I write this paper in response to some feedback I have gotten from others in the EA community regarding the length of my prior post. So here’s a shorter version. 


Please note that we are now using the term "Profit for Good" (here described as Guided Consumption). For the companies that direct all or the vast majority of profits to charities we refer to them as "Profit for Good Companies" or just "Profit for Goods" (here described as Guiding Companies).

TLDR: Businesses that are either owned 100% by or direct 100% of their profits to charities would have a competitive advantage over traditional companies that benefit shareholders. This is because charities are more popular than normal investors and there is no additional cost to being a charity as opposed to a normal investor. Thus, these businesses working for charities, which I call Guiding Companies, could offer goods and services at the same price and of the same quality as ordinary businesses. Consequently, the project of creating and making the public aware of these companies-working-for- charities is potentially very high-impact, because these companies could tap into the profits in the broader economy and generate billions of dollars for effective charities.

Charities as Profit Recipients of Businesses

In most contexts today, consumers, or buyers of goods and services, are mostly unaware, and/or given little care to, who is on the other side of the transactions they engage. If you buy some laundry detergent or cables for your phone, usually some company’s set of shareholders is gaining profit from your purchase. In any case, companies seldom advertise who is profiting on the seller side. Consequently, there is a dimension of difference in the global consumer economy on which almost no sellers compete:: the identity of the entities that benefit from your purchase, often, owners in some form. An attempt to compete on shareholder/owner identity could be very effective, given that there is no strong public sentiment in favor of company shareholders or the other existing stakeholders. This use of seller-identity to compete could be seen where a consumer has a friend that owns a business, such as a barbershop, and the consumer chooses her friend’s barbershop out of a desire to help her friend. In that case, the consumer would be choosing on the basis of where the profit would go, without necessarily sacrificing quality of haircut or paying more.

One set of entities that could potentially occupy that shareholder position would be various kinds of charities. This makes sense because people donate millions of dollars to Oxfam, for instance, but they do not donate any money to Amazon. Consequently, if a charity or charitable trust acquired a company (through a set of wealthy philanthropists funding the acquisition- perhaps through a leveraged buyout) and advertised this fact to the public- that  they could advance popular causes by buying through the firm owned by a charity instead of its competitors- it should enjoy an advantage. This effect could also be achieved by a company that explicitly directs all of its profit to charities.  I call this Guided Consumption because this situation would enable consumers to further their values by buying through specific firms that specifically communicate the identity of their owners. I call the companies that are either owned by charities or explicitly direct 100% of profit to charities Guiding Companies.

A few conditions would be needed in addition to Guiding Companies, such as systems that ensure that Guiding Companies are doing what they say that they are doing. Another condition is effective marketing to tell the public about Guided Consumption, where they can channel their purchases to advance a charitable cause. If you are interested in reading my descriptions of these conditions, feel free to check out Section II of my longer paper. But the main concern, in my view, would be whether or not the networks boosting Guided Consumption would be able to penetrate the public understanding such that consumers would adjust their behavior to favor Guiding Producers over normal producers. This level of public awareness, to be the most powerful, would likely require a social movement, although a Guiding Company would likely enjoy a degree of advantage correspondent with a Guiding Company being able to communicate this feature with its customer base.

I am optimistic about the prospects for a movement developing because of what it allows for consumers: they get the same product, at the same price, but profits benefit charities rather than shareholders. Essentially, it is a no-brainer from the consumer perspective. Unlike asking someone to sacrifice 10% of his/her income or radically change his/her diet, the consumer can do good without losing money or changing habits. I think that Guided Consumption, helping worthy causes through consumer awareness, is likely to have traction with thought leaders, celebrities, and others who can see that this could be a powerful tool to direct resources toward important causes. A movement that enables everyday people to help charities without sacrificing anything personally should be much easier than one that demands people give significant things up or even mildly inconveniences people.

Other Advantages for Guiding Companies

Vincent van der Holst, who is the founder of BOAS (basically a sustainable Amazon donating all profits to charities), opened my eyes to other advantages Guiding Companies would likely enjoy from other market participants. In his experience, he has been able to secure advisors to his company who work for free, despite charging hundreds of dollars an hour to other companies. He has also seen brands that he sells on his site offer higher commissions than they offer other companies, because BOAS benefits charities, not shareholders. Vincent has been able to secure higher discounts for advertising through influencers, and even some that would work for free. In short, market participants other than consumers are often willing to provide favorable treatment for worthy causes, either because they want to do good themselves, or because they want to be associated with Guiding Companies doing great work, like BOAS.

Which Market Sectors?

So, where would some sectors be that would be ideal for Guiding Companies? One way of approaching this that I think is helpful is thinking of creating the “no-brainer” for the consumer. This could make it sensible to introduce Guiding Companies to sectors where there is not much difference between products. Although there’s some degree of brand loyalty in most consumer sectors, people just may not see much of a difference between varying brands of toilet paper, ketchup, paper towels, etc. In low-differentiation sectors, it may be easier to construct a “no-brainer” where a consumer is genuinely ambivalent as to two products. Given this ambivalence, they can go with the brand that, for instance, helps prevent kids from contracting malaria. Conversely, in sectors where there are a lot of different ways that products are differentiated, other factors are likely to overwhelm the consideration of who gets the profit. For instance, if you are going to a restaurant, you’re likely going to be considering how much you like a restaurant’s offerings, the convenience of the location, the ambience, the quality of service, etc. It is hard, in such cases, to think that anything close to the “no brainer” could be constructed.

Another approach is to capitalize on virtue-signaling, perhaps through products that could enable a consumer to conspicuously show that they bought through a Guiding Company. Perhaps many people would be willing to pay a premium to show that they purchase in a way that benefits charitable causes. I think both approaches could be fruitful avenues for Guided Consumption and likely an exploration of both is warranted.

Which Benefiting Charities?

For this question, I think an EA should be looking for where there is alignment between causes that are very effective at doing good and causes that are popular with the general public. I think that charities dealing with Global Health and Development, such as those endorsed by GiveWell, would be a natural fit. I think that causes looking to improve animal welfare, even farmed animal welfare, may also be a good fit. It is worth considering some causes that may not be as effective as the EA community typically endorses, for the purpose of resonating with a broader section of the public, perhaps in addition to Global Health and Development and Animal Welfare. Of course, it would be incumbent on those advancing Guided Consumption to endeavor to advance the most effective charities in a given cause area.

Why Prioritize Guided Consumption?

IMPACT: As a group, the companies on the 2022 Global 2000 account for $47.6 trillion in revenues, $5.0 trillion in profits. EAs urge people to donate money to programs, for instance, endorsed by GiveWell, stating that the expected utility from donation to an effective charity is 100-1000x greater than that money’s use by most people in wealthy countries. I suspect the utility difference resulting from the diversion of money from the average shareholder in a company to an effective charity is likely even greater, as the distribution effect of investment tends to be regressive, enabling further accumulation to the wealthy. But even if you (for some reason) believed that shareholder wealth accumulation had 10x utility related to that of the average person to whom the argument to give 10% of income is directed, there is still a 10-100x greater utility from the diversion from normal stakeholders to effective charities. 

If Guided Consumption directs 1% of Global Economy Profits (through dividends or asset value  accumulation) to charities, in a world of $10 trillion in global profits, this is $100 billion dollars. If 15%, $1.5 trillion dollars. Furthermore, if EA is involved in ensuring that significant portions are going to effective charities, significant headway may be possible in cause areas where effectiveness and popularity overlap, especially given that much of the general public support for charities tends to not flow to the most cost-effective, impactful charities. Particularly noteworthy is that, in the United States, only 5% is donated internationally, though charities in the developing world usually are far more cost-effective. Even if the competitive effect of Guided Consumption is less potent than hoped, it still may be a powerful fundraising tool in some contexts.

TRACTABILITY: Significant research is needed to determine the degree to which consumers would switch to Guiding Producers over normal producers. This research and other empirical validation is cost-effective because it relies on modest assumptions. Essentially, the value of Guided Consumption holds if consumers have some preference for the funding of charities over traditional shareholders, we are capable of informing consumers of how to engage in Guided Consumption, and we are capable of creating the "no-brainer” situation, or otherwise obtain advantage through Guided Consumption, for consumers, in some contexts, which constitute a significant portion of our economies. The ask being made of consumers is extremely modest: buy the same stuff you would otherwise buy at the same price, but through a specified company. Essentially, we are asking consumers to favor helping the neediest in the world over the most wealthy. The rejection of this is confusion or psychopathy. This message, I believe, would not only resonate with the end consumers, but also with influencers, thought leaders, and others who are influential with consumers, because it is intuitively reasonable. One variable could be the amount of time that such a process might take, but even discounting for a long time period for consumer activation, the utility derived would be tremendous.

