Rational Charity

Big givers make the news. We all know about how generous Bill Gates has been, and if you’ve been keeping up with this blog, you probably know of a few more generous faces whose individual donations amount to more money than most of us will ever earn in a lifetime. But, by far, the bulk of all money given to charities is in the form of many smaller gifts sent by people of average wealth. People give for a number of reasons, too. It’s not always about helping a cause; some people donate to impress their boss, while others give because they want to leave a legacy behind. More still just give because someone held out their bucket and asked. Charity is not always a rational endeavor in which a giver seeks to do the most good with their money.

For those of us who are concerned about our money going to the best charities, the site Charity Navigator is globally accepted place to turn. There you will find ratings and statistics about charities, but is that all there is to the story? Some factors can’t be defined by mere numbers. Take, for instance, the case of the Play Pumps. These were a seemingly ingenious fusion of two unlikely items; a playground wheel that children spin around and a water pump. The idea was to have children play on the wheel, which would generate the pressure necessary to pump water in African villages where electricity was unable to do the job. The invention stirred up an astounding amount of charity support and play pumps were installed at will. Nobody saw the potential shortcomings.

The Guardian newspaper reported in 2009 that children would need to play with the pump for 27 hours a day in order to pump enough water to meet daily needs. Allow me say that, as a kid, the playground wheel was fun, but it wasn’t THAT fun. I’m sure the poor children felt the same way, and while the pumps were effective while they were playing, no child can play all of the time. So, when the children weren’t playing, it was left to the women to spin the wheel to pump water. Not only was it tough and potentially humiliating, the wheel took considerably more effort to get water flowing than the old hand pumps, which in some cases had been removed when the play pumps were installed. Now tell me what number can warn you about those consequences.

Enter: Give Well, an organization devoted to finding the best charities, using a much more involved approach than sorting out financials. Their methodologies bring to light a number of crucial angles that charities SHOULD be graded on, but aren’t. Aimed at donors who are really concerned with the effectiveness of their dollar, Give Well has chosen a handful of stand-out all-star charities that surpass the norm of standard aid organizations. Some of their reasoning in choosing the best charities may surprise you and even make you arch your brow, but you cannot deny the final result: if you give to one of their recommended charities, your money will do more good than harm with a guaranteed efficiency that you can’t get by giving elsewhere.

Giving aid is much more than throwing money at a problem. In fact, sometimes throwing money at a problem can only make it worse. Picture disaster areas like Haiti, with only one working airport and badly maintained roads. How many organizations can operate in that area before it becomes a clusterfuck? Give Well advises against donating to disaster relief. From a purely rational standpoint, there is no guarantee that you will be contributing to the benefit of the situation. Sometimes more aid is not needed, just smarter aid.

Just like disaster areas can suffer from too much generosity, so can the typical siphons of everyday charitable efforts. When a charity’s aim is too narrow, it can miss the big picture. Much like the play pump story, there are unseen effects of giving too much. Entire communities in Africa have forgotten how to farm because their food has been given to them for the last two generations. They now suffer from an unsustainable lack of cultural work ethic that comes with having your basic life needs donated to you without any effort on your part. It is important to know, when you give to a charity, how exactly they deliver their aid and what the potential long-term effects are.

Then what happens when a charity receives more money than it has the capacity to utilize? Many organizations are sitting on a mountain of cash and make no effort to inform their potential donors of their financial situation. A good charity will either have a plan for utilizing excess cash or will only ask for what it needs. This is one of the angles from which Give Well peers into the guts of an operation and their recommendation only comes when there is a clear sense of responsibility.

There are many different types of charities performing different types of deeds, so who actually thinks it makes sense to rate them all by the same metrics? It’s important to take a charity within the context of its mission. A charity that provides logistics management for a group of clinics doesn’t feed a starving child or teach people to read or even vaccinate a baby, but it allows health care to work with amazing efficiency, which, in turn, becomes a far more effective investment in saving lives than simply buying more supplies. You wouldn’t be able to figure that out if Give Well didn’t take the time to uncover it. Village Reach, their most highly recommended charity, provides those logistics.

The hottest form of charity these days is microfinance, but, surprisingly (or not?), Give Well doesn’t recommend it. You can probably guess that there are more factors in play than giving a simple interest-free loan to some poor entrepreneur that may or may not be paid back, but by offering up a pay-back rate as a success statistic, sites like Kiva.org are only obfuscating the real measure of success. In truth, when you provide a loan through a micro-finance site, you are just giving money to an intermediary which then loans the money to the poor, high-risk client at interest rates around 35% (on the year). On top of that, you don’t get a tax break for any of your generosity. The pay-back rate, as well, is a bit of behind-the-scenes magic, as loan recipients are often hassled to repay, even if their investment goal failed. The more telling metric for success in microfinance would probably be the drop-out rate, which is the amount of users who used the service only once, due to its hassle. That figure is well above 50%.

Giving to those less fortunate comes naturally many of us, but the effort necessary to find the best way to invest in our fellow man evades nearly everyone. Give Well doesn’t recommend the ONLY worthwhile charities, nor do they spend much time pointing out the bad ones. Their efforts go into picking out the best ponies for the race; the ones that are the sure bets. That’s extremely valuable when we care not only about doing good, but also making a real, measurable difference. It also serves as a lesson that information can be misleading, and there are far more facets to the simple act of giving than just good intentions.