What does financially effective global charity look like?

By Michael Blayney

Our short-term emotions often dictate our charitable giving, but what if we scrutinised giving in the same way that investors look at stocks and nurses perform triage?

Updated 24 August 2016

In a 2013 TED Talk, Australian ethicist and philosopher Peter Singer raised the type of moral dilemma likely to pop up in an after-dinner board game. Consider this: you’ve unexpectedly inherited US$40,000 and decide to donate the lot to a charity for the blind. Would you fund the training of one guide dog or help between 400 and 2000 trachoma sufferers in a developing country regain their sight?

Singer says the choice is clear – the untrained Labrador puppy does not stand a chance.

This type of brutal comparison between good works is the cornerstone of effective altruism, a growing community dubbed as “generosity for nerds”. Combining economics, math and philosophy, effective altruists identify the most needy causes before opening their wallets. Many donate large sums, but they want more bang for their charity buck – and they’re not afraid to go data mining for it.

Singer mounts a case that Bill Gates and his wife Melinda are the world’s most effective altruists. In 15 years, the pair distributed US$34.5 billion, primarily to eradicate disease in the developing world. The philosophy that underpins the Gates Foundation is that every life has equal value. Effective altruism shares a similar philosophy.

From nowhere to Google

The term “effective altruism” was first used, in a formal sense, when the Centre for Effective Altruism (CEA) – an incubator for charities and social enterprises – was established by a loosely affiliated group of academics, philosophers, students and philanthropists in 2011. Based at the UK’s University of Oxford, it took off fast, nurtured by newly rich technologists.

“For the past three years [the fourth annual conference of Effective Altruism was held August 5-7 2016 at the University of California Berkeley], we’ve had an annual conference for members of the movement,” says Seb Farquhar, executive director at the CEA.

“[Where once] there were about 50 attendees; [in 2015] we had almost 1000 in three cities across the world.”

Silicon Valley billionaire Elon Musk addressed the conference last year at Google headquarters in California.

CEA is now sprouting offshoots: 80,000 Hours is an organisation offering career advice to people who want to make a difference; and Giving What We Can is a community of people who have pledged to donate at least 10 per cent of their income to charities.

Since launching, these not-for-profits have together raised more than US$400 million in lifetime pledged donations.

In 2015, CEA trustee Will MacAskill released a book, Doing Good Better, detailing effective altruism’s brand of rational, evidence-based reasoning. MacAskill, who co-founded both 80,000 Hours and Giving What We Can, points out that if you make more than US$52,000 a year, you are in the top 1 per cent of income earners globally.

He asks people to ask themselves: if you can save a life for US$4000 and choose not to, how different are you from someone refusing to rescue a drowning baby from a shallow pool? He also suggests that once you start giving in an effective way – one that actually saves lives – you will look at your life in a new way.

Altruism’s heaviest hitters

Farquhar concedes that there is no magic formula when measuring the effectiveness of different charities.

“It depends on the area, but evaluation is very labour intensive,” he says.

Central to that evaluation is GiveWell, an independent not-for-profit whose aim is to recommend cost-effective charities (its commitment to transparency even extends to publishing a list of its own previous errors). Farquhar says CEA relies on GiveWell’s detailed analysis of a charity’s management structures, books and delivery models.

GiveWell’s analysis often comes down to a strange but now well-accepted unit called the “quality-adjusted life-year” (QALY), which allows comparison of different health measures.

A year of good health is worth 1 QALY; a year of visual impairment and limited activity might be worth just 0.5 of a QALY. Applying this hyper-rationalist methodology, GiveWell has come up with four top charities:

Against Malaria Foundation (AMF) funds insecticide-treated nets for communities at high risk of malaria.
GiveDirectly makes direct money transfers to the very poor.
Schistosomiasis Control Initiative provides treatment programs to counter the world’s most damaging parasitic worm.
Deworm the World Initiative deworms children in the developing world.

GiveWell estimates that a US$4000 donation to top performer AMF can prevent one infant dying of malaria – a curable disease that claims an estimated 800,000 lives each year, mainly children under five living in sub-Saharan Africa. In a collective effort, effective altruists have funded more than a million anti-malarial bed-nets through AMF.

The choice of AMF has not come without controversy. A recent article in The New York Times claimed that Zambians are using the mosquito nets to fish, the insecticide poisoning the ecosystem. Although CEA was disturbed by the report, Farquhar says its analysis of the charity had taken these “unintended consequences” into account.

