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A Local Approach to Philanthropy

The reason I’m writing this blog is because one of my friends has been doing well on the job front lately and is deciding to give a portion of income to charity. They were asking around for thoughts on how best to think about a strategy for donating.

Back in the first half of 2020, I was involved with a small group of friends that started a hand sanitiser business where we decided to give profits to charity. I think there are many good approaches to giving and am writing this blog so you have one more to add to the compendium.

First, the limited amount I know about approaches to giving.

  1. Effective Altruism – The Trendy Approach

Kicked off by William MacAskill, this approach involves analysing which of kinds of giving offer the most impact per dollar donated.

Donation opportunities should be tractable but also underserved. For example, effective altruism might see donating to disaster relief as tractable (i.e. the aid can actually help) but not underserved because natural disasters often already get government funding as well as donations from the public. By contrast, 

run deworming programs would be seen as tractable (they are shown to help in countries with this issue) and underserved because not many other organisations see this as a priority.

Side-note: Another key tenet of the Effective Altruism movement is that it may be more efficient to work at a high paying job (e.g. banking) and donating a percentage of your money, than to work at a low paying non-profit job.

2. Causes I care about – The Classic Approach

This approach does what it says on the tin and somewhat describes the approach MacKenzie is taking with her donations of Amazon shares after divorcing from Jeff Bezos.

Causes I care about can be local or national or international or blended.

There is also the related “Causes I care about and benefit me politically or financially”, which guarantees a healthy debate. We are not going down that rabbit hole in this blog.

3. Fractal localism – The Meta Trendy Approach

This approach says that – in the same way you care more about your family than about your community, and more about your community than your country, and more about your country than other countries – you should care more about first donating locally before donating more broadly. It is more important to support your own daughter or your own neighbourhood, than someone else’s daughter or neighbourhood in a foreign country.

People generally have a better understanding of what is local – they feel the upsides and the downsides. Once donations go wider afield it is hard to appreciate the full impacts (positive and negative) of donations – and indeed to be aligned culturally, politically or morally.

With national or international donations, there is what I call the Irish passport problem.

The Irish passport problem is that if you let everyone with an Irish passport vote then you have a substantial portion of those voting who don’t live in Ireland (because Ireland had so many emigrants). The law – which I strongly agree with – is therefore that you can only vote in Irish elections if you are present in Ireland (with some exceptions). I wouldn’t want people outside of Ireland influencing what happens in Ireland. I see the same issue with donating further from one’s locality. Donations are political or moral or social judgements so one should be careful as one’s reach goes further afield. 

A Case Study on RESPOND Hand Sanitizer Donations

The approach we took with donations from this business was a hybrid of the above:

  1. Since there were a few core team members spread across the US, we decided that each member should be free to choose a charity, provided it supported low income families in the US through COVID. (Causes I Care About Approach).
  2. We focused on charities where the amount of our donation would be around 10-20% of their annual donations received. This was for two reasons: i) so the donation would be more than a drop in the bucket for them, and ii) the donation would not be so big that they would see a big slump in donations the following year. (Aspects of the Effective Altruism approach)
  3. Give unrestricted (Paul Graham essay here). The donations did not have any restrictions on how the organisations could use the funds.

On a technical note, we checked the charities were registered, had filed their last three tax returns, and were responsive when we reached out by email or phone.

Footnote: Being a mechanical engineer, I thought I would start this blog by coining a new word – philentropy – a hybrid of philanthropy and entropy. I decided not to because it made the blog look disorderly.

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