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 is spent.

History

The concept of a donor lottery was first explicitly described by Carl Shulman in 2016,^[1][2] as a development and refinement of some previous ideas by the author.^[3] The first donor lottery was run in early 2017, by Shulman and Paul Christiano.^[4]  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.^[5][6][7][8]  Currently, donor lotteries are run by Effective Altruism Funds and held at least once per year. The most recent lottery was drawn on 24 January 2022, and two chosen donors won the right to allocate $2.5 million.^[9]

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.^[1]