NEGLECTEDNESS: Although there are a few examples such as Newman’s Own and Girl Scout Cookies, where charities benefit from consumer activity, there is virtually no effort to deliberately weaponize the identity of the owner of businesses’ profit in a focused manner, let alone create a movement that could divert significant portions of our world economies to effective charities. Worth noting is that Newman’s Own has donated more than $570 million for charitable causes since 1982, indicating interest in the concept,  even though this feature of 100% of profits going to charities has not been aggressively advertised and many customers are not aware of this feature. One notable exception is that of Vincent Van der Holst, who created BOAS, an online store in the EU that directs 100% of its profits to charities. Another awesome example is Misericordias, which was created by a young man who read my longer essay and was inspired to create an online store selling clothing and other items, where 100% of profits are split between The Against Malaria Foundation and The Clean Air Task Force. Given the potential for good that could be done by having a significant portion of our economies going toward the most effective charities, it seems totally bizarre to me that more effort and resources are not being devoted to attempting to leverage consumer sentiment in our economies. Even with very high degrees of skepticism, the exploration of this cause area/potential tool is cost-justified. 

FAQ’s and Answers

Won’t Guiding Producers Increase Costs for Consumers? Structurally, there is no reason that a Guiding Producer would produce goods and services at a higher cost. A charitable investor or set of investors buying out a firm would not necessarily have to pay more than a private investor or set of investors. There may be some cost to advertising a firm’s status as a Guiding Producer for a charity, but firms in general have costs of advertising. The inference of a cost increase may be under an assumption of a firm with normal stakeholders/shareholders that elects to give a percent of proceeds to charity. Such a firm would likely have to increase costs to cover this donation. Indeed, Vincent van der Holst, founder of BOAS, has indicated that Employees/Influencers/PR/Consultancy are willing to work for less for Guiding Companies. Vincent has also noted negotiating advantage when dealing with brands, given that they often benefit from being associated with a Guiding Company. Given the advantages Guiding Companies could enjoy, one might even expect a Guiding Company operating with the advantages of economies of scale to offer lower prices than competitors.

 One caveat is that, in many contexts, the firms that can compete best on price enjoy economies of scale. Consequently, given that initial forays into Guided Consumption may not have the millions or billions of dollars to create companies that can exploit economies of scale, a consumer may have to pay a slight premium for goods from early Guiding Producers. Fortunately, the success of such firms should indicate with even greater strength that Guiding Producers would compete if able to compete at economies of scale, thus warranting further philanthropic investment.

What if selfish motivations make for the best founders/investors/etc.? The efforts of philanthropic investors are capable of being strategically deployed, meaning that they can enter sectors with stable competitive equilibria and capitalize on consumer sentiment. Founders, venture capitalists, and angel investors can create value by disrupting various industries out of a desire to enrich themselves, and this is wholly compatible with philanthropic investors entering at different points of the business cycle. If circumstances were correct, it may make sense to start a new firm. But the lack of a monopoly on brilliant talent would not prevent the tactical entry of different sectors by philanthropic investors.

Competitive firms often need to reinvest rather than make cash profit distributions to shareholders; would this be acceptable for a Guiding Producer?  Firstly, some firms would be conducive to a dividend-structure. Secondly, when firms reinvest, this tends to increase the value of the ownership stakes of the business. This value appreciation (and, indeed, principal amount of the asset) can be converted to cash in various ways, such as debt to be serviced by later infusions from the Guiding Producer. There further could be a small percentage of the Guiding Producer, say 5-10% that could be privately held, which could later be absorbed in stock buybacks. Essentially, this question is a question of corporate finance that should ultimately be resolvable.

Won’t there be moral objections to activities that normal businesses use to compete, such as extreme executive compensation, environmental effect, low worker pay? This is a tricky question, but for one, it is not clear to me that bad behavior is necessarily the most effective business strategy, and firms may enjoy a premium for avoiding acting poorly. But even if Guiding Companies engage in activities that consumers take issue with regarding traditional firms, such as competitive (i.e., princely) compensation for CEOs, it is not clear why this would cause a consumer to choose a company that enriches shareholder over a company that helps fight global poverty. People all over the world choose the “lesser of two evils” in the political contexts routinely.

Why hasn’t such a movement for something like Guided Consumption happened already? Because Guiding Companies, by definition, generate profit for charities instead of traditional investors, a major issue they face is that Guiding Companies cannot access the same investment pool of private equity and angel investors for seed money. One solution to this would be to seek financing from philanthropists, particularly those who are looking to spend their money to advance the same cause area as the Guiding Company. However, the question remains: if Guided Consumption is a more effective means of funding charities than direct donation, why has this not been more fully explored already?   I suspect that the reason stems from a deep-seated psychological separation between the way that people think about the business world, essentially a rather competitive, dog-eat-dog mindset and the kinder, more magnanimous mindset involved in charity work. The notion also seems to violate intuitions about sacrifice involved in charitable contributions, although these intuitions do not hold with the deliberate substitution of traditional stakeholders for charities. I would also note that some further red-teaming can be found in the comments of the longer paper.

Are there other possible advantages Guided Consumption might enjoy? Why thank you- nice not to be raked over the coals for a minute! Yes! Employees may be attracted to work for Guiding Companies because many employees find it important to work for companies that do good, This allows for competitive advantages in hiring and morale. Guiding Companies may get discounts due to their worthy mission enabling lower prices than competitors. There may be some tax advantages. Potentially, Guiding Companies could enable greater consumer choice in charities. Advertising from organizations such as the Consumer Power Initiative which promote Guided Consumption could help Guiding Companies spend less on advertising individually, lowering costs vis-à-vis competitors.


Guiding Companies should enjoy an advantage over normal companies because they serve a more popular master - charities- than normal companies - rich shareholders, thus enabling consumers to benefit popular and worthy causes through normal purchases. This advantage is not balanced by other factors, and thus Guiding Companies, once created and known by consumers, should expand throughout market sectors and deliver profits to charities many multiples of costs incurred in their creation. Critical to note in considering attention/funding Guided Consumption is not just the initial funds generated for effective charities, but also the move towards an economy where profits are enjoyed not just by the already wealthy, but by effective charities.

I’m Convinced: How Can I Help?

First things first, if you think this idea has potential, please share it with 3 people. If you don’t think it has potential, please share why you think so in the comments so we can improve or learn and address your concerns. I have started a nonprofit called the Consumer Power Initiative, with the purpose of promoting Guided Consumption. I could use insights from all kinds of people wanting to share thoughts about directions the Consumer Power Initiative could go. I could use advice and guidance from those who have worked in the profit or nonprofit spaces. I could use technical assistance, such as people who have worked on websites, especially Shopify or other ecommerce experience. I could not begin to think of all the different categories of insight which might be useful to this project. Finally, I could use funding, although I will defer this request until 501(c)(3) status has been finalized.

My email: brad@consumerpowerinitiative.org

Consumer Power Initiative website: https://www.consumerpowerinitiative.org/

Longer paper: https://forum.effectivealtruism.org/posts/4j7CsFvG2ADsj33FD/guided-consumption-funding-charities-by-leveraging-consumer

BOAS:  https://boas.co/

Misercordia: https://misercordia.square.site/



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70 comments, sorted by Click to highlight new comments since: Today at 7:31 PM

"Won’t there be moral objections to activities that normal businesses use to compete, such as extreme executive compensation, environmental effect, low worker pay?" - This would be my main concern about the idea. While I agree that bad behavior is not the most effective business strategy, there are a lot of behaviors that I would consider sensible (e.g. paying a CEO 6-figures, making redundancies, putting prices up when there's lot of inflation) but that many people would consider wrong (particularly in Europe). People can be very funny about capitalism. For example, many people prefer to buy from small, local companies rather than national companies, even when those national companies are cheaper and operated very morally. I suspect most consumers would choose a friendly privately-owned company over a ruthless charity-owned company. Bill Gates was an incredible philanthropist but people didn't flock to use Microsoft for that reason. Let's not even talk about Soros and his public image. I think at the end of the day you are overestimating how much difference it would make to consumers (most of whom would probably be unaware of the distinction without an expensive advertising campaign) and underestimating how easy it is to suddenly own a major corporation without paying a premium (either for a buyout or new entrant) to get there.

