Posts

How You Can Counterfactually Send Millions of Dollars to EA Charities 2020-12-24T02:50:14.631Z
EA could benefit from a general-purpose nonprofit entity that offers donor-advised funds and fiscal sponsorship 2020-06-27T00:16:58.808Z
EA Angel Group: Applications Open for Personal/Project Funding 2019-03-19T18:29:32.777Z
EAs and EA Orgs Should Move Cash from Low-Interest to High-Interest Options 2019-02-23T12:24:02.970Z
Requesting community input on the upcoming EA Projects Platform 2018-12-10T17:41:32.212Z
Ideas for Improving Funding for Individual EAs, EA Projects, and New EA Organizations 2018-07-10T06:12:29.993Z

Comments

Comment by Brendon_Wong on Has anyone found an effective way to scrub indoor CO2? · 2021-06-29T04:31:17.385Z · EA · GW

HVAC systems with outdoor air inputs (like DOAS) may be an effective way to reduce the buildup of CO2, VOCs, etc indoors in an automated and temperature-controlled manner.

Comment by Brendon_Wong on US bill limiting patient philanthropy? · 2021-06-27T11:22:41.776Z · EA · GW

I agree that this is a possible outcome (perhaps there would be loopholes in the law, foundations and DAFs would pursue other investment strategies like using leverage to achieve higher returns, or philanthropists would shift funds into alternative non-regulated entities), and if spending down endowments is the outcome, this certainly seems like it would have major ramifications on the entities subject to this regulation.

If these regulations persist in the long-run, I would imagine that patient philanthropy would transition to storing funds in other entities, like corporations, that are not subject to these regulations. Entities like corporations are not tax advantaged, so funding going into those organizations would be fully taxable. Investment gains might be fully or partially taxable (current regulations state that C Corps can only write off 25% of their total income for donations). A C Corp could switch to directly paying for products/services to avoid the limit of write-offs, or make those "purchases" through other entities like charities, so there would probably be ways to make the investment income non-taxable. Either way, the primary mechanism of impact for patient philanthropy—the effect of compounding interest over many years—would be preserved even if regulation to increase disbursements perpetually into the future were to pass.

Comment by Brendon_Wong on How You Can Counterfactually Send Millions of Dollars to EA Charities · 2021-01-14T00:12:56.538Z · EA · GW

Thanks for your response Catherine! It's great to hear that GiveWell is moving in this direction!

Makes sense regarding those three aspects of GiveWell's banking, and completely agree that our estimation methodology is likely in GiveWell's case to overestimate its average cash balance during the year. For the benefit of readers, as mentioned in our article, whether the estimate is accurate, too low, or too high will vary by charity and there is no way to increase the accuracy for an estimation methodology that works across charities due to the limitations of the Form 990 data.

Other commenters have mentioned that the federal funds rate is now close to zero. This article was primarily written before COVID-19 and the federal funds rate seemed like an appropriate and conservative benchmark at the time. I did not update the benchmark before the article was published because I received feedback from reviewers that the magnitude of the impact was large regardless of the exact interest rates. This is a sentiment that I agree with.

If the exact rate is literally 0% for the next few years (I did not intend for the federal funds rate to be used as a forward-looking estimate) that would indicate the benefit to charities is pretty low. I think a better proxy for the interest rate charities could have earned in the past and can earn now and into the future is Ally Bank's high-yield savings account rate. Ally Bank is a large institution and has over 10 years of historical interest rate data available. Their rate has historically been close to high-yield savings rates offered by most banks, and just a touch lower than the best options.

At this exact point in time, Ally Bank's rate is 0.5%. Here is the link to a historical rate chart with data since 2009: https://www.depositaccounts.com/banks/ally-bank.html#a305301. Ideally, GiveWell and other charities earning interest on U.S. dollar deposits should choose banking options that have historically earned and currently earn something close to this rate. Unfortunately, I do not think organizations can open accounts at Ally Bank at this time because they only cater to individuals, but there are many options for organizations out there that are competitive with Ally Bank's rate. We're happy to provide suggestions to GiveWell or any other organization.

As you can see from the chart, back when the federal funds rate was close to 0% after the 2008 recession, Ally Bank's interest rate hovered around 1%. That was one of the reasons my counterfactual impact estimate for GiveWell used a 1% rate. In retrospect, I should have elaborated on how I generated that estimate in the article itself.

I understand that factors like customer service, security, technology integrations, etc influence GiveWell's decision making around its banking needs. I have two thoughts on the matter.

Firstly, a high-yield savings account simply exists to maximize the yield on a nonprofit's cash, whereas a checking account accommodates most of an organization's banking needs. A checking account does not need to be selected on the basis of its interest rate, whereas this is much more important for a savings account, where an nonprofit's appropriate savings balance (e.g. most of its cash that isn't immediately needed) is stored.

Secondly, GiveWell and other charities can also select the option of having an account at a major brokerage firm such as Vanguard or Fidelity which may be more trustworthy and integrated with more options than a lesser know savings account provider (although FDIC insurance means that most regulated U.S. banking options are safe). Charities can hold these funds inside a money market account (offered by most brokerage providers as well as a lot of third parties), which is designed to not change in value, or another low-risk option. My article from last year contains more information on different options for charities, including analyzing the risk/security of both bank accounts and money market funds which you mentioned GiveWell is considering, as well as concrete guidance on selecting a brokerage account and the fund(s) to hold within it.

Comment by Brendon_Wong on How You Can Counterfactually Send Millions of Dollars to EA Charities · 2020-12-31T07:40:49.207Z · EA · GW

Thanks for commenting!

First, what specific options are available? As an individual I can open a high yield savings account with Ally (or I can  refer to NerdWallet for a list of other high yield savings accounts). But If I am running an NGO I can't legally use accounts intended for individuals, right? Could you provide a list of options?

Exactly, in most jurisdictions, NGOs must create savings accounts meant for organizations. In the United States, those accounts would be called business savings accounts. In the U.K., those accounts would be called charity savings accounts, but some business savings accounts might work depending on the terms and conditions.

For the U.S., here's a link to some examples of business savings account (online sources may be somewhat biased in choosing recommendations due to affiliate links, although this source seems decent): https://www.magnifymoney.com/blog/best-of/best-business-savings-accounts625269146/

Second, these ideas are fairly limited to cash held in USD in the United States, right? For organizations that have operations (and thus which keep funds) in other countries and other currencies, are you able to recommend any options? I am concerned that both the lack of high yield savings accounts in those countries and the cost of international transactions would prevent organizations from using this method.

The ideas expressed here are applicable to any country that has accounts or investment options available that pay more interest than the default accounts in use by most people/organizations. This likely holds true for most/all countries that have an established financial system.

In terms of offering recommendations, it would depend on the currency and country in question. The Flagstone option I mentioned in earlier comments works for GBP, EUR, and USD (they may be limited to UK-based clients, I don't recall off the top of my head). Feel free to mention specifics in a follow-up comment or email us at support@antigravityinvestments.com. I've historically researched the US, UK, and Canada, but I'll see what we can do if there's another country in question!

For countries that have less established financial systems, I agree, they may be unable to find a suitable alternative in their base currency that pays a high rate of interest, or be unwilling to take on currency risk and currency conversion costs by opening an international account likely denominated in another currency.

Besides opening an international account in USD, for instance at StoneCastle, an organization could also open an account at a brokerage firm that supports international clients like Interactive Brokers (I believe they support 19 currencies) and access various investment options. That is getting to a pretty high level of complexity though.

Comment by Brendon_Wong on How You Can Counterfactually Send Millions of Dollars to EA Charities · 2020-12-30T19:17:59.521Z · EA · GW

Thanks for taking the time to list those out Steve. I downvoted your comments because while I'm very happy to engage in this type of discussion with commenters, and have with others that have commented on this article, I feel like you are jumping to conclusions that things are "incorrect" or "misleading." In fact, many of your points are already mentioned in the article itself. Additionally, you are attacking my writing by making comments like something is "naive" which I feel is not conducive to a positive and intellectual discussion about this. You'll find that I've thought out the reasoning for all of the points you mention, either in the article itself, or because it's fairly easy to understand why.

Cash balance methodology

Dividing interest earned over the year by end of year cash is not an upper bound estimate interest

In the sentence directly above this quote, I explain what I mean by upper bound: "GiveWell’s total cash and investment income in 2019 was $26,260. GiveWell held investments in 2019, so using the full amount on Line 3 to estimate GiveWell’s interest on cash in 2019 likely overestimates GiveWell’s actual interest earned on cash in 2019."

I am saying that the number overstates the interest earned on cash alone because of the confounding effect of investment income. 

It's actually more like a lower bound estimate, because it implicitly assumes that the cash level at end of year was the same as the average cash level throughout the year.

The reason why this methodology is being used is stated in this first line of the article "This methodology is easy for anyone to replicate and is based on publicly available nonprofit financial statements (IRS Form 990) that all U.S. charities are required to file yearly."

