Edit 27/10/21: See these posts 1 2 3 for the next steps in this project. The post below was originally published on 09/01/20.
At Founders Pledge, we are considering launching a long-term investment fund for our members. Contributions to this fund would by default be invested, potentially over centuries or millennia to come. Grants would only be made when there’s a strong case that a donation opportunity beats investment from a longtermist perspective.
This idea was prompted in large part by recent research in the EA community, most notably Phil Trammell’s initial work on patient philanthropy and Will MacAskill’s forum post and the ensuing discussion on outside-view longtermism.
We have just started this investigation, and don’t hold the views expressed below strongly. This post is mainly a call for input: we’d like to make the best possible use of the expertise and connections available in the larger EA community.
Why a long-term investment fund
In brief, we currently see three main potential ways in which investing to give later may be better than giving now:
- By exploiting the pure time preference in the market, i.e. that non-patient people are willing to sell the future (and especially the long-term future) cheaply
- By exploiting the risk premium in the market, to the extent that longtermist altruists should price risks differently to the market
- By giving us more time to learn and get better at identifying high-impact giving opportunities to benefit the long term
There are also considerations that may counter (partially or in full) these three benefits:
- We may be living at one of the most influential times in history
- There are risks of expropriation, e.g. existential catastrophes or legal changes
- There are risks of value or competency change in the wrong direction, e.g. governance ends up in the wrong hands or new moral and nonmoral insights are not incorporated
We have major uncertainty about all six factors, and intend to look into them further as part of this investigation. Assuming legal feasibility, we think it likely (>50%) that a well-governed long-term investment fund is among the highest-impact giving opportunities we currently know of from a longtermist perspective.
What the fund would (ideally) entail
Donations would be invested with the idea of growing the fund, potentially over centuries or even millennia to come. Money would only be deployed when there is a strong case that allocating to a funding opportunity is higher-impact from a longtermist perspective than keeping the money invested. This could happen, for instance, if our estimate of the expropriation rate rises greatly, legal and/or market changes make investing much less attractive, or we identify a truly extraordinary funding opportunity that we don’t expect to be filled by others.
We might decide to create a separate legal entity for the fund, to make it less dependent on what happens to Founders Pledge in the long term. If so, we’ll have to define a legally fixed objective. We think we should define this in pure moral terms to allow for strategic flexibility, e.g. it should not include anything about investing. It should also balance protection against value drift with flexibility to incorporate new moral insights. Our starting idea is “to provide maximum benefit to all sentient beings, regardless of where or when they exist”.
In addition to this fixed legal objective, we are thinking about the best way to structure the fund’s year-to-year governance. For instance, we could carefully select a board of trustees to guard the objective of the fund and update its strategy. They should embody the values of the fund and be strategically knowledgeable. This would allow a lot of the governance to remain adaptable: value and competency drift could be averted by good initial trustee choices and a solid process of succession.
If we launch this fund, we will recommend it to our longtermist members alongside our existent recommendations on existential risk reduction and forthcoming new longtermist recommendations. Some of our members have already expressed interest. We also expect this fund could be interesting for non-longtermist members who nonetheless want to allocate a fraction of their ‘giving portfolio’ to benefiting the longer term.
What type of input we would most value at this stage
In order of preference:
Connections or expertise on international trust, charity and investment law
Legal and tax considerations will have a major influence on how we could best set up this fund. If you have expertise in this area or could connect us to anyone who does, your help would be highly appreciated. Please reach out to firstname.lastname@example.org.
Criticisms of the idea and any of its premises
References to relevant papers / articles are also welcome. Please leave these in the comments.
Examples of similar funds
To learn more about e.g. risks of value drift, risks of expropriation and legal structures, we’re looking into case studies of similar funds, both active now and in the past. We are aware of the Wellcome Trust, the Mormon investment fund, the Nobel Foundation, the Islamic Waqfs, sovereign wealth funds, university trusts, and the Catholic Church. If you know of any other good examples or have useful sources on the above-mentioned ones, please let us know in the comments.
Creative ideas for optimal governance of the fund
Creative thoughts on naming and framing of the fund
Our current working title is ‘Legacy Fund’, but if you have any other ideas, feel free to suggest.
That would be great! I would really like to see this! Would likely be in my, or my top recommendation for donations.