7Vincent van der Holst9mo
My background is in marketing and this is one of my major concerns as well. People don't behave and buy rationally, and don't accept perfectly rational actions from companies who are "good". We're not sure how people will react to a billion dollar guided company who has a CEO who earns 10 million or that pays workers an unfair wage. But I do believe that if that company is open about why they operate the way they do, and they market the impact from their giving, this will still be an advantage. The company might pay its CEO 10 million, but it donated 1 billion this year to effective charities and that saved 100.000 lives. If you focus on the incredible impact that company has I think the overall value of marketing your charitable giving is positive, even if it is small. We know from Newman's Own that 6 figure pay and increasing prices with inflation are accepted by the general public, so I don't actually think those are issues. FYI I am from Europe.  The good thing is that even if this makes a small difference to consumers (we agree on that) there's no reason this won't work with effective marketing and infrastructure to fund these companies, although that's far from easy. If a guided company has even a 0.1% advantage to their competition this advantage will compound and the company is "winning" slightly more and the extra profit would be worth the investment from philanthropists. Brad explains this really clearly: "So, if we define the value of a firm with a normal shareholder set as F(k), I would posit that the relationship between the value of F(c), a firm owned 100% by a popular charity, is that F(c) > F(k). It seems to me that F(c) = F(k) + P, where P is the monetary value of the advantages attaching to the popularity of charities with economic participants  vis a vis the popularity of normal investors with market participants." Even if P is low, and we argue it might, this company would still outperform the competition. As was discussed before, P is not onl
4Brad West9mo
Bad behavior (or behavior irrationally perceived to be bad) from Guiding Companies: This is why one of the functions of the Consumer Power Initiative will be to do broad-based marketing for Guided Consumption [https://forum.effectivealtruism.org/posts/WMiGwDoqEyswaE6hN/?commentId=vH9ahP6ubA3zf2TxR], so that consumers can be aware of their power to do good.  Imagine a campaign that focused on how much profits the average person generates from their average consumer behavior- maybe $12,000. And we show how if someone was able to get $4,000 of that to some charities, they could  save a child's life. "Don't you want to buy in a way that lets you save people's lives rather than make rich people richer?" As for consumer response to different activities by companies, the beauty is that charitable investors and other actors will be able to direct their activity in the ways that make sense in response to research and thought This is why one of the functions of the Consume Power Initiative is research. [https://forum.effectivealtruism.org/posts/WMiGwDoqEyswaE6hN/?commentId=vH9ahP6ubA3zf2TxR] The (lack of) Bill Gates or George Soros factor: One thing is that consumers may not be aware of the intentions of an EA profit-beneficiary or they may not be able to trust them to act consistently to it.  Another thing is that consumers may feel more of a direct impact from a purchase where the profits go directly to a charity they value instead of by buying from a company and hoping that the profit-recipients will act beneficently. You as a consumer get to take credit for the moral act in a way that you don't... It is more like the profit-recipient philanthropist gets all the moral credit. "At the end of the day you are overestimating how much difference it would make to consumers who are not aware of the distinction without an expensive advertising campaign" This is why, as mentioned above, one of the functions of the Consumer Power Initiative will be broad-based marketing, suc

I just skimmed. I like the idea. That plausibly only works for sufficiently memetically fit charities (which varies based on the product/service), but that's probably still a significant number.

If this is thesis is true, then it means donors (of charity that have companies with a consumer based that is memetically fit for that charity) should buy companies and transform them into Profit for Good (at least assuming they're able to hire a good CEO, and maybe providing other incentive-based pay for the CEO if they don't have shares), because this would increa... (read more)

2Brad West3mo
Hi Mati. Thanks for your thoughts. I would push back a bit on your notion that it would only work with memetic matching. Especially if the PFG model were to take off, it may be pretty cheap and effective to signal that a company works for charities instead of shareholders. For instance, one of our thoughts with the Consumer Power Initiative is that PFGs could use a color-variant of our logo to signify a category of charity (maybe red for Global Health and Development, yellow for animal welfare, green for fighting environmental degradation). Essentially though, helping any of those causes, if you're not paying more, or otherwise sacrificing, should give you an edge regardless of whether there's a thematic match. I also do not know about PFGs acting as charities themselves... I think charities in most places are limited in the degree to which they can participate in the economy this way... But in any case, a company with charities in the equity position can do most of what others can do. This is why I think this model will take off eventually. I just hope EA takes advantage of the model so that effective charities enjoy the fruits of our economies. Thank you for adding this to those sources. I will take a look at the other entries!
yeah, could be a nonprofit but probably not a charity

Another example of this is Humanitix [website / wikipedia], a ticketing service like EventBrite.

I've been thinking about the Guided Consumption model as Choice Charity. Do good simply by choosing a different provider—no donations required. 

With Global Income Coin we are following this model as well, except with a currency rather than a product or service.

3Vincent van der Holst9mo
Humanitix is a great example, turning something super annoying into good! I will try and reach out to the founders to learn from their lessons.  And don't get me started on GIC, what a concept! I have subscribed to your newsletter and will follow it closely. Great to see more people interested in this model. I might reach out to you as well to learn from what you've learned!
1Brad West9mo
Just got a chance to read the Global Income Coin and the project of generating a global UBI through seignorage sounds promising and interesting. I'm looking forward to the Zoom call next week and looking for opportunities to potentially work together.

Hey Brad! I love the idea. I’m late to this comment section and many of my initial reactions were discussed at length. That being said here are a few ideas/questions which haven’t gotten much attention:

  1. You say that very few companies explicitly mention who benefits from their profits, but I think this is changing. More and more products state that their parent companies are woman-owned or Black-owned, etc.. I wonder if there is research about whether this sort of marketing actually drives sales. Regardless, the ubiquity of this sort of marketing is further
... (read more)

A lot of the critique that we get is that we can't be sure this works because we haven't done enough research or can provide data to show that this works. That's great critique and this post addresses both.


We commissioned research (a Master's Thesis that was just successfully defended) on the economic sustainability of philanthropic enterprises (i.e. guiding companies) that donate all profits. Please note the research was completely independent but we did pay the researcher for their time. 

Here is the main conclusion of the paper (I enco... (read more)

Hi Brad!

A friend of mine sent this to me and I'm interested in hearing how you see this playing out in practice. I want to start by saying I think this is a great idea, but I don't think it would work much better than current structures. My bias here is that I'm very anti-capitalist and see profit as one of the driving forces behind our current economic state of disarray. So I'm interested to know how you came to some of the statements you did, as my experience working for a for-profit company would suggest you're incorrect in some of your assumptions.

Prem... (read more)

