Donor Lotteries In Depth

Contents

Why a donor lottery?

Donating effectively is a hard problem. Finding highly effective organizations is a time-consuming, resource-intensive job. Organizations such as the Open Philanthropy Project spend a significant amount of time on researching these questions, but for individual donors, making these decisions can be hard. Furthermore, given the size of any individual donor’s donation, it’s often not worth it for each person to invest a lot of time into investigating the most effective use of their money.

One solution to this problem is to pool funds with other donors with broadly similar worldviews. Then, one person can do the required research, and allocate money on the rest of the donors’ behalf. Effective Altruism Funds is one product that aims to solve this problem, allowing donors to pool their resources together into a Fund, and then have a domain expert make the decision about where to grant the money. Another option is to follow the recommendations of a trusted organization like GiveWell, which produces in-depth evaluations of high-impact global development charities. But choosing which advisors to rely on is also difficult, and it may be the case that there is no relevant expert who you believe captures all the considerations.

Another option is to run a donor lottery. This allows donors to take a stake in a large pot of money. Each donor’s probability of winning the lottery is proportional to their donation, and the winner can make a recommendation for how to grant the whole pot. In expectation, each donor is granting the same amount of money to their preferred charities as they would have if they had donated directly. However, for the donor that wins, the larger pot of money makes it worthwhile to spend more time and energy researching where the money should go. It also creates an economy of scale for the other individual donors in the lottery, as only one person is required to do the research, and gets around situations where a donor would like to give to an organization with a minimum donation size.

For more information on the genesis of the donor lottery, you should read Carl Shulman’s introductory post, which describes the concept in detail, and shows the results of the first donor lottery, run in late 2016.

Dates

There are three significant dates in the donor lottery, the close date, the lock date, and the draw date.

The close date is the date at which new entries into the lottery stop being accepted. You can only enter a lottery before the close date.

The lock date is the date by which all payments must be finalized, and when lottery entrants will receive their ticket numbers.

The Giving What We Can must have confirmed your payment by the lock date. For payments made by Credit/Debit Card and GoCardless this will happen automatically. However, if you are intending to make a donation via Check or Bank Transfer please ensure you leave sufficient time for the payment to arrive. Donors who do not have payment confirmed by the lock date will be removed from the lottery drawing. If you are concerned that your payment may not arrive in time please get in touch with us.

The draw date is the time at which the lottery will be drawn. The UNIX timestamp of this date will be used to select the NIST beacon entry from which the winning lottery number is derived.

Please note that dates are displayed in both Coordinated Universal Time (UTC) and your computer’s local time. The local time displayed depends on the accuracy of your computer’s clock settings, and in the case of any discrepancy, the UTC time should be considered the reference time.

Entering the Lottery

Open donor lotteries will be displayed at the top of this page. To enter the lottery, click the ‘Enter lottery’ button. Once you have made a donation using the payment form, you will be entered into the lottery and your entry will show up on the details page for that lottery.

Entries must be made via making a donation through the Donor Lottery. Any other communication (e.g. email, instant message, conversation, carrier pigeon), or other donations made directly to Effective Altruism Funds does not constitute an entry. You must enter before the lottery's close date.

When you enter, you will receive an email confirming your entry, your probability of winning, and the lock time and draw time of the lottery.

Lottery entries are listed on the lottery details page. You can choose to publicly display your name against your lottery entry, or to remain anonymous. Lottery winners will be encouraged to provide a write up on how they arrived at their allocation decision (which Giving What We Can can publish on behalf of the winner, if the winner wishes to remain anonymous). The winner's grant recommendations will be made public regardless of whether the winner remains anonymous or whether they provide a write up.

Tax Deductibility

Donations to the lottery are tax-deductible in the US and the UK (UK donors can also automatically claim gift aid if they wish). On confirmation of your donation payment, you will be provided with a tax receipt. Tax receipts will be dated to the time that payment was made, not the lottery close date or draw date.

Blocks

Lotteries are denoted by 'block size', which is the defined size of the lottery pot. The block size is guaranteed by a benefactor who agrees to ‘backstop’ the pot up to this amount. If the lottery receives more in donations than the block size, a new block will be created. This means that donors’ probabilities of winning remain fixed (at donation amount / block size) and the benefactor’s maximum liability is capped at the block size.

Winning

Entrants will be assigned a ‘ticket’, which is a range of numbers in the space [0, (16^10-1)] (see ‘Methodology’ section below). The winning number for each lottery block will be determined by taking the first ten hexadecimal digits of the NIST Beacon at the lottery draw date. The winner will be the entrant holding a ticket range that the winning number falls within.

Unallocated number ranges will be assigned as a ‘ticket’ to the lottery guarantor, and if the winning number falls in this range the benefactor will be declared the winner, and be able to make grant recommendations for the lottery block.

Methodology

Entering the lottery

Donors enter the lottery by making a donation to it. The odds of winning are given by the size of the donation relative to the lottery’s block size.

For example, if the block size is $100,000, and you enter the lottery with a $2,000 donation, your probability of winning will be 2%:

2,000 / 100,000 = 0.02

Choosing a winning number

Winners will be selected by taking the first 10 hexadecimal digits of the value of the NIST Randomness Beacon at the lottery’s draw date. The entrant whose ‘ticket’ (see below) contains the winning number will be declared the winner. If there is more than one block, all blocks will use the same winning number. The NIST Beacon provides a publicly-verifiable source of randomness. Links to each block’s NIST beacon entry will be posted on the Lock Date.

Taking the first 10 hexadecimal digits means winning lottery draws will be in the range [0, (16^10 - 1)].

