Gifted $1 million. What to do? (Not hypothetical)

post by BenWilder · 2021-08-30T08:39:42.433Z · EA · GW · 24 comments

This is a question post.

I recently was unexpectedly gifted a little less than $1 million in stock. I am speaking with a financial advisor, but I want EA advice.

What are my most important next steps? I want to be part of doing the most good possible for living, feeling beings before I die. 

I know this is very personal. It is different for each situation. What are the most important factors to keep in mind? I am open to radical thinking, but only if it can be practically implemented by an ordinary imperfect person.

Thank you for your time--I am serious about this. 

Answers

answer by Aaron Gertler · 2021-08-30T11:06:25.804Z · EA(p) · GW(p)

It's very good of you to ask this question here!

Before what follows, a personal offer: Please email me if you'd like to talk about this one-on-one. I'd be happy to give an overview of common EA advice and connect you to experts who can answer certain questions in more detail. (I've been in the EA community for eight years, have provided donation advice to many people, and currently consult for an EA-focused foundation in San Diego.)

Other notes:

This is my favorite article on charitable giving -- really detailed, with advice suitable for many types of donors. See the table of contents for a sense of what gets covered.

The article mostly covers "ways to give" rather than "what to think about". Some factors I think are important to keep in mind:

  • Do you care a lot about "seeing" your impact happen soon, or are you comfortable with more uncertain or longer-term donations?
  • To what extent do you want to have a "say" about what your donation is used for, vs. letting the charity choose how to spend it?
  • How do you weight the feelings of nonhuman animals compared to humans?
  • What do you think of arguments like those in "The Case for Strong Longtermism [EA · GW]", that the most important impacts of your actions are probably those that happen well into the future?
answer by Benjamin_Todd · 2021-08-30T12:21:38.717Z · EA(p) · GW(p)

The advice below is only about where to donate it, but that's only one of the key questions.

It's also worth thinking hard about how much you want to give, and how to time your giving.

Even if you decide you want to use the entire amount for good, Phil Trammel's model about giving now vs. giving later suggests that you should donate x% of the capital per year, where x% is mainly given by your discount rate. In general people think the community as a whole should donate 1-10% per year, so I'd suggest, as a starting point, you could pick a percentage in that range to donate each year.

(There are lots of complications. A few examples: (i) If you think the community is too tilted towards investment, and you've found an unusually good opportunity to donate now, then it could be justified to donate the entire amount right fairly soon. But I think a good prior is to donate something close to the optimal percentage for the community as a whole.  (ii) If you think AI is coming soon, or lots of big donors are going to enter EA in the coming years, you could argue for a lot of urgency (iii) likewise if you anticipate you might give up on donating in the future (iv) Otoh, you might radically change your views of which causes are best in the coming years. If you donate everything now, you can't take advantage of that learning. (iv) there are also questions about psychology and practicalities e.g. whether you'll still be willing to donate in the future, how much time you have for research, taxes.)

There's also the question of how much to give to charity vs. spend on yourself. As one consideration: once you've donated the money, that's irreversible - if you run into financial hardship later, you could really regret it. Disbursing more slowly is not only probably optimal for impact, but it also preserves this option value.

I think a procedure that makes a lot of sense is to work out how much you'd like to live on per year, and how that might change over time. Then you can donate a significant fraction of any income you earn above that.

For instance, if you'd like to live on $50k, need to save $20k per year for retirement, you get $70k of income from work, and you earn $20k of income from your investments, then your 'excess' that year is $20k, so maybe you put that $20k into your 'altruism' fund, and then donate 1-10% per year of that. (While bearing in mind your altruism fund could be used as emergency funds.) I think this is a pretty good procedure from a tax pov too.

As a rough rule of thumb, I think you can plan to withdraw ~2% per year from money invested in the global index indefinitely, if you want your spending to keep pace with nominal GDP. The 2% is chosen to be roughly the dividend yield on global stocks, accounting for net buybacks, so this percentage will go up and down over time. But right now this means your $1m can provide an indefinite income of ~$20k (pre-tax).

The above was all framed in terms of income, but it probably makes sense to have some wealth goals as well e.g. maybe you should put aside enough for retirement + runway + some income insurance, and then donate excess income after those goals are made.

Related, it's worth thinking about whether you can use the money to empower yourself to do something high-impact. E.g. you now have the freedom to take 1-2 years off work – should you consider retraining, studying, or trying to make a big career change? You might be able to think of ways to increase your long-term impact a lot, perhaps with higher-rates of return than investing the money in the stockmarket.

comment by Linch · 2021-09-02T20:36:44.035Z · EA(p) · GW(p)

(I agree with many points in this answer. But for communication succinctness and because this answer is highly upvoted, I will only point out my disagreements)

In general people think the community as a whole should donate 1-10% per year, so I'd suggest, as a starting point, you could pick a percentage in that range to donate each year.


