Giving Now vs. Later

Throughout the post, “we” refers to GiveWell and Good Ventures, who work as partners on the Open Philanthropy Project.

We've been wrestling lately with the question of how much Good Ventures should be aiming to give at this early stage in its development. As discussed previously, we are prioritizing building knowledge and capacity over investigating specific potential grants. But this still leaves the question: once we have investigated a potential grant, how do we decide where the bar is for recommending it? With all the uncertainty about what we'll find in future years, how do we decide when grant X is better than saving the money and giving later? This question is especially important when considering what size grants to recommend to GiveWell's top charities: these giving opportunities have been investigated to about the maximum extent possible, and this year they have considerable room for more funding. Good Ventures could support them at a level anywhere in between $0 and $100+ million, and Good Ventures asked GiveWell to recommend an amount and allocation, with the aforementioned questions in mind.

In this post, we lay out our working framework for questions like this. In brief, we aim to recommend giving based on:

The remainder of this post will:

The basic criteria


The Open Philanthropy Project is still relatively early in its development. At some point, we expect that we will reach what one might call "peak capacity" in terms of staff size and ability to evaluate giving opportunities. We think this will be the appropriate time to reach "peak giving" as well – to be recommending grants at a rate consistent with drawing down the full amount Cari and Dustin are hoping to give away within their lifetimes.

However, for now – since we still have so much progress to make in terms of learning and capacity building – we think it makes sense to err on the side of recommending grants totaling a relatively small percentage of the available capital. We think the idea of a "relatively small percentage" maps intuitively to 5%, because:

As long as total giving is below 5%/year, we'll be happy to recommend more (subject to the benchmark below), and feel this is consistent with preserving option value for the bulk of future giving.

Benchmarking against direct cash transfers

By default, we feel that any given grant of $X should look significantly better than making direct cash transfers (totaling $X) to people who are extremely low-income by global standards – abbreviated as "direct cash transfers." We believe it will be possible to give away very large amounts, at any point in the next couple of decades, via direct cash transfers, so any grant that doesn't meet this bar seems unlikely to be worth making.

We note that current gifts to GiveDirectly appear substantially better than "pure" cash transfers, because they have value to GiveDirectly's trajectory as an organization and they are usually funding experiments; the "direct cash transfers" term here essentially refers to GiveDirectly's intervention in isolation, ignoring those benefits. (And we think those benefits would be negligible for e.g. the 200 millionth dollar disbursed by GiveDirectly in a given year.)

It's possible that this standard is too lax, since we might find plenty of giving opportunities in the future that are much stronger than direct cash transfers. However, at this early stage, it isn't obvious how we will find several billion dollars' worth of such opportunities, and so – as long as total giving remains within the 5% budget – we prefer to err on the side of recommending grants when we've completed an investigation and when they look substantially better than direct cash transfers.

It is, of course, often extremely unclear how to compare the good accomplished by a given grant to the good accomplished by direct cash transfers. Sometimes we will be able to do a rough quantitative estimate to determine whether a given grant looks much better, much worse or within the margin of error. (In the case of our top charities, we think that donations to AMF, SCI and Deworm the World look substantially better.) Other times we may have little to go on for making the comparison other than intuition. Still, thinking about the comparison can be informative. For example, when considering grants that will primarily benefit people in the U.S. (such as supporting work on criminal justice reform), benchmarking to direct cash transfers can be a fairly high standard. Based on the idea that the value of additional money is roughly proportional to the logarithm of income, and the fact that mean American income is around 100x annual consumption for GiveDirectly recipients, we assume that a given dollar is worth ~100x as much to a GiveDirectly recipient as to the average American. Thus, in considering grants that primarily benefit Americans, we look for a better than "100x return" in financial terms (e.g. increased income). Of course, there are always huge amounts of uncertainty in these comparisons, and we try not to take them too literally.

When these criteria apply

When we have completed an investigation of a potential grant, we intend to compare the likely value of the grant to that of direct cash transfers, and – if it appears substantially stronger and there seems to be room to make the grant while still being within our total budget for the year – move forward with the recommendation. However, this doesn't mean that we plan to investigate every grant that might fit these criteria. At this stage, we are short on time relative to funding, and we spend time only on what we see as the highest-value activities we can identify.

Complications and adjustments

Exit grants

If we recommend supporting an organization, we need to think through what will happen if we later change our minds and decide that supporting the organization no longer meets our criteria. In many (though certainly not all) cases, we will feel the need to recommend "exit grants" in order to unwind our support gradually and give the recipient organization time to plan and adjust; without this practice, we could undermine organizations by causing them to plan suboptimally, and we could risk becoming the kind of funder that organizations are hesitant to work with.

Any potential "exit grants" need to be accounted for when considering the size of the grant and how much it should count toward our budget.

Knowledge/capacity building

We've written before that it can be helpful (and even necessary) to commit to recommend grants in a cause, in order to learn about the cause as a potential focus area. We think the "direct cash transfers" benchmark laid out above is most appropriate when applied to causes we know well and have a decent ability to evaluate; for early grants in causes we're still exploring, we think it can often be a good idea to be less strict in applying this standard (though we don't want to support things that are clearly much worse than direct cash transfers, nor do we want to enter any cause where there doesn't seem to be a plausible path to grants that are much better).

