Thanks for the clarification, Owen! I had mis-understood 'investment-like' as simply having return compounding characteristics. To truly preserve optionality though, these grants would need to remain flexible (can change cause areas if necessary; so grants to a specific cause area like AI safety wouldn’t necessarily count) and liquid (can be immediately called upon; so Founder's Pledge future pledges wouldn't necessarily count). So yes, your example of grants that result "in more (expected) dollars held in a future year (say a decade from now) by careful t... (read more)
Hi Owen, even if you're confident today about identifying investment-like giving opportunities with returns that beat financial markets, investing-to-give can still be desirable. That's because investing-to-give preserves optionality. Giving today locks in the expected impact of your grant, but waiting allows for funding of potentially higher impact opportunities in the future.
The secretary problem comes to mind (not a perfect analogy but I think the insight applies). The optimal solution is to reject the initial ~37% of all applicants and then accep... (read more)
I highly recommend the Founder's Pledge report on Investing to Give. It goes through and models the various factors in the giving-now vs giving-later decision, including the ones you describe. Interestingly, the case for giving-later is strongest for longtermist priorities, driven largely by the possibility that significantly more cost-effective grants may be available in the future. This suggests that the optimal giving rate today could very well be 0%.
I think it's implausible that the optimal giving rate today could be 0%. This is because many giving opportunities function as a form of investment, and we're pretty sure that the best of those outperform the financial market. (I wrote more about ~this in this post: https://forum.effectivealtruism.org/posts/Eh7c9NhGynF4EiX3u/patient-vs-urgent-longtermism-has-little-direct-bearing-on )
Have you compared your analysis to this previous EA Forum post? Are there different takeaways? Have you done anything differently and if so, why?
Here’s the math on moral/financial fungibility:...You’re probably better off eating cow beef and donating the $6.03/kg to the Good Food Institute
Here’s the math on moral/financial fungibility:
You’re probably better off eating cow beef and donating the $6.03/kg to the Good Food Institute
Is refraining from killing really morally fungible to killing + offsetting? Would it be morally permissible for someone to engage in murder if they agreed to offset that life by donating $5,000 to Malaria Consortium? I don't mean to be offensive with this analogy, but if we are to take seriously the pain/suffering that factory farming inflicts on animals, we should morally regard it in a similar lens t... (read more)
Thanks, Sanjay, I’m sharing a basic model I’ve written that highlights the trade-off for impact investments that seek both social impact and financial returns. This isn’t specifically about ESG but the key ideas still apply. The upshot: the investment must produce annually one percent of a same-sized grant’s social benefit for every one percent concession on its financial return. I construct impact investing’s version of the Security Market Line and quantitatively define what ‘impact alpha’ means.
This model was written a couple of years ago but since then,... (read more)
I agree with Michael that a 70% allocation to US stocks is way too high. US stocks' outperformance against international developed stocks can almost entirely be explained by the increase in the US market's valuation (which shouldn't be assumed to continue and indeed, is more likely to reverse). See AQR's analysis on pg 6 here. Also, what about Emerging Market stocks? This should certainly get some allocation as well, especially if you're focused on the next 100 years. China and India will increasingly be key economic players and have capital markets that w... (read more)
This paper is relevant to your question.
Abstract: This article asks how sustainable investing (SI) contributes to societal goals, conducting a literature review on investor impact—that is, the change investors trigger in companies’ environmental and social impact. We distinguish three impact mechanisms: shareholder engagement, capital allocation, and indirect impacts, concluding that the impact of shareholder engagement is well supported in the literature, the impact of capital allocation only partially, and indirect impacts lack empirical su... (read more)
I don’t think it makes sense to compound the model distributions (e.g. from 1 year to 10 years). Doing so leads to non-intuitive results that are difficult to justify.
1) Compounded model results (e.g. 10x impact in 10 years) are highly sensitive to the arbitrarily assumed shape, range, and skewness parameters of the variable distributions. Also, these results will vary wildly from simulation to simulation depending on the sequence of random draws. This points to the model's fragility and leads to unnecessary confusion.
