Allocating Donations

     We've established in "The Investment Mechanics of Giving" that treating donations as investments is very useful. When you invest, you expect to either receive dividends (or some other cash flow) or capital appreciation (being able to sell your investment for a higher price than what you bought it). For donations, the money is no longer yours, but the impact you have is similar to that of a dividend (there are positive effects over time, perhaps forever). We also touched on the idea that you should probably have a diversified donation portfolio, and there should be a balance between less "risky" bets (such as global poverty/health, where you can be pretty sure you are doing good) and "riskier" bets (such as ex-risk, where you will likely have no impact but there is a small chance of massive impact). Since the money is no longer yours, one benefit of a donation portfolio is that it does not have to be rebalanced. The weighting you assign between the different causes only matters when you send the money to the charities. This allocation between different causes is a deeply personal decision, but there could be useful guidelines.

    I plan to have a series about each of the major Effective Altruism causes, and I will give my own opinions about how to structure your donation portfolio. Finance in the age of machines is tricky business, as if you really believe AGI is near you should probably structure your investments and your donations very differently. If you are very concerned about ex-risk and want to donate, your question is probably as follows:

              “We’re probably all going to die. So where do I invest? Where should I donate? Can I have an impact?”

              I would urge caution with this line of thinking. “Doomsayers” have existed throughout history and they have all been wrong. Yes, we are probably at the highest level of existential risk in human history (aside from the early formation of humans when there were like 200 of us) but predicting when the world will end is entirely unpredictable. Since we don’t know how the world will end, it’s hard to determine exactly when and where to donate and invest. So, still save for retirement, and you should probably still donate to non-existential risk charities. I would use Toby Ord’s “The Precipice” as a pretty good guide to existential risk probabilities. He estimates a 16% chance of existential risk within the next 100 years, so you should probably live your life assuming that in over 80% of the scenarios you make it to retirement. He estimates that there is a 10% chance AI kills us all and a 0.1% change climate change does, so we should probably focus more on AI. If you disagree with his numbers that could inform your asset (donation) allocation. If you think the AI risk is actually 50%, that should probably make up the bulk of your donations. Obviously, feasibility and capacity constraints matter. I wonder if there would be demand for model portfolios, or example donation portfolios that you could model your own donations after (here is the % Tody Ord donates to global health, nuclear risk, etc). It is probably the case that unfortunately, not enough people donate for this to really be of use.