If you were to take the global population and rank everyone by income, richest to poorest, where do you think you rank? Most people I ask guess in the top 10-30%. The reality is different. If you make more than ~$14,500usd, you are in the top 10% of global income earners. If that’s you, congrats, you’re rich. If you make ~$50,000 or more, you are in the top 1%. The super-rich. It’s easy to forget about how good we have it in first world countries. First world dwellers may be accustomed to thinking the top 1% are breeds of corporate executive elite. Well, some may be part of some rich elite cults.. However, most of super-rich(top 1%) are part of the working middle-upper class, shopping at the same grocery stores as most of what they consider “poor people” aka normal rich people(lower/middle class in first world countries).. The chart below displays the data:
Notice, contrary to popular belief, income inequality decreased from 2003 to 2013.
This article isn’t going to focus on wealth inequality. I’m interested in investigating the science of giving. More specifically; how people are donating to charitable organizations, and how to optimize the process. To start off, let’s take a look at how people are giving today. I’m going to use the USA for general data. America has been considered the #1 or #2 “most charitable country” for 2013-2016 by the Charities Aid Foundation. In 2016 individuals in the USA donated $282 billion dollars. That works out to an average of ~$900 per person. Most individuals donated much less than $900, and some people donated much more. The chart below provides a good overview of charitable donations in the USA. Of the total donations, religious institutions received the most at 32%, education received 15%, and human services got 12%.
Religious organizations received the most in donations. Unfortunately, as you may imagine, these organizations don’t use the donations in the most charitable manner… In fact, relatively, religious organizations do a horrible job helping the poor. A research report featured on secular humanists
found; “One calculation of the resources expended by 271 U.S. congregations found that, on average, “operating expenses” totaled 71 percent of all the expenditures of religions, much of that going to pay ministers’ salaries.4 Financial contributions addressing the physical needs of the poor fall within the remaining 29 percent of expenditures.” To reiterate; 29% of total contributions went to the poor/needy. That is a pathetic number; it’s extremely operationally inefficient. By comparison, an organization like the American Red Cross had 92.3% of expenditures reach the poor/needy. Some religious organizations are particularly scummy. A prime example is The Church of Jesus Christ of Latter-day Saints(mormon church). They tout about donating $1 BILLION dollars over a 23 year time-period. It may seem like a lot, but if one does the math.. this works out to average less than 1% of their annual income.
There isn’t easily accessible data on the #2 and #3 largest donation segments. We can take a look at the biggest charities in America, which will provide a general representation of the charitable organizations in America. The largest charities in the USA (as ranked by forbes in 2016) are United Way, Task Force for Global Health, and Feeding America. All three get more than 90% of income to programs for the poor. For every dollar, more than 90 cents goes to programs to benefit the poor. In the business, this is considered operationally effective. However, operational efficiency is only the tip of the iceberg. To discover how effective these organizations are, we need to know how much money is going to the poor, but more importantly, how much benefit is being created from the money?
To assess the benefits of a program is a challenging task. The best methods we have today consider multiple factors(cost-effectiveness, benefit analysis, financial transparency etc.) which generate models to evaluate charities. There are a few organizations used as the industry standard for evaluating charities. GiveWell, Giving what we can, and charity navigator are my favorites. I find Givewell particularly useful because it doesn’t require organizations to file to the IRS. Many of the major evaluators require IRS filing, so it narrows the scope of possible organizations.
The application of these models in giving to charity has been given a special term. These days, it is known as “Effective Altruism”. I like to think of effective altruism as the art of giving. When it comes to giving effectively, there is one factor that makes a world of difference. If you simply donated on this principle, you’d be making a larger impact than the majority of donors. Quite simply; donate to the poorest nations instead of the richest. When it comes to saving human life, a dollar in Africa goes way further than a dollar in America. This makes sense, but people seem to underestimate the impact here. In William Macaskill’s book “Doing good better” he estimated that a dollar in the poorest corners of the globe is worth 100x more than a dollar in America. He dubbed this concept the 100x multiplier.