The Form 990 does not include a better estimate of an organization's average daily cash balance. This is why I am calling this an "estimation" methodology.  In the "Estimation Methodology Caveats" section I cover this and other issues in depth (and I've already mentioned this to other commenters, who also brought up this valid point). A short quote: "The average of a nonprofit’s start of year and end of year cash could noticeably underestimate or overestimate a nonprofit’s actual average cash balance during the year because it only uses two days as data points..."

Since GiveWell is a grant-making organization that's a very dangerous assumption to make (and their 990 form shows them making ~$30m in grants over the course of the year).

GiveWell is used as an example—this analysis is meant to highlight the methodology, including its shortcomings, not be a deep dive into GiveWell itself. I don't have the data needed to estimate this better. Neither you nor I know how much money GiveWell actually holds during other times of the year. They receive funds year-round and need reserves on hand to pay operational expenses.

You acknowledge this in the next section, but then propose an equally questionable workaround

That is not correct, the workaround is, as I state in the article, meant to account for the confounding effects of money made from investments rather than cash holdings by only looking at the cash balance we know isn't earning any interest. This "workaround" has nothing to do with the cash balance issue you mentioned.

The same page shows that funds received in the final three months of 2019 were substantially greater than those received in the first nine months of 2019, which is another reason that the end-of-2019 cash balance paints a misleading picture

Thanks for pointing this out. I didn't look more closely into GiveWell's specifics because GiveWell is used as an example of a methodology that generalizes to other charities as I stated in the article. Data like this is very difficult to correlate with an organization's cash balance. We don't know what percentage of GiveWell's cash balance the Maximum Impact Fund is, what the Maximum Impact Fund balance is after a grant is made, whether the "amount" column reflects all donor inflows during a specified period or also granting from reserves or other revenue sources, etc.

The year you've chosen for your analysis happens to be the year with the highest cash rates in the past 12 years.

The most recent data is most relevant to GiveWell's current and future opportunity costs.

This isn't acknowledged, and you don't backtest your strategy in other years (e.g. all the years where rates were ~0%).

That is a good point! Time did not permit, but as I stated in my reply to Rob, I do think that "to get savings accounts yields themselves, we might need to use a third-party service or design a benchmark ourselves. Given the current situation with the federal funds rate, it would make sense for us to find a better proxy for good savings accounts yields in 2020 so that we can better estimate the opportunity cost for 2020 once the 2020 Form 990s come out as well as use the rate as a point of reference for current and future expected earnings."

So it is a good idea to use an alternative metric to the federal funds rate, particularly for lower interest rate years, so they more accurately reflect the opportunity cost. Off the top of my head I think that rates were around 1% (see Ally Bank's 2015 and 2016 historical yields when the fed funds rate was 0.13% and 0.39% respectively), which is the exact same rate I used for the forward-looking estimate for GiveWell. Using savings yields from one bank or a blend of banks instead still wouldn't change the article's conclusions, given that those rates would be both higher than the federal funds rate and also significant enough to warrant consideration even in a zero interest rate environment.

Potential returns of other investment options

There's nothing about that asset that makes its one year backward-looking return able to be extrapolated. Indeed this is basically the equivalent of picking a different asset that you know now performed well over a one year period and using that to  estimate opportunity cost. Why not Bitcoin in 2017 or Tesla stock in 2020?

Exactly, why wouldn't I pick Bitcoin or Tesla? Because both ultra-short-term bonds and a standard conservative risk portfolio are extremely common investment portfolios for more risk averse investors such as many nonprofits who require a steady rate of return with minimal drawdowns. It doesn't matter what examples you use, low-risk options would have performed well during this time period and other time periods, just worse than riskier options.

Citing the one year, backward looking return of JPST is misleading

And another reason I used JPST as an example is because I recommend  JPST in my early-2019 article before I could see its historical performance. So I'm not sure if "backward looking" is the right verbiage.

And re citing a year of drawdown data - the fund had a drawdown in March 2020! If you look at a similar index with a longer timeseries you'll see there have been drawdowns, even against the backdrop of a period of secularly falling interest rates that juiced bond returns.

I already state in the article that I am quoting month-to-month drawdown data, not day-to-day data. This means the fund did not decline in value month by month. The highest historical month-to-month drawdown was -1.72% and it recovered in two months. Hardly a volatile investment.

This analysis suffers from the same problem. At least there's an attempt to look at a window longer than one year, but again it's a cherry-picked period of 20 years, and it's backward looking returns data implied to be forward-looking. You also mention the drawdown in 2018. What was the maximum drawdown in 2008 to 2009?

Given the organization is granting funds a couple of months after receiving them, it has little ability to tolerate drawdowns, making comparisons to a higher risk fund incorrect to misleading.

I did not cherry pick the time period, stocks and bonds have generally performed well across time. Portfolio Visualizer has data starting from 1987, which indicates an annual return even higher than what I quoted, at 7.07%. Maximum drawdown is -8.49% from the 2008 crash. Exactly why this is considered a standard conservative portfolio by financial professionals.

Given the organization is granting funds a couple of months after receiving them, it has little ability to tolerate drawdowns, making comparisons to a higher risk fund incorrect to misleading.

As we can see, the drawdown is very low, and the expected value is positive and significant. For granted funds that GiveWell cannot afford to have a drawdown on (this does not represent all of their funds), then a "zero-risk" option like a savings account would make more sense. It all depends on the charity. Investment examples are for illustrative purposes, I have no idea what approaches GiveWell can or cannot take in actuality, beyond a savings account, which it should be able to do.

Conclusion and staff time

As shown above, getting a counterfactual impact number in the millions of dollars is not "very likely... regardless of the estimation method". That statement is somewhere between incorrect and misleading. For instance if the cash balance is 10% of what you cite, and the interest rate is more like 0.50%, it doesn't hold up.

That depends on what numbers we're using. I think 10% is very low. As I've said, the Maximum Impact Fund cannot be used as a reliable estimate or predictor of GiveWell's average daily cash balance. But if we assume just the fund itself represents all of GiveWell's money, we can see that there's a 3-month grant collection period (averages to 1.5 months of cash at 100%) plus a 2–3 month delay in granting (averages to 2.5 months of cash at 100%) which would suggest a minimum percentage of at least 33% (4/12 months) just based on the money collected during the last three months of the year.

The staff time estimate is also somewhere between incorrect and misleading:

  • If it's just opening bank accounts, then the impact is GiveWell on average earning roughly the prevailing bank interest rate (close to zero for much of the relevant period)
  • If instead you want them (without the benefit of hindsight that you employ) picking actively managed JP Morgan bond funds, or creating and balancing a bond + stock fund, then I'd hazard it's more than two hours of work per year!
  • So either it's not much effort, and not much return, or there can be higher returns, but clearly it's more than 2 hours a year of effort.

This is probably evident from the rest of my replies, but a 1% account savings rate or even 0.5% still produces significant financial returns. These numbers should be used instead of 0%.

And it would take a very small amount of time to keep funds in one fund for multiple years, whether that's JPST or a multi-asset fund that has, say, a 20% stock allocation and 80% bond allocation. Vanguard, a well-known and trusted provider, has a great ultra-short-term bond fund as a JPST alternative. A nonprofit might not maximize returns by shifting between funds on the reg (which is, as you say, time consuming, although Antigravity Investments is more than happy to help with that), but evidently they will do much better than nothing. Many nonprofits self-manage their investment approach.

Comment by Brendon_Wong on How You Can Counterfactually Send Millions of Dollars to EA Charities · 2020-12-30T06:34:25.777Z · EA · GW

This article makes several statements that I interpret as somewhere between intentionally misleading and outright incorrect.

Could you list out those statements? Are you talking about the article, or my comments? I would certainly not want to intentionally mislead, nor be outright incorrect.

For instance, this reply says the 2.19% Fed Funds rate was the prevailing rate in 2019, and isn't intended to be a forecast of the future. But since we know the Fed Funds rate is 0% today, why would that rate be used to argue for a forward-looking change in behavior?

As I state in the introduction, "In this section, we will introduce our cash interest opportunity cost estimation methodology for U.S. 501(c)(3) charities." The majority of this article is about open sourcing the estimation methodology we developed, which took considerable effort over multiple years. We analyzed financial data across over 300,000 nonprofits and ran the methodology past the IRS and an independent accountant. This methodology was not designed to forecast future opportunity costs, and doing so seemed especially unnecessary in the pre-COVID-19 environment of rising interest rates that we originally developed the methodology in.

As you can see by the dollar amount of the $4 million dollar forward-looking estimate for GiveWell (based on a 1% interest rate), the interest rate does not need to be 2% for this recommendation to make sense. Current bank yields are 0.5%, so if we assume that's the case for the next five years, the five-year benefit is $2 million instead. Given that the implementation time is, say, a conservative 20 hours, the associated staff time cost might be 20 * $100 = $2,000. Should GiveWell spend $2,000 to make $2,000,000? That's a 1000x ROI.

