Identifying points of leverage

If something is important to us, such that we want to do it as well as possible (as opposed to just doing it in the way people commonly do it), then it’s crucial to put in a lot of thought and always be on the lookout for more effective strategies, for multipliers and leverage points that allow us to make more effective, i.e. more goal-achieving use of our resources. In regard to charitable giving, the gains from picking charities based on cost-effectiveness evaluations or from “going meta” can be huge.

Another way we could get increased leverage out of of our donations is the idea of donating later as opposed to donating now: We could invest our money as profitably as possible, have it compound over time, and donate a huge sum at the end of one’s life. The better an investor you are, the more it makes sense to consider this route. However, there are couple of counter-considerations: A big danger of waiting before donating is that the waiting may never end. The intention to donate later needs to be sufficiently credible. Will I still be altruistically motivated 20 years from now? Psychological studies suggest that we tend to underestimate how much our preferences and values change over time. The more uncertainty there is about whether we will follow through with good intentions, the more it makes sense to donate now rather than later.

While these considerations are certainly significant, they are not decisive. If people are serious about their commitment and take the required steps to maximize the probability of following through, then we should indeed expect that investing leads to more money being donated in the long run. This brings us to another important consideration: Is the total money donated to effective charities the main variable that counts, or does it also matter when money is donated? Or, to put it differently, can charities have compounding effects, too

Investing into altruism: The Haste Consideration

The answer is: Yes! Meta-charities are actually all about this effect. There are some reasons why direct charities might be more effective now rather than in the future. The paragraphs below will focus on meta-charities and develop the argument that they have strongly compounding benefits, just like successful investing.

Meta-charities promote the meme of effective giving: they motivate people to donate more money to more effective charities than they otherwise would. Meta-charities make up the driving machinery behind the relatively young movement of effective altruists. A lot of thinking has been going into the question of giving now vs. giving later, with the main upshot being that it is crucial to estimate how strongly the so-called Haste Consideration applies:

Imagine two worlds:

(1) You don’t do anything altruistic for the next 2 years and then you spend the rest of your life after that improving the world as much as you can.

(2) You spend the next 2 years influencing people to become effective altruists and convince one person who is at least as effective as you are at improving the world. (And assume that this person wouldn’t have done anything altruistic otherwise.) You do nothing altruistic after the next 2 years, but the person you convinced does at least as much good as you did in (1).

By stipulation, world (2) is improved at least as much as world (1) is because, in (2), the person you convinced does at least as much good as you did in (1).

When it comes to motivating others to join the endeavor of effective giving, waiting has huge opportunity costs. If someone else joins now rather than a year later, you gain an entire year of whatever altruistic activities the other person will engage in, be that donating, investing or outreach. If this other person talks to her circle of acquaintances, perhaps even more people will join the cause. The potential is huge, and even with conservative estimates on how many other people can be encouraged to do more than they would otherwise do or do things more effectively than otherwise, the return on investment of successful meta charities is plausibly extremely high. Investing into altruism not only gives one-time benefits; rather, it sets off a chain reaction that pays dividends into the indefinite future. As the above example on the Haste Consideration shows: Your resources now (during the next 2 years, say) may be much more valuable than your resources later (during all the following years combined). If, during the next two years, you successfully convince 10 people to henceforth become a world-improver as impactful as you are, then the resources you spend during the next two years will be 10 times as important as the resources you spend during all the following years combined.

A growing movement: Most of the money will be donated later, and money is needed now

We find ourselves at an interesting time in history: The ideas behind effective giving are there, we may not know all the details and tricks yet (maybe not even close!), but we already know a lot. At the same time, this knowledge is still rare, the ideas far from mainstream.

If the movement as a whole is expected to grow, this means that in the future, there will be much more money donated to effective causes, which means that the low-hanging fruit will be picked more easily. Currently, with the movement still in its beginnings, it is very likely that the top (meta-)organizations are getting less funding than they’d have effective use for. Because of the outreach efforts of meta-charities, more and more young people have been making a commitment to go into high-earning careers in order to maximize the amount of money they will be able to donate. But for many of them, it will still take a while until they complete their educations and start earning. We should expect that there is a greater shortage of resources in the movement now than in the future, which presents a further reason in favor of donating now.

One might object: Consider Bill Gates. The guy is altruistic and pretty rational – he probably knows what he’s doing. He has a large pot of money at his disposal and clearly decides against donating it all (or even a lot of it) now and in favour of donating much more later. If Gates basically knows what he’s doing and contradicts our recommendations to donate now, does this not imply that we may be wrong? It would indeed, if it were the case that Gates’ decision contradicted our recommendation. But that’s not so: If you donate most of what you earn now, you’re still only donating a very small portion of your total pot (1%? 2%?) – for the pot is equivalent to your life-time earnings. By not donating now we therefore move even more money towards later, such that our now/later ratio likely becomes implausible even by Gates’ lights (which may not take the Haste Consideration into account – the Gates Foundation seems insufficiently focused on movement building in general).

Most of the money given effectively – by ourselves and even more so by the movement we’re part of – will be given later. So the pot under consideration is very heavily skewed towards later anyway. Skewing it further in that direction is unlikely to be the winning strategy.

Concluding thoughts

Donating towards meta-charities can be viewed as “investing into altruism”. Due to the growth potential of the ideas, the returns on this front are likely very large. Therefore, even if you’re a good investor, we generally recommend donating now rather than later. That said, the better you are at investing and the more you think having more money on your bank account helps you increase your absolute win-rate, the more it makes sense to wait.

For those who choose to wait, we recommend to regularly donate smaller amounts to get into the habit of donating, establishing a self-identity of being an “effective donor”. This should greatly increase the probability of following through with one’s commitment later.

The general movement building argument for giving now seems quite strong, though: If accumulating a lot of money and donating it later is best per se, then donating it now towards persuading many others to accumulate money and donate it later seems better.