- `Effective altruism' seeks to maximize returns from charity
- Gates and Gross fans of a data-driven approach to giving
When it comes to charity, some of the biggest names on Wall Street can be as hard-nosed about where they put their money as they are when investing.
Elon Musk, Peter Thiel, Bill Gates, Warren Buffett and billionaire hedge fund manager Bill Ackman are just a few of the converts to “effective altruism,” a movement that calls for using data science to calculate how people can ensure each dollar they give has the greatest impact on those in need. It also extols having a high-paying job because a greater disposable income can help more people than volunteer work in the field.
|Billionaire||Net Worth||U.S. Rank|
Econometrics is the new buzzword in charity circles with a growing number of non-profit organizations applying a more scientific methodology to lure the rich and powerful to give more. GiveWell, for example, studies academic research and data to test a given approach and applies metrics such as “cost per life saved” or “financial benefits to recipients per dollar spent by donors.”
“When the end of the year comes, people prefer not donating than donating badly," said Alexandre Mars, a tech entrepreneur and venture capitalist-turned-philanthropist.
Which is why Mars set up Epic Foundation, where he manages a portfolio of 20 youth-focused social enterprises for donors. The idea is that high net-worth individuals may not have the time to do the homework themselves but want guarantees they are getting value for money. Mars vets the charities by analyzing their data, ranking them through an algorithm and producing reports for each based on on-site visits and interviews.
“We want to track what we’ve donated,” he said. “In the non-profit world, this doesn’t exist: You would have to wait six months or a year for a brochure or get invited to a gala you have to pay" to attend.
GiveWell, which was founded by two former analysts at Bridgewater Associates, have their top picks each year.
For 2016 they selected Against Malaria Foundation, which funds insecticide-treated bednets for communities at high risk of malaria; GiveDirectly, which delivers cash directly to the extremely poor in developing countries; Deworm the World and Schistosomiasis Control Initiative, which pay for inexpensive but highly effective parasitic treatments.
GiveDirectly, which transfers about 91 cents of each donated dollar it has received directly to beneficiaries, is a popular choice. Pacific Investment Management Co. co-founder Bill Gross said he and his wife contribute money directly to needy Africans through the organization.
Peter Singer, professor of bioethics at Princeton University and among the philosophers behind effective altruism, has his own annual list of 17 best charities. He bases his recommendations on the belief that one is better off divorcing from emotions when making ethical choices.
What $100 Buys for Some Charities on Singer’s List
|Evidence Action||1,000||Children dewormed|
|Project Healthy Children||384||People given a year of micronutrients|
|Schistosomiasis Control Initiative||125||Children protected for a year|
|GiveDirectly||91||Dollars for recipients to use as they wish|
|Against Malaria Foundation||33||Bednets|
|Fred Hollows Foundation||5||Eye-disease screenings|
|Possible||4||Nepalese given health care|
|Fistula Foundation||3||Women transported to hospital|
|Oxfam International||2||Households given seeds and farm tools|
Here is one case he presents: Donating $7,500 to the Seva Foundation to treat common causes of blindness in developing countries can protect 100 children from losing their sight as they grow older. Make-a-Wish Foundation of America on average spends the same amount of money to execute one feel-good mission fulfilling an ailing child’s wish.
The key to finding the best opportunities for cost-conscious donors is by standardizing the measurement of outcomes, according to Michael Thatcher, chief executive officer of Charity Navigator. His organization was founded 15 years ago to rate the financial health of aid groups based on their tax filings.
“We’re investing in social change and as an investor you expect performance, just as an investor in the stock market would want to see returns,” said Thatcher, who was a public sector chief technology officer at Microsoft Corp. before joining Charity Navigator six months ago. “It’s a very valid thing for people to be asking for returns from charities, versus feeling good about themselves for having given some money.”