A donor lottery is an arrangement where multiple prospective donors each contribute to a common pot in exchange for a chance, proportional to the size of the contribution, to win the right to decide how the pot will be spent.

History

The concept of a donor lottery was first explicitly described by Carl Shulman in 2016 (Shulman 2016a; Shulman 2016b), as a development and refinement of some previous ideas by the author (Shulman 2014). The first donor lottery was run in early 2017, by Shulman and Paul Christiano (Christiano 2017).  Many lotteries have taken place since then, and some of the winners have written detailed reports of the process they followed for allocating the funding pool (Gleave 2018; Rheingans-Yoo 2020a; Rheingans-Yoo 2020b; Telleen-Lawton 2020).  Currently, donor lotteries are run by Effective Altruism Funds and held at least once per year. The most recent lottery ran in mid-2021, and the chosen donor won the right to allocate $500,000 (Brinich-Langlois 2021).

Justification

At its core, a donor lottery is a method for exploiting situations where there are increasing marginal returns to donation: the lottery converts a small budget into a small chance of winning a budget large enough to take advantage of economies of scale.

For illustration, consider an effective altruist who, instead of donating $1,000, buys a 1% chance of directing $100,000 to their chosen charity. Entering this lottery provides two distinct benefits. First, it cuts down research costs per expected dollar donated by a factor of 100, since researching donation alternatives becomes necessary only in the winning scenario. Second, it allows the altruist to fund projects whose minimum funding size exceeds their charitable budget.

In principle, someone persuaded that they could do more good in expectation with a small chance of a correspondingly larger donation could realize these gains by high-stakes gambling or high-risk investment. In practice, the associated overhead and transaction costs typically make donor lotteries a more attractive alternative (Shulman 2016).