Globally, more than a billion people live on <$2/day in impoverished environments. To save a life in the most impoverished environments costs roughly $3400. This is because people are flat broke and suffering from all sorts of easily preventable causes. For example; hundreds of thousands of people die from Malaria every year. One of the best ways to protect against malaria is to use mosquito nets. For every ~$2 donated, an organization called Anti-Malaria Foundation(AMF) dispenses one family-sized mosquito net in Africa. ~$2500 will distribute ~1250 nets to at-risk humans. 1250 is a lot of nets. A modest annual donation could protect a small village in Africa from Malaria for several years. We don’t have the same opportunities to protect people in first world countries. If took $2500 and went searching for effective ways to protect a village from death in America, you’d have a fraction of the impact(~1%!).
The largest US charity, United Way is an international organization. They have programs to help the poor in America, and around the globe. However, in 2016 they received roughly twice as many contributions towards domestic operations than international operations. If those domestic donations went to international causes, UW would have a much larger beneficial impact on the planet. It seems Americans prefer donating to help Americans. This could be for a variety of reasons, and I won’t speculate here and now… However, I suspect maximizing benefit to human life is not a major motivator for most donors.
It should be clear that most Americans are donating inefficiently. I think its safe to assume that most first world countries have similar donating habits. Most individuals are barely making an impact by donating to religions. Of the individuals that are donating to “good” organizations, many are making only a small impact. This begs the question: How to maximize the benefit of donations? Well, luckily, it isn’t that hard. You can do it with barely any thought or research. Conversely, you could give it some thought and research and probably have a larger impact. It’s similar to a shopping experience. If you are going to buy a new laptop, it’s pretty normal to conduct research and try to find the best price for a product that will provide desired benefits. It would be ideal if people followed this process in the world of charity.
I recently went through an “Effective Altruism donation experience”. This application of effective altruism can serve as a guide for those of you interested in making a difference. For me, the first step was research. I wanted to maximize the influence of my donation(and write about it!), so I decided I’d develop my knowledge around the subject. I re-read “Effective Altruism: Doing good better”, listened to a podcast with William Macaskill, and found a few articles/blog posts on Effective Altruism.
If you don’t want to go deep on research or spend too much time thinking, there is an easy way to have a large influence. If you can find an organization getting 90%+ of program expenses to a program in a third world country, you are making a large impact. The easiest way to do this is to use an organization like GiveWell
who evaluates charities to find the best ones. Just click a random one and get a payment method ready. If you do want to go deeper, read the works of William Macaskill and learn his principles of effective giving. In short, the principles are; Maximization, rationality, cosmopolitanism, cost-effectiveness, scope-sensitivity, cause neutrality, and counter-factual reasoning.
The next step for me was to decide what % of my income to give. Last year I gave 5%, and I decided to donate 5% this year. At this stage in my life, this is the amount I feel comfortable donating. I’d like to increase this amount to 10% soon, and eventually 50%+.
After this, I open up my primary tools; Givewell.org
, Charity Navigator
, and Google. I overview GiveWell’s top charities. Anti-Malaria Foundation is the featured “number 1”. I gave to AMF the last 2 years, and decide I’d like to support an alternate cause focused on human mortality. There are several organizations that deal with de-worming the poor. They seem to be very effective at helping the poor. A major benefit seems to be increased school attendance. An increase in education may be undervalued by goodwills models. I decide this is a good place to donate.
There are many de-worming initiatives to choose from. Which is the most effective? I do some research to find out. I discovered one of the organizations operates primarily in India. The Indian government provides large subsidies towards de-worming initiatives. It’s one of those instances where if you donate $x, they match a % of $x. Without accounting for the subsidy, the average cost to deform for Evidence Action
was lower than the other organizations. With the subsidy, the cost is ~$.34-$.70, roughly half of the cost of the second most effective organization listed on Givewell. Evidence Action looks like a slam dunk. I open the donation page for EA and fill it out. I put in 2% of my annual income. I hover my mouse pointer over donate. Before I click, I close my eyes and repeat my intention for the funds I’m giving. I take a breath and click the donate button.
