An explanation of EA Funds and why it might be a more effective way for individual donors to give.
Effective Altruism Funds is designed to help individuals give more effectively. It allows us to pool our money across the community into different funds so that together we can have a bigger impact. The four available funds cover areas that we believe are important, tractable and neglected, and each fund is managed by someone we consider an expert in the field (including staff at GiveWell and the Open Philanthropy Project).
While we think EA Funds is likely to be higher impact than the alternative for many donors, we do not think EA Funds is the best option for everyone. Below are some of the considerations for and against donating to EA Funds to help you make an effective donation decision.
For background you can read our original announcement introducing the project. This post provides a more detailed explanation of the project and why we think it may be an effective donation options for many individual donors.
EA Funds are mutual funds for giving effectively within the core cause areas of the effective altruism movement. When you donate to a fund, you specify the cause area, and pool your donation with many like-minded donors. Cause area experts then decide how to best allocate the pooled donations to the most promising giving opportunities they can find.
Using EA Funds involves three basic steps:
- Choose how to split your donation across our four funds: Global Health and Development, Animal Welfare, Long-Term Future, and Effective Altruism Community Building.
- Make a single donation to CEA’s EA Funds which we split across the four funds as per your chosen allocation. You get a single tax receipt.
- The fund managers use their expertise in the field to find the highest-impact charities to support.
We don’t expect EA Funds to be the highest-impact donation option for all donors. We only want to devote significant time to the project if it is plausibly a higher-impact donations alternative for many individuals in the EA community.
Below are four arguments for why EA Funds might be higher-impact than the alternatives available to many donors. We expand on each argument below.
Donations to EA Funds could be at least as good as the Open Philanthropy Project’s last dollar in the following four ways:
- Increasing the total allocation to the cause area in question
- Providing a funding stream for more unusual, risky or time-sensitive projects, particularly where the Open Philanthropy Project might have brand-risk concerns
- Providing additional funding to organizations where the Open Philanthropy Project already provides a high proportion of total funding.
- Displacing the Open Philanthropy Project's money is a very good worst-case-scenario
Open Philanthropy Project fund managers will treat money donated through EA Funds as additional funding allocated to the cause area, so donors who have a strong preference for some cause areas over others can potentially increase the total amount of funding allocated to that cause area.
2) Providing a funding stream for more unusual, risky, or time-sensitive projects, particularly where the Open Philanthropy Project might have brand-risk concerns
While the Open Philanthropy Project's program officers have considerable freedom in their grant making, there may be additional giving opportunities that are not a good fit for the Open Philanthropy Project. EA Funds gives Fund Managers a pool of funding they can make grants from with more brand separation from the Open Philanthropy Project, possibly allowing them to counter risk-aversion. Fund managers might also encounter giving opportunities that are particularly time-sensitive, or very small, where the need to go through Holden (Executive Director) and Cari (President) is prohibitive.
3) Providing additional funding to organizations where the Open Philanthropy Project already provides a high proportion of total funding.
The Open Philanthropy Project currently tries to set an upper limit on the proportion of an organization’s budget they will provide, in order to avoid making organizations dependent on a single funder. In the case where EA Funds generates recurring donations from a large number of donors, Fund Managers may be able to fully fund an organization already identified, saving the organization from spending additional time raising funds from many small donors individually.
While Fund Managers will attempt to avoid using money from EA Funds to displace money the Open Philanthropy Project would grant, we think the issue of displacing money deserves more thorough exploration. In our post introducing the basic idea of the EA Funds, some commenters expressed concern than money given through EA Funds would displace Open Philanthropy Project funding since the fund managers are all Open Philanthropy Project staff:
It seems strange to have the funds run by people who also direct money from on behalf of big grant-making organizations. Under what circumstances will the money end up going somewhere different? … [T]he current incarnation seems to be basically equivalent to just giving GiveWell or OPP [Open Philanthropy Project] money with a cause-based restriction. -Larks
While the fund managers will continue operations as normal within the Open Philanthropy Project, even if the fund managers were unable to find any more promising opportunities, and donations through EA Funds did end up going to destinations the Open Philanthropy Project was planning to fund, this might not be a bad thing. Displacing a donation the Open Philanthropy Project was going to make means your donation is at least as good as its last dollar. As Carl Shulman explains:
In principle one one could donate to the donor-advised fund (DAF) of Open Phil, directly increasing its ultimate donation capacity. At the moment, this doesn't seem to be set up, but one could instead donate to something that Open Phil is donating to (inframarginal), and request that it 'funge' you by reducing its own donation to that charity by the corresponding amount, increasing the reserves of Good Ventures and other Open Phil backers accordingly. So the marginal Open Phil/Good Ventures dollar sets a minimum standard for risk-neutral donors: if you don't expect to do better than Open Phil, just arrange to get 'funged'.