There are lots of complications[...].But I think a good prior is to donate something close to the optimal percentage for the community as a whole

I don't share this intuition at all fwiw, because of two considerations:

1) From purely an optimal investment vs philanthropy perspective,  it seems like the prior should very strongly be to either donate everything if the community's not donating enough, or donating 0 if the community donates too much. As an individual donor, your decision-making should involve thinking on the margin, and it will be surprising if 1 million just happens to be enough to swing the community from donating too little to donating too much, or donating too much to donating too little.  [1]

2) A lot of these investment models are too conservative in their modeling of cash flows, because most people have incomes. In Ben's case, I don't know him or his life, but if he has a typical profile of an EA "unexpectedly given ~1M in stock", I think it is very likely that he has >1M in net present value of future earnings.

(I have the same issue with using Kelly ). 

Now in practice, I happen to agree that there's a strong case against donating much this year because of "complications" like learning value and radical worldview shifts, especially for new EAs, but my intuitions come almost entirely from these complications and are not, to a first approximation, driven by macro-level movement considerations like optimal philanthropy. And I think it's good for reasoning transparency for us to actually say our true reasons for believing things.

[1] Implicitly assuming Causal Decision Theory (CDT) here. I think your decision criteria makes more sense if you're assuming FDT with tightly correlated decision makers, but "tightly correlated" is an additional assumption. (I don't understand EDT too well but I think it ought to also support marginal analyses here as well)

Replies from: Benjamin_Todd
comment by Benjamin_Todd · 2021-09-03T18:29:55.977Z · EA(p) · GW(p)

2) I agree you should consider your future income, the percentage should be calculated as a percentage of current assets + NPV of future income.

 

1) I agree the approach of "work out if the community is above or below the optimum level of investing vs. saving, and then either donate everything, or save everything" makes a lot of sense for small donors. I'd feel pretty happy if someone wanted to try do that.  (Another factor is that it could be a good division of labour for some to specialise in giving soon and some specialise in investing.)

But I feel a bit unsure about recommending it.

  •  One issue is that it assumes you're pretty coordinated with the rest of the community, which might not be true, especially of new people.
  • It's very hard to know what the optimal level is for the community as a whole should be, and if the person gets it wrong, then they might donate everything, which is irreversible. The advice of "give about 4% per year" seems less likely to be drastically wrong for them.
  • From a community pov, 'everyone donate what they think they ideal percentage should be' vs. 'donate all or nothing depending on your best guess at whether above or below the optimum' would both end up converging to the ideal percentage donated.
  • Donating more gradually means you can take advantage of learning (and as you say, radical worldview shifts).
  • It also lets you self-insure if your personal circumstances end up worse than you expected.

 

PS A third approach would be more bottom up: do a search for the best thing you can donate to right now, then compare it to your best investment, and try to think about which is better.

Replies from: Linch
comment by Linch · 2021-09-03T19:06:03.014Z · EA(p) · GW(p)

Thanks so much for the fast   and detailed response!

Sorry I should be clearer. Ben Wilder probably shouldn't donate all of his money this year. EA is a marathon, not a sprint, and it's good to take advantage of (eg) learning more and worldview shifts. I just don't think optimal philanthropic timing is the main consideration here.

PS A third approach would be more bottom up: do a search for the best thing you can donate to right now, then compare it to your best investment, and try to think about which is better.

Agreed, I think there's a lot to recommend for this approach, including but not limited to if this search works out well, relevant information can be passed along to the rest of this community.

comment by Nathan Young (nathan) · 2021-08-30T22:12:21.363Z · EA(p) · GW(p)

I like that you suggest that people should give what they are comfortable giving. 

I think that's advice I'd want someone to give my friend and I think it's wiser in the long term.

answer by MaxRa · 2021-08-30T08:58:40.263Z · EA(p) · GW(p)

Wow, that's really cool! One idea is to look at the reports from winners of donor lotteries. They are also more or less ordinary people who got to decide where to donate a lot of money and shared their process and learnings: https://forum.effectivealtruism.org/tag/donor-lotteries [? · GW]  

answer by Gus Docker · 2021-08-30T09:02:57.197Z · EA(p) · GW(p)

Here is a great place to start: https://funds.effectivealtruism.org 

comment by MichaelStJules · 2021-08-30T18:53:31.964Z · EA(p) · GW(p)

I think this should be the default option for your donations (setting aside how much and when you want to donate), and you should either defer to them or make a serious effort to beat them (possibly with their help). You can talk to the fund managers for advice. These fund managers have a good idea if how money is being spent within their causes and how their grants/donations might affect where other funding goes (e.g. where Open Phil grants).

