grant one tremendous social status and the psychological benefits of being able to do lots of good through your job.
The benefits from actors across the economic arena—consumers, employees, consultants, advertisers, vendors- will allow for enormous advantages for Guiding Companies over regular companies. It just takes enough people to realize that the power of Guided Consumption.
Guided Consumption just needs (as was noted in the previous post by Tomer_Goloboy) to hit a social tipping point. Because right now, there’s a strong status quo bias that is not fully appreciating the structural advantages that Guiding Companies will have.
Regarding the burden of proof… I would think that such a burden is a function of the purpose that it serves. In the criminal justice system, we require a very high burden of proof, “beyond a reasonable doubt”, because of the enormous cost of a false positive: depriving an innocent person of life and/or liberty. In the civil context, a mere preponderance (greater than 50%) as if it is more likely than not that one has violated another’s rights and harmed them, they should be compensated commensurately, even though there may still be a significant chance that we are wrong.
Regarding the burden of proof here, in considering whether and to what degree one should support a project, one should consider the probability associated with different outcomes and the utility associated with said outcomes. This is why even if you are very skeptical of Guided Consumption, supporting it, especially at early stages, is justified.
I am interested in learning more about GIC and will very soon be taking a look at the project. I love the idea of global UBI and very much want to work toward a world in which everyone has a chance toward living a life of dignity and having a chance at his or her dreams. Perhaps there are some opportunities for collaboration here!
Hi Madhav,
Thank you for your thoughts.
On the commodity issue: the reason that it is hard for firms to get an advantage in the commodity business is because no market actor can offer a better product at a better price than any other market actor. Now imagine, in a commodity space that one market actor was able to produce a more valuable product without incurring additional costs. This market actor would tend to monopolize that commodity market, provided that other market actors could not secure the same advantage. This is the situation that Guiding Companies are in because costs are no higher for them, yet they have an advantage with other market participants, including consumers. I am positing, and believe strongly that research will substantiate this, that consumers will value profit destination at a nonzero level. In the commodity space, this advantage should be decisive. In sectors with more differentiation, it is less likely to be decisive.
Your commodities of scale point definitely makes sense. It will be difficult to compete without hundreds of millions or billions of dollars. This is why research and working on educating the public is critical to satisfy charitable investors that the targeted creation/acquisition of companies that serve effective charities is best use of their resources.
Your point regarding alignment of practices with charitable shareholders is a good and interesting one that will require a lot of thought regarding how to best organize. One solution would be to pair industries with these issues with charities in different cause areas. Another would simply be to create Guiding Producers in other industries that lack those moral concerns.
The starting place for CPI is likely going to be entry into areas where we can compete without huge economies of scale. We are super interested in input from sharp economic minds like yours to map out this path.
Hey Gee.
Yeah. I think that there are several sets of target customer bases.
One would be the super conscious set of consumers that would be seeking out the opportunity to do good through purchases and would be very excited to learn about Guided Consumption. This set of is analogous to “early adopters” in other contexts. They would value purchasing through Guiding Companies significantly, and would purchase such products even if they had to pay a slight premium. Given that some of the early forays into Guided Consumption will not necessarily be able to exploit economies of scale such “early adopters” would be especially helpful in the early stages.
However, the set of consumers who place a non-zero weight is the vast majority of all consumers: non-psychopaths. Consequently, once the Guiding Companies have the economies of scale to be price-competitive with multinational firms, they should have an advantage with every consumer (the “no-brainer”). Given that advantages with other participants in the economy could allow for costs even below competitors, it seems Guiding Producers in a developed Guiding Economy should tend to monopolize their sectors.
What’s rather intriguing is to consider contexts in which Guiding Producers can be super competitive even without huge investments. For instance, you could pay a realtor or life insurance salesperson a salary in exchange for their commissions and then commit those commissions to effective charities and advertise this to prospective clients. I would think such Guiding commission-based employees could be a compelling example of early Guiding Producers.
The Altruist Economic Network: Leveraging Consumer Power to Better Our World
Yesterday, a thought crossed my mind regarding how to generate funds to support Effective Charities. Being an attorney in a small firm, I am able to command a portion of fees generated from business that I bring in. As this portion of the fee is mine, I can elect to put directly into Effective Charities, such as those recommended by Givewell.org, but also, to charities that are shown to be the most effective in other areas that short-term human welfare, such as animal welfare, long-term projects by which funding may have a considerable effect on changing the trajectory of the world for the better, or helping to avoid catastrophic futures. I realized that this willingness of myself to connect the provision of my services for a fee with the funding of projects aligned with Effective Altruism allows for a compelling variation of a product that may find analogous applications in the vast majority of goods and services domains in which Effective Altruists purchase just about anything.