Part of the reason why the article was mostly about my estimation methodology is because the exact forward-looking numbers don't change the conclusions of the article.

So assuming an organization needed to make a grant within 12 moths, they could currently expect to make 0.10% on their cash balance. Needless to say this is 1/10th of 1%, or <1/20th of the figure cited in the post. And it seems a stretch to assume organizations hold cash for 12 months before granting it. So the likely benefit is perhaps at best 1/10th and potentially <1/100th of what's cited here.

You are citing numbers for an unappealing option to store cash in, and using that to argue that that's the best that organizations can do. Furthermore, you're doing this after I already mentioned bank interest rates of 0.5%+ in my reply to Rob that you are replying to. A quick Google search indicates that there are lower risk options (business savings accounts) that yield 0.5% and upwards. I have no idea why you are quoting a 0.10% figure.

You may not be understanding what the article means by "cash balance." As I make very clear in the article, we are using the organization's estimated average daily cash balance to calculate the historical and future opportunity costs. The average daily cash balance is the amount that an organization literally makes interest on; I can't think of a better number to use to calculate the interest an organization previously made and could be making in the future. All organizations have a cash balance, which we can say is the amount of cash in their checking and/or savings accounts, that they regularly make grants out of. As you can see from the historical opportunity cost estimation, clearly organizations have cash reserves on hand, and clearly those cash reserves could be earning more interest than they are now, regardless of whether or how they make grants.

Comment by Brendon_Wong on How You Can Counterfactually Send Millions of Dollars to EA Charities · 2020-12-29T19:38:11.239Z · EA · GW

Thanks for your thoughtful reply Rob!

"The 2.16% U.S. federal funds rate in 2019 is one of the most conservative interest rates possible."

The U.S. Federal Funds rate has been effectively 0% since April 2020 and was roughly 0% for six years from 2009 to 2015. The same is roughly true of the UK. Central banks in both countries are saying they'll keep rates low for years to come.

I can't immediately find a reputable business savings accounts in the UK/US that currently offers more than 1%.

To quote my reply to GMcGowan, "We used the latest Form 990 data from 2018 and 2019 and the associated interest rates from those years to calculate the prior-year opportunity costs as accurately as possible, which is a separate calculation than estimating the forward-looking counterfactual impact." In other words, the 2.16% is meant to be a conservative rate of interest a charity could earn by holding cash in a respectable savings account in 2019 rather than a forward-looking projection.

The federal funds rate is a good rate to use for historical analysis because we have very granular data for what it is in the past, whereas to get savings accounts yields themselves, we might need to use a third-party service or design a benchmark ourselves. Given the current situation with the federal funds rate, it would make sense for us to find a better proxy for good savings accounts yields in 2020 so that we can better estimate the opportunity cost for 2020 once the 2020 Form 990s come out as well as use the rate as a point of reference for current and future expected earnings.

I think the recommendation in this article is timeless, so the specific numbers don't matter that much. In fact, if the interest rates are lower, organizations are even less likely to do this, so the counterfactual impact decreases along the lines of expected interest increase but increases with the timeframe of impact before the organization would have otherwise implemented these changes.

In the "estimating counterfactual impact" section of this article, I use a 1% average improvement over the next five years to estimate GiveWell's opportunity cost over the next five years rather than, say, 2.16%. Right now, the rates are below 1% as you say. I see savings account options around the 0.5% and 0.6% range in both the US and the UK, although they've been higher earlier this year even after COVID-19.

You mention challenges with opening and managing bank accounts like: 

"I can't immediately find a reputable business savings accounts in the UK/US that currently offers more than 1%"

"These accounts usually offer a high rate to attract customers for a while, then dramatically reduce the interest rate"

"Opening bank accounts for non-profits, at least in the UK, is a pain."

"It looks like you usually won't be able to put in more than a million dollars/pounds in any given account, often less."

"keep track of them, secure the chequebooks, have them audited annually, integrate them into your bookkeeping system, change the signatures when staff turn over, figure out the idiosyncratic requirements to pull out money when you need to"

I have three responses. First, given the magnitude of the opportunity costs involved, most organizations with significant cash holdings should do this since the benefit is greater than the operational complexity (maybe a higher cash threshold for organizations wanting to hold money in UK banks). All organizations mentioned in the table have cash holdings of over $1,000,000.

Second, I think you've articulated some great reasons why Antigravity Investments should exist! On the surface, it might appear challenging to solve this problem, so having one person or organization figure this out and make the recommendation to multiple organizations and help with implementation as needed seems like a much more efficient model compared to having operations/finance team members at each organization relying on their preconceived notions to evaluate the benefits of this, plus needing to figure out the implementation component all by themselves.

Third, because Antigravity Investments exists, the EA community is now aware that there are institutional cash management solutions that overcome the challenges you mentioned. While it's better to directly contact Antigravity Investments for our latest recommendations, I wrote a DIY guide to institutional cash management in my  2019 EA Forum article (which is the solution to the opportunity cost problem mentioned in this forum post, although slightly outdated).

I've mostly been focusing on the United States and business savings accounts seem easier to open here. However, it so happens that I have done some preliminary exploration for the UK where you seem to have more experience with dealing with bank accounts. I'll mention several solutions, which address all of the concerns you mentioned.

In my original article, I mention a service called StoneCastle: "Our recommended solution is StoneCastle’s AAA-rated Federally Insured Cash Account (FICA). FICA works by continually analyzing yields at hundreds of U.S. banks and automatically storing cash at each high-yield bank up to the $250,000 FDIC insurance limit." Basically, you open one account, and that one account automatically optimizes the yield across hundreds of banks. The application is a very short PDF that can be filled out and submitted quickly and completely digitally. StoneCastle is open to international clients that want to store funds in USD.

As I mention in a comment on my 2019 article, "We're in the process of investigating options in the UK. Right now, Flagstone looks very promising, particularly for charities and large account sizes."

Flagstone is a somewhat similar service to StoneCastle but for UK cash deposits. It allows charities to open a single account and gain access to the best rates across (as of the time of writing) 45 partner banks. Unlike StoneCastle, money isn't moved automatically, but it can be moved at the click of a button. Flagstone appears to overcome the discovering reputable banks problem, the interest rate teaser problem, the switching bank accounts to get the highest yield problem, the account maximum balance problem, and the complexities of managing multiple accounts problem that you mentioned.

As mentioned in my original article and briefly in this article, storing money in ultra-short-term bonds or other investments is another good approach. Then, there's only a single brokerage account, and no bank-related complexity. Options like ultra-short-term bonds are safe relative to other investment options and also have a higher expected yield than savings accounts. Organizations can manage a brokerage account with a DIY approach, which could be as simple as making a couple-minute trade in a brokerage account every few months, or have an external service (like us) handle that.

Comment by Brendon_Wong on How You Can Counterfactually Send Millions of Dollars to EA Charities · 2020-12-29T01:42:40.410Z · EA · GW

I have not received a response from GiveWell staff members I've cold emailed in the past, but I have consistently received responses from info@givewell.org. This makes me think that info@givewell.org is a good choice.

I believe the detailed documentation of GiveWell's opportunity cost in this article makes it likely (85%) that GiveWell will respond to this inquiry or a follow-up email within two months. Hopefully they forward the inquiry to the appropriate team members.

I anticipate that the main failure mode of email outreach is that GiveWell indicates they intend to take action but does not do so in a timely manner (within six months), or isn't transparent regarding cash management improvements they say they've made in the past or intend to make in the future. In the latter case, the lack of transparency makes it difficult to determine the effectiveness of GiveWell improvements relative to the best possible interest rate until new Form 990s are released, which will be mid-2022 at the earliest for the 2021 Form 990. As an interest rate reference point, Axos Bank, which I mentioned in my talk earlier this year, is paying a 0.50% rate of interest right now.

I believe that it is difficult to mitigate risks associated with this failure mode without some way to increase GiveWell's trust in this recommendation or influence/get more time to speak with the appropriate decision makers. To date I have not found someone that can help with this, so I think a cold email is most appropriate in this case.

My email is as follows:

To: info@givewell.org

Subject: EA Forum Article About GiveWell

Dear GiveWell,

I wanted to share an EA Forum article I recently published about the opportunity costs of GiveWell's current approach to cash management. A rough estimate puts GiveWell's opportunity cost at $4 million over the next five years. Excluding deliberation time, I believe it will take under 10 hours for GiveWell to implement the change the article recommends.

It would be great to know if GiveWell has or intends to make changes, as well as the change that was made/how much interest it is currently paying relative to the best business savings accounts. My outreach to GiveWell is being publicly tracked in the action thread of the article, which is an experiment around leveraging the EA Forum to drive institutional behavior change.