6Brad West9mo
Hi Jo!  I am very grateful and delighted with your serious and thoughtful engagement with my thoughts. Firstly, I would note that Guided Consumption is not a panacea.  A world of Guiding Producers/Companies could still be one in which structural relations between labor and capital result in workers not getting their due. It is unlikely that all corporate behavior of Guiding Producers would be totally unimpeachable. However, although Guided Consumption does not solve every problem, it tends to direct the fruits of economies from the least needy (wealthy shareholders who have the capability to own components of the means of production) to the most needy (beneficiaries of charities such as the global poor or potentially the billions of animals that are tortured through the factory farming process). In my view, allowing the perfect to be the enemy of the good, thus choosing not to explore the possibilities that Guided Consumption may allow, is dreadfully mistaken. That being said, even in a world where Guiding Producers/Companies that serve excellent and effective charities, there are likely going to be other political and social projects  to engage in to work for an even more just and happy world!  You appear to have two premises, one unbolded, another bolded. Your unbolded premise, that Guided Consumption does not solve every injustice in our economy, is one I agree with, as noted above. As for your bolded premise, I would disagree because your claim is too strong. You contend that “I don’t believe that this factor alone is a deciding business advantage over another business with similar products. It would be one factor of many at best.” A business advantage, like advantage in other competitive contexts, has the potential to be decisive depending on the other factors involved. Certainly, there are contexts in which profit destination is less likely to be effectuate a large market advantage; I used a restaurant as an example where profit destination will often be lo
3Vincent van der Holst9mo
Hi Jo, We agree that profit has contributed to many of the problems that we face. We also agree that profit for non-profits is one factor among many, but I disagree that this is always a small factor. I believe it's a small factor in some businesses (e.g. the restaurant example, where you're going to go with the best marketed, top-reviewed and most tasty option) and a bigger factor in other business (e.g. buying from an insurance broker, where two dozen brokers are all selling an identical product and one donated all profits to charities).  But let's assume it is a really small factor and suppose two identical companies (an online marketplace), where one is purely for-profit, and the other donates profit to charities, start. These companies need one billion in funding to generate 10 billion in future profits. The for-profit company gets the billion from VC because the expected value is 10 times the investment. In the current state of the world, the company directing profits to charities doesn't get the one billion because there is no VC like EA infrastructure to fund it. But if such a structure existed (e.g. SBF donating/investing the billion), the company directing profits to charities would be able to take off and donate 10 billion to charities over its lifetime. Again, both of these companies are identical, and let's assume they have a 1000 differentiating factors, only one of them being the profit destination. With all things being equal, the company who has 1001 differentiating factors would win. You're right that the reality is much more complex, and you're right in saying: "It is not safe to assume that because a business purchases, manufactures, and distributes the same or similar goods, their up-front cost is the same and therefore the cost to the consumer is virtually the same." But these are factors that are relevant to both for-profit companies and guiding companies. Statistically, if you start the above company a 1000 times you would have 1000 differe

A few questions:

  • "creating the “no-brainer” for the consumer. This could make it sensible to introduce Guiding Companies to sectors where there is not much difference between products." - if there is low brand differentiation, wouldn't that lead to commoditised products and lower margins? Which makes the guiding company less incentive for nonprofits/philanthropists to invest in as a way of making returns that they can use for their priorities? 
    • Similarly, more commoditised products tend to create more conglomeration to take advantage of economies of sca
... (read more)

Hi Madhav,

Thank you for your thoughts.

On the commodity issue: the reason that it is hard for firms to get an advantage in the commodity business is because no market actor can offer a better product at a better price than any other market actor. Now imagine, in a commodity space that one market actor was able to produce a more valuable product without incurring additional costs. This market actor would tend to monopolize that commodity market, provided that other market actors could not secure the same advantage. This is the situation that Guiding Companies are in because costs are no higher for them, yet they have an advantage with other market participants, including consumers. I am positing, and believe strongly that research will substantiate this, that consumers will value profit destination at a nonzero level. In the commodity space, this advantage should be decisive. In sectors with more differentiation, it is less likely to be decisive.

Your commodities of scale point definitely makes sense. It will be difficult to compete without hundreds of millions or billions of dollars. This is why research and working on educating the public is critical to satisfy charitable investors ... (read more)

