Charitable donations have been increasing in recent years and accounted for approximately $358 billion in 2014 (or, 2 percent of GDP). Of this amount, about 72 percent of donations came from individuals (perhaps in part due to Warren Buffet and Bill Gate’s positive peer pressure). With so many charities to choose from, who should we be writing the cheque to? Nick Cooney‘s latest book, How to be Great at Doing Good, helps add clarity to the decision.
In the book, Nick Cooney discusses efficiency’s role in the non-profit sector. It explores the idea of applying business performance metrics to charitable organizations in order to ensure the highest return of “good” for a donation dollar. He considers that all charities are not created equal and that some are more effective at improving human or animal welfare. While efficacy and efficiency are important metrics in the investment world, Cooney acknowledges the lack of this mentality in the non-profit world.
Nick shared some time to answer follow-up questions on his ideas.
A: I’ve been thinking about this approach to charity (and trying to act on it) for years, but the inspiration to actually write the book came out of a mixture of disappointment and optimism. On the one hand, I have for years been disappointed that so much of the money that goes toward charity is, you could say, wasted. Not wasted in the sense that it does no good whatsoever. Rather, wasted in the sense that it could do far, far more good than it does, if the money were put into more carefully-chosen programs and causes. It’s very sad to think about how many more people, animals, etc. that we could be sparing right now, if only we would make more calculated charity choices.
On the other hand, I’m incredibly optimistic when I look at how much good each one of us can do for the world. Each one of us has the ability to save the lives or spare the misery of hundreds, thousands, tens of thousands of individual people or animals over the course of our lifetime, and it doesn’t require a huge bank account or endless hours of spare time. All it involves is making very smart, rigorous decisions about how to use the limited time and money we have in the way that does the most good. I wrote How To Be Great At Doing Good to help people be able to make those smart decisions.
Q: In your book, you encourage the reader to make more calculated decisions instead of using emotions to decide on which is the best use of his/her donation dollars. Since these calculated decisions are at the heart of economics, have you always had an interest in the field? If so, how were you first introduced to the topic?
A: No, I haven’t always been interested in Economics – I didn’t study it in high school or college, and it was never a subject I spent much time around. My interest came from being introduced to behavioural economics while writing my first book, Change Of Heart. There, I was looking at the psychology research around behaviour change so that I and other advocates could be able to more effectively inspire people to make compassionate choices. Once I saw there was an entire field of economics devoted to essentially the same subject, I realized how valuable that information could be to those of us trying to create social change.
Also, as you point out, taking a calculated, utilitarian approach to doing good is an ethical philosophy that highly mirrors traditional economics and the idea of the rational consumer (not that we are really all that rational consumers, but you know that already). The only difference is that when we take a calculated approach to charity, we are trying to get the most good for others with each dollar, instead of getting the most good for ourselves.
Q: Your book implies that there are currently inefficiencies in the non-profit sector. The solution to this can come in many ways including: educating the public, creating an index comparing charity performance metrics or even creating a system where givers donate to a particular cause and then a third-party researches the most effective use of each dollar (this of course comes at the cost of performing the research). What do you think is the best way to correct the inefficiency?
A: Hmm. Right now it’s a catch 22 sort of problem. A major 2010 study found that only 3% of donors pick which charities to donate to based on how much good that charity does for the world (relative to other charities). The remaining 97% donate to causes that, one way or another, make them feel good. As a result, donors are incentivizing the charity field to work on feel-good causes as opposed to working on the most high-impact causes. Then, charities do work on feel-good causes and promote those same causes and approaches back to the donating public and say “This is what doing good looks like, give us money to do more of this.” And the cycle continues.
The growth of charity advisory sites like GiveWell.org and AnimalCharityEvaluators.org, which make recommendations of which charities to donate to based on how much good a charity does with each dollar donated, is a very good thing. The more sites like these are marketed and promoted, the better off we’ll be.
Similarly, we need to spread the meme of “donate based on what does the most good” through society in all the usual ways new ideas are spread: social media, media, organizations, and person-to-person. It’s an idea that makes a lot of sense once people hear it – but they need to hear it, and hear it repeatedly.