Best,

Brendon

Comment by Brendon_Wong on How You Can Counterfactually Send Millions of Dollars to EA Charities · 2020-12-29T01:15:44.880Z · EA · GW

GiveWell

This is the first post in the action thread which I hope will be a good model for anyone that would like to try posting in this thread in the future. I hope that the action thread in general will be a good experiment for the EA Forum.

As documented in this article, I estimate GiveWell's five-year opportunity cost at $4 million. This is a very rough estimate which is dependent on many factors including GiveWell's true past and future cash balances. GiveWell's Form 990 makes it pretty clear they can benefit from this recommendation because they are earning a very small amount of interest income per year, even if their cash balances during the year are considerably lower than the year-end balances in Form 990.

Comment by Brendon_Wong on How You Can Counterfactually Send Millions of Dollars to EA Charities · 2020-12-24T09:34:55.571Z · EA · GW

Thanks for sharing your thoughts!

For point 1, I mention this in more detail in my response to GMcGowan—the 2.16% federal funds rate in 2019 was in fact a conservative estimate for bank yields. That can be seen by looking at my EA Forum article from 2019 which references bank savings yields of up to 2.4%. The accounts that offer a higher rate of interest (like the 2.4% accounts) do not fluctuate like bonds and have identical risk to other savings accounts because they’re all insured by the FDIC. They yield less in 2020, of course. I perform a more in-depth risk analysis of savings accounts and alternative options in my article from 2019.

Regarding point 2, if we include 2% estimated inflation, then bonds would return 1% and a low-interest charity savings account would return -2%. If we adjust your estimates upwards to include inflation like my 5.51% figure, so 7% for equities and 3% for bonds, we get 3.8% (likely higher, say 4%, with rebalancing). Would you say that’s within the same ballpark? Regardless, I think future returns are very difficult to forecast, even with good causal explanations. With those assumptions, it would make sense to allocate more of the portfolio to stocks instead.

Regarding point 3, yep, that’s a shortcoming of solely relying on Form 990 data. If we had the full data, I think it’s unlikely that would change the numbers by that much (say more than 50% higher or lower). I talk about this and other estimation issues in the “Estimation Methodology Caveats” section of the article.

Comment by Brendon_Wong on How You Can Counterfactually Send Millions of Dollars to EA Charities · 2020-12-24T09:19:00.918Z · EA · GW

That’s a good point! While UK and US interest rates do differ, the interest rates are much lower now because of the COVID-19 economic situation. We used the latest Form 990 data from 2018 and 2019 and the associated interest rates from those years to calculate the prior-year opportunity costs as accurately as possible, which is a separate calculation than estimating the forward-looking counterfactual impact. We chose the federal funds rate because there’s a lot more granular and historical data on it and it’s one of the most conservative rates possible. There’s a link in my article explaining its association with savings account yields. If you look at my EA Forum post from 2019 I was referencing savings account rates of 2.4% which was the same or higher than the federal funds rate at the time.

In my talk earlier this year I listed savings account yields at banks that were around 1% even as the federal funds rate was plummeting to 0%. That’s why I used a more conservative 1% interest rate in my five-year opportunity cost calculation for GiveWell (estimated at $4 million), which aligns with the lower UK interest rate of 0.9% you mentioned.

Comment by Brendon_Wong on EAs and EA Orgs Should Move Cash from Low-Interest to High-Interest Options · 2020-09-07T00:19:58.179Z · EA · GW

Thanks for your suggestions! We didn't look into Open Phil grant recipients—that's a great idea for expanding the scope of charities to advise.

Comment by Brendon_Wong on EAs and EA Orgs Should Move Cash from Low-Interest to High-Interest Options · 2020-09-07T00:15:34.086Z · EA · GW

We're in the process of investigating options in the UK. Right now, Flagstone looks very promising, particularly for charities and large account sizes.

Comment by Brendon_Wong on How Much Leverage Should Altruists Use? · 2020-07-07T05:23:22.150Z · EA · GW
I don't really understand what you're saying here.

I meant that if a donor isn't going to make generic grants, like funding a GiveWell top charity, and will instead do things like fund small EA projects that might not otherwise be funded, then pursuing a more reliable investing approach would be a better bet.

If a non-generic donor pursues a risk neutral approach or invests in a single asset class, that could jeopardize their grantmaking, and from the donor's perspective the downside of not being able to fund a considerable number of projects if there are bad investment outcomes likely outweighs the expected benefit of fractionally shifting the EA community as a whole towards choosing more unusual asset classes.

That's true, I said that in the post. QMHIX/EQCHX might also have a worse ex-ante Sharpe ratio than GAA. The argument for investing in managed futures is that it has positive expected return (not guaranteed) and has basically zero correlation with stocks and bonds.

Right, and I stated that to emphasize other approaches I mentioned later in my comment that might have had and may continue to have decent returns with zero correlation.

VC is highly correlated with equities, and as an asset class, historically it has performed worse than the S&P 500.
Gold has only performed well relatively recently. In the long run, there is no reason to expect gold to have a real return above 0% because it doesn't generate any cash flows like stocks and bonds do, and it doesn't gain value over time except via inflation.

There are a wide variety of views on whether it is wise to invest in every single asset class, from Bitcoin, to gold and venture capital which I mentioned, to managed futures which you mentioned.

I don't have strong asset class views because Antigravity Investments follows the approach of using quantitative/evidence-based investing to allocate different amounts to different asset classes at various points in time rather than sticking with a particular one for the long haul. I think that writing off entire asset classes may not be a good approach due to the inherently challenging-to-predict nature of future investment returns.

Regarding venture capital, this document from Invesco (which is not trying to sell a VC investment) notes there was a -0.06 correlation between venture capital and large-cap equities from 1990-2014. That document also notes that "top quartile absolute returns for venture capital have historically exceeded those for other asset classes." Top-quartile outperformance in VC is especially interesting because unlike equity funds in recent decades, it seems like VC funds may experience consistent outperformance across time. Whether that's due to skill, simply having access to better networks and deal flow, or some combination of both is the question.

Gold definitely struggles with some of the issues commodities and currencies as a whole have (debatable long-term value), but it's also recommended by the founder of the largest hedge fund in the world, so I don't think there's no case to be made for it (not saying there is, either, since I don't hold strong asset class views). A 7.8% non-inflation-adjusted return from 1972 to 2020 with 0.02 market correlation doesn't seem that terrible, although there are rather awful, extended drawdowns of course. I'm not saying that gold is or isn't a good long-term investment, but clearly gold and other things that have uncertain intrinsic value like Bitcoin can be good investments if held during the appropriate times.

Comment by Brendon_Wong on Long-term investment fund at Founders Pledge · 2020-07-07T04:39:49.071Z · EA · GW

Thanks for sharing your thoughts! I think that making some fund distributions in the present also serves to demonstrate the decision making and grantmaking capabilities of the fund's grantmakers. Some donors might consider it an uncertainty to donate to a fund that has not made any grants for, say, three decades, whereas having the fund make microgrants or having a version of the fund that makes grants demonstrates that the fund has been and will continue to make a positive social impact.

Comment by Brendon_Wong on How Much Leverage Should Altruists Use? · 2020-07-04T01:58:14.533Z · EA · GW

I'm the founder of Antigravity Investments, an EA social enterprise and SEC-registered investment advisor with the mission of donating millions of dollars to high-impact causes by increasing returns on charitable capital held by donors, nonprofits, foundations, etc. We've advised over $20 million in charitable capital and been supported by CEA's EA Grants program, the Berkeley SkyDeck accelerator, American Express, and Ashoka.

If anyone would like implementation assistance, I think we're a good alternative to Alpha Architect—we also operate in the evidence-based investing space, and we provide free advising to EAs along with lower-cost investment management. We're an advisor on the Interactive Brokers platform and also support other brokerage firms like Vanguard.

I like the breadth of content covered in this post. Regarding implementation details, if a small donor is going to fund things that are different than what other EAs would typically fund—an approach that various EAs have advocated for and one that I personally support—then I think there's a strong argument to not "invest all your altruistic funds into a managed futures fund." Separately, I think there's a high likelihood that this approach (i.e. 100% in QMHIX or EQCHX) will underperform a balanced portfolio, GAA, and a lot of other approaches over a short-term, medium-term, and long-term timeframe.

If someone is taking the approach of diversifying into other assets that most of the money in EA is not invested in, I'm more enthusiastic about speculating in asset classes that have historically experienced good returns (venture capital or even gold), or perhaps more promising, investing in a market that isn't that efficient or that the investor believes they might have an edge in (cryptocurrencies, prediction markets, angel investing, etc).

I believe that Good Ventures' investment data may be available on their Form 990. I am writing an upcoming article on how EAs can use Form 990 data to increase funding for charitable causes, potentially by millions of dollars with only a few hours of effort. I will try to update this comment when my article is out.