To determine whether getting displacing Open Philanthropy Project money is better or worse than the alternative, we need to know how good the Open Philanthropy Project’s last dollar would be.
The Open Philanthropy Project’s current view on the value of their last dollar is:
… I have very low confidence in my working view on how good the “last dollar” is likely to be, and I expect my view to change quite a bit in the future. On balance, our very tentative, unstable guess is that the “last dollar” has higher expected value than gifts to GiveWell’s top charities today.
Carl Shulman's view on the topic is:
… [M]y expectation for the 'last dollar' of Open Phil’s portfolio is exceptionally high relative to the general world of charity. Among other things, I think even after diminishing returns some combination of scientific research (e.g. gene drives to eradicate vector-borne diseases), policy work (e.g. on foreign aid or science policy), nonhuman animals, global catastrophic risks (potential risks from AI, biosecurity, nuclear risk), and others put the expected value of the 'last dollar' for Good Ventures higher than for GiveWell's top charities.
Thus, it seems quite plausible (although uncertain) that displacing Open Philanthropy Project money is higher-impact in expectation than the lowest-cost alternative available now, namely, donating to GiveWell-recommended charities.
In cases where the fund managers are Open Philanthropy Project staff (which is the case for all of the funds during the three-month trial period, but could change in the future), displacing Open Philanthropy Project money is a plausible lower bound on how good donations through EA Funds will be. If fund managers are unable to find something that beats the Open Philanthropy Project’s last dollar in expectation, they could simply donate to the Open Philanthropy Project’s existing grantees such that the Open Philanthropy Project can reduce their funding to those organizations by a similar amount. Donors who believe that the Open Philanthropy Project’s last dollar will do more good than their current giving may find EA Funds an attractive option for this reason.
EA Funds allows individual donors to pool their donations with others who share their world-view and values, then delegate some of the remaining empirical research and decision-making to people with a comparative advantage in allocating money. To make an effective donation, individual donors must try to answer all the following questions, given their values:
- Which problem areas are most important?
- Which interventions are likely to make progress in solving the problem?
- Which charities executing those interventions are most effective?
- Which charities have a funding gap that is unlikely to be filled elsewhere?
Time spent answering these questions is time not spent doing other worthwhile activities, and so many donors will wish to spend marginal time investigating cause selection, while deferring the empirical research to those with a comparative advantage in doing so. In addition, it is particularly time-consuming to answer questions (3) and (4), as answering these questions requires timely information and knowledge of other funders’ intentions. Staff at major foundations have a particular comparative advantage at answering (2) and (3) since they spend virtually all of their working time thinking and learning about how to allocate money to achieve the most good in any given cause area. These people are also particularly well suited to answer (4) as they have up-to-the-minute information about the largest funder in the space. EA Funds are designed to allow donors to focus their research efforts on (1), the area where differences in world-view or personal values may lead to the biggest differences in donation targets.
The initial Long-Term Future and Effective Altruism Community funds will be managed by Nick Beckstead, a Program Officer at the Open Philanthropy Project who has helped advise a large private donor on donation opportunities for several years. The donor-advised fund (DAF) Nick manages was an early funder of CSER, FLI, Charity Entrepreneurship and Founders Pledge. A list of Nick’s past funding is available in his biography on this website.
We think this represents a strong track record, although the Open Philanthropy Project’s recent involvement in these areas may make it harder for the fund to find promising opportunities in the future.
Donors can give to the DAF directly by filling out this form and waiting for Nick to contact you. If you give directly the minimum contribution is $5,000. If you give via the EA Funds there is no minimum contribution and you can give directly online via credit/debit card, ACH, or PayPal. Nick's preference is that donors use the EA Funds to contribute.
Disclaimer: Nick Beckstead is a trustee of CEA. CEA has been a large recipient of the EA Giving Group DAFs funding in the past and is a potential future recipient of money allocated to the Movement Building fund.
As well as the increasing the effectiveness of individuals’ donations in the short term, we believe that the existence of, and further development of EA Funds as a project might have significant longer-term benefits, which you could see as a positive externality of using the funds.
Longer term, if EA Funds continues beyond its initial three-month trial, it might increase the incentives for researchers to explore new areas for potential donations. This would be both because the EA Funds would cause money to be available for allocation based on the research, and because in the future we hope to encourage new fund managers to create new funds with different focus areas than the current options.