One way in which Effective Altruists can currently advance Effective Charities is by accumulating wealth through the sale of their labor or other business activity and commitment of a portion of the income generated to Effective Charities. However, Effective Altruist may also generate funds for Effective Charities by rationally directing their purchase of goods and services. An Effective Altruist could do so by channeling her consumption of goods and services through other Effective Altruists who have committed to directing the profits they derive from their businesses to supporting Effective Charities. Rational transactions typically create a surplus of value for both the buyer and seller (or else the transaction would not occur), consumer and producer. The consumer surplus is the difference between what the maximum amount that a consumer would be willing to pay for a good or service; the producer surplus is the difference between the costs of the production of a good or service and the price actually charged by the producer. For instance, if a consumer is at McDonald’s and is really craving a Big Mac, such that they would be willing to pay as much as $5 for the sandwich, but it only costs $3, there is a consumer surplus of $2. If it cost McDonald’s only $1 to produce its Big Mac, but it charges $3, there is likewise a $2 producer surplus.
My proposal regards this producer, or seller, surplus, and how, through effective networking, Effective Altruists can leverage their purchases of goods and services to generate funds for Effective Charities. This is because Effective Altruists, as consumers, can potentially control the persons or entities who capture the producer surpluses of the transactions in which they participate. As is, if one has no regard for the person or entity from whom one purchases goods and services, one has no control over how such surplus is allocated. Consequently, such surplus could end up going toward the producer’s personal consumption (buying a yacht, getting a larger TV, etc.), the furthering of ineffective charities, or anything else. However, if Effective Altruists consciously direct their purchases toward producers who had committed to direct their profits toward Effective Charities, they could generate thousands of dollars individually, or millions, or even billions (conceivably trillions, as I will discuss below) of dollars collectively, through their purchases whose producer surpluses would have otherwise been inefficiently utilized.
One context that comes to mind that generates significant producer surpluses is the sale of life insurance. A life insurance salesperson often collects a commission that is some percentage of the buyer’s life insurance annualized premiums. Thus, if a life insurance salesman generates a lot of business, they can extract tremendous profits. Through the sale of hundreds of policies on an annual basis, such a salesman can earn hundreds of thousands of dollars from the millions of dollars in annualized premiums that she generates. Now, imagine that the Effective Altruist Community knew of a life insurance salesperson who would limit her income to $40k a year, all profit in excess going toward an Effective Charity. The Effective Altruist Community could direct all its purchases of life insurance (which ostensibly, some would want to purchase to protect their families from risk), through this Effective Altruist Agent, thus diverting potentially millions of dollars that would otherwise have resulted in inefficient use. And, of course, this is applicable toward virtually every consumer domain. Millions, billions, trillions of dollars in profits are generated by car dealerships, law firms, stores, restaurants, and countless other realms of economic life.
Effective Altruists can, first, establish individuals and companies in various spheres of work and business who are committed (contractually, ideally) to devoting the profits generated from their business and labor to various Effective Charities. Then, Effective Altruists can form a huge collection of networks in geographic regions all throughout the world and direct their purchases through persons and organizations who are contractually committed to putting all but a small portion of the profits generated toward Effective Charities. This might be called the Altruist Economic Network (AEN). Are you buying a new car? Buy through a dealer through the AEN. Are you purchasing a TV? Buy from an AEN electronics store. Were you injured in an automobile accident and need a lawyer to sue and maximize compensation from your injury? Retain an AEN lawyer. Effective Altruists worldwide generate millions or even billions in producer surpluses from their consumption activity. The AEN would be a way for Effective Altruists to make the world a better place not just by dedicating a portion of the wealth they generate to Effective Charities, but also by leveraging their consumption and other economic activity to create a more just and happier world.
Furthermore, it may well be that consumption through the AEN might be able to achieve broader subscription than Earning to Give. This is because dedicating a substantial portion of one’s income to supporting Effective Charities generally involves a degree of sacrifice (or at least perceived sacrifice) of one’s well-being and/or the well-being of one’s family or others whom the Effective Altruist has a direct emotional connection or feelings of loyalty. Thus, it is difficult for many people to devote 10% of their income towards effective charities. On the other hand, directing one’s personal consumption and purchase through the AEN would not necessarily represent any loss to the consumer. The sacrifice would be borne by Effective Altruist producers of various kinds, who commit to limiting their personal gains (in at least one sphere), so that they can be vessel carrying the seeds of our economy to the most fertile fields in the gardens of well-being throughout time and space.
One can imagine having an AEN brand that is endorsed not only by philosophers such as Peter Singer, but by celebrities worldwide. Indeed, if having the AEN brand was not sufficient for AEN companies and individuals to outcompete traditional companies and individuals, it may even make sense for Effective Altruists to subsidize or otherwise provide an external competitive edge to AEN companies and individuals, facilitating the capture of significant market share in virtually every economic sphere all over the world.
The significant barrier to growth to intrinsic to Earning to Give, that it is difficult to persuade individuals to sacrifice significant portions of their income to helping charitable causes, does not necessarily exist regarding Effective Consumption through the AEN. This is because only a small fraction of the population would be required to be Altruist Producers in order that a majority of the population could direct their consumption through them, without any personal sacrifice resultant from the transaction on the consumer side (indeed, conceivably external subsidization by the AE community could tilt the economic field even further and cause an AEN producer to be even more attractive to an amoral consumer than a traditional competitor). There does not appear to be any reason that the AEN could not occupy a significant portion of worldwide economic activity, and thus yield funding for effective charities in figures that might revolutionize what Effective Altruists could achieve.