Comment by Brendon_Wong on EA could benefit from a general-purpose nonprofit entity that offers donor-advised funds and fiscal sponsorship · 2020-07-01T05:28:15.872Z · EA · GW

That's great, I'm happy fiscal sponsorship exists within EA now! I'll definitely refer any projects I'm aware of. Now I'm wondering how long it'll take for DAFs to pop up!

Comment by Brendon_Wong on EA could benefit from a general-purpose nonprofit entity that offers donor-advised funds and fiscal sponsorship · 2020-06-28T19:21:37.451Z · EA · GW

I agree that the second bullet point is likely more novel/compelling. Regarding the first point, I think that barriers like "high minimums to create a DAF, high annual fees, high minimum grant amounts, high minimum maintenance amounts, and limited investment options" mentioned in my post may reduce the counterfactual amount that would otherwise go to DAFs from EA by a considerable degree exceeding the $200,000 figure mentioned. For example, the minimum to create a DAF at Vanguard Charitable is $25,000, which is a somewhat large amount of capital for some people just to invest their money in something safe like a 2% savings account or money market fund prior to donation.

I think that some DAF applications I mentioned are more novel/compelling than others, such as allowing people to easily invest intended donations, fund their own future charitable work in a tax-deductible manner, and create additional "EA funds" offering a wider range of cause areas and methodologies beyond what the existing EA Funds offer.

I think that the second bullet point is viable so long as all appropriate best practices are followed, such as giving fair compensation for the level of future work (e.g. not paying people $500,000 a year for work that charities normally pay $50,000 a year for) and ensuring that all future work is actually charitable and appropriately documented.

I find it unlikely this will cause any PR issues unless this is actually broadly advertised to the general public, and even if so, it's important to note that this idea requires people to actually do charitable work in the future at a lower pay rate as opposed to simply saving for retirement in a 401(k) which offers similar tax and investing benefits. It only seems amazing to us because we would actually like to work full-time on charitable work in the future at a low pay rate—this is not an idea that seems popular in the mainstream.

Comment by Brendon_Wong on EA could benefit from a general-purpose nonprofit entity that offers donor-advised funds and fiscal sponsorship · 2020-06-28T18:50:52.283Z · EA · GW

Regarding fiscal sponsorship, some EA organizations like CEA and CFAR have done something similar, albeit to a highly limited extent. CEA and CFAR have occasionally hosted efforts seen as independent initiatives under their legal entity. I think this demonstrates the value fiscal sponsorship can bring to the community.

Fiscal sponsorship generally refers to the service of hosting independent efforts under the same legal entity with the associated expectations: (1) explicitly offered as a service, (2) allows independent efforts to remain under the umbrella organization for an indefinite period of time, (3) allows independent efforts to migrate their assets to another organization at any point in time, (4) allows independent efforts to independently fundraise under their own brand name, (5) offers an administrative portal, tools (such as expense reporting and fundraising portals), and procedures to reduce the administrative overhead of offering such a service, (6) accepts applications to use the service on an ongoing basis, (7) accepts a significant number of applications onto the service to fulfill the service's goal of making it easier to people to launch social impact efforts, (8) offers the service at scale to a large number of independent efforts, (9) tracks the finances of each independent effort separately from other independent efforts, (10) financed based on flat monthly fees and/or a percentage fee charged on incoming donations.

CEA may have offered something similar at some point in time, but it doesn't seem like they are currently focused on doing fiscal sponsorship. It is not my understanding that CEA is advertising or accepting applications for such a service, and is only hosting a very small number of efforts that could be seen as independent, which are the most important distinctions. CEA probably offers at most expectations 2, 3, 4, 5, and 9.

Also, CEA does not look like it's in the business of offering DAFs (I can provide an enumerated list of DAF provider expectations if that would help clarify), although the EA Funds are vaguely reminiscent of "collective DAFs."

Comment by Brendon_Wong on EA could benefit from a general-purpose nonprofit entity that offers donor-advised funds and fiscal sponsorship · 2020-06-28T03:05:41.959Z · EA · GW

Have you chatted with John Beshir? He mentioned to me that he was working on setting this up as a trust in the UK in mid-2019.

Update: Some difficulties came up, so John is not actively pursuing this right now.

Comment by Brendon_Wong on EA could benefit from a general-purpose nonprofit entity that offers donor-advised funds and fiscal sponsorship · 2020-06-27T22:48:54.130Z · EA · GW

Thanks for sharing your thoughts! Which of the applications of fiscal sponsorship seem most promising to you?

Regarding DAFs, I'd have to do the math, but I think that the benefit of the $15,000–$25,000 could be realized extremely quickly. For example:

  • If just $200,000 in intended donations for 2022 or later were counterfactually invested at a 7.5% ROI rather than held in cash, the initial investment would be recouped in a year ($200,000 * 0.075 = $15,000)
  • If someone in California was earning $250,000 a year and saved $50,000 in a DAF in both 2020 and 2021 to do direct work in 2022 and 2023 by $50,000 a year from their DAF, they would pay a tax rate of 19.46% in 2022 and 2023 on the $50,000 per year instead of paying a marginal tax rate of 46.65% if they saved $50,000 in 2020 and 2021 without depositing it into a DAF, leading to a $27,190 tax reduction ($100,000 * (0.4665-0.1946) = $27,190)

I think it's highly unlikely an existing DAF provider will customize their offerings (for example by offering to pay individuals a salary directly to do charitable work instead of just regranting to 501(c)(3)s) because their expected benefit from doing so is simply too low to justify the time investment.

Comment by Brendon_Wong on EA could benefit from a general-purpose nonprofit entity that offers donor-advised funds and fiscal sponsorship · 2020-06-27T22:30:10.089Z · EA · GW

Are you referring to the DAF or FS side of things, or both? My prior was that it would be fairly straightforward because there are UK DAFs in existence, and CEA does both DAF-like and FS-like things to a limited extent (sponsoring EA orgs and running EA funds).

While CEA might have charitable purposes that seem restrictive, it doesn't seem like that's impacting their ability to try to do everything under the sun.

You tried to create a trust to do this before, but it was rejected because the charitable objects were too broad?

Comment by Brendon_Wong on EA could benefit from a general-purpose nonprofit entity that offers donor-advised funds and fiscal sponsorship · 2020-06-27T03:09:50.337Z · EA · GW

It's interesting you mention that! In my post I link to the article Long-term investment fund at Founders Pledge which relates to patient philanthropy, and I also left a comment on that article.

I think one of the many possibilities made possible by an EA DAF provider would be to enable people to set up DAFs that are designed to impact the far future. It might or might not be better to run a centralized fund as a separate entity. A separate entity might be able to focus more on survivability; however, DAF providers are by their very nature designed a last a long time, so offering a long-term fund as part of a DAF provider's offerings might be an even better way to guarantee that the fund lasts into the future. For example, Vanguard Charitable has billions of dollars within it, and is thus very likely to have an outsized impact and last for many years to come.

Comment by Brendon_Wong on EA Forum feature suggestion thread · 2020-06-27T01:50:38.630Z · EA · GW

Making it possible for people to add a bio in their profile (that supports external links) so people can get a better idea of someone's background and interests when reading posts and comments.

Comment by Brendon_Wong on Non-Profit Insurance Agency · 2020-06-26T22:21:09.457Z · EA · GW

I run Antigravity Investments, an SEC-registered RIA. Let me know if you'd be interested in collaborating!

Comment by Brendon_Wong on EA is risk-constrained · 2020-06-26T22:10:19.692Z · EA · GW

I think this could be set up by launching a 501(c)(3) as a donor-advised fund and fiscal sponsor and then setting up funds inside the entity that support specific purposes. For example, having a fund that pays UBI for people working on high-impact entrepreneurship.

I welcome anyone to get in touch with me if they're interested in collaborating on and/or funding such a proposal (estimated setup cost of the entity and necessary legal work: $15,000–$25,000).

Edit: Was inspired to write an EA Forum post on this!

Comment by Brendon_Wong on What EA questions do you get asked most often? · 2020-06-26T21:52:41.067Z · EA · GW

Here are the early-stage funding opportunities I am aware of:

  • CEA's EA Funds, some of which provide early-stage funding with occasional posts on the EA Forum announcing new rounds with occasional forum announcements
  • CLR's Fund (formerly EAF Fund), which only funds longtermist projects

EA Grants and BERI Grants are no longer active.

Quite a few EAs, including me, have written about significant perceived bottlenecks in early-stage project funding.

Comment by Brendon_Wong on Problem areas beyond 80,000 Hours' current priorities · 2020-06-23T18:37:48.364Z · EA · GW

They are referring to financial investments (stocks, bonds, etc) as covered in the linked podcast episode with Philip Trammell.

Comment by Brendon_Wong on What EA questions do you get asked most often? · 2020-06-23T18:34:45.223Z · EA · GW

Unfortunately EA Grants is no longer operating.

