• My biggest issue is that I don't think returns to increased donations are flat, with the highest returns coming from entering into neglected areas where EA funds are already, or would be after investment, large relative to the existing funds, and I see returns declining closer to logarithmically than flat with increased EA resources;
• This is not correctly modeled in your guesstimate, despite it doing a Monte Carlo draw over different rates of diminishing returns, because it ignores the correlations between diminishing returns and impact of existing spending: if EA makes truly outsized altruistic returns, it will be by doing things that are much better than typical, and so the accounts on which more neglected activities are the best thing to do now have higher current philanthropic returns as well as faster diminishing returns
• Likewise, high investment returns are associated with moving along the diminishing returns curve in the future, as diminishing marginal returns are not exogenous when EA is a large share of activity in an area; by drawing investment returns and diminishing returns from separate variables, your results wind up dominated by cases where explosive growth in EA funds is accompanied by flat marginal returns that are extremely implausible because of the missing correlations
• These reflect a general problem with Guesstimate models, it's easy to create independent draws of variables that are not independent of each other and get answers exponentially off as one considers longer time frames or more variables
• Regarding prognostications of future equity returns, I think it's worthwhile to follow other fundamental projections in breaking down equity returns into components such as P/E, economic growth, growth in corporate profits as a share of the economy etc; in particular, this reveals that some past sources of equity returns can't be extrapolated indefinitely, e.g. 100%+ corporate profit shares are not possible and huge profit shares would likely be accompanied by higher corporate or investment taxes, while early stock returns involved low rates of stock ownership and high transaction costs
• When there are diminishing returns to spending in a given year, being forced to spend assets too quickly in response to a surprise does lower efficiency of spending, so regulatory changes requiring increased disbursement rates can be harmful
• Mission hedging and tying funding to epistemic claims can be very important for altruistic investing; e.g. if scenarios where AI risk is higher are correlated with excess returns for AI firms, then an allocation to address that risk might overweight AI securities

GiveWell top charities are relatively extreme in the flatness of their returns curves among areas EA is active in, which is related to their being part of a vast funding pool of global health/foreign aid spending, which EA contributions don't proportionately increase much.

In other areas like animal welfare and AI risk EA is a very large proportional source of funding. So this would seem to require an important bet that areas with relatively flat marginal returns curves are and will be the best place to spend.

I agree risks of expropriation and costs of market impact rise as a fund gets large relative to reference classes like foundation assets (eliciting regulatory reaction) let alone global market capitalization. However, each year a fund gets to reassess conditions and adjust its behavior in light of those changing parameters, i.e. growing fast while this is all things considered attractive, and upping spending/reducing exposure as the threat of expropriation rises. And there is room for funds to grow manyfold over a long time before even becoming as large as the Bill and Melinda Gates Foundation, let alone being a significant portion of global markets. A pool of $100B, far larger than current EA financial assets, invested in broad indexes and borrowing with margin loans or foundation bonds would not importantly change global equity valuations or interest rates.

Regarding extreme drawdowns, they are the flipside of increased gains, so are a question of whether investors have the courage of their convictions regarding the altruistic returns curve for funds to set risk-aversion. Historically, Kelly criterion leverage on a high-Sharpe portfolio could have provided some reassurance with being ahead of a standard portfolio over very long time periods, even with great local swings.

Thanks for the post. One concern I have about the use of 'power' is that it tends to be used for fairly flexible ability to pursue varied goals (good or bad, wisely or foolishly). But many resources are disproportionately helpful for particular goals or levels of competence. E.g. practices of rigorous reproducible science will give more power and prestige to scientists working on real topics, or who achieve real results, but it also constraint what they can do with that power (the norms make it harder for a scientist who wins stature thereby to push p-hacked pseudoscience for some agenda). Similarly, democracy increases the power of those who are likely to be elected, while constraining their actions towards popular approval. A charity evaluator like GiveWell may gain substantial influence within the domain of effective giving, but won't be able to direct most of its audience to charities that have failed in well powered randomized control trials.

This kind of change, which provides power differentially towards truth, or better solutions, should be of relatively greater interest to those seeking altruistic effectiveness (whereas more flexible power is of more interest to selfish actors or those with aims that hold up less well under those circumstances). So it makes sense to place special weight on asymmetric tools favoring correct views, like science, debate, and betting.

Thanks, edited.

Wayne, the case for leverage with altruistic investment is in no way based on the assumption that arithmetic returns equal median or log returns. I have belatedly added links to several documents that go into the issues at length above,.

The question is whether leverage increases the expected impact of your donations, taking into account issues such as diminishing marginal returns. Up to a point (the Kelly criterion level), increasing leverage drives up long-run median returns and growth rates at the expense of greater risk (much less than the increase in arithmetic returns).

The expected $ donated do grow with the increased arithmetic returns (multiplied by leverage less borrowing costs, etc), but they become increasingly concentrated in outcomes of heavy losses or a shrinking minority of increasingly extreme gains. In personal retirement, you value money less as you have more of it at a quite rapid rate, which means the optimal amount of risk to take for returns is less than the rate that maximizes long-run growth (the Kelly criterion), and vastly less than maximizing arithmetic returns.

In altruism when you are a small portion of funding for the causes you support you have much less reason to be risk-averse, as the marginal value of a dollar donated won't change a lot if it goes from $30M to $30M+$100k in a given year. At the level of the whole cause, something closer to Kelly looks sensible.

E.g. the VIX, a measure of stock market volatility (and risk plays a role in formulae for leverage) is above 30 right now, close to twice the typical level. Although that's a quantitative matter, and considering future donation streams (which are not invested), pushes towards more (see the book Lifecycle Investing). But people shouldn't do anything involving leverage before understanding it thoroughly.

My preference within this genre would be for something with more leverage and greater expected impact at the expense of local linearity. I'd especially call out the Center for Global Development, which has a history of policy wins that I think justify its budget many times over, and Target Malaria for work getting gene drives deployed to eliminate vector-borne diseases such as malaria. I'd prefer one dollar to these over multiple dollars to AMF, or the recommendations in the report.