6Madhav Malhotra9mo
I appreciate your detailed followup! "I am positing, and believe strongly that research will substantiate this, that consumers will value profit destination at a nonzero level." * I intuitively can see why you say this. "In the commodity space, this advantage should be decisive. In sectors with more differentiation, it is less likely to be decisive." * That said, could it be possible that the higher margins in sectors with more differentiation are worth gaining only a fraction of customer purchases instead of (nearly) all of them? Ie. Do we want to maximise volume sold x profit per unit or volume sold only? * On an individual organisation level, I've seen plenty of case studies [https://www.notion.so/madhav-malhotra/5b2c992f9e404ff2a9060b49aedb80e5?v=34d4802516b54cbb998985b1da9787eb] of nonprofits using cross-subsidisation to reduce reliance on donations/grants. One notable example that comes to mind is Me to We's model of selling Rafiki bracelets [https://www.rafikibracelets.org/] (bracelets being a product with lots of differentiation and very high margins) "Your commodities of scale point definitely makes sense. It will be difficult to compete without hundreds of millions or billions of dollars. This is why research and working on educating the public is critical to satisfy charitable investors that the targeted creation/acquisition of companies that serve effective charities is best use of their resources." * Large companies tend to be very complex to manage and have their own disadvantages to scale.  * How would investing in large guiding companies compare to, say, charities investing in a VC fund of startups? Or investing in institutional options like a bond and getting steady returns?  * Ie. Some charities already invest in profitable companies via various means. What leads you to conclude that investing in guiding companies is a better alternative to these existing investments?
5Brad West9mo
(I just got my  501(c)(3) letter from the IRS so I am super excited!) Thank you for the continuation of excellent points and questions!   You may be dead-on regarding the question of dimensions of product differentiation. Even though competitive advantage may be most powerful when there are the fewest dimensions, this may not correspond with the highest profit opportunity for Guiding Companies.  Perhaps entering a moderately variegated market sector would allow for sufficient market-share capture such that it would be more profitable to enter such a market sector than it would be to enjoy a (near) monopoly in a lower margin sector with fewer factors of differentiation. The key would be entry of Guiding Companies into sectors  where there exists enough product similarity that profit destination would have the potential to be a decisive factor for a significant portion of consumers who are aware of profit destination. I am imagining an area like laundry detergent, where there is substantial similarity  between rival brands, even though there are ingredient differences that make for marginal differences in product features. This is why I am interested in engaging very bright, driven, and aligned people to work with the Consumer Power Initiative. We can construct experiments and otherwise come to determinations  about what industries profit destination is likeliest to provide the greatest potential for charitable profit. I think an analogy here would be sports where one participant has an advantage in one dimension, such as running faster. In terms of securing an advantage, such a participant would have a maximal advantage - a perfectly decisive one- in a hundred-meter-dash. In a contest like basketball, where one's running speed would confer an advantage, but could be overcome by other factors, the faster runner would have an edge, but perhaps only a probabilistic advantage. However, if the prizes for winning basketball games was sufficiently larger than the prizes
4Madhav Malhotra9mo
I'll continue adding on here, just in case the public discussion helps anyone else too :-) Glad to see the milestone on the 501(c)(3)! I could imagine that it's easy to just stick to academia, so good on you for bringing the ideas to more practical/uncertain grounds.  RE: "We can construct experiments and otherwise come to determinations  about what industries profit destination is likeliest to provide the greatest potential for charitable profit." * Agreed on your points here. Which metrics do you think are useful to decide which industries guiding companies make sense for?  * One idea is that we could research willingness-to-pay-premium on organic or fairtrade products. As a proxy for how much consumers are willing to switch their buying choices based on non-price determinants. Though there are differences (ex: a guiding company's product may/may not have a premium relative to competitors). * Another idea is price elasticity of demand. My hypothesis is that inelastic products could be seen as a proxy of staples that people won't go without. Ex: "If I'm going to buy baby formula anyways, I might as well buy it from the option that does more good?" * Curious to hear your ideas :-) RE:  "The tendency of large companies to have complexity and disadvantages  is one shared by traditional firms that work for the benefit of rich shareholders." * Agreed. I was more so comparing guiding companies' complexity to nonprofits investing in smaller companies (like with the VC fund).  RE: "One of the most important functions of the Consumer Power Initiative will be to maximize the value of P, in [value(charity_funded) = value(investor_funded) + P]" * What are your ideas on how to maximise the value of P? * So far, we've already seen lots of 'certifications' for various products (ex: fairtrade, non-GMO, organic, etc.). They've had various challenges in 'doing good.' Though if we focus on just their ability to increase the value of t
4Brad West9mo
One thing that I hope will be a bit clarifying is an outline from a previous call with Vin in which I outlined some of the functions of the Consumer Power Initiative. I have posted it in another comment. [https://forum.effectivealtruism.org/posts/WMiGwDoqEyswaE6hN/?commentId=EdenNZTgtHkCKAjwb] What metrics do you think are useful to decide which industries guiding companies make (most) sense for? 1. I think research on the willingness-to-pay-premium in contexts in which there is data, such as organic or fairtrade products would be a good place to start. Another way to test willingness-to-pay-premium is by launching low-cost Guiding Producers in a variety of sectors. One idea I have had was to launch a Dropshipping store that sells gaming peripherals, such as headphones that works in conjunction with streamers/online influencers. An advantage of this sector is that positive discrimination by another market participant, streamers/influencers, could be extremely powerful in addition to positive discrimination by consumers. Because I have very little ecommerce/website development experience, I am very eager to find partners that could help launch low-cost Guiding Producers (forgive me if I sometimes refer to them as Producers rather than Companies, the broader category would be Producers), not only to generate money for worthy charities and boost Guided Consumption generally, but also to test what sectors are most responsive to charitable profit destination. 2. Price inelastic products may be a good sector for GC because of their side benefit of broadly exposing the public to the idea of GC. This is part of what I am going to try to achieve when I launch the Giving Store, offer a wider degree of offerings to the general public so that a wider degree of people can become part of the project: buying stuff they were going to anyway. 3. Another area to research is one that you referenced earlie
5Vincent van der Holst9mo
I really enjoyed reading your dialogue and wanted to jump in with some more thoughts.  If you look at companies ranked by market cap [https://companiesmarketcap.com/] (an easy way to estimate the overall profitability potential of companies). You'll find commodities/monopolies (oil, Google) and more differentiated companies (apple), so it seems that for overall profit potential both avenues could work.  "What leads you to conclude that investing in guiding companies is a better alternative to these existing investments?" I agree that the main factor is what Brad has already mentioned: it's a structural advantage and it cannot be replicated by competitors who are for-profit (investors love companies that have something that can't be replicated!). In addition, I think that funding guiding companies are a more direct and impactful path to impact. If you invest in guiding companies, you're investing in a company that donates directly, and you can influence the path of that company to more impact (rather than profit) and the founders and employees might be persuaded to become EA's and sign the founders pledge. Additionally, showing that guiding companies can work might slowly start to shift the broader economy to guided consumption, and with the economy having trillions and trillions of dollars in profit each year this could make more than just a dent in some very important problems.  "Agreed on your points here. Which metrics do you think are useful to decide which industries guiding companies make sense for? " In addition to your metrics I would look at the competitiveness of markets. It's very hard to enter monopolized markets such as search engines. Is it a market where we can build a competitive offering?  If we believe that it will be continue to be hard to get funding for guiding companies, it might make sense to start with businesses that are easy and cheap to start, thus requiring less capital. Dropshipping is a good example.  I believe that price is a mo
3Glen Edward9mo
"The most important factors considering where people donate are proximity (favoring local donations) and how close it is to their heart" I agree these are important factors in how people like me often chose a charity but an equal or greater factor is having a sense of confidence that the Guiding Company and the charities it's owned by are not only legit but also effective. In these days where so many people have reduced trust in just about everything, I think it's critical for some trusted means for "certification" of effectiveness and integrity to be in place, much as Brad describes in his full length post  (i.e. “NCCOs”).  It's sad but there is a lot of skepticism out there today which keeps some people on the sidelines especially with lesser known charities.
2Brad West9mo
Yeah. People in EA are confident in the effectiveness of charities such as those endorsed by Givewell, but the general public is likely to be more skeptical. Especially with declining public confidence in institutions that has been prevalent... This is why I think negative advertising could be effective... Maybe the public doesn't know whether The Malaria Consortium spends their money well, but they probably don't want to make rich elites even richer.
1Vincent van der Holst8mo
Although that would be great, from all of the research I read about donations, it doesn't seem that effectiveness is a big factor for consumers. I do think a certification for effectiveness could help, but based on the data I'm pessimistic how much it would add compared to marketing your charity effectively. 
3Madhav Malhotra9mo
Useful perspectives! If you were inclined to write a followup post with some of the data you've seen thus far at BOAS, I think it'd help with establishing credibility for CPI :-) RE: "I am inclined to think that few, or even one, charitable profit destination would be appealing to consumers." I can see how both of you reached your conclusions. Empirical data would be the best solution :-)
4Vincent van der Holst9mo
Yeah we can definitely do that. We have a research paper coming out on Monday with loads of references and data and the research is independent (but sponsored by BOAS). Will post it here once it comes out.  You can already look at our pitch [https://drive.google.com/file/d/1T3RPaYxkbyRy6hWwHJ5Z64acV3LYVgfS/view?usp=sharing] for investors/philanthropists which has some data points from ads and talking to more than 100 user and 50 brands. We always encourage feedback so feel free to reply.  
3Vincent van der Holst8mo
Please note that my latest comment includes the research paper with additional data. Looking forward to receiving more feedback. 
1Brad West9mo
The Giving Store allows for a natural experiment contra BOAS. Of course, there will be a lot of potentially confounding factors, but still good information.
3Madhav Malhotra9mo
RE: Making  a Dropshipping site I have web development experience. If you have clear goals/a 'why' behind making the site, I can get it done for you for free. Feel free to message when you get to that stage :-) RE: Inelastic Products + general customer exposure Good point, I hadn't thought of this :-) RE: "One of the functions of the Consumer Power Initiative is to create a mass social movement questioning why..." I'd be eager to hear your marketing plans when you have more specific information. Maybe Development Media International [https://www.developmentmedia.net/] would know EA-aligned marketers who'd be willing to help out?  RE: "Guided Consumption seems to be unique in that popular shareholder identity does not have an attendant cost (vis a vis other investors)." Lots of social justice charities have tried to market black owned businesses / businesses started by former felons. Ex: Inmates to Entrepreneurs [https://inmatestoentrepreneurs.org/].  Have you looked into how scalable / effective their 'P-value' is? Do you think it'd help to talk to them to learn what has/hasn't worked well for them?  RE: "The value proposition that CPI and Guiding Producers offer consumers and other economic participants is pretty singular and clear: significantly further worthy causes by going through me. " This may be true when customers choose you from a directory with exactly the right information. It's less true on a Google Search page. Less true still on an industrial product datasheet. Less true still on a supermarket aisle.  What I'm saying is that the context (channel) by which consumers buy the products of guiding companies will influence the value proposition(s) they see for those products vs. competitors' products. And given how much information is sometimes thrown at consumers, the decisions they make on average might be surpising to you or me. 
2Brad West9mo
Dropshipping Site:  That's awesome! I will get back to you shortly, probably in a week or so, with a more fully-fledged value proposal and details regarding The Giving Store. But The Giving Store will serve many purposes:  (1) it will be a concrete example of Guided Consumption in the United States, with a wider variety of products that will enable a broad range of people to be able to do good by buying cool and helpful items, this I think will help market the idea of Guided Consumption to the general public more accessibly than an essay for many. (2)  It will provide data regarding Guided Consumption for the Consumer Power Initiative- and potentially a proof-of-concept for others (3)  It will generate funds for an effective charity- I have one  in mind now, but I am still thinking it over. Marketing Plans:  I am still developing marketing plans, and  the resources that you mentioned of Development Media International and Inmates to Entrepreneurs are definitely two groups that may have some very valuable input. Some ideas that I have had on marketing:  (1) Developing the Consumer Power Initiative website as a hub where people can be directed to a variety of affiliated Guiding Producers and learn more about Guided Consumption. (2) Coming up with a simple, fun video for YouTube that goes into the microeconomics of consumer/producer surplus and presents the possibility of using consumer power through Guided Consumption to benefit charities instead of rich people. I had thought of a video similar in style and humor to this [https://www.youtube.com/watch?v=rStL7niR7gs] . (3)  Trying to engage influencers/streamers to potentially become ambassadors for Guided Consumption and let their audiences know about it, as well as some cool Guiding Producers that they can buy from. (4) Potentially engaging a variety of musician Guiding Producers who can release musical albums online where 100% of the money generated will go to an effective charity. (5) Vin and EA Forum us
5Vincent van der Holst9mo
Traditional companies are also scrutinized for their strategies, investments and donations by their shareholders, which I believe to be a good thing because it improves business and holds people and companies accountable.  Personally I wouldn't start a guiding company that isn't ethical (e.g. bad for the environment, known for underpaying, prohibiting unions, sweatshops, etc.) because I believe the profit has to be made in a good way, but that's my personal view. Rationally, it would be better for oil companies to be guiding companies, where the profits would offset some of the harm they cause.  I believe that guiding companies need a similar investment infrastructure as traditional companies and I agree that more than one philanthropist would invest. These guiding VC's would invest in the guiding companies who have the best shot at generating a large return on donation (ROD). In principle it's exactly the same as traditional VC, who also invest in whatever they believe to have the highest ROI. 

Many large companies are owned by non-profit foundations. There's also evidence that they do outperform, but I suspect that is because they have better governance and a longer-term perspective, rather than because consumers choose them for their credentials.

See https://blogs.lse.ac.uk/netuf/2018/09/06/the-performance-of-foundation-owned-firms/

4Brad West9mo
There also has not been a particularly concerted effort to massively market this ownership.  For instance, I have never heard of negative advertising against competitors, which I imagine could be really powerful. "Buy from our competitors and you make some rich person a bit richer; buy from us and you help save lives." Foundation or charitable ownership has always been incident. CPI is working to make profit destination a salient feature in consumer choice- perhaps other factors will warrant the choice of a normal company, but the possibility of doing good is at least in the mix.  Also, the fact of outperformance by existing Guiding Companies at least suggests that it might serve as an advantage, even if this fact is not emphasized.
3Vincent van der Holst9mo
FYI Negative advertising against competition can be powerful but you have to tread lightly (at least in the EU) for legal issues. I have talked to laywers about this and you can be sued if you say the wrong things and even factual negative advertising (e.g. we're X% cheaper than our competitor Y) has strict rules for what you can and cannot say. 

"If Guided Consumption directs 1% of Global Economy Profits" - I'm not quite sure I understand the mechanism to get to this state of the world. Would this essentially require the EA community to buy 1% of the global market? Or are you suggesting we build a whole load of new companies? That is almost impossible in most mature markets unless there is some sort of disruption.

3Brad West9mo
I am suggesting that strategic investment by EA or other philanthropic investors to create Guiding Companies/other Guiding Producers will allow for a huge profitable return. For instance, in life insurance sales, there is little to differentiate salespeople  within an agency (they are all selling  the same products at the same costs), but they could make millions of dollars and capture a huge portion of the market for life insurance sales if they advertised that their commission would go 100% to charity. Paying 400 life insurance salespeople $120k/year, distributing them across states and agencies, would cost $75mil/year, but they could potentially  capture a significant portion of the market with a viral campaign (why not save the world while protecting your family?). And compensation of $200k/year is sufficient that we could capture talented salespeople and pay them more than what they had otherwise made. So if they generate $2 .5 billion in sales, that is 33x ROI.  The reason that this could be so effective in sales commissions contexts is that there is almost nothing to differentiate salespeople (they are all selling the same stuff) and there are people that already want the product, so it makes sense for those consumers to buy the exact same stuff in a way that benefits a charity. So, I am suggesting that strategically deployed charitable investment in conjunction with a broad-based marketing campaign could enable outsize market capture from a small investment. Also see my response here [https://forum.effectivealtruism.org/posts/WMiGwDoqEyswaE6hN/?commentId=vH9ahP6ubA3zf2TxR] under the heading "So, for a simple example to illustrate what I would be thinking of doing- "

Thought it would be helpful to share an outline of the Consumer Power Initiative's functions.

Functions of Consumer Power Initiative

  1. Marketing Guided Consumption (creating a social movement) 
    1. To the broad public (consumers)
    2. To EA and other and other organizations
    3. To nonprofits
    4. To public intellectuals, influencers,  celebrities, academics (economists)
    5. To philanthropic sector
    6. To world governments
  2. Research critical to questions of Guided Consumption
    1. Public choice research (will consumers switch to Guiding Producers)
    2. Mechanism and degree of impact
      1. Degree to whic
... (read more)

I keep going beck to this part, because this is what could make this so successful.

"... they get the same product, at the same price, but profits benefit charities rather than shareholders. Essentially, it is a no-brainer... the consumer can do good without losing money or changing habits... A movement that enables everyday people to help charities..."

Because at the end of the day, people can be pretty lazy (Including myself).

Newman's Own is an example of this. You're gonna buy pasta sauce anyway, might as well go with Newman's.

Even if it just gets the ball rolling, once you know companies who do good, it's easier to know what to look for and where to look.

3Brad West9mo
Hey Gee. Yeah. I think that there are several sets of target customer bases. One would be the super conscious set of consumers that would be seeking out the opportunity to do good through purchases and would be very excited to learn about Guided Consumption. This set of is analogous to "early adopters" in other contexts. They would value purchasing through Guiding Companies significantly, and would purchase such products even if they had to pay a slight premium. Given that some of the early forays into Guided Consumption will not necessarily be able to exploit economies of scale such "early adopters" would be especially helpful in the early stages. However, the set of consumers who place a non-zero weight is the vast majority of all consumers: non-psychopaths. Consequently, once the Guiding Companies have the economies of scale to be price-competitive with multinational firms, they should have an advantage with every consumer (the "no-brainer"). Given that advantages with other participants in the economy could allow for costs even below competitors, it seems Guiding Producers in a developed Guiding Economy should tend to monopolize their sectors. What's rather intriguing is to consider contexts in which Guiding Producers can be super competitive even without huge investments. For instance, you could pay a realtor or life insurance salesperson a salary in exchange for their commissions and then commit those commissions to effective charities and advertise this to prospective clients. I would think such Guiding commission-based employees could be a compelling example of early Guiding Producers.

I know so many millennials and zoomers that do want to do better for the world and its people, but are so overwhelmed they dont know how or where to start. One spot that breaks it down to "this product you will buy anyway is also good because it does x, y, z, which is better then just lining another millionares pockets" would be so helpful for them.

So often I hear "look at this amazing thing.... that I unfortunately got from amazon... but look! It will cut down on my plastic usage/good waste/ect. So it kinda evens out." So I'm rather excited to see this get off the ground.

5Glen Edward9mo
I think Guided Consumption works across multiple generations and for somewhat different reasons.  While I believe all generations would like to do better for the world (and this could provide an easy, natural and "low cost" way to do so) it's worth considering the very large population of retired and retiring boomers as a fertile pool of high value labor.  As evidenced by the recent drain of experience from corporate America due to the relatively affluent, aging population retiring, there is a very strong pool of knowledgeable people with a) more time on their hands than they know what to do with and b) a growing motivation to give back in some meaningful way as their personal priorities change. Many retirees who have spent decades in the working world in which a significant portion of their self-worth and social interactions were formed are struggling as they move into the next phase of their lives [https://www.forbes.com/sites/bobcarlson/2022/01/28/how-to-succeed-at-the-hardest-part-of-retirement/?sh=241cd52dbf9c] especially after many of their bucket-list items have been either checked or reevaluated.   Even if there is no personal financial need there will likely be a real demand for opportunities for retirees to retain or regain some of this structure, especially if the fruits of their labor can more directly and reliably do good for others than was likely the case during their working years.   As Guided Consumption gains more traction and clear needs and opportunities are created, experienced individuals are available in unprecedented numbers to participate in the creation or staffing of either supporting organizations or even the Guided Companies themselves and very likely to do so at below market (or even no) cost.  Talk about an business advantage!
3Brad West9mo
This is another area in which Guiding Producers might be able to have competitive advantages with actors in our economies other than  consumers.  One of the virtues of Guided Consumption is the potential to magnify  the capabilities of a very wide set of people to do good. I am sure that there are a lot of people that would be interested in doing a lot of good with their lives, for various reasons are not the most effective at working directly in a cause area, and are not well-suited or capable of earning extremely high incomes working in quant trading, neurosurgery, or high-level consulting. The areas where one can achieve the highest impact- either directly, or through Earning to Give- are not easy paths, and many smart, hard-working individuals may be better suited for other areas. Guided Consumption potentially opens up the Earning to Give field dramatically. Perhaps someone is relatively talented in sales such that they would earn $70-100k/year selling life insurance. As a Guiding Producer advertising that their commissions would got to a popular and effective charity rather than an individual , they could potentially earn 10-20x that, in an environment of robust public awareness of Guided Consumption. And like you say, a lot of individuals (talented retirees, for instance) may be willing to provide excellent work informed by decades of experience for below-market rates, provided that it is for a cause that they believe in.

Please note that I helped edit this piece and gave my feedback, and that I have left my red team points in the previous longer paper. Also note that I'm building a Guiding Company, so I'm biased.

"But even if Guiding Companies engage in activities that consumers take issue with regarding traditional firms, such as competitive (i.e., princely) compensation for CEOs, it is not clear why this would cause a consumer to choose a company that enriches shareholder over a company that helps fight global poverty."