Measured approach to philanthropy

This meticulous way of giving has already encouraged a push towards evidence and measurement throughout the philanthropic sector. Caitriona Fay, national manager of philanthropy at financial services group Perpetual, says philanthropists have become more discerning, with her company placing a strong emphasis on tracking an organisation’s effectiveness and efficiencies.

“We have our own approach, and it is much like the approach we take as an investment house when looking at financial opportunities,” says Fay.

“We look at the quality of an organisation with respect to leadership and strategy perspective, and we assess if they’re an outcomes-driven organisation.”

Effective altruism has its critics. Many question the clinical, dispassionate, algorithmic manner in which the movement operates. Others believe that encouraging charity to Third World nations with dysfunctional governments prevents systemic change.

“This is a criticism that is definitely true of some types of charitable intervention and that would be a reason to look elsewhere,” says Farquhar, noting also that effective altruists are enthusiastic about working with governments or in policy areas to bring about change.

He adds: “I can’t think of a bigger systemic change than getting everybody to give a tenth of their incomes to the most effective causes. It’s a huge change at a societal level.”

Some think the movement is fixated on short-term solutions and that easily quantifiable causes have an advantage come assessment time.

Dr Wendy Scaife, director of Queensland University of Technology’s Australian Centre for Philanthropy and Nonprofit Studies, argues for a more “measured approach to measurement”.

“Just as an example,” she says, “say you’re in the city accommodating country cancer patients while they’re undergoing treatment. You’ve built a facility and you have counselors on hand looking after the families. People are surviving longer or have a better quality of life. How exactly can you measure that? How do you measure degrees of suffering? People may come up with measures, but is that where we want people in charities focusing their time and energy?”

Scaife says that many not-for-profit organisations, especially smaller ones, are under-resourced and would find it difficult to build a measurement capability into their models.

“Perhaps we’re part of the problem,” she observes. “If we want every dollar we give to go to the child on the ground, we’re not thinking about what delivery agents are required to make sure the money does get to that child and supports them effectively. It’s problematic to that extent.”

To an extent, Farquhar is sympathetic to the not-for-profit sector’s frustrations.

“Measurement by the charities can be difficult and is seen by some organisations as a distraction from doing the actual work,” he says.

“We appreciate that everybody who starts a charity cares very deeply about successfully solving the social problem they’ve identified, but being able to measure does help you spot the best opportunities.”

Fay is a little more pointed: “We don’t want to pit causation areas against each other. That’s the real challenge effective altruism has; pitting a sick child in a developing country against a sick child in a developed country helps no-one.”

Keeping the emotion

Effective altruists, or Farquhar at least, believe the “official party line” shouldn’t stop anyone giving to charities that have a personal or emotional connection.

“It’s definitely not the wrong thing to do,” he says.

“I personally give to a couple of charities for emotional reasons that I don’t think are particularly effective. I view it as a different activity than making the biggest difference I can.”

Fay argues that no philanthropist wants to be ineffective: everyone hopes to make an impact or a difference in their specified areas.

“There’s nothing wrong with anyone feeling good about wanting to do good,” she says.

“In a period of great and growing wealth, we don’t want systems and barriers to giving. If you take away the warm-hearted component of philanthropy, who’d want to get involved in it?”

Scaife, however, believes that the popularity of effective altruism allows for more reflective activity in the sector.

“We shouldn’t have to follow slavishly what they’re suggesting, but instead take the good out of it,” she says.

“Measurement is a tool for improvement and it’s important for charities to respect that. It gets charities and funders thinking more deeply.”

Earning to give

The concept of “earning to give” has gained traction in the effective altruism community, largely since the 80,000 Hours website first appeared just over four years ago. The premise of the organisation is maximising your income during your career (all 80,000 hours of it) and donating a share to charity.

Princeton University graduate Matt Wage was a philosophy student of Peter Singer’s. After graduating in 2012, he was offered post-graduate study with the University of Oxford.

Instead, he took a high-paying job at a Wall Street trading firm. He reasoned that working in finance would enable him to contribute more to charity (effectively, of course) than if he had chosen to work in the aid industry. In 2013, he donated more than US$100,000 of his salary.

“I worked as a management consultant, during which time I gave considerably more than I do now,” he says, adding that “about 1300 people have pledged to give at least a tenth of their income for the rest of their life through the website Giving What We Can”.

Effective altruism in practice

Effective altruism applies evidence and reason to measure the most effective ways to improve the world. To read more about the movement’s methods and recommendations, these websites provide many of the answers:

www.effective-altruism.com
www.centreforeffectivealtruism.org
www.givewell.org
www.givingwhatwecan.org
www.thelifeyoucansave.com