It could be worth asking them for estimates of the cost-effectiveness of their marginal grants, although I don't know if they will actually keep track of this, and it could have extremely high uncertainty, depending on the cause.

answer by Khorton · 2021-08-30T09:47:20.865Z · EA(p) · GW(p)

That's wonderful news. I imagine your financial advisor will talk to you about when and how to donate the stock, so I'll just share a couple of considerations about what charities:

-One charity or multiple charities? On the one hand, committing to give to one charity at a time forces you to be quite rigorous with your evaluation, and making larger donations would probably reduce the difficulty of donating your stocks. On the other hand, some people like to "diversify" their donations by giving to multiple organisations, some riskier and some better established. But if you think of yourself as part of the EA community, you can think of the community's donations as being diversified, so perhaps you're free to just donate to one charity.

-Restricted or unrestricted donation? 99% of the time I recommend just finding an organisation you trust enough to give an unrestricted donation rather than telling the organisation what to do. The exception might be in a very large organisation that has one very good program and a bunch of average programs. Hopefully you can stick with unrestricted.

-Donating in a lump sum or over time? One million dollars is a lot of money, but probably small enough that most charities could handle receiving it all at once. But you might feel better giving your money to a charity over 5 or 10 years, or seeing certain milestones achieved before releasing more money (as above, ideally you'd find a charity you trust so you don't need to make them jump through hoops). There also might be tax or logistical reasons for donating over time.

-Keeping to a well-known charity or betting on something new? As suggested below, the EA funds could redistribute your money, or you could donate to a GiveWell or Animal Charity Evaluators top charity. You might be able to find an even more impactful and cost-effective option if you're willing to look at less established charities, charities that could have a large positive impact but could have no impact ("hits-based giving"), or charities in areas that haven't been evaluated in the past. If you have time, I'd recommend choosing a charity you know is high-impact as your "charity to beat" and then comparing other options to that charity. For example, the charitable foundation Open Philanthropy compares all of their spending to GiveDirectly - they want to make sure all their charitable giving is at least as impactful as giving it directly to someone in extreme poverty.

comment by Khorton · 2021-08-30T09:49:11.897Z · EA(p) · GW(p)

For some non-EA further reading, here's a report I really liked looking at how charities prefer to work with major donors like you: https://cep.org/portfolio/crucial-donors-how-major-individual-givers-can-best-support-nonprofits/?fbclid=IwAR2XZ3nSTWvg0_nqLevFVGTCYNL_PGHrDzq5xhm368W_E_YxiRIzWyNbGaQ

answer by tessa · 2021-08-30T15:09:48.110Z · EA(p) · GW(p)

Congratulations! According to the Founder's Pledge FAQ, anyone who holds equity in a company can participate. They offer a bunch of High-Impact Giving Support. You might be able to book a call with them and get advice about how to efficiently donate equity.

answer by lukefreeman · 2021-08-31T03:06:58.724Z · EA(p) · GW(p)

Hi Ben, great to hear you want to make such an impact and are taking it so seriously!

There are some really fantastic answers here already! Once you've read through them I'm also happy to chat with you about this over a call if that'd help. GWWC also regularly hosts Open Forum events for people who want to discuss their giving decisions, the next one is in mid-September.

Also, if you are so inclined, it can help others if you write up what you end up deciding and why 😀 

answer by Matt_Sharp · 2021-08-30T16:00:15.958Z · EA(p) · GW(p)

Hi Ben. I'm the Principal Analyst at SoGive. As well as offering advice, we may be willing to undertake bespoke analysis and research on specific charities or cause areas, depending on what questions you have. If this may be of value to you, please contact Sanjay 

I'd also endorse the other responses to your question. If you follow-up on all the suggested articles, and do some thinking about the various questions, then you will be better placed to understand whether you actually want or need SoGive's input.

answer by matthewp · 2021-09-04T10:25:51.864Z · EA(p) · GW(p)

This doesn't seem to have been said, so I will: $1m is enough to live off as an endowment. You can use this to work your entire life on any cause you want to, and then donate as much of it in your will as you wish to. 

answer by jackmalde · 2021-08-30T10:03:53.210Z · EA(p) · GW(p)

You might find it interesting to read through this post [EA · GW] and the comments. It covers how one might use a large sum of money to most improve the far future.

Many EAs believe that we should be focused on the far future when doing good, a school of thought called "longtermism". Let me know if you would like to read more about that and I can try to point you in a useful direction.

answer by andzuck · 2021-09-02T17:16:09.044Z · EA(p) · GW(p)

What a wonderful position to find yourself in! If you are considering donating some of the gift today, Qualia Research Institute (QRI) would be a great place to donate as we currently have a 1:1 matching grant out for $200,000.

