GiveWell's staff are mostly giving their money in this year, rather than saving to give more in the future. One reason cited by a staff member is:
"I am persuaded by the argument that good done in the present probably compounds over time"
This is true. But does it compound faster than the alternative over all timescales?
Paul Christiano has pointed out that while charitable giving such as cash transfers and basic health services probably compound (socially) very quickly to begin with (maybe 20% in the first year), these incredible rates of compounding must decline over time. Otherwise these small charitable acts would quickly become responsible for all of the good in the world. What sustainable level of compounding can they achieve in the long run? The global economic growth rate, which would mean they converge to, at most, a fixed share of the world's economy or welfare.
High-risk business investments by nature compound more quickly than the global economic growth rate. This is the classic 'r > g', which has become widely understood due to Piketty.
As a result, in the long term, investing at this higher rate to fund a much larger donation long in the future could be better.
For the sake of illustration, let's say the global economic growth rate is 3%, the return on business equity is 5%, and the internal rate of compounding of say, cash transfers, is 20% in the first year, 18% in the second, then 16%, 14%, 12%, 10%, 8%, 6%, 4%, and 3% thereafter. (This set of numbers is probably generous to the 'giving later' strategy, but it will help to highlight the difference.) Holding all else constant, how long would the 'invest and give later' strategy take to catch up?
The answer is about 40 years:
What if you also count the same initial burst of rapidly compounding social impact at the point that you give later - say, in year 28?
You get a bigger take-off, because the donation itself is much bigger when given later. Now 'give later' looks significantly better.
I think the natural response is that 'GiveWell classic' donors expect opportunities to end extreme poverty to dry up significantly over such a timescale. It may be that extreme poverty and malaria are eradicated, or nearly so, by that time. By then the world will be richer and the very poor much less numerous, and so the difficulty of finding extraordinary opportunities much higher. This seems entirely plausible.
If the cost effectiveness of the best giving opportunities were to decline by 2% each year - roughly a halving every 40 years - then the 'invest and give later' strategy won't be able to catch up.
Whether the decline is actually that steep, I'm not sure.
And if you're giving to causes other than global poverty, quite different considerations can dominate.