Downsides of Small Organizations in EA

By Ozzie Gooen @ 2023-06-24T20:59 (+179)

Epistemic Status: This is a subject I've been casually thinking about for a while, but I wrote this document fairly quickly. Take this with a big grain of salt. This is written in a personal capacity.

A lot of EA, especially in meta and longtermism, is made up of small organizations and independent researchers. This provides some benefits, but I think the downsides are substantial and often unappreciated. 

More clearly:

• EA funding mostly comes from a very few funders, but it goes to a mass of small organizations. My impression is that this is an unusual combination.
• I think that there are a lot of important downsides to having things split up into a bunch of small nonprofits.
• I'm suspicious of many of the reasons for having small organizations that I've come across. There might well still be good reasons I haven't heard or that haven't been suggested.
• I suggest some potential changes we could make to try to get some of the best incremental tradeoffs.

Downsides

Low Management Flexibility

If you want to quickly create a new project in a sizeable organization, you can pull people from existing teams. This requires upper management but is normal for said management. On the other hand, if you instead have a bunch of tiny independent organizations, your options are much more limited.  Managers of tiny organizations can be near-impossible to move around because many of them own key funding relationships. Pulling together employees from different organizations is a pain, as no one has the authority to directly do this. The best you can do is slowly encourage people to join said new project.

Moving people around is crucial for startups and tech firms. The first version Amazon Prime was made in under two months, in large part because Jeff Bezos was able to rapidly deploy the right people to it. At other tech companies, some amounts of regularly rotating team members is considered healthy. Strong software engineers get to work on many projects and people.

Small nonprofit teams with locked-in mission statements are the opposite of this. This rigidness could be good for donors with little trust, but it comes at a substantial cost of flexibility.

I’ve seen several projects in EA come up that could use rapid labor. Funding rounds seem particularly labor-intensive. It often seems to me like it should be possible to pull trusted people from existing organizations for a few weeks or months, but doing so is awkward because they’re formally part of separate organizations with specific mission statements and funding agreements.

A major thing that managers at sizeable organizations do is size up requests for labor changes. The really good requests (with good managers) get quickly moved forward, and the bad ones are shot down. This is hard to do without clear, able, and available authorities.

Low Employee Flexibility

Employees that join small organizations with narrow missions can be assured that they will work on those missions. But if they ever want to try working with a different team or project, even just for a few months, the only option is often that they formally quit and formally apply for new roles. This is often a massive pain that could take 2-6+ months. The employee might be nervous about resentment or retaliation from other team members.

My org, QURI, is doing fairly niche work and has a small team (2 people now!). I’d be excited to have some team members try rotating on and off for a few months here and there. It’s very valuable for us to have people with certain long-term skills “available” for long periods of time, but they don’t need to be active for long portions. I think this project makes sense to keep small, but I also feel awkward about asking others to join a very small organization for a lengthy time.

There could be many reasons for an employee to want to work with a different team, at least for a while.

• They might think their career/skills would progress faster somewhere else.
• Their team might require a physical location where they don’t want to be.
• They might not along well with other team members, or maybe there’s a toxic work environment. 

When I look back on my career, I learned a whole lot at larger organizations that I would never have otherwise. I was a decent independent hacker for a while, but it wasn’t until I worked on a sizeable engineering team that I felt like I really leveled up. 

Now I’m working on a small project where I feel good about the work, but I also feel very isolated. I expect my professional development to be slower because of it. In my case, I think this is workable, but I’d have much more trouble recommending it to junior employees. 

I think we can mimic some of these benefits with things like shared coworking places and conferences, but it’s difficult. In practice, right now, I don’t think we’re doing a great job here. 

Quality Control

Good organizations often need solid infrastructure for HR, PR, legal, management, IT, security, and more. These are difficult to get right. It’s very hard to do a consistently amazing job in these areas in a large organization, but it’s possible to mostly ensure that the really awful situations are rare. 

It would be great if we could promise people, “If you work in an EA organization, you can expect a decent level of competence in key organizational aspects.” 

Right now, I’m not sure if we can.

On the management level, making a new EA project often means making a new org, and then figuring out many things you’re not great at or interested in. I spent months with QURI figuring out things like which accountants to hire and how to set up our internal payment processes. 

Sponsorship programs help. In the last year QURI joined RP as a sponsee, which I feel has been a solid win. But sponsorship only provides a subset of the full organizaitonal benefit, and RP has a limited capacity to accept new sponsees. 

Boards, not Managers

Nonprofits are controlled by boards. Boards have a lot of problems, as Holden has written here. I’ve written about this briefly here.

In sizeable organizations, the vast majority of management is done by professional managers, not boards. But when you have a large collection of tiny nonprofits, you’re stuck with a large collection of boards.

Management is typically a full-time paid position. Managers are accountable to superiors. If it’s a decent organization, they get training and oversight. There’s often a management career track. Management hierarchies are portrayed in clear diagrams and are iterated on to be pragmatic and straightforward. 

Board membership is typically a minor side-project. In the UK, I believe many board members can’t be paid. Even in the US, pay for board duties is rare, and few organizations seem to budget for significant board spending. I’m barely sure what board membership accountability or recognition would look like. Board decisions and activity are often kept secretive, and there’s no clear “manager” or “meta-board” of the board. Boards are typically chosen by team members, which is a very obvious bias. 

Painful or Partial Downsizing

When a sizeable organization decides it needs to end a project, it might be painful to the people on the project, but it can be swiftly done. Many team members are likely worth keeping, and can be reallocated. 

If the organization decides it needs to do layoffs, the standard advice is to do them swiftly and then be done with it. 

Meanwhile, consider the case of a small nonprofit tied a specific mission. If this mission is no longer great, a good outcome is that the nonprofit realizes this and closes up operations, laying off its team in the process. A more common outcome is that this action seems so severe that they get really good at rationalizing. 

If funders need to significantly cut spending, this will take months or years to carry out. I think what happens is something like:

1. The usual funding rounds begin.
2. After 2-6 months of applications and evaluations, responses are given out.
3. Many teams that don’t get their funding needs met then think there’s a good chance another funder will be interested, so go through one or two more funding rounds before cutting staff. There’s a lot of stress in the meantime. 
4. Sometimes, the org lives in some “zombie” state, where many employees are fired or lose confidence, but there’s still a trickle of funding large enough to keep a shell of the organization around. 

The latter process is long, tedious, painful, and nerve-racking. 

Funders often don’t want to take responsibility for closing down a project or laying off nonprofit staff. I haven’t heard much “you should shut down your project.” I have heard, “this project isn’t a fit for us, you should try other funders.” This is polite, but I think often the result is that a short and hard shutdown is replaced with a gradual, drawn-out shutdown. The latter is seems much more painful and a huge waste of time. 

Specific Counter-Arguments I Disagree With

“Aren’t startups far more efficient than large companies?”

I believe that large tech companies are, on average, more efficient at converting talent into market cap value than small companies or startups are. They typically offer higher salaries, for one.

In terms of “market cap growth”, my impression is that big companies feature a lot more growth small ones. In the period of 2005 to now, all YC companies combined grew to a net worth of $600B. Meanwhile, Apple Inc alone grew from $30B to $2.7T. 

I think it often feels like startups do things more efficiently. There’s less process or bureaucracy. It’s easier to implement features in small startups than big ones. 

But I think these indicators are deceiving. In small startups it might feel like things are moving quickly, but most of these efforts either have tiny markets or end up as failures. There’s a lack of legal oversight, but some of that is because the startup doesn’t have to worry about downside risks. There’s fairly little risk of hurting the brand, but at the same time, you don’t have the benefits of a brand worth protecting. 

“Effective Ventures had severe downsides from the FTX fiasco. This proves it was too large.”

I heard that the FTX fiasco caused significant problems at EV, which created a mess that impacted all of the organizations under the EV umbrella, even ones not otherwise associated with FTX. 

I’m sure there’s a lot we can learn from this. I’m not convinced that one takeaway is that “we need to resign ourselves to very small organizations.”

The Gates Foundation has ~1600 employees. The ACLU, to pick a known nonprofit at random, has 1155 employees. Of course, the famous tech companies are much larger. Apple has over 160k employees. 

At a quick glance, maybe all of EV has 100 employees? We’re really far from the size that other groups can manage.

I wouldn’t be surprised if it makes sense for there to be different substructures. Perhaps there’s a certain team or two that really make sense to be independent. But I think that broadly, it should be feasible to have groups much larger than EV and have them function adequately. 

“The existing EA organizations aren’t good enough. We should fund new ones to discover teams worth growing.”

If you believe that a lot of value comes from large organizations, there is one legitimate strategy of spreading out your money to many small organizations, to see which ones will be worth growing later. However, I don’t get the impression that this strategy is really being done. 

A good attempt at this strategy would involve:

1. Be clear about your strategy upfront. 
2. Tell teams that the main value comes from them possibly becoming sizeable, and encouraging them to do so.
3. Quickly stop funding groups that don’t prove themselves viable.

I don’t think the EA funders do this. 

Personally, I don’t think we need this intense of an approach. I think that existing leadership teams are at least good enough to oversee projects that might later spin off.

But if as a funder, you want new organizations because you have a high bar and dislike the existing organizations, I think it’s important that you make your stance very clear and follow through with it.

“Middle management is toxic, we should avoid it.”

Having larger EA organizations would require more official middle management. A lot of people really don’t like middle management.

But in EA, I’m not convinced we’ve removed the importance of middle management. It seems to me like we’ve just converted middle management from a regular management class, into a large set of boards and funders.

I think the thing that makes middle management hard is not the managers, but the circumstances. It’s brutally difficult to coordinate a bunch of humans into aligned outputs. Replacing official managers with an ecosystem of boards and funders doesn’t remove the problem, it just moves it around.

“More organizations means more diversity of projects”

I prefer sizeable organizations to many tiny ones. But there are many ways sizeable organizations can be structured and run. 

If you want highly-independent teams, you can still do that. Many corporate lab/R&D divisions are run with a lot of autonomy.

I heard that “Focused Research Organizations” created by Convergent Research are functionally set up as projects within a larger organization. That way they can be provided good legal and operations support. These organizations are essentially projects with a lot of independence. 

If you’re creative, making an organization for each idea can be a restriction, not a benefit. 

“We don’t have enough managers to oversee new projects. So it’s better to let these groups spin off into new organizations.”

As you might expect at this point, I think that the “solution” of getting around a lack of management capacity with the creation of new organizations, is often just moving one problem around into an even worse problem. When you do this, you replace the need for a good manager for the need for a good board. And the result is left with the extra burdens of setting up and maintaining a tiny organization.

In some cases where I’ve seen this trade happen, it has felt like it was because the institution making it, itself, would be the one on the hook for the manager but not the eventual board. It’s harder for an organization to set up a new internal project than it is for it to encourage someone to make a new organization and have them deal with all the resulting responsibilities and challenges.

So I suspect that “making new organizations because you don’t have enough management capacity” is often effectively just kicking the can down the road. You’re converting a straightforward problem that organizations need to deal with soon, to a harder and more nebulous one that others will have to deal with later.

I went back and forth with Max Dalton about this issue a few years ago, here.

Potential Proposals for Next Steps

I think that EA has gone too far along the axis of “having lots of tiny organizations with poor ability for coordination.” It feels like we have a bunch of independent fiefdoms with mediocre quality control. I think we’re getting many of the disadvantages of small orgs (mentioned above), without actually getting many of the hypothetical advantages of small orgs. 

I would better understand the desire for many organizations in an environment with a diverse funding ecosystem. But now, a huge amount of funding comes from a few very similar donors. 

I don’t think we should change to a completely centralized organization. I do think that there are probably a lot of incremental and pragmatic changes we can enact to get better tradeoffs.

Don’t Resign Ourselves to Tiny Orgs

Some of the discussion I’ve seen around EA seems to assume that we just need to have tiny (<20 person) organizations for reasons of liability or similar. I really don’t think this is a hard limit. It’s possible that in many situations small organizations are a good fit of costs and benefits, but I don’t at all think it’s essential. Running 300+ person organizations should be a much easier job than other challenges we’re facing. 

Instead of making incubators that encourage new organizations immediately, