Epistemic status: Exploratory, just one proposal for how we might mitigate certain funding risks in the future in light of the collapse of FTX. Probably not a novel idea overall, but it's timely and I think some parts of this proposal are new and worth considering.
Funding Diversification is something that could be explicitly evaluated for priority cause areas in EA. Working to have more diverse funding sources for top cause areas could make highly valued work more resilient to the sudden loss of any individual funder.
It's common in EA analysis to evaluate cause areas based on Importance, Tractability and Neglectedness. In light of the recent bankruptcy of FTX and the resulting funding crunch for several top EA causes, we might consider a fourth factor: Funding Diversification.
Funding Diversification is similar to Neglectedness in that it evaluates the current resources going toward a given cause area. Except instead of considering the total amount of funding going into the cause area, it considers the diversity of funding sources the cause area draws from.
For example, if 70% of the funding for AI Safety came from the foundation of a single billionaire, then we would rate this cause area as having low funding diversification.
Benefits of funding diversification
High funding diversification is desirable because it provides financial stability in the event of a sudden loss in funding. For example, we might strive for there to be no single funding source which accounts for more than 10% of the total funding in a top cause area. This way, even if the largest funder suddenly collapsed, 90% of funding for that cause area would remain.
In addition to financial stability, increased funding diversification means less exposure to moral, legal and reputational hazards from funder failures. If it turns out the largest funder in a space committed a crime, it's a lesser crisis all around if the cause area was only 10% dependent on that funder rather than 70% dependent.
Another benefit of funding diversification is it can help with diversity of thought/approaches within a cause area. In case funders have strong opinions about how things should be done in the cause area they're funding, funding diversification provides people working in that area with more opportunity to blaze a different trail. If their current funder has a blindspot which prevents them from seeing the merits of their new intervention or research direction, they are more likely to find another funder who will support them.
How do we increase funding diversification in a cause area?
People working on fundraising in a given cause area could take its funding diversification into account. If their area has low funding diversification, then they could prioritize raising funds from new donors, rather than going back to the largest funder to try and raise additional funds.
Similarly, grantmakers could take funding diversification into account when they are evaluating cause areas to donate to. If there is a cause area they believe is important but which has low funding diversification and they are not currently funding, then they could see it as a benefit to fund that area in order to help increase its funding diversification.
It's hard enough just to get sufficient funding for a cause area. Sculpting the makeup of funding sources for a cause area isn't a luxury we have.
Philanthropists are looking for opportunities to stand out and build a legacy. It's exciting to be the majority funder in an important cause area. "Thanks to your grant, funding diversification in this cause area was increased by 5%" is a less exciting prospect.
- Setting up financial endowments for top cause areas could be another way to provide them with financial security and help them to better weather funding shocks.
- In addition to funding diversification, cause areas could be evaluated in terms of the number/diversity of people, organizations, types of interventions, active research directions, etc.
Thanks to EA UBC and the people who attended tonight's meetup for giving me some feedback on this idea.
Funding Diversification would be a slightly different kind of factor than Importance, Tractability and Neglectedness. I argue that it's an important consideration, but it should probably influence a cause area's overall priority calculation less than ITN does. So it would be more of a secondary consideration that comes into play in tactical funding decisions, rather than a primary criteria for evaluating a cause area's priority.
This is a rough approximation of what I found to be true from looking at TylerMaule's funding data. In this data, the 2022 total est. funding for Longtermism and Catastrophic Risk Prevention was $223M, with Future Fund providing $157M or 70.4% that. The data isn't granular enough to see the funding for AI Safety specifically, but since AI Safety falls under the umbrella of Longtermism and Catastrophic Risk Prevention, its funding probably has a similar breakdown (but it might be different!).
10% is just a made up number, but it illustrates the point. There is probably a clever way to calculate optimal targets for funding diversification, but I haven't gone to the trouble to figure that out here.
Credit to James Deng at the EA UBC meetup tonight who suggested this idea.