Comment by Brendon_Wong on Aligning Recommender Systems as Cause Area · 2020-06-23T09:48:27.141Z · EA · GW
It’s likely that the flow-through effects on the rest of users’ lives will be even greater, if the studies showing effects on mental health, cognitive function, relationships hold out, and if aligned recommender systems are able to significantly assist users in achieving their long term goals. Even more speculatively, if recommender systems are able to align with users’ extrapolated volition this may also have flow-through effects on social stability, wisdom, and long-termist attitudes in a way that helps mitigate existential risk.

I am very interested in these sorts of positive effects of aligned recommender systems. In addition to improving people's effectiveness at large, I think they can be a valuable tool for improving individual/organizational decision making and personal productivity which are EA focus areas.

I think that building a collaborative search engine is a tractable starting point and has the potential to improve information discovery within EA and in general—if anyone is interested in collaborating on this, please get in touch!

Comment by Brendon_Wong on Long-term investment fund at Founders Pledge · 2020-06-23T09:33:44.786Z · EA · GW

Here are a few ideas that come to mind.

It could be interesting to explore/offer funds with different distribution thresholds (for example, saving all funds for 100+ years out versus donating a small percentage every year or nearly every year while still letting assets compound) for donors that have different distribution preferences. Knowing your money will be used to better the world every year in the present while also compounding indefinitely into the future to help future generations may be appealing.

As an alternative to a fixed set of people governing the fund, it could be interesting to consider a model of collaborative democracy/liquid democracy in which donors influence fund decisions and distributions, with each donor's voting power done via equal weighting, donation weighting, or some other mechanism. Succession could be easily incorporated into such a system, with one's votes being distributed in an even or preference-weighted fashion to living donors/stakeholders.

Having the fund structured as a corporate entity could be an interesting possibility as well; it seems some corporations have lasted for over 1,000 years. It should also be possible to set up different legal entities in different countries for maximum continuity (which also easily supports donors from different countries).

The fund could have staff that explore impact investing, such as directly funding high-impact startups or impacting the direction of corporations (private equity, shareholder activism, etc), so that the assets can be used to do good even as they compound indefinitely.

Edit to include a recent EA Forum post I wrote: Having the long-term investment fund be hosted within a more generalized entity (ideally one that is controlled by or aligned with the fund management), such as a provider of donor-advised funds, might increase the chances of the fund surviving into the far future due to it having a lot more assets and also a lot more living stakeholders at every point in time.

Comment by Brendon_Wong on EA Forum feature suggestion thread · 2020-06-23T08:10:15.729Z · EA · GW

I was initially thinking of including a link to the tags page in the sidebar on the home page, but that is another good idea as well. Including tags in the metadata subheader under article titles on the home page would also increase the prominence/usage of this feature.

Comment by Brendon_Wong on EA Forum feature suggestion thread · 2020-06-23T08:04:03.051Z · EA · GW

Can tags be linked to (this page) for easy access? How about grouping the tags into a hierarchy for ease of use and discovery, rather than just organizing them alphabetically?

Comment by Brendon_Wong on Investing to Give Beginner Advice? · 2020-06-23T07:41:48.786Z · EA · GW

I think that even within EA people will have varying opinions on investing, with a bent towards using standard low-cost index funds, employing leverage, and/or doing factor investing. I second the recommendation for Bogleheads to learn about implementing a standard investing approach. This 80,000 Hours post titled Common investing mistakes in the effective altruism community provides an introduction to alternative asset allocations, leverage, and factor investing.

I wrote an EA forum post that focuses on advising EAs to move cash into higher-interest accounts, but it covers various aspects of investing from donating appreciated securities to asset location in the appendix. I hope that is a helpful resource!

Using a donor-advised fund could make sense for donating later to gain some immediate tax benefits and to have the money compound with zero taxes.

I personally believe in using evidence-based investment approaches at an asset class level rather than at a securities level (for example, tolerance band rebalancing). The 80,000 Hours post references this at the end of the post. Unfortunately, most of these approaches range in difficulty from being inconvenient to requiring an investing algorithm to implement. That's one of the reasons why I started an EA-aligned investment firm, Antigravity Investments, which helps EA organizations and donors address implementation barriers. Feel free to get in touch.

Comment by Brendon_Wong on EAs and EA Orgs Should Move Cash from Low-Interest to High-Interest Options · 2020-06-23T07:13:07.583Z · EA · GW

I'm happy you discovered my post! The general recommendations (e.g. high-interest accounts are better than low-interest accounts, particularly if both accounts have identical risk) hold true in essentially all market and interest rate conditions. The specific recommendations for bank accounts and investments can vary with time and interest rate changes.

For instance, some banks will offer higher yields than other banks at certain times due to their cost of borrowing, revenue when lending, and desired profit level. The expected returns and risk of investments can also change. Feel free to get in touch if you have specific questions or would like our latest guidance!

Comment by Brendon_Wong on EAGxVirtual Unconference (Saturday, June 20th 2020) · 2020-06-09T23:06:38.306Z · EA · GW

How financial improvements can counterfactually increase funding for EA charities by tens of thousands to millions of dollars per charity

I run Antigravity Investments, an EA social enterprise with the mission of indirectly donating millions to charity by helping charities invest more effectively. Last year, we published this EA Forum article explaining why charities should shift cash from low-interest to high-interest accounts: https://forum.effectivealtruism.org/posts/YjN6cGoXxPZeqCh4Z/eas-and-ea-orgs-should-move-cash-from-low-interest-to-high.

This talk will cover new research done by Antigravity Investments on approximating opportunity costs that charities incur by not following best practices in cash management. We will cover applying our opportunity cost estimation methodology across selected EA charities as well as across a data set of over 300,000 U.S. charities.

We will also cover how our outreach strategy has fared over the past year, and perhaps most importantly, recommend concrete steps EA community members and operations/finance staff at EA organizations can take to increase funding for high-impact causes.

I am based on the West Coast and would prefer the late sessions.

Comment by Brendon_Wong on Do we have any recommendations for financial advisers for earning to give? · 2019-04-14T20:27:07.319Z · EA · GW

I run Antigravity Investments, an EA-aligned investing firm that helps EA nonprofits and individuals with investing. Our EA Forum article with public recommendations is mostly focused on cash management, although Appendix B discusses higher-EV investing options.

We give free advice and typically charge a low fee for directly managing portfolios. Feel free to reach out at support@antigravityinvestments.com.

For a DIY approach in the United States, we recommend a portfolio with low-fee ETFs. A DIY approach with ETFs makes it possible to donate investments that have gone up in value without paying any taxes, which is an optimal way to donate.

Comment by Brendon_Wong on EA Angel Group: Applications Open for Personal/Project Funding · 2019-03-28T18:16:28.694Z · EA · GW

Thanks for asking! At this time we do not specifically limit the types of early-stage high-impact activities that can apply. Early-stage nonprofits, for-profits, and personal projects would all fall under the scope of acceptable activity types.

Comment by Brendon_Wong on $100 Prize to Best Argument Against Donating to the EA Hotel · 2019-03-28T07:47:13.282Z · EA · GW

The following arguments are ideas and have not been thoroughly researched. They may not reflect my actual views. Counterarguments are not mentioned because the OP is "mainly interested in seeing critiques." I may post counterarguments after the reward deadline has passed.

Claim to argue against: "$172,000 to the EA Hotel has at least as much EV as $172,000 distributed randomly to grantees from EA Meta Fund grantees or EA grants grantees."

Argument 1: The EA Hotel has a low counterfactually-adjusted impact

In this post, the EA Hotel states:

Out of 19 residents, 15 would be doing the same work counterfactually, but the hotel allows them to do, on average, 2.2 times more EA work -- as opposed to working a part time job to self-fund, or burning more runway.

This datapoint supports the view that most EA Hotel residents would be doing the same work whether or not they stay at the hotel. The claim that "the hotel allows them to do, on average, 2.2 times more EA work" could be incorrect. To gain more certainty about this, the EA Hotel should track what residents that are not accepted actually end up doing instead.

EA Hotel residents have many options to consider to do the same work while not staying at the hotel. For example, depending on the time and location requirements of the work, they could do some combination of: (1) part-time work to finance their living expenses, (2) living with parents, friends, or another location with near-zero living expenses, or (3) living in very low-cost housing that resembles the cost of the EA Hotel.

If someone pursues option (2), the EA Hotel is negative EV because someone can choose a free option instead of the EA Hotel, which consumes community funds.

If someone pursues options (1) and (3), they might only have to work a very limited amount of time. For example, I believe I recently heard of someone that was able to find a one bedroom living arrangement in Berkeley, CA in a large house for $500 a month, although they have to share a bathroom with many people. So someone might only need to do paid work 25% of the time and can do EA work 75% of the time. This suggests that the "2.2 times more EA work" figure greatly overstates the benefit of the EA Hotel in terms of reducing living expenses. Pursing options (1) and (3) seems to be feasible for the vast majority of people.