Full disclosure, I am the Executive Director of QRI.

You can 2x your donation's impact and completing this match will allow us to make our first large hire outside of the core founding team.

Our main goal is to understand and quantify the most important aspects of conscious experience, in particular, emotional valence (how good or bad experiences feel). Some large impacts of this would include:

  • Helping find first-principles solutions to hard-to-treat mental health & chronic pain conditions.
  • Creating more rigorous measures of philanthropic & economic utility and upgrade imperfect measures of well-being such as the QALY (Quality-Adjusted Life Year), which could drastically improve economic policymaking and the efficiency of our resource allocation.
  • Helping more accurately measure the quality of life of animals and non-linguistic humans.

You can read more about this history of QRI and our 2021 Strategy here.

comment by Question Mark · 2021-09-04T20:57:28.707Z · EA(p) · GW(p)

There was a post here [EA · GW] a few months ago giving brief evaluations of various longtermist organizations, and briefly commented on the Qualia Research Institute. It described QRI's pathway to impact as "implausible" and "overly ambitious". What would be your response to this?

Replies from: andzuck
comment by andzuck · 2021-09-06T03:48:08.969Z · EA(p) · GW(p)

Hi Question Mark. While Nuño evaluated many longtermist orgs in that post, he didn’t actually evaluate QRI. Here’s the full quote: “Below is a list of perhaps notable organizations which I could have evaluated but didn't. […] Qualia Research Institute. Its pathway to impact appears implausible and overly ambitious.” It’s unfortunate that no explanation is actually given for why the view is held. The name of any longtermist org could have replaced QRI’s name and the statement would sound exactly the same.

QRI’s path to impact has three steps. Step 1: understand what things are conscious and how to measure and quantify valence (how good or bad an experience feels). Fortunately, we’re in a great position to make progress. Michael Johnson’s Principia Qualia breaks down the problem of consciousness into eight clear sub-problems and lays out a testable theory for what valence is. You can read about the progress made since the theory was presented here.

After we can measure valence, step 2 is to do just that in humans, animals, and anything we suspect is conscious. We'll do it in a variety of situations and conditions. We’d confirm whether valence follows a log scale, as Andrés Gomez Emilsson has suggested. All this data will make it easier to make economic decisions, allocate capital, and do effective altruism. It’ll also let us learn what the situation is with the quintillions of organisms on the planet and come up with a triage plan to help. For more on this topic, see Johnson’s “Effective Altruism, and building a better QALY."

Step 3: reduce suffering, increase baseline well-being, reach new heights of happiness. Solving valence measurement will probably yield insight into how to take a suffering mind and nudge it toward something better. We also take inspiration from the quote: ‘Thermodynamics owes more to the steam engine than the steam engine to thermodynamics.’ So we’ll be working on how to measure valence (step 1) and how to reliably create positive valence (step 3) at the same time. If AGI is involved in creating an awesome future, chances are it’s because we aligned its values to care about valence too. Johnson wrote about this in more detail here. That’s the path to impact. If it seems implausible, I’m curious what step doesn’t make sense. As for it being overly ambitious, well, that’s only a problem if the project isn’t able to be accomplished. It definitely will be hard to accomplish without money, but we’re working on it anyway.

answer by Question Mark · 2021-08-31T22:39:09.987Z · EA(p) · GW(p)

Brian Tomasik wrote this article on his donation recommendations, which may provide you with some useful insight. His top donation recommendations are the Center on Long-Term Risk and the Center for Reducing Suffering. CLR and CRS are doing research on cause prioritization and reducing S-risks, i.e. risks of astronomical suffering. S-risks are a neglected priority, so any additional funding for S-risk research will likely have more marginal impact compared to other causes.

answer by Nathan Young · 2021-08-30T22:00:25.362Z · EA(p) · GW(p)

I agree with the other answers and will avoid repeating them.

The only thing I'd add is that I suggest giving an amount of money you'll be glad you gave.

You don't have to give any of this money.

If you do choose to give away any %, that's wonderful! 

This is the advice I'd want someone to give to someone I care about. Also it's more sustainable in the long term, if we give away what we are comfortable with. 

answer by aaronhamlin · 2021-09-01T03:01:35.916Z · EA(p) · GW(p)

Congrats, Ben! In terms of targets for any donation, I'd be happy to talk with you about The Center for Election Science, where I'm the executive director.

In terms of strategies relating to tax efficiency and giving, I'd be happy to talk with you and your financial advisor. I think a lot about this topic and have written about it quite a bit. I actually just finished my sixth essay on giving and taxes. Aside from working in the nonprofit sector for going on ten years, I'm also a licensed attorney. Feel free to email me and we can set up a call.

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