Aside from working on individual donors, we can also work on non-profits themselves. We can use both carrots (the promise of more donations, positive publicity, awards, etc.) and sticks (including the threats of fewer donations, negative publicity, etc.) to prompt charities to more often make programming decisions around what will do the most good.
It’s definitely a long, uphill battle, but I’m very glad that it’s a battle which has now started and in which we are gaining some initial traction.
Q: Do you think that some people notice these inefficiencies in the charity world and donate less than they would have otherwise? If so, how much do you expect this to amount to?
A: That’s an interesting question that I hadn’t thought of or thought about before. I really don’t know. For your average donor, no, I’d be surprised if these sorts of concerns are causing much of a decrease in overall donations. And even when it does, it’s usually based on concern around things that don’t actually matter – for example, an organization’s overhead or executive salaries.
In my experience though there are many wealthy individuals, often from numbers-heavy fields like finance, technology and real estate, who get excited and donate more when they see charities taking a really smart, calculated approach to doing good – as they should! So I think that as more charities take this approach, we’ll likely see more millionaires and billionaires begin to invest more heavily in creating positive social change.
Q: An article by the Federal Reserve Bank of St. Louis outlines that the rich have the “lowest marginal cost of giving” since higher income relates to a higher marginal tax rate and greater savings in tax deductions. Is this well-known in the non-profit world and do charities target the rich?
A: Well, we definitely do try to target the rich! For many charities, a sizable portion of income comes from a small pool of large donors. These people are absolutely indispensible – we would not be able to do nearly as much good without their involvement and support. That’s all the more reason that your readers might consider going into a high-income career in order to be able to give huge sums of money to highly effective charities.
As you can imagine though, charities also get a sizable share of income from a large pool of small donors, so it’s important not to neglect them either. But yes, donors who are perceived as having higher donation potential (meaning they have more money, and/or have in the past donated at high levels) are given more attention than your average donor.
Q: You mentioned some particularly efficient charities in your book. Would you be able to outline a few efficient charities across a range of causes that readers can consider while making their donation decisions?
A: Let me start with the animal side, since that’s the field I work in and therefore know the most about. Mercy For Animals, The Humane League, and Animal Equality are all animal protection charities that will spare a huge amount of animals and reduce a huge amount of animal suffering with your donation. You can see more about them, and why they are so effective, at AnimalCharityEvaluators.org. (ACE is an independent charity advisory organization that researches and shares recommendations on effective animal protection charities.)
On the human side, one of the organizations I profile in How To Be Great At Doing Good is the Seva Foundation, which spares huge numbers of people from blindness each year through inexpensive cataract surgeries. They appear to spend less than $100 for every person they spare from blindness, which is pretty amazing.
When it comes to environmental protection, organizations working to promote responsible family planning and reduce overpopulation seem to me to be among the best bets for preserving the air, water, and climate, both now and in the long term. A small donation can empower a woman or man with very limited income to take control of their reproductive decisions through access to birth control, vasectomy surgery, and family planning information. Population International is one prominent example from the field, though I personally have no idea whether they are more or less effective than other charities working on this issue.
Q: Lastly, you often describe donation decisions being made over a hot cocoa. What do you find is the best hot cocoa recipe to have while making these decisions?
A: Well, ideally you’d find the cheapest cocoa available so that you can give the money saved on that cocoa to an effective charity (laughing out loud here). And of course you’d want to use rice milk or soy milk in it instead of dairy milk, since dairy production causes a lot of animal suffering plus a lot of greenhouse gas emissions. Unfortunately I’m not much of a chef so aside from dumping a spoonful of cocoa in rice milk and sticking it in the microwave for a minute, I don’t have any other good hot cocoa tips!
Delicious! Perhaps this hot cocoa mix recipe from Eat Drink Better could be modified with no dairy products.
Thanks for your time, Nick and good luck with your mission moving forward.
Picture Credit: Pictures supplied by Nick Cooney.