If direct funding allows people to pursue option (3) and secure low-cost housing, and if the cost is around the same as the EA Hotel, there may be no need for the EA Hotel itself to exist. The question becomes what is the counterfactually-adjusted impact of funding living expenses at the EA Hotel compared to option (3)? Adjustments should be made for things like missing out on the benefits of living elsewhere than Blackpool as well as relocation time and expenses which would further reduce counterfactual impact. The EA Hotel community certainly provides benefits, although coworking out of REACH may provide similar benefits.

Argument 2: The EA Hotel should charge users directly instead of raising funding

Rather than fundraising from EAs, the hotel should try to directly charge people who are benefiting from their services and community, which is an argument against donating to the hotel.

There doesn't seem to be a need to fund people who can afford the hotel. It's not clear what proportion of people fall under this category, but considering that it only takes 13 weeks of work at $15/hour to pay $7,900 for a one year stay at the hotel, it is possible that majority of residents can already afford to stay at the hotel.

For people who cannot afford the EA Hotel, applicants to funding organizations like EA Grants can include that they are requesting funding for living expenses and indicate EA Hotel expenses as part of their requested grant funding. EA Grants evaluators and other funders may be better equipped to evaluate the EV of projects people are working on as opposed to EA Hotel staff. If EA Grants can already cover this, there is no need to donate to the EA Hotel.

Argument 3: Funding projects has a higher impact than funding living expenses

I assume that EA Grants funds applicants' project expenses as well as their personal salary and living expenses. This could be higher impact than solely funding living expenses. Working at the EA Hotel with an unfunded project may be quite unproductive, particularly if the project requires funding to get anywhere. Seeking early-stage EA project funding seems to require waiting for long periods of time (perhaps months) for funders to get back to you rather than working full-time trying to acquire funding.

Argument 4: People should not donate to the EA Hotel until they improve their impact metrics and reporting

The EV estimation for the EA Hotel is highly mathematical and commenters have expressed that it is difficult to follow. Actual impact reporting appears to consist of testimonials which are hard to evaluate. It's even trickier to evaluate the counterfactually-adjusted impact.

Comment by Brendon_Wong on Mental support · 2019-03-28T06:34:47.363Z · EA · GW

There is probably a nontrivial number of people who do not seek support due to the presence of a fee, even if they can theoretically afford it (see trivial inconveniences). Unfortunately, I've seen this happen in practice.

Comment by Brendon_Wong on Bayesian Investor proposes you can predictably beat the market by ~3% following a simple and easy strategy · 2019-03-27T19:13:29.507Z · EA · GW

The potential downside (and upside) of diversifying by adding some tilts and consistently sticking with them is limited, so I don’t see a major problem with “non-advanced investors” following the advice. Investors should be aware of things like rebalancing and capital gains tax; perhaps “intermediate investor” is a better term.

Comment by Brendon_Wong on Bayesian Investor proposes you can predictably beat the market by ~3% following a simple and easy strategy · 2019-03-27T06:06:39.175Z · EA · GW

It takes a certain degree of investment knowledge and time to form an opinion about the historical performance of different factors and expected future performance. It also requires knowledge and time to determine how to appropriately incorporate factors into a portfolio and how to adjust exposure over time. For example, what should be done if a factor underperforms the market for a noticeable period of time? An investor needs to decide whether to reduce or eliminate exposure to a factor or not. Holding an investment that will continue to underperform is bad, but selling an investment that is experiencing cyclical underperformance is a bad timing decision which will worsen performance each time such an error is made.

As a concrete example, the momentum factor has had notable crashes throughout history that could cause concern and uncertainty among investors that were not expecting that behavior. Decisions to add factors to portfolios need to take into account maintaining an appropriate level of diversification, tax concerns (selling a factor fund could incur capital gains taxes, and factor mutual funds will pass capital gains the fund incurs while following factors onto investors whereas factor ETFs almost definitely won't), and the impact of fees, among other considerations.

Comment by Brendon_Wong on EA Angel Group: Applications Open for Personal/Project Funding · 2019-03-22T19:55:47.134Z · EA · GW

This post was intended as a grant application announcement post that also happened to contain some information about new funder-friendly and applicant-friendly policies we are adopting. I did not include any information about our evaluation process or risk reduction process in the body of the post, so I would not expect the post to convey high awareness of either reasons why long-termist applications don't get funded.

I am curious what ideas we included you think address your first point about grantmakers being unable to vet the project. I'm not sure if application sharing, rolling applications, or providing feedback to grant applicants address your first or second points.

To elaborate more on risk, I wrote in another comment on this post that:

We have several layers of checks to help reduce risks and improve grant decision making including initial staff review of incoming applications, angels sharing their evaluations with one another and talking with external contacts/experts if appropriate, and hearing opinions of external grantmakers on grant applications we have received (we still need to talk with grantmakers to set this up).

I think that an initial staff review can help detect risks, and if we notice a large problem with downside risk in incoming projects, we can enhance the initial staff review process. The angel evaluation period is where a lot of nuanced considerations about risk can come up, since angels can share their perspectives on a grant proposal with other angels and external experts, and we have angels with significant experience in areas like meta and AI. Finally, this wasn't mentioned in the post, but we are aiming to share evaluations both ways with funders in EA. I think this can go a long way towards making all funders aware of all of the potential risks of a project.

Angels in the group seem to actively avoid funding projects that they feel they are not qualified to evaluate. Angels can point out funding behavior that they perceive is risky from other angels, although from what I've seen, our angels lean more on the side of risk avoidance than anything else.

High-quality grant applications tend to get funded quickly and are thereby eliminated from the pool of proposals available to the EA community, while applicants with higher-risk proposals tend to apply/pitch to lots of funders. This means that on average, proposals submitted to funders will be skewed towards high-downside-risk projects, and funders could themselves easily do harm if they end up supporting many of them. I'd be interested in your thoughts on that.

As Denise mentioned in a post on Jan's project evaluation idea, there is a category of project that is "projects which are simply bad because they do have approximately zero impact, but aren't particularly risky. I think this category is the largest of the the four." This lines up with many of the applications I am seeing. This might be different with long-term/x-risk projects specifically, but since we are a general funding group with individual EA funders with a wide variety of backgrounds and experiences, we are not receiving a large number of such applications relative to the entire pool of applications.

Therefore, I wouldn't say that our applications are likely to be "skewed towards high-downside-risk projects." I expect to continue to receive a large number of projects that may have very low impact just like other funders are likely receiving. As Oliver mentioned, "in practice I think people will have models that will output a net-positive impact or a net-negative impact, depending on certain facts that they have uncertainty about, and understanding those cruxes and uncertainties is the key thing in understanding whether a project will be worth working on." I think that other EA funders will fund projects that match the model of the funders, but because people's models differ wildly and are very likely wrong in many cases due to the high failure rate of funded startups for the most successful VCs, I don't know if other funders are actually funding a significant fraction of the opportunities that end up having the highest impact.

To my understanding EA Grants is the only other funder that is funding general grants, with BERI Grants and EAF Fund focusing on long-term projects exclusively, and the EA Funds focusing on their respective areas and funding larger organizations as well. Since EA Grants is currently closed for applications (I support rolling applications rather than application rounds), we are receiving applications that have not been funded by other funders because the only other funder isn't accepting applications right now. Since I support funder application sharing, with this method funders will be able to see the entire pool of proposals, rather than the pool without the projects other funders have funded. This will help each funder evaluate the quality of the projects they are funding relative to the quality of other projects that other funders have funded.

I really like that you're providing feedback to applicants! In general, I wish the EA community was more proactive with providing critical feedback.

Thanks! I completely agree.

Comment by Brendon_Wong on Request for comments: EA Projects evaluation platform · 2019-03-22T19:31:42.841Z · EA · GW
I think it is fair to say you expected very low risk from creating an open platform where people would just post projects and seek volunteers and funding, while I expected with minimum curation this creates significant risk (even if the risk is coming from small fraction of projects). Sorry if I rounded off suggestions like "let's make an open platform without careful evaluation and see" and "based on the project ideas lists which existed several years ago the amount of harmful projects seems low" to "worrying about them is premature".

The community has already had many instances of openly writing about ideas, seeking funding on the EA Forum, Patreon, and elsewhere, and posting projects in places like the .impact hackpad and the currently active EA Work Club. Since posting about projects and making them known to community members seems to be a norm, I am curious about your assessment of the risk and what, if anything, can be done about it.

Do you propose that all EA project leaders seek approval from a central evaluation committee or something before talking with others about and publicizing the existence of their project? This would highly concern me because I think it's very challenging to predict the outcomes of a project, which is evidenced by the fact that people have wildly different opinions on how good of an idea or how good of a startup something is. Such a system could be very negative EV by greatly reducing the number of projects being pursued by providing initial negative feedback that doesn't reflect how the project would have turned out or decreasing the success of projects because other people are afraid to support a project that did not get backing from an evaluation system. I expect significant inaccuracy from my own project evaluation system as well as the project evaluation systems of other people and evaluation groups.