You asked for other examples. The following two examples are certainly not the most relevant but they are interesting:
-- Benjamin Franklin, in his will, left £1,000 pounds each to the cities of Boston and Philadelphia, with the proviso that the money should be invested for 100 years, with 25 percent of the principal to be invested for a further 100 years. As a result, Boston wound up in 1990 with a fund of over $5 million, Philadelphia with $2.3 million.) [copy-pasted from a book review by Joseph Heathe in Ethics]
-- From Cliff Landesman's 1995 2-page-paper (http://bit.ly/2QETQ9Z) ): "I and a dozen or so nickel and dime philanthropists belong to the 2492 Club. We each contributed less than $25 to open a Giftrust mutual fund account (#25000044879) with Twentieth Century Investors. With luck, a millennium after Columbus landed in America, this account will pay out its accumulated value (expected to exceed the equivalent of 26 million in 1992 dollars) to Oxfam America, an organization that fights hunger in partnership with poor people around the world. Other altruistic gamblers who wish to join the 2492 Club, hoping to influence events centuries from now, and betting that current conditions will prevail for another 500 years, should contact the author or Oxfam America."
PS: In trying to remember where I found the quotes I came across the following two papers which pre-date the current EA discussion and I just post them here in case anyone who's interested in this stuff hasn't noted them: Dan Moller's 2006 paper "Should we let people starve -- for now?" (http://bit.ly/2TgJz5T) or Laura Valentini's 2011 paper "On the duty to withhold global aid now to save more lives in the future" (http://bit.ly/37TbxIG) .
Also of note is that he gave conditions on the investments; the money was to be lent to married men under 25 who had finished an apprenticeship, with two people willing to co-sign the loan for them. So in that regard it was something like a modern microlending program, instead of just trying to maximize returns for benefits in the future.
Thanks! These are useful examples.
Fantastic initiative! One potentially interesting approach could also be to invest in strongly EA aligned startups (pathogen detection, ai safety etc.). Basically like GoodVentures investments with a stronger focus on investing and donating much later.
Could also entail funding something like Jade Leung’ long-termist project incubator or something similar to a 100% EA aligned YCombinator or EntrepreneurFirst. This could become the go-to for EAs who want to start a for-profit venture but also want to enrich a fund that is completely aligned with their vision.
Basically a ea-aligned longtermist rolling fund that can make both for-profit investments and non-profit donations.
Some simple but possible consideration against patient philanthropy that comes to my mind are:
That's not to say that it seems not worthwhile to explore ways that one can profit from patience but I would personally prefer a term like "wise philanthropy" as a more appropriate goal that respects a more holistic perspective.
That sounds great! I find the arguments for giving (potentially much) later intriguing and underappreciated. (If I had to allocate a large amount of money myself, I'm not sure what I'd end up doing. But overall it seems good to me if there is at least the option to invest.) I'd be very excited for such a fund to exist - partly because I expect that setting it up and running it will provide a bunch of information on empirical questions relevant for deciding whether investing into such a fund beats giving now.
Some quick thoughts (most are probably obvious):
This comment is less well cited than my usual, but perhaps one of the ideas might spark some useful thought:
Unfortunately I cannot find the reference, but I seem to recall the Ford Foundation having suffered such severe value drift - far from what Henry Ford intended - that the family basically disowned it.
I have heard (though have not verified, so consider this very speculative) that there is a legal structure left over from the crusades (for protecting your castle while you were away in the holy land) that might be useful for cryonics - perhaps it might be of use here.
Maybe https://www.newyorker.com/magazine/2016/01/04/what-money-can-buy-profiles-larissa-macfarquhar ?
Getting the legal structure of this right will be as important as the financial structure. Getting a good trust lawyer to set it up is crucial.
I believe that there might be a counterargument somewhat along these lines.
1. Effective interventions will largely depend on investments in information/prestige goods because they will probably aim to steer the usage of much larger resources.
2. These kinds of investments are made in competition with other investments in information/prestige goods aiming to steer the usage of much larger resources.
3. The ratio between information/prestige goods and physical goods changed much during the last century. Information/prestige goods are a much larger portion of our production/consumption today than a hundred years ago. We might reasonably expect this trend to continue, at least globally, for the coming century.