I think consumers would actually oppose high CEO pay ... (read more)

6Brad West9mo
The question isn't whether consumers would oppose high CEO pay of a Guiding Company/Producer, but rather whether they would choose that company over a normal company that serves normal shareholders and also has high executive pay. If you're a consumer and you're choosing a normal company's product over a Guiding Company's product due to high executive pay, you're cutting off your nose to spite your face, because you are enriching shareholders instead of charities. It may even be they Guiding Companies can compete better for executive talent because of the social cache of leading an organization that generates $100 million/year for effective charities. Sure, normal fortune 500 companies can offer 10 figure yearly compensation, but a major Guiding Company could not only pay well (perhaps not quite as exorbitantly) but also grant one tremendous social status and the psychological benefits of being able to do lots of good through your job. The benefits from actors across the economic arena - consumers, employees, consultants, advertisers, vendors- will allow for enormous advantages for Guiding Companies over regular companies. It just takes enough people to realize that the power of Guided Consumption. Guided Consumption just needs (as was noted in the previous post by Tomer_Goloboy) to hit a social tipping point. Because right now, there's a strong status quo bias that is not fully appreciating the structural advantages that Guiding Companies will have.
5Vincent van der Holst9mo
I completely agree that it makes no rational sense for people to choose traditional companies over guided companies with all things being equal. But I've been in marketing long enough to know that people are highly irrational and emotional, and charities evoke a whole host of strong emotions. It will be really interesting to see how the public responds to guiding companies, but I know it won't be rational. The CEO of Newman's Own apparently made 270K USD each year [https://www.ctinsider.com/news/article/Ousted-Newman-s-Own-CEO-made-270K-per-year-14087948.php], this [https://www.quora.com/With-Newman-s-Own-products-being-all-non-profit-what-does-the-CEO-make-yearly-Is-that-justified-or-not] question on quora about the CEO's pay is also interesting. Most people tend to think that 270K USD isn't too much.  With new talent (millennials) caring much more about the sustainability and ethicality of their jobs, guiding companies might have better teams, and better teams, provided there is enough money, built the best companies. I'm very excited about this aspect and from anecdotal evidence from my company, this is true. We have a lot of applications on our jobs and the main reason they apply is because of our guiding company business model. 

#Which Benefitting charities

It is worth considering some causes that may not be as effective as the EA community typically endorses, for the purpose of resonating with a broader section of the public, perhaps in addition to Global Health and Development and Animal Welfare.

I think this already exists enough with Newman's Own etc. I think we should try to focus on GH&D here and maybe some Global Catastrophic Risk prevention public goods. Animal causes: maybe, but only to some demos/products (like vegetarian stuff).

Which Market Sectors

Another approach is to capitalize on virtue-signaling, perhaps through products that could enable a consumer to conspicuously show that they bought through a Guiding Company. More

I strongly agree with this. Focus on conspicuous consumption things.

low-differentiation sectors, it may be easier to construct a “no-brainer” where a consumer is genuinely ambivalent as to two product

But are there substantial profits to be had by newcomers in such sectors? The profit margins may be low for such commonplace undifferentiated sectors.

Repug... (read more)

Somewhat minor, but perhaps an important example

Consequently, there is a dimension of difference in the global consumer economy on which almost no sellers compete:: the identity of the entities that benefit from your purchase, often, owners in some form.

A lot of companies (e.g., Big Y) advertise themselves as 'American owned. '

A movement that enables everyday people to help charities without sacrificing anything personally should be much easier than one that demands people give significant things up or even mildly inconveniences people.

But can we really quantify the benefit?

  • Charities already hold shares of companies

  • People already do consider the owners of companies (usually through a political lens … e.g., "Home Depot owner supports right wing causes so people boycott" or some such

  • How much more will shopping at a "Guided Consumption owned company" actually lead more

... (read more)

By the way, I'm adding comments and suggestions inline using the hypothes.is tool. Get an account and install to see and interact with these.

Some key things in threads below...

You say:

The ask being made of consumers is extremely modest: buy the same stuff you would otherwise buy at the same price, but through a specified company.

But is it possible that the company that donates its profits/revenue could indeed provide an equal product at the same price? And if not, is the price differential less or more than the donation being made? (And if it's more, why not just pay less and donate the difference? However, either is theoretically possible.)

I think the basic microeconomic issues are

  1. Are the firms in question earning 'sup

... (read more)
And in case it's interesting, here [https://davidreinstein.files.wordpress.com/2011/08/ftpresentation_lisbon.pdf] is a slide presentation of a talk on this paper I gave (a long time ago), which includes some of the empirical analysis at the bottom (which was dropped from the published paper).
1Brad West6mo
You're making the same mistake in understanding my proposition that a lot of my economics professors made that I am discussing charitable "bundling" (although after discussing with my professor from U of C, he understood better than what I was proposing). I must not be writing clearly. Just instead of thinking of "donations" think dividends. Charities are simply occupying the same place that shareholders normally occupy. Thus, there is no reason it would be "taking a loss" any more than any other firm that has owners. The identity of an owner does not necessarily imply higher costs. Just as individuals trade ownership positions every day on the stock market, ownership could go to charities without jeopardizing performance.
I didn't really misunderstand your proposal, but I am sort of thinking "at the margin, why would a rational altruistic consumer buy from these firms." So basically you are saying 1. Charities/philanthropists should invest in companies and tell people they are doing this, and tell people what share of profits is going to the charity. OK they already do invest in companies, but they should tend to invest in those companies that are altruistic-consumer-facing, perhaps. 1. People will be motivated to shop at these companies rather than at other companies This seems kind of obviously true and reasonable, and to some extent it already happens (Bill Gates and Microsoft etc.) But maybe it should happen more and be publicized more. So maybe I mainly agree with you on this, and it seems like a good initiative. But I think the 'at the margin' questions still should be considered. From the POV of the rational altruistic consumer, it must be the case that by buying a product specifically from the GC firm, this leads more money to go to the charity in net[1]. Going back to the idealized models of microeconomics With 'perfect competition' or 'monopolistic competition', firms are meant to enter (and introduce new products) until no 'super-normal' profits are left. In such worlds I am not sure if a consumer preferring to buy from a GC company actually leads that company to make more profit. At least in perfect competition, firms set their price at marginal cost, and entry occurs until all firms are pricing at their average cost, and thus making no profits. Nor, with average cost pricing, are they making any incremental profits from additional purchases. Our "Fair Trade paper" basically makes the point that even if firms are pricing at cost, a firm that pays its workers/suppliers more could, under some conditions, charge less than this markup to consumers, making it rational for altruistic consumers to buy from it. That's the 'synergy' we talk about. Of course

Not sure if you are aware of this or simply consider this to be fundamentally different from your approach, but there are some companies out there who are majority-owned by charitable foundations. An example is Robert Bosch GmbH (one of the largest industrial companies in Germany). Most (if not all) of the profits go to the Robert Bosch Foundation which spends them on charitable causes (not EA-aligned though). See: https://en.m.wikipedia.org/wiki/Robert_Bosch_Stiftung

Hope this helps to assess the viability of your approach & learn from existing solutions. There are more companies like this out there, let me know if you want me to point you to them.

3Brad West9mo
Yes. In Germany, I think people are aware of Bosch's charitable ownership, but this is seldom known by the broader world. I'm looking to look more into Bosch for insight. I would be interested in learning of more companies like this. EDIT: and that is an example of a Guiding Producer/Company. If you look at my larger essay, I note the conditions of Guided Consumption. You basically need networking and communication in addition to the existence of Guiding Producers/Companies. But Bosch and Newman's Own have definitely been able to do well... I suspect they would do even better if there was a social movement buttressing them further. EDIT2: Keep in mind Bosch and Newman's Own took off prior to the age of the Internet. There may be more potent ways nowadays to further movements.

the question remains: if Guided Consumption is a more effective means of funding charities than direct donation, why has this not been more fully explored already?   I suspect that the reason stems from a deep-seated psychological separation between the way that people think about the business world, essentially a rather competitive, dog-eat-dog mindset and the kinder, more magnanimous mindset involved in charity work.