Thanks - both of that happened after I posted my comment, and also I still do not see the numbers which would help me estimate the ratio of projects which applied and which got funded. I take as mildly negative signal that someone had to ask, and this info was not included in the post, which solicits project proposals and volunteer work.
In my model it seems possible you have something like chicken-and-egg problem, not getting many great proposals, and the group of unnamed angels not funding many proposals coming via that pipeline.
If this is the case and the actual number of successfully funded projects is low, I think it is necessary to state this clearly before inviting people to work on proposals. My vague impression was we may disagree on this, which seems to indicate some quite deep disagreement about how funders should treat projects.

I wrote about the chicken and the egg problem here. As noted in my comments on the announcement post, the angels have significant amounts of funding available. Other funders do not disclose some of these statistics, and while we may do so in the future, I do not think it is necessary before soliciting proposals. The time cost of applying is pretty low, particularly if people are recycling content they have already written. I think we are the first grantmaking group to give all applicants feedback on their application which I think is valuable even if people do not get funded.

The whole context was, Ryan suggested I should have sought some feedback from you. I actually did that, and your co-founder noted that he will try to write the feedback on this today or tomorrow, on 11th of Mar - which did not happen. I don't think this is large problem, as we had already discussed the topic extensively.

Ben commented on your Google Document that was seeking feedback. I wouldn't say we've discussed the topic "extensively" in the brief call that we had. The devil is in the details, as they say.

Comment by Brendon_Wong on EA Angel Group: Applications Open for Personal/Project Funding · 2019-03-22T07:23:23.213Z · EA · GW

John Maxwell brought up some interesting points. He suggests that platforms can experience the chicken and egg problem when it comes to getting started, and that intensive networking is a way to overcome this issue. I agree that platforms often have this problem, but the EA Angel Group resolved this not by networking intensely but instead by offering a lot of value to angels. This would incentivize them to join the platform even without a large number of existing grant applicants which would in turn incentivize grant applicants to apply.

Of course, we do need a stream of incoming grant applications to remain viable, and unfortunately we encountered some unexpected issues when attempting to collaborate with EA Grants and speak to many community members as part of several strategies to acquire grant applications. As mentioned in my progress update comment, I am currently pursuing alternate strategies to achieve this objective which involve steps that I have greater control over (and less steps that require the approval of entities whose decisions I cannot influence). That being said, I think networking and collaboration is highly valuable, and am scaling that up even as I pursue strategies that do not require networking to succeed.

Comment by Brendon_Wong on EA Angel Group: Applications Open for Personal/Project Funding · 2019-03-22T07:04:47.552Z · EA · GW

I wrote a progress update comment regarding the EA Angel Group which covered our grant opportunity discovery activities over the last few months. We spoke with EA Grants several months ago, and to the best of my knowledge they are still determining whether to send and receive grant applications with other funders. At least one major funding group has expressed significant interest in sending and receiving grant applications with the EA Angel Group, and we are in the process of talking with various funders about this.

I mentioned the one concern I heard and my response to it in my progress update comment:

One objection to sharing grant applications among funders is that a funder would fund all of the grant proposals they felt were good and classify all other grant proposals as not suitable to be funded. From the funder's perspective, sharing the unfunded grant proposals would be bad since other organizations could subsequently fund them, and the funder classified those grant proposals as not worth funding. I personally disagree with this objection because the argument assumes that a funder has developed a grant evaluation process that can actually identify successful projects with a high degree of accuracy. Since the norm in the for-profit world involves large and successful venture capital firms with lots of experienced domain experts regularly passing on opportunities that later become multibillion-dollar companies, I find it unlikely that any EA funding organization will develop a grant evaluation process that is so good it justifies hiding some or all unfunded applications.

Can you elaborate on:

I think for example that a ‘just-another-universal-protocol’ worry would be very reasonable to have here.

Are you suggesting that funders may be concerned about adopting a protocol which ends up providing limited value? As I've stated in several other comments, I think sharing grant applications can be of considerable value since arbitrarily limiting the pool of projects seems pretty suboptimal.

To avoid that I think we need to do the hard work of reaching out to involved parties and have many conversations to incorporate their most important considerations and start mutually useful collaborations. I.e. consensus building.

I agree. I did some initial outreach at first and will begin additional outreach shortly.

Comment by Brendon_Wong on Request for comments: EA Projects evaluation platform · 2019-03-22T06:06:58.377Z · EA · GW

Thanks for pointing that out! Jan and I have also talked outside the EA Forum about our opinions on risk in the EA project space. I’ve been more optimistic about the prevalence of negative EV projects, so I thought there was a chance that greater optimism was being misinterpreted as a lack of concern about negative EV projects, which isn’t my position.

Comment by Brendon_Wong on Request for comments: EA Projects evaluation platform · 2019-03-21T20:08:04.055Z · EA · GW
We had some discussion with Brendon, and I think his opinion can be rounded to "there are almost no bad projects, so to worry about them is premature". I disagree with that.

I do not think your interpretation of my opinion on bad projects in EA is aligned with what I actually believe. In fact, I actually stated my opinion in writing in a response to you two days ago which seems to deviate highly from your interpretation of my opinion.

I never said that there are "almost no bad projects." I specifically said I don't think that "many immediately obvious negative EV projects exist." My main point was that my observations of EA projects in the entire EA space over the last five years do not line up with a lot of clearly harmful projects floating around. This does not preclude the possibility of large numbers of non-obviously bad projects existing, or small numbers of obviously bad projects existing.

I also never stated anything remotely similar to "to worry about [bad projects] is premature." In fact, my comment said that the EA Angel Group helps prevent the "risk of one funder making a mistake and not seeking additional evaluations from others before funding something" because there is "an initial staff review of projects followed by funders sharing their evaluations of projects with each other to eliminate the possibility of one funder funding something while not being aware of the opinion of other funders."

I believe that being attentive to the risks of projects is important, and I also stated in my comment that risk awareness could be of even higher importance when it comes to projects that seek to impact x-risks/the long-term future, which I believe is your perspective as well.

Also, given the Brendon's angel group is working, evaluating and funding projects since October, I would be curious what projects were funded, what was the total amount of funding allocated, how many applications they got.

Milan asked this question and I answered it.

Based on what I know I'm unconvinced that Brendon or BERI should have some outsized influence how evaluations should be done; part of the point of the platform would be to serve broader community.

I'm not entirely sure what your reasons are for having this opinion, or what you even mean. I am also not exactly sure what you define as an "evaluation." I am interpreting evaluations to mean all of the assessments of projects happening in the EA community from funders or somewhat structured groups designed to do evaluations.

I can't speak for BERI, but I currently have no influence on how evaluations should be done, and I also currently have no interest in influencing how evaluations should be done. My view on evaluations seems to align with Oliver Habryka's view that "in practice I think people will have models that will output a net-positive impact or a net-negative impact, depending on certain facts that they have uncertainty about, and understanding those cruxes and uncertainties is the key thing in understanding whether a project will be worth working on." I too believe this is how things work in practice, and evaluation processes seem to involve one or more people, ideally with diverse views and backgrounds, evaluate a project, sometimes with a more formalized evaluation framework taking certain factors into account. Then, a decision is made, and the process repeats at various funding entities. Perhaps this could be optimized by having argument maps or a process that involves more clearly laying out assumptions and assigning mathematical weights to them, but I currently have no plans to try to go to EA funders and suggest they all follow the same evaluation protocol. Highly successful for-profit VCs employ a variety of evaluation models and have not converged on a single evaluation method. This suggests that perhaps evaluators in EA should use different evaluation protocols since different protocols might be more or less effective with certain cause areas, circumstances, types of projects, etc.

Comment by Brendon_Wong on EA Angel Group: Applications Open for Personal/Project Funding · 2019-03-21T19:51:17.603Z · EA · GW

That is correct! The EA Angel Group is designed to help individual funders who are already making grants with discovering more opportunities and hearing from other funders about possible benefits and risks of individual funding opportunities. Many people in the angel group have been heavily involved with the EA community for many years and have a history of making successful grants. Analogous to a for-profit angel group, we do not force angels to do everything through our group, we just seek to add value in terms of helping people fund better opportunities through improving opportunity discovery, evaluation, and funding processes.

We have several layers of checks to help reduce risks and improve grant decision making including initial staff review of incoming applications, angels sharing their evaluations with one another and talking with external contacts/experts if appropriate, and hearing opinions of external grantmakers on grant applications we have received (we still need to talk with grantmakers to set this up).

Comment by Brendon_Wong on EA Angel Group: Applications Open for Personal/Project Funding · 2019-03-21T19:26:18.346Z · EA · GW

Thanks for the suggestion Remmelt! I just added your primary wording recommendation to the post.