The efficiency of modern philanthropy

Summary: The most important inefficiency in philanthropy may be the philanthropist’s desire to make decisions that look good in retrospect.

In financial markets, if you encounter an investment opportunity which looks like it will significantly outperform the market, it is reasonably safe to conclude that either (1) finding the opportunity required some special ability, info, disposition, or connection you have that others lack, or (2) you are mistaken about the goodness of the opportunity, or there are associated costs.

We might ask: to what extent is the same thing true in philanthropy? If it looks to me like a cause is obviously important, but others are ignoring it, does that mean that I’m overlooking something they know? Of course, there is a spectrum of possibilities. In general I should ask: how hard should I expect to have to search before I can expect to find something important that others have overlooked?

Holden from GiveWell has recently commented on this question. His conclusion, roughly, is that while there are probably still neglected high-impact causes, you should expect to have to do a lot of effort to identify them. In particular, one can’t appeal to simple a priori arguments about what people are likely to miss and expect to thereby find great neglected opportunities. Read the rest of this entry »