When we're extremely early in a cause, at the stage of making grants whose primary purpose is learning, we don't see the need to make a comparison to direct cash transfers at all. When we're somewhat advanced but still have a lot of learning to do – as is the case for our current U.S. policy focus areas – we're going to look for grants that are at least competitive with direct cash transfers.

Coordination issues

As we've written before, trying to anticipate and adjust to other givers' behavior can lead to thorny-seeming dilemmas. We do not want to be in the habit of – or gain a reputation for – recommending that Good Ventures fill the entire funding gap of every strong giving opportunity we see. In the long run, we feel this would create incentives for other donors to avoid the causes and grants we're interested in; this, in turn, could lead to a much lower-than-optimal amount of total donor interest in the things we find most promising.

Encouraging other donors to help support the causes and organizations we're interested in – and ensuring that they have genuine incentives to do so – will sometimes directly contradict the goal of fully funding the best giving opportunities we see. Thinking about GiveWell's top charities provides a vivid example. If GiveWell recommended that Good Ventures fully fund each of GiveWell's top charities, GiveWell would no longer recommend these charities to individual donors. In the short run, this could mean forgoing tens of millions of dollars of potential support for these charities from individuals (this is how much we project individuals will give to our top charities this year). In the long run, the costs could be much greater: we believe that individual-donor-based support of GiveWell's top charities has the ability to grow greatly. A major donor who simply funded top charities to capacity would be – in our view – acting very suboptimally, putting in a much greater share of the funding than ought to be necessary over the long run.

Over the past couple of weeks, we've had many internal discussions about how to reconcile the goals of (a) recommending as much giving as possible from Good Ventures to top charities, which we consider outstanding giving opportunities; (b) preserving long-run incentives for individuals to support these charities as well. The proposals that have come up mostly fit into one of three broad categories:

1. "Funging" approaches. Individuals do most of their giving in December. We could wait until we've seen how much support comes in for each of our top charities, and then – in, say, February of 2016 – GiveWell could recommend that Good Ventures grants to fill whatever funding gaps remain.

This would have the advantage of fully funding top charities, while not spending more (in the short run) than necessary to do so. However, it would have the disadvantage of creating a long-term incentive for individuals to stop supporting GiveWell top charities, since the only effect of their giving (in this scenario) would be to reduce the amount GiveWell recommends to Good Ventures. Most individuals would probably not notice this issue unprompted, but it's very important to us to be open with our audience about the pros and cons of taking our recommendations, and we don't want our offering to be valuable/attractive only to people who misunderstand it.

There are a variety of "funging" approaches that are less precise and less obvious than the one outlined above, but that we feel ultimately have the same basic pros and cons. Any approach that is designed to ensure that the entire funding gap is always filled will be creating the kind of problematic incentives outlined here.

2. "Matching" approaches. Rather than recommending that Good Ventures fill the remaining funding gaps after accounting for individuals, GiveWell could recommend that it gives $1 for each $1 we track from individual donations. This would create the opposite incentives to those created by "funging": it would mean that individuals had a magnified, rather than reduced, incentive to support top charities.

The disadvantage of this approach is that it would tie the recommended level (and allocation) of Good Ventures's funding to decisions made by individuals. This could result in recommendations to give much less than is optimal, or much more, or much differently (e.g. with a much different allocation across charities). There are also logistical challenges involved with matching programs.

3. "Splitting" approaches. When trying to coordinate with another funder who can't be directly negotiated with, one approach is to come up with what seems like a "fair share" of the funding gap each would provide, and simply recommend that Good Ventures commit to providing its "fair share" – no more and no less, regardless of the other funder's behavior.

This approach has pros and cons somewhere in between those of the other two.

Our preference at the moment. All three of these approaches have issues. Even in theory, it's hard to reconcile the basic goals of (a) closing important funding gaps and (b) creating good incentives for other donors. When dealing with another major donor whom we can have a direct discussion with, it is often possible to be mutually honest about our thinking and agree to a fair-seeming split; but when thinking about how to coordinate with a large number of individual donors whose time and attention is scarce, any approach we take will be suboptimal in some major ways.

For this year, we have chosen the "split" approach. It is relatively simple to execute (unlike "matching" approaches) and keeps incentives relatively simple for donors (unlike "funging" approaches). It avoids the worst problems with each of the other approaches, while not being perfect by any criterion.

Specifics of our recommendation re: GiveWell's top charities

The split we have chosen regarding GiveWell's top charities is:

More specifically, we have chosen the recommended amount and allocation as follows:

We are currently reasonably happy with the output of this approach. It reliably leads to recommending that Good Ventures fill a significant part of top charities' funding gaps, while also being principled enough to avoid any reality or appearance of "funging" that might create problematic incentives for individuals. We felt this was the best approach we could come up with given time constraints, since GiveWell wanted to announce our recommendations to Good Ventures along with its recommendations to individuals, so that individual donors would have the knowledge of its recommendations to Good Ventures before making their own giving decisions.

That said, we're fairly early in our thinking on these issues, and we recognize that the approach we’ve chosen does not seem close to fully optimal or fully satisfying. We plan to revisit our approach next year, and we welcome more thought on how to answer this question in the future.