For the other 3%, I consider alternate ways to donate. How can I donate in a way to have an impact that may be undervalued by the charity evaluators? Well, I consider the biggest weakness in models used by charity evaluators. Primarily, the models are not all-encompassing– It’s very hard to measure the influence of certain types of actions. For example, how can one account for the value of a “life-changing experience”? What if the CEO of an oil corporation has a mystical experience on psilocybin mushrooms. As a result of the experience, he decides to dedicate his life purpose to preserving the rainforest instead of deforestation for oil profits. How exactly can the benefit of this be measured? Is this type of experience more or less valuable than saving a child in Kenya from Malaria? I don’t think you can come up with a quantitative model very easily.
Dennis McKenna(brother of Terrace McKenna) is a scientist and author. On a recent podcast
, he stated that the best way he can help the planet is to introduce people to psychoactive plant experiences. He’s under the impression that these types of consciousness-expanding experiences provide a massive benefit to humanity. I’ve felt the transformation these types experiences can impose, and I agree. If others were given the opportunity to have these experiences, it could shift the values of the most powerful people in the world– the rich! I believe this type of “consciousness-raising” would have a huge influence on the health of the planet. I believe this area of “development” is neglected, so I decide to donate money to this cause.
How to donate to this cause… That is the question. This required some contemplation. I came up with a theory. I believe the best way to donate to this industry is to support psychedelic research in the USA. In order for the average rich/super rich(top 10%) citizen to have a transcendental psychedelic experience, psychedelics need to legal and culturally accepted. The first step here is that they need be de-classified as a dangerous substance with no medicinal benefit. Many studies have been conducted over the last few years showing substantial medical benefits of mushroom use
. We need more studies. Many
more studies. My belief is that the burden of proof for medicinal benefit has to be overwhelmingly large. I expect pharmaceutical/corporate lobby groups will attempt to disprove the benefits of mushrooms and create general panic/fear surrounding drug use. The pharma industry wants to continue selling anti-depressants and similar medication, so they will likely publish a bunch of bogus studies to keep psilocybin mushrooms out-of-reach. The general public could be easily manipulated on this subject, so evidence needs to be substantial.
Now that I have chosen an industry to donate to, I must decide which organization to pick in the industry. In the psychedelic research industry, the biggest player is MAPS
. They are, by far, the most well known. The second largest organization is the Heffter Institute
. Both organizations have similar cost-effectiveness. To figure out which I should donate to, I decide to dig into the financials on charity navigator/google. In 2016 MAPS spent $2.5M on expense, and had $5.5M in revenue
. By contrast, Heffter had $1.4M in expenses and $1.7M revenue
. Given this information in combination with the “neglected-ness” principle, I suspect Heffter is probably in more in need of money than MAPS. Additionally, the board members of MAPS are active in the public space(podcasts/interviews) so I suspect that MAPS will gain more popularity in 2018(higher income:expense ratio). I go to Heffter, fill out the donation page information, and put in 2% of my income. I hover my mouse over the donate button, close my eyes, and give an intention for my donation… Then, I click donate.
I still have 1% of my income left to donate. There is another area where I believe my donation will have a huge influence. Again, it is an industry where its hard to measure benefits using quantitative, mortality-based models. This third area is initiatives to protect the rainforest. I believe this is an area that is very hard to quantify and incorporate into the charity evaluation models. The rainforest plays a crucial, complex role for the planet. No rainforests in 20 years = likely unhabitable planet. I believe that current trends in deforestation, global warming and animal agriculture make rainforest conservation a very beneficial space to donate.
Givingwhatwecan identifies CoolEarth
as the most effective “carbon-offsetters” they could find. They estimate that they are 25-times more effective than most carbon-emission offsetters. I take a look into the operations and find coolearth works with Amazonian communities to facilitate a sustainable, symbiotic relationship with the jungle. Easy decision here. I fill out the donation page, give my intention, and click donate.
There you have it; effective altruism in action! Remember, when it comes to giving; make informed decisions. Practice the art of giving.