Insights

Our Approach to Charity

Last Edited
2018-07-01
Written by
David Goldberg
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Summary: Our Approach to Charity

How We Think About Charity

With so many charities out there (1.5 million in the US alone), and countless appeals for support coming our way every day, the world of philanthropy can be difficult to navigate. In this report we’ll explain why we think getting this navigation right is a crucial part of donating to charity, and outline our methodology for finding impactful, effective and transparent giving opportunities.

In its simplest form, our take on charity can be summarised by three core ideas:

1. Make a real difference

When thinking about charity evaluation, what often comes to mind is big financial scandals. In fact, the UK Charity Commission's research shows that irresponsible spending and fundraising practices tops the list of the public's concerns around charity. In reality though, there are strong safeguards against fraud in the sector, and the threat posed is over-exaggerated due to the high profile of these relatively few incidents. Something more difficult, and arguably more important, is figuring out which charities are outstandingly good.

Doing this is a game-changer, as evidence shows that some charities have tens, and even hundreds, of times more positive impact than others do (for the same amount of funding). In practice, this means that choosing an effective charity is equivalent to multiplying your amount donated to a less effective charity. Why? Studies show that implementing effective social programs is harder than most people think. Which is why a large number of charities actually have very little or no impact at all - despite the best intentions. And some even do harm through unintended consequences. Founders Pledge are here to find the very best charities out there, so that you can feel confident that your donation is doing as much good as possible.

2. Follow the data

You’re probably used to making business decisions by digging into the data. We do the same with charities. We look for two main pieces of information. First, we look for evidence that programs improve outcomes, not just outputs. For example, we don’t just want to know how many books have been distributed; we want to know how much more students are learning. Second, we look at impact evaluations: studies that track the causal impact of charities’ work. For example, we don’t just want to know whether student are learning more; we want to know whether this increase was brought about by the charities work.

3. Change the game

Charities spend a significant portion of their budgets competing for future funding. This means that whichever qualities donors ask for, charities will compete on. If donors make their choices based on glossy marketing brochures, charities will have to spend a significant portion of their budget on that. But if donors ask for impact evaluations and evidence of effectiveness, charities will allocate their resources there. By giving smart, the Founders Pledge community can have outsized impact; helping to encourage a industry wide best practice, and influencing how charities operate now, and in the future.

Research Methodology

Our framework for finding amazing donation opportunities is based on best practice in impact assessment, drawing on the latest academic standards in social sciences. We evaluate charity on three levels:

Focus area

There are countless important and urgent causes in the world, often making us feel helpless when it comes to choosing one over another. This is why, if you don’t already have one particular focus area you’ve decided on, we want to help you identify the area where your donation is most likely to make a big difference. To do this, we start by understanding your core values: for example, how much weight do you give to saving a life, as opposed to improving quality of life? How do you weigh the suffering of animals against the suffering of humans?

The second step consists of selecting the area where your donation is most likely to have the most impact given your individual values. To do this, we look at three factors:

Scale

How many are affected by the problem? How badly does the problem affect them?

Tractability

Relative to how large the problem is, how easy is it to improve it? Can we realistically make meaningful progress at this time?

Neglectedness

How much attention is given to the problem, and how many resources are currently spent to solve it? In other words, is it a ‘crowded’ area? By the law of diminishing returns, your donation is likely to have more impact on a challenge where fewer people are already helping relative to the scale of that challenge.

Intervention

In every cause area there are many different proposed strategies to help. For instance, if you are interested in improving education, you could consider supporting a program to provide learning materials, train teachers, give scholarships etc. In most cases, some strategies are much more successful than others. To find the ones that are, we look for the following qualities:

Supported by robust evidence

This means we look for interventions that have been studied, and we look for those studies to be methodologically sound and reliable. For instance: are we confident that any impact measured has actually been caused by the specific intervention, and not by a separate, unknown factor? Do the studies avoid possible biases? Do they show consistent effects?

Effective

Does the evidence show that the intervention has positive outcomes, and achieves its goals?

Cost-effective

How large is the impact per dollar spent? In other words, if you donate a set amount of money, how much good does it do compared to spending the same amount on another strategy? Quantifying impact is much easier for certain types of interventions- such as vaccines, than for others- such as policy advocacy campaigns. However, in most cases, estimations can be made using a variety of methods.

Charity

There are often several organisations running a given type of intervention. Our goal is to find the ones that do so most effectively. The specific questions we discuss with a charity depends on the area they’re working in, but the most essential things consider are:

Intervention implemented

Does the charity implement a promising intervention?

Organisational strength

Does the charity have a strong internal structure?

Room for funding

Do they have concrete plans for growth? Would they be able to use further funding productively?

Transparency

Are they transparent about their activities and finances? Have they shown willingness to adapt or change their methods if a project did not work as hoped?

Track record

If they have been running for a while, have they had any success?

Evidence and risk

Some donors are most comfortable supporting organisations where we can confidently and accurately estimate how much good their donation will do. Others prefer to support interventions that are considered high-risk and high-return. These are usually interventions where chance of success is lower, but where a successful outcome would have outsized impact. Some donors want to make a mix of low- and high-risk donations, similar to how one may think about a ‘diversified investment portfolio’.

We are committed to respecting individual values, and think that an evidence-based approach can be taken no matter where your preferences lie, and how you feel about risk taking.

David Goldberg

Author

David is the co-founder and Global CEO of Founders Pledge. He moved into the non-profit sector from an eclectic commercial background. Having run the gauntlet of finance, start-up, and academia, he started Founders Pledge to make it absurdly easy for entrepreneurs to do good in their work and lives. Following high school, David joined Mortgage Capital Associates, one of the largest privately held mortgage banks in the U.S., where he launched the secondary marketing department. After that, he worked as a mortgage and investment banker at CS Financial in Beverly Hills. David also founded and ran a boutique real estate firm in Germany and was the general manager of Urban Motion. David is a graduate of UCLA and the University of Cambridge.