I don’t think most people I know in the community (myself included) really understand what you do.
I agree there’s a lack of understanding of our work, and hope this discussion helps clarify some things. And we haven’t done a great job of reaching out to the community to explain our work. One difficulty in operating a multiplier charity is that it can be tough to promote your own organization since your whole purpose is to promote other charities.
I was even unaware of how high your estimated multiplier is (if you had asked me to guess prior to your comment, there’s no way I would’ve gone higher than 4x).
FWIW, I think most (maybe all) multiplier organizations report multipliers well above 4x.
1. Why have TLYCS’s expenses tripled since 2016? Other than the website overhaul and the book launch, what have you been spending on? Are you aiming to engage in similar (financial) growth again in the near term? If not, would you be if you had more support from small donors?
Most of the increase was due to the book: expenses were around 300k in 2016 and 2017, ~450k in 2018, and a bit under $1m in 2019 as we ramped up for the book project. The increase in 2018 was due to adding a bit of headcount (by far our largest expense) and rationalizing some very low salaries that had been in place at the outset.
Going forward, we’d very much like to be able to grow our operational budget and would do so if we had more confidence in our ability to raise the necessary funds. Off the top of my head (definitely not an official organizational response) I’d say something like 30% annual growth would be manageable.
2. What do you mean by “communicate with more donors?” What does that involve? How costly is it on a per-donor basis? How scalable is it?
I meant this very broadly- it covers a lot of things, and the cost of those activities likely varies a lot. Over the past few years we’ve done things like: building out a CRM system to manage our donors and leads, personally emailing and/or calling more donors to thank them and build a relationship, have more one on one conversations with large donors/prospects, hold more donor/fundraising events, and add customization to our newsletter/email communications (so that, for example, donors and non-donors receive different newsletters.) The common thread is that this all involves work, and you need to pay someone to do that work.
I think there is enormous room to scale this stuff.
3. When you spend more money (beyond your basic operating expenses: salaries, office space if you have it, etc.), and that spending seems to be associated with an increase in donor interest in your recommended charities, what do you think generally explains that relationship, and how do you determine that such an increase in donor interest was counterfactually caused by the increase in spending?
Salaries account for the vast majority of our budget (meaning increased spending typically means increased headcount). We try to assess if our strategy and execution are working, and the details depend on the project. Sometimes we add expenses that don’t immediately impact donations, like hiring an accountant. We didn’t try to model out that ROI, we just knew we had grown beyond the point where it was feasible to operate with a volunteer accountant. When we overhauled the website, we were able to look at a lot of quantitative metrics (conversion rates, engagement rates, etc) and see that they improved a lot right after the change. When we launched TLYCS Australia, we didn’t have to watch the donations that came in for very long to know it was going to be a big success.
FYI our 2018 annual report has a good discussion of how we pivoted our strategy then assessed that change.
4. More generally, and this may be an extremely dumb question/something you have explained at length elsewhere, how do you arrive at your “money moved” estimates, and how do you ensure that they are counterfactually valid?
Thanks for asking- this is something most people probably don’t know.
It’s pretty simple: we count money that’s been donated to TLYCS to be regranted to our recommended charities + money donated to those charities (and reported back to us) where the donor indicates that we influenced the gift.
We’ve discussed counterfactuals in detail in the appendix to our 2017 annual report. There are definitely a lot of considerations, but I generally think counterfactual concerns are becoming less of an issue over time (TLYCS’s role in producing the new book really mitigates concerns that we’re measuring Peter Singer’s impact rather than the organization’s.)
One place we have made a counterfactual adjustment (which I think speaks to our attempts to be reasonable in our metrics) is with a specific family that has donated several million dollars over the past 5 years. We think it’s very likely those gifts would have been made without our involvement, so we’ve only counted 5% of their value in our numbers. FWIW, the charities involved told us they thought we should take full credit.
I don’t really know what TLYCS’s exact multiplier would be if you had perfect information and could account for all the counterfactuals. But I’m highly confident it’s well above the threshold of providing significant leverage. In 2020, even if our true impact is only 10% of our reported money moved figure (which I believe is conservative), we’d still provide >50% leverage. There’s a very large margin of safety (which you wouldn’t really have if you had a mental model that our multiplier was 4x or less per your comment above).
5. Do you personally believe that TLYCS will hit diminishing marginal returns on investments in growing its base of donors to its recommended charities sometime in the near or intermediate term?
Personally, I think TLYCS is just getting started. The new book is a powerful asset, and by getting free copies (and excerpts, video summaries, etc) in many people’s hands, I’m confident that our money moved will grow significantly over the long run. We know the first book influenced a ton of people (including Cari Tuna), now we have a book that will have a much wider reach and has an organization behind it.
I know our multiplier will go up in 2020, but after that I’m not really sure. We focus more on “Net Impact”, which is our Money Moved minus our expenses, rather than our multiplier which takes the ratio of those numbers.
I think Peter Hurford originally suggested the Net Impact metric back in the day, and it makes a lot of sense to us. We’d much rather spend $1 billion to move $5 billion than spend $1,000 to move $10,000. So potentially there could be diminishing marginal returns (i.e. a falling multiplier), but I don’t think that’s necessarily a problem if you’re trying to build an organization that does as much good as possible instead of one that’s as efficient as possible.
Thanks for sharing your thinking on this! Hopefully this exercise will shed some light on whether that lack of excitement is warranted, or whether it could represent an untapped opportunity.