To me these premises seem to lead to the conclusion that:
4. The invested funds must surpass general economic growth and reach general growth + change towards information/prestige goods in order to be better compete for steerage of larger resources in a hundred years time than now.
Stock market returns are larger than the economic growth rate, so it could still work? In fact, that could even speak in favor of investing?
Yes. But it moves the hurdle quite a bit I would guess.
The obvious approach would be to by-default invest in the stock market, (or maybe a leveraged ETF?), and only move money from that into other investments when they have higher EV.
This is a really interesting idea and I'm glad you are taking this up! Some considerations of the top of my head:
1. This set-up would probably not only 'take away' money that would otherwise have been donated directly. There is some percentage of 'extra' money this set-up would attract. So the discussion should not be solely decided by 'would the money be better spent investing or donated now?
2. There is probably a formal set-up for this (optimization) problem, and I think some economist or computer scientist would find it a worthwhile and publishable research question to work on. I'm sure there is related work somewhere, but I suppose the problem is somewhat new with the assumptions of 'full altruism', time-neutrality, and letting go of the fixed-resource assumption.
3. There is a difference between investing money for a) later opportunities that seem high-value that can be found by careful evaluation, and b) later opportunities that seem high-value and require a short-time frame to respond. I hope this fund would address both, and I think the case for b) might be stronger than for a). One option for a) would be a global catastrophic response fund. As far as I am aware, there is not a coordinated protocol to respond to global catastrophes or catastrophic crises, and the speed of funding can play a crucial role. A non-governmental fund would be much faster than trying to coordinate the international response. Furthermore, I think a) and b) play substantially different roles in the optimization problem.
Thanks Siebe. On (3) the fund as we currently see it would indeed attempt to address both (e.g. via evaluation on both that FP would also do otherwise), but it's a useful distinction to make.
I really like your idea of a GCR response fund-I was thinking about something similar (though did you mean it was in category b) not a)?). It seems that there could be quite a few EAs who think that contributing to AI is the highest priority, but if there were a global catastrophe, they might recognize that it could jeopardize all the work on AI and there are things we could do to make it go better.
These are excellent questions to ask. I’m more sceptical about the three main points than you.
In terms of “pure time preference”, the data shows that the real risk-free rate typically ranges from -1% to +2% and is below that range (i.e. less than -1%), so in the long-run it is minimal and in the short-term it is not there at all.
In terms of the “risk premium”, you can deduce (through a hypothetical portfolio of long S&P 500 forward, short US Treasury) that the risk premium is an argument for selling risk to those who are more risk-averse, but not an argument for waiting. In my post on it, I show how the risk premium is a price for selling risk, not a return on patience.
Finally, “more time to learn and get better” is only relevant if you are thinking about it from a personal rather than system lens. New technologies get cheaper over time only because humanity learns from doing. DVD players were very expensive when the first came out. They became cheaper because the world got better at making DVD Players. As volumes increased, so did scale economies. As manufacturers got experienced in the process, efficiency went up. As supply chains reconfigured to produce the relevant components, those components became cheaper. However, most of this would not have happened if DVD players had not been launched. The same has happened with distribution of mosquito nets and deworming. As EA charities have grown, they have got more experienced, learnt from mistakes and developed supply chains. The price has come down. If I had delayed my donations, I would have been able to buy more nets, but only because somebody else was paying more for them early on while the infrastructure was being built.
Here are a few ideas that come to mind.
It could be interesting to explore/offer funds with different distribution thresholds (for example, saving all funds for 100+ years out versus donating a small percentage every year or nearly every year while still letting assets compound) for donors that have different distribution preferences. Knowing your money will be used to better the world every year in the present while also compounding indefinitely into the future to help future generations may be appealing.
As an alternative to a fixed set of people governing the fund, it could be interesting to consider a model of collaborative democracy/liquid democracy in which donors influence fund decisions and distributions, with each donor's voting power done via equal weighting, donation weighting, or some other mechanism. Succession could be easily incorporated into such a system, with one's votes being distributed in an even or preference-weighted fashion to living donors/stakeholders.
Having the fund structured as a corporate entity could be an interesting possibility as well; it seems some corporations have lasted for over 1,000 years. It should also be possible to set up different legal entities in different countries for maximum continuity (which also easily supports donors from different countries).