The ability of the EA community to discover new ideas for funding has been one source of the community’s value in the past. As Carl Shulman notes:
[I]n past years I have recommended donation targets other than contributing to the Open Phil grant pool to people asking my advice, generally in the areas of reducing potential existential risk from future developments in artificial intelligence, and developing institutions in effective altruism. These recommendations were for areas where several of the above factors applied: organizational risks, reputational/communication problems, staff bottlenecks, and interactions with broader worldviews. In subsequent years OpenPhil did enter the areas, but the early grants were able to fund time-sensitive opportunities such as seed and growth funding.
For example, many areas that were of interest to the effective altruism community subsequently became focus areas for Open Phil. Examples include: immigration policy, existential risks (especially risks from advanced AI), farm animal welfare, and effective altruism. It seems plausible that the EA community could continue to serve as a source of ideas for very large funders in the future.
A future version of EA Funds might also have lower barrier to entry than, say, getting a job as a Program Officer at the Open Philanthropy Project. This would allow more people to try out in-depth charity research to see if they should specialize in it. It also provides a clear feedback mechanism for this kind of research, namely, whether the EA community chooses to donate to your fund.
As Will notes in the initial post, it might be possible in the future to use the EA Funds infrastructure to try a number of interesting, related projects. Two examples are moral trades (see bottom of the post) and coordinating donor lotteries.
There are likely to be other interesting experiments that can be conducted with the donation infrastructure required for the EA Funds once it gets to scale. Supporting the EA Funds would make it more likely to go beyond the trial phase and reach the scale necessary to conduct these experiments. The EA Funds concept need not remain static as we scale and experiment more in the future.
By virtue of their size, foundations and other large donors gain a number of benefits that are not available to individual donors:
- Foundations can credibly signal long-term funding availability in particular areas, making it more likely that new projects arise in those areas, and that more people go to work in those areas.
- Foundations can help find and develop new potential projects for funding.
- Foundations can use their funding to encourage the nonprofits they support to cooperate more than they might otherwise have done.
Concentrating more of the funding done by EAs through the EA Fund b and putting more funding into the hands of individual fund managers can help individual donors gain access to some of these benefits of size that are generally not available to individual donors.
EA Funds can help solve certain donor coordination problems that arise between strategic, impact-focused donors. We discuss two types of coordination problems and how EA Funds can help solve them below.
Problem: Funders have an incentive to be the last funder in an organization's fundraising round, as this makes it more likely that the donation is not trading off against funding that could have been acquired elsewhere. Some degree of this probably makes sense, but it may distort incentives or falsely signal a lack of support for an organization if used too frequently.
Solution: EA Funds coordinates more of the funding through individual fund managers to create a single, large funder. Large funders generally do not suffer from the “last funder in” problem for two reasons. First, large funders generally only have to worry about other large funders for their donations to be crowded out. Since there are few large funders, this makes coordination much easier. Second, larger funders can request much more information from funding recipients. (It's more worth it for recipients to have a call with one large funder than 100 calls with 100 small donors.) This makes it easier for large funders to get a sense of the funding landscape for the recipient and to then coordination with other funders.
Problem: Standard practice among individual donors in the EA community is to provide projects with around one year of funding and then re-evaluate when they ask for funding again. This makes sense for donors, as it allows them to easily pivot to funding more valuable projects later. Yet, for project leaders this means that they don’t know whether funding will be available next year. The uncertainty can cause project leaders to be more risk-averse than they would otherwise have needed to be.
Solution: Large funders solve this problem by providing multi-year grants tied to specific outcomes. This allows large funders to pull funding from underperforming organizations. It also allows funding recipients to predict their funding income multiple years into the future and to plan accordingly. Designing grants is time-intensive for funders and funding recipients. This time is worth it at large funding sizes, but probably not worth it at smaller sizes.
We want the EA community to use EA Funds if and only if doing so is the highest-impact donation option in expectation. We anticipate that EA Funds will not be the highest-impact donation option for a number of donors, especially those moving large amounts of money and spending considerable time determining where to allocate their donations.
We discuss three considerations against donating to EA funds below.
The beta version of EA Funds has four funds, all of which are managed by program officers from the Open Philanthropy Project. Given that the Open Philanthropy Project is already one of the largest funders in these areas, concentrating more money in the hands of Open Philanthropy Project staff may have several negative effects.
- Concentrating more money in the hands of a few people could decrease diversification of worldviews and increase the risk of biases appearing in funding.
- Donating via EA Funds may cause a higher percentage of the budget of individual charities to be determined by a single individual and increases in single-donor funding may be problematic. It is unclear to what extent this applies, though, if there is a wide, recurring donor base to the fund supporting them.