For example, let’s say a lottery's draw date is at midday on December 1, 2017 (UTC). The NIST Beacon value for this time (given by the Unix Timestamp 1512129600) was:

02FDF3FCCE145B93C3FA46DFDDA6113C770006CBEC54C6D7ACF21B005CAC3B91FAF9B0C4ED74A070B70B19D740CEDAEE20D6C1B96D59006E596DEB94C0266888

Taking the first ten hexadecimal digits gives us 02FDF3FCCE (or 12850560206 in decimal).

Tickets

Entrants will be assigned a ‘ticket’, which is an interval in the range [0, (16^10-1)].

The size of the interval is given by:

⌊(Probability of winning) * (16^10 - 1)⌋  

                   where ⌊n⌋ = floor(n)

The actual start and end values of a given entrant’s ticket interval will be determined by distributing these intervals across the entire range.

For example, let’s say there are three entrants into a lottery with a block size of $100,000:

  • Alice donates $20,000
  • Bob donates $10,000
  • Carol donates $30,000

The entrants’ ticket sizes are as follows:

Range 'R' = (16^10 - 1)  
         = 1099511627775  

Alice ticket size =⌊(20,000 / 100,000) * R⌋  
              = 219902325555  

 Bob ticket size = ⌊(10,000 / 100,000) * R⌋  
              = 109951162777  

Carol ticket size = ⌊(30,000 / 100,000) * R⌋  
              = 329853488332  

Tickets are allocated by dividing up the entire range of possible winning numbers:

      Alice = [           0,  219902325554]  
        Bob = [219902325555,  329853488331]  
      Carol = [329853488332,  659706976664]  
Unallocated = [659706976665, 1099511627775] (lottery guarantor) 

Represented visually, this looks like (G is the lottery guarantor):

single block

Taking the winning number from above, 12850560206, we declare Alice the winner, as 12850560206 falls within her interval [0, 219902325554].

single block draw{.img-responsive}

Multiple blocks

If the lottery takes more in donations than the block size, we split the range into multiple blocks. Multiple blocks ensure that there is no cap on the number of donors who may enter the lottery, while ensuring that the guarantor's liability is capped at the block size.

Let's say that a fourth donor, Dave, enters the lottery before it closes, with a $50,000 donation. As this will overflow the block, a second block is now in play. Dave now has a ticket range that covers $40,000 in the first block, and an additional $10,000 in the second. Note that Dave's chance of winning is still 50%, and as there is only one winning number, he can only win in one of the blocks.

multiple blocks

At draw time, winners are selected in each block. Using the same winning number as in the first example, Alice wins the first block, and Dave wins the second. They each may independently recommend $100,000 worth of grants.

multiple blocks draw

Ticket intervals will be assigned to donors at the lock date of the lottery.

Fees and Gift Aid

If you donate using a payment method that attracts fees (e.g. credit/debit card, GoCardless) your entry will be for the amount of your donation net of fees.

To avoid fees, you may donate by making a direct bank transfer (US/UK) or sending a check (US only), however for smaller amounts this is discouraged, as accounting for these transactions takes considerably more staff time than those handled through an automated payment processor. (For UK donors, it’s worth noting that GoCardless fees are capped at £1.20.)

If you are a UK donor claiming Gift Aid on your donation, the value of your entry will be your donation amount, minus any fees, plus Gift Aid. Gift Aid is calculated as 25% of your gross donation amount.

Exchange rates

Lotteries will be denominated in USD. If you donate in a different currency, the value of your donation will be converted to USD using a recent exchange rate for the purposes of calculating your tickets. Our exchange rate data are provided by Open Exchange Rates.

Caveats and limitations

The lottery is administered by Giving What We Can (a project of The Centre for Effective Altruism). The Centre for Effective Altruism (CEA) is a registered charity in England and Wales (Charity Number 1149828) and a registered 501(c)(3) Exempt Organization in the USA (EIN 47-1988398). An entry to the lottery is a donation to CEA; CEA will regrant the lottery money, based on the recommendation of the lottery winner.

All grants made are at CEA’s sole discretion. This is a condition of CEA’s status as a tax-deductible non-profit (both in the UK and the US). Of course, CEA will make a good faith effort to act on the recommendation of the winning donor, but it is important to understand that this does not constitute a binding contract, and the final decision rests with CEA.

There are cases where it may not be possible to follow the winner’s recommendation. In particular, CEA is limited to making grants within its charitable objects (and in the US, within the scope of what the IRS would deem an 'appropriate organization' to regrant to). Judgements about whether a potential grantee is within this scope will be made on a case-by-case basis by CEA. If CEA determines that it cannot follow a recommendation, the donor will be contacted to discuss and be given the opportunity to provide a revised recommendation.

Broadly speaking, CEA should be able to regrant to any fund or organization on listed on Giving WHat We Can, as well as nearly all other registered non-profit organizations in the US, the UK, Australia, Canada, Europe, and possibly other jurisdictions (assuming their organizational purposes don’t contravene CEA’s charitable objects, and we can verify their non-profit status).

CEA may also be able to make grants to organizations that are not registered non-profits, or projects that are run by unincorporated individuals. These requests will be assessed on a case-by-case basis.

If you are unsure about whether a potential grantee would be eligible, please get in touch before entering the lottery to discuss (contact details below).

Donor advised fund option

To provide greater flexibility, Giving What We Can will also offer winners the option to have their funds placed in a Donor Advised Fund (DAF), to which the winner can then make their recommendations. This option is available to winning donors based in the US and the UK. We'll endeavour to work with winners from other jurisdictions to set up a similar scheme, but this may not be possible.

Reports from past lottery winners

Further Questions

If you have any questions regarding the donor lottery, please send us a message (click on the blue circle at the bottom right of the page to open a chat window) or email lottery@effectivealtruism.org.