2) The parameter estimat... (read more)
A 7% real investment return over the long-term is in my opinion, highly aggressive. World real GDP growth from 1960 through 2019 is 3.5%. Since the proposed fund expects to invest over “centuries or millennia,” any growth rate faster than GDP eventually takes over the world. Piketty’s r > g can’t work if wealth remains concentrated in a fund with no regular distributions.
Even in the shorter run, it’s unrealistic to expect the fund to implement a leveraged equity-only strategy (or analogous VC strategy):
1) A leveraged ... (read more)
Hi Carl, thanks for your response and for posting the links. I have now retracted my initial strong downvote of your comment.
I understand and am sympathetic of the view that altruists investing to donate should be a lot more risk-seeking than when investing to fund their own future consumption. My concern was entirely based on your recommendation to invest long term in leveraged ETF’s. I did not think this is a good idea because leveraged ETF’s can have realized returns that deviate substantially from its underlying index in a bad and unexpec... (read more)
You should NOT be holding leveraged ETF's for long periods of time (i.e no more than a day or two). When held for a year, a 3x leveraged ETF will not deliver 3x the returns of the underlying index. In fact, it is quite possible given high current volatility, that the ETF delivers negative returns even when the underlying index is positive. For more info, see 'Why Leveraged ETFs Are Not a Long Term Bet.'
Hauke's calculation simply determines a standard Benefit/Cost ratio. If it costs $10 to avert a tonne of CO2 that provides benefits of $417 (in damages averted), this Benefit/Cost ratio equals 41.7. This ratio should be directly comparable to Copenhagen Consensus 'Social, economic, and environmental benefit per $1 spent.' For the Post-2015 Consensus, 'Climate Change Adaption' is listed as providing a Benefit/Cost ratio of 2 while climate-related 'Energy Research' has a ratio of 11. I would weight these results from meta-l... (read more)
Thanks for your response, kbog!
Animal welfare issues are plausibly getting worse and not better so I’d be less confident to assume it will not be an issue in the future. As the world develops and eats more meat, Compassion in World Farming estimates that annual factory farm land animals killed could increase by 50% over the next 30 years. Assuming people’s expanding moral circle will reverse this trend is dangerous when the animal welfare movement has progressed little over the past few decades (number of vegetarians in US have been flat; there are some a... (read more)
Thanks for posting this, kbog! I would be interested in your recommendation for someone donating to the EA funds. The Long Term Future and Global Development funds focus on humans and thus potentially runs into the meat eater problem. For every dollar donated to the above funds, what would be an appropriate amount to donate to the Animal Welfare Fund that is enough to offset this issue? Thanks!
A company structure to consider would be a mutual organization where all profits go to members, which in your case would be the policy holders. Profits can be retained to grow the company or policy fees can be reduced by the amounts of its profits. Mutuals have a long history and many of the most successful financial organizations in the US are mutuals (e.g. Vanguard, State Farm, Liberty Mutual, NY Life). You could develop an insurance brokerage mutual that offers products from different insurance companies. I'm not sure if there are mutuals in this s... (read more)
Hi Huwelium, thanks so much for your post! I’m also advising someone on highly cost-effective interventions, so I found your thoughtful analysis to be very interesting. My question relates to your cost effectiveness estimates vs GiveWell’s. Based on GiveWell’s spreadsheet, their modeling of DDK (2017) places that program’s cost effectiveness at 0.5x – 2.5x GiveDirectly’s. Their modeling of Bettinger et al (2017) places that program’s at 0.2x – 1.4x GiveDirectly’s. Both of these estimates are for consumption effects only and excludes non-pecuniary benefits ... (read more)
I would challenge your notion that you are over-analyzing the problem and that you must make a definitive decision soon.
1. In general, better knowledge and information leads to better decision making. If you are new to the EA community or to thinking deeply about philanthropy more generally, it is very unlikely that your current notions of how to give are appropriate.
2. Once you give away money, you cannot get it back. But money you save now can always be given away later. This argues for waiting in the presence of uncertainty. For example, in the optima... (read more)