- Using Program Officers from the Open Philanthropy Project may cause EA Funds to suffer from several diseconomies of scale that are relevant to entities as large as the Open Philanthropy Project. Examples include risk aversion due to higher costs to reputational damage and decreases in time spent investigating per dollar spent.
We see the initial selection of funds and fund managers as the MVP version of EA Funds. In the future we aim to create a wider variety of funds with a wider variety of fund managers.
We chose program officers from the Open Philanthropy Project as the initial fund managers for three reasons:
We don’t yet know how much money might be donated through EA Funds. If the amount of money turns out to be small, a highly skilled fund manager might be better off spending relatively little time allocating the fund in favor of spending time on other activities. This fact could create two detrimental effects.
First, the fund manager might feel obligated to spend considerable time allocating the funds even if that would be better spent on other activities.
Second, donors might be incentivized to wait to see how large the fund will be before donating because they anticipate that the fund manager will spend more time allocating larger donation pools. This creates a donor coordination problem that we would rather avoid.
However, the Open Philanthropy Project’s Program Officers have reason to investigate these spaces independent of the amount of money raised through the EA Funds. If the EA Funds raises little money, they can spend little additional time allocating the EA Funds’ money but still utilize their deep subject-matter expertise in making the allocation. This reduces the chance that the EA Funds causes fund managers to use their time ineffectively and it means that the lower bound of the quality of the donations is likely to be high enough to justify donations even without knowing the eventual size of the fund.
We found the idea that the Open Philanthropy Project’s last dollar could be a lower bound on the impact of donations (as discussed by Carl Shulman) compelling. Working with the Open Philanthropy Project’s program officers seems like one of the best ways to make this the lower bound in practice.
Unsurprisingly, the Open Philanthropy Project has been able to hire some exceptional Program Officers. When we thought about the ideal candidates for managing the funds, we found that many of the best candidates were employees of the Open Philanthropy Project.
Some donors may choose to donate elsewhere if they find that they have specific disagreements with the worldviews of the fund managers.
All fund managers have histories of past donations made through the Open Philanthropy Project, although these may not be representative of future donations. Prospective donors should look at the fund manager’s past donations (we have included these on the EA Fund website on the page for each fund) and the reasoning for their donations to determine if they have specific disagreements with the fund managers.
Behind the scenes, the structure of EA Funds operates similar to a donor-advised fund (DAF) with CEA operating as the DAF. Donations go to CEA and are put aside until the fund manager recommends a donation. CEA’s trustees must then approve the donation before the donation is sent to the recipient. Just as in a DAF, making a donation through EA Funds surrenders ownership of the donation to CEA with the understanding that the fund manager will have advisory privileges over how the fund is used.
We’ve opted for this structure over having donors give to a DAF for each fund for two reasons: 1) we believe this structure will allow us to reduce the fees associated with giving to the EA Funds by avoiding the administration fees that DAFs charge and by allowing us to negotiate lower processing fees with payment processors; 2) We believe that this structure will allow us to create a more seamless donor experience in the long run, which may allow us to move money into EA causes from those not involved in the EA community.
However, this setup requires placing trust in CEA to donate the funds as intended. In addition, there may be unexpected cases that would require CEA's discretion to resolve. Some examples include: fund managers resigning, fund managers ending their term with money remaining in the fund, fund managers making recommendations that are not in keeping with the description of the fund, etc. CEA is unlikely to have planned for all cases and may need to exercise discretion to resolve unforeseen circumstances. Donors should make sure they are comfortable with this before donating.
While we think our selection of fund managers is ideal for the beta version of EA Funds, it is not optimal in the long run. If we decide to proceed with the EA Funds project after the three month trial, our aim would be to have 50% or fewer of the fund managers be staff of the Open Philanthropy Project (although they may manage more than 50% of the money donated). Some things we might consider to accomplish this include: adding funds in new cause areas, adding funds in the existing cause areas that represent a different approach to solving the problem, having multiple people manage some of the initial funds, or through some other approach.
If you have ideas for new funds or new fund managers, please fill out this form.
We think EA Funds may be among the highest impact donation options for many donors although the case is far from certain. We plan to use community feedback and engagement with EA Funds to determine whether we should allocate substantial resources to the project in the future.
If you think EA Funds is not among the highest-impact options for you, we would be interested in hearing why via our feedback form. We would also be interested in hearing whether you think your case will generalize to others.
If you think EA Funds is among the highest impact options for you, the best thing to do is to make a donation using the beta version of the project at the link below. We would also appreciate any comments on how you plan to use it or why you think it would be a good option for you. However, our evaluation of the potential for the project will depend much more on whether people actually donate through the beta version than it will on whether people expressing support for the project in the abstract.