I think you've got a great idea and I hope to see it work. The default answer -- the obvious answer -- to the question you raise i... (read more)

4Vincent van der Holst9mo
Thanks for raising these points Seth. I agree that the burden of proof is higher than what we currently have. This paper and the companies that some of us are building are just the start of proving that this might someday happen.  I think it's critical to note that guiding companies are basically for-profits. There's nothing distinguishing them  from for-profits except that the profits go to charities and that the investors are philanthropists buying out companies or funding new guiding company initiatives.  The good news is that there's one large successful case with Newman's Own [https://newmansown.com/], who have donated about 570 million USD to charities and give away all of their profits. There's more smaller projects that are successful and donated millions, but nothing that I know of that's close to Newman's . I see one big difference between Newman's Own and the other initiatives that are less successful: money. I hired a research intern to validate that and he's now drafting up his thesis on the economic sustainability of this business model (I can share it here once it's done), and the main conclusion is that the issue with this is money. If you have someone like Paul Newman funding your guiding company there's no reason it can't be big, and that turns out to be true, because Newman's Own is a multi-billion dollar company in a very competitive space. If the wealthiest philanthropists put their weight behind this and "invest" in the next best guiding companies, I don't see why these companies cannot be the biggest in the world. With the money you can hire the best team, and the best teams build the biggest companies. Currently, the infrastructure (venture capital, stock markets, etc.) are lacking for guiding companies, but these can be built. This will take a long time.  To answer your other questions, I have no evidence that any Fortune 500 company tried this, but I don't think that kind of initiative would be public. You could argue that Warren Buffet
5Seth Ariel Green9mo
Thanks for the thoughtful reply -- I think that I should have specified 'shareholder-corporate-governance-structure for-profit' rather than just 'for-profit' 😃 and once we get to that level of granularity, maybe it is plausible that alternatives haven't abounded simply because of a lack of imagination! Newman's is indeed a nice counter-example.  And FWIW, I am a coworker of Jasper's at Global Income Coin [https://forum.effectivealtruism.org/posts/FMgvYitqeikgTxpcw/introducing-global-income-coin-a-ubi-generating-currency], and we're trying to do something exactly like what you propose but with currency...so I really hope it's viable!!
5Brad West9mo
Regarding the burden of proof... I would think that such a burden is a function of the purpose that it serves. In the criminal justice system, we require a very high burden of proof, "beyond a reasonable doubt", because of the enormous cost of a false positive: depriving an innocent person of life and/or liberty. In the civil context, a mere preponderance (greater than 50%) as if it is more likely than not that one has violated another's rights and harmed them, they should be compensated commensurately, even though there may still be a significant chance that we are wrong. Regarding the burden of proof here, in considering whether and to what degree one should support a project, one should consider the probability associated with different outcomes and the utility associated with said outcomes. This is why even if you are very skeptical of Guided Consumption, supporting it, especially at early stages, is justified. I am interested in learning more about GIC and will very soon be taking a look at the project. I love the idea of global UBI and very much want to work toward a world in which everyone has a chance toward living a life of dignity and having a chance at his or her dreams. Perhaps there are some opportunities for collaboration here!
I suspect the main reason is just that regular for-profits can attract far more investment, because they attract investment from investors who want the profits for themselves, not given away to charity. This allows them to scale faster and bigger, and for more of them to exist. EDIT: And then economies of scale or other benefits from size (recognition, network effects) may favour them further. If something is a mostly or completely non-profit company but takes (or starts to take) private for-profit investment, two things could happen to cause the non-profit shares to remain low in total value: 1. It could scare away for-profit investment, because investors may be skeptical that the company will prioritize profits over helping others or being ethical. Then the company struggles to scale. 2. The company attracts significant for-profit investment and scales, but then becomes a primarily for-profit company. Also, with easier access to financial capital, for-profits could potentially sell below cost of production for longer than non-profit companies to drive out competition and increase their market share.   You could also just compare the size of all philanthropy vs all investment. The funding available for non-profit companies would be relatively tiny, so we should expect few such large non-profit companies. These non-profit companies would be funded initially or acquired through philanthropy. There's just much less money for this, and this is just one competing use of philanthropic funds, with some alternatives being to donate directly to charitable work or invest more broadly in the market.
1Brad West3mo
The firms would not be looking for (much) investment on behalf of typical shareholders. So your numbered points are immaterial... PFGs are 90%+ charitable equity. Your characterization is a bit off... These Profit for Good Companies are not "nonprofit. " They exist to make profit, but for a specific kind of shareholder. You're right... Currently PFGs cannot get adequate investment because this isn't on the menu for philanthropists as means to multiply their donations. But if philanthropic money could be multiplied by leveraging consumer (and other economic actor's) discrimination in favor of charities, there would be ample incentive to invest... Philanthropists want to multiply the funds that are available and leveraging the good will of economic participants gives them that opportunity... If people can buy your laundry detergent for the same cost and help fight malaria, they will. The fact that we are not trying to give them this power is foolishness. Anyone would rather buy in a way that benefits charities rather than traditional shareholders, and equity being held by a particular kind of entity does not necessarily increase costs or otherwise compromise a product. You're right, capitalizing PFGs would compete with direct donations and "more broad investment." In these competing cases, you're leaving money on the table because you're failing to leverage the good will of consumers and other economic actors. The bottom line is that PFGs, if capitalized, have all the advantages normal firms do, plus an extra advantage in that economic participants value their success more than competitors. The only thing keeping such firms from thriving and offering a huge multiplier opportunity is that we haven't created an environment of public awareness of the opportunity (which is what my nonprofit is trying to do).
The problem is "if capitalized". Even with widespread awareness, they could still be at a disadvantage for raising capital and scaling, because the pool they're targeting (philanthropic capital) is much much smaller.
1Brad West3mo
Yep. Acquiring capital without selfish profit motive is a key challenge. However, if there is an environment in which PFGs enjoy a large advantage and this is clear to the relevant parties, there should be no problem raising funds through philanthropists and debt. You can frame it as F(C) = F(K) +P F(C) is a firm capitalized mostly by charitable equity F(K) is an identical firm capitalized by private equity P is the monetary value of positive discrimination in favor of charities If we have an environment in which P is high enough (I think this could be true in a lot of lower differentiation products), a PFG could probably be capitalized wholly by debt... If PFGs offer a high enough value proposition (and this is clear to the relevant parties), the financing issues will work themselves out. Thus, the question is, are the costs of creating the environment we're looking for worth it? I think with the amount of money on the table, it is definitely worth determining what P values are possible in different contexts because money in the hands of effective charities is such high impact.
1[comment deleted]9mo

How does this differ from eg FTX?

Maybe (albeit in a slightly different way) SBF did this, in that he founded a company, made billions of dollars, and pledged it to EA causes - to me that looks like the same outcome, but with the advantage of not having to buy an established company at market value.

5Brad West9mo
SBF ran an excellent company and made billions by running a normal company. He did not use the fact that he would use the money he earned to donate to charities to gain an advantage with consumers. What would make FTX a Guiding Company is if he had donated his equity ownership to a charitable trust and advertised this to users of his product as a basis to choose FTX over competitors. FTX and SBF do not resemble Guided Consumption because they do not use consumer sentiment to gain an advantage.
3Vincent van der Holst9mo
FTX does sometimes advertise their foundation [https://blog.ftx.com/blog/ftx-foundation/] but they are not a GC of course. I hold my crypto on FTX because I know it will end up in their foundation or on SBF's bank account and he'll do great things with it. I think more people would switch to FTX if they went GC or advertised their charitable work more broadly.  It's great that people like SBF are humble, but his purpose is worth bragging about and it might accelerate the causes he cares about. 

I don't want to push you into feeling more guilty, but honestly I don't think directing the profit towards charities can offset the harm if the purchase is wasteful. In this case I'd focus more on the core problem, ie. what need of yours is behind the shopping binges and why they help you, rather than trying to patch the consequences of it.

3Vincent van der Holst9mo
It's obviously better to not buy stuff you don't need, but when you do need something, buying it from guided companies would be a better option than traditional companies, simply because they create impact from their donations. If you buy a 100USD worth of stuff online and 5USD goes to effective climate charities, in most cases you would be offsetting more CO2 than what was generated in the supply chain of those products.  I think the key word in Aswasse's message is "necessary". I agree it's probably not too healthy if people buy even more because they no longer feel guilty buying stuff they don't need.