Why Most of Us Do Charitable Giving All Wrong
4:30 pm, December 26th | by Laura Shin, LearnVest
Now we’ve got a question for you: Can you say, with certainty, whether that charity’s work will be effective in truly helping the cause it’s meant to further?
That’s the point being raised by a recent trend known as effective giving, which is reshaping how people think about charity.
According to proponents of effective giving, we don’t approach charitable giving the way we would other purchases–and we should.
Case in point: When you buy a new winter coat, you likely try to get the best bang for your buck in terms of quality, style and fit. But we don’t look for the most good for our dollar when it comes to charitable donations. Instead, we tend to give to organizations that have brand recognition or simply because they request money from us … all without asking whether our donation will accomplish its goals.
Some people at least look up the organization’s profile on Charity Navigator to see how much it spends on overhead costs versus program expenses to make sure that the charity isn’t a fraud–but neither of these things say anything about the effectiveness of its work.
We’ll dive into what the effective giving movement is about, how it differs from typical charity approaches and how you can use its principles to guide your own giving.
The Thinking Behind Effective Giving
Three years ago, Toby Ord, a researcher in moral philosophy at Oxford University, wanted to find out how much charitable projects differed in terms of their impact in an area such as health. This was a question that the Gates Foundation, started by Bill and Melinda Gates, had posed in the Disease Control Priorities Project.
Ord expected that the health improvements of different projects might vary by 10% or 20%, but he found instead that some projects had an impact 10 times bigger (a 1,000% difference) or 100 times bigger (a 10,000% difference).
For instance, it takes $42,000 to train a guide dog to help a blind person, according to Guide Dogs of America. But to really help the blind, you could put that $42,000 toward funding eye surgeries for people in Africa suffering from a bacterial eye infection called trachoma. Since surgery costs as little as $25 and is 80% effective, you could theoretically restore the sight of 1,344 people with that $42,000.
As The New York Times puts it in an article on effective giving: “If you value all lives equally—and in a minute I’ll get to the fact that we certainly don’t—then if you are training a guide dog, you might as well be giving to a charity that wastes 99.93 percent of its money. (Actually even more, as a guide dog does not restore sight.)”
Organizations Excelling at Effective Giving
Ord decided that the best way to give is to donate to the charities that were most effective. So he pledged to give 10% of his income to the most effective project at the time (deworming school children), and found that many friends and colleagues wanted to join him.
That’s how he came to found Giving What We Can, an organization dedicated to eliminating poverty in the developing world. So far, it’s gotten 264 people to pledge at least 10% of their income every year to charity–which amounts to $100.8 million in future earnings toward the most effective projects.
Giving What We Can works closely with GiveWell, a Brooklyn-based organization that researches charities to see which ones are the most effective. Founded in 2007 by former two hedge fund managers, GiveWell initially thought it would obtain data on the effectiveness of projects from the charities themselves, says Alexander Berger, GiveWell’s research analyst.
“But collecting data is a social scientist’s job, and it’s something that charities are not very good at. What we can do is rely on published academic papers or academic journals to make a basic case that a certain type of program works,” he says. After evaluating methods, GiveWell then interviews charities employing that method to make sure that they are executing the work correctly.
To date, GiveWell has analyzed the work of almost 800 organizations working internationally. It currently recommends three top-rated charities, which were chosen for being cost-effective, underfunded, exceptionally effective and transparent with donors–essentially places where your dollar will go furthest:
- Against Malaria Foundation, which distributes insecticide-treated bed nets in malaria-ridden areas
- GiveDirectly, which transfers cash to the poorest households in Kenya via cell phone
- Schistosomiasis Control Initiative, which treats children for parasite infections in sub-Saharan Africa
GiveWell’s analysis has subsequently turned up some surprising results. Popular charities, such as Heifer Project International – known for providing much-needed livestock to families in developing countries – don’t make the cut. In fact, GiveWell hasn’t found any evidence that livestock gift programs are effective at all. Other well-known organizations that don’t receive a negative rating, but also don’t get a recommendation: charity:water, Doctors Without Borders and Partners in Health.
How to Jump Start Your Own Effective Giving
Here are a few tips from Giving What We Can’s Research Director, Robert Wiblin, and GiveWell’s Berger:
Be proactive. “It’s easy to respond to solicitations or when friends ask, but if you’re just waiting for the charity to come to you, you’ve lost the battle,” Berger says.
Be open-minded about the cause. ”The broader minded you are, the more opportunity you have to find an appropriate organization,” he says.
Don’t be swayed by a moving story. GiveWell notes that most charities offer testimonials as evidence, “but scattered success stories can’t really capture whether a program is working. Out of 100 people in a program, the odds are that some of them will see their lives improve, just by chance,” the site says.
Separate giving to friends and local charities from effective giving. ”If you want to give to an organization in your community that makes you feel good, that’s fine,” says Wiblin, referring to donations that you make to your local church or a friend who’s running a marathon for charity. “But you should count that as personal spending, and separate it from money that you put out to help others.” What would count in this latter category? Charities whose effectiveness has been ranked, such as those who received top ratings from GiveWell.
Look for proven effectiveness. The best evidence is to look at controlled trials that demonstrate a statistically significant impact, but it’s difficult to find this evidence yourself. A site like GiveWell can make that research easy.
Focus on developing countries. Wiblin says that, in order to give a lot of charitable bang for your buck, people who live in developed countries should give to countries where incomes are particularly low.
Give cash–no strings attached. Find an organization that you believe in, and then give it cash, trusting them to use it well.
Increase your giving by giving a percent of your raise toward charity. “People don’t like to see their paycheck go down,” says Wiblin, “but they don’t mind if it doesn’t go up as much.” So instead of increasing your donations now, and living on a tighter budget, you could vow that, for every raise you receive from now on, half will go to charity.
So this year, when you go to make your end-of-year donations–or when you plot out your overall giving plan for 2013–think about what you can do to make sure that your charity dollars have the most effective impact.
“People really like a personal story, especially about one individual,” says Berger. “It’s a totally legitimate urge, and a human one, but you can do more to help other people when you put in the work to be more thoughtful and critical.”
This post originally appeared on LearnVest. It has been republished with permission.
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