The fund could have staff that explore impact investing, such as directly funding high-impact startups or impacting the direction of corporations (private equity, shareholder activism, etc), so that the assets can be used to do good even as they compound indefinitely.
Edit to include a recent EA Forum post I wrote: Having the long-term investment fund be hosted within a more generalized entity (ideally one that is controlled by or aligned with the fund management), such as a provider of donor-advised funds, might increase the chances of the fund surviving into the far future due to it having a lot more assets and also a lot more living stakeholders at every point in time.
That indeed sounds like a valuable idea to me.
Personally, my current best guess is that EA should move more in the direction of "patient philanthropy", and that it makes sense for most of my own giving to take that form, at least until research into and debate on that topic has progressed further. But I also quite like giving some amount now. So I'm continuing to give at 10% per year - as per my Giving What We Can pledge, which I took before learning about the arguments for patient philanthropy, but I think I'd like doing that anyway. And then I try to save and invest a lot beyond that, so that I can hopefully eventually do something like a "backdated" Further Pledge, in which I'll ultimately give as much as I earned from ~2019 onwards beyond ~15-30k USD per year.
Maybe this is actually the optimal strategy, for reasons such as giving each year helping me avoid value drift, or me having taken the pledge already and it being a good general principle to stick to one's promises (see also). But I think I'd like doing this even if it wasn't optimal.
So I imagine many other people would also find it appealing to have the option of getting to feel that they're doing good each year. And it seems plausible to me that making that option available, alongside arguments for mostly taking the "patient" approach, would actually increase the total funding allocated to the "patient" approach.
Thanks for sharing your thoughts! I think that making some fund distributions in the present also serves to demonstrate the decision making and grantmaking capabilities of the fund's grantmakers. Some donors might consider it an uncertainty to donate to a fund that has not made any grants for, say, three decades, whereas having the fund make microgrants or having a version of the fund that makes grants demonstrates that the fund has been and will continue to make a positive social impact.
The real hinge here is how much we should expect the future to be a continuation of the past and how much we update based on our best predictions. Given what we know about about existential risk and the likelihood that AI will dramatically change our economy, I don't think this idea makes sense in the current context.
I recently wrote about how altruistic investing differs from regular investing, with some ideas about how altruists might want to invest their money. It's just some preliminary ideas and it's targeted at retail investors, but most of it is relevant to your situation. It includes some ideas that I do not commonly see discussed in EA circles or in investing circles.
I think this fund is an intriguing idea. But I think there’s an argument that current market conditions would suggest deploying funds now rather than investing them. Interest rates are at extraordinarily low levels, which suggest lower than normal expected future returns not only for fixed income instruments but also other asset classes that compete for capital with fixed income. To put into context how low current rates are, a 2015 analysis found that “rates remain at the lowest levels in the last 5,000 years of civilization.” Since then, rates have gone even lower. As of August 2019, “About $15 trillion of government bonds worldwide, or 25% of the market, now trade at negative yields, according to Deutsche Bank.”
To be clear, I think this argument applies to the general class of “donate now vs. invest and donate later decisions” EAs make, not just the proposed longtermist fund (where it might apply less due to the especially long time horizons). But my impression is that EAs are often too quick to assume they can always achieve investment returns in line with historical long-term averages, when they should only expect to do so over very long time horizons or when starting valuations are also in line with historical long-term averages.
Of course, it’s also worth noting that the “valuations are currently high so on the margin EAs should give more now” argument could have been made several years ago, and those years have generally been good ones for asset prices…
1. Agree that equity valuations outside the US are much less extreme. But if you’re building a diversified portfolio, global fixed income and US equities are probably going to play a large part. So avoiding lower expected returns in those asset classes would require an element of active management, which I think raises the hurdle for this project significantly since active management is both expensive and hard to do well. Given the goals of this fund, I would think a passive Risk Parity strategy (which includes a lot of fixed income) would make a lot of sense.
2. Good point. I would still argue that if there’s an intention to deploy money when “market changes make investing much less attractive”, it makes sense to try and define those types of conditions ahead of time. And if you were going through that exercise a couple of hundred years ago, I’m pretty sure “widespread negative real yields” would have made the list.
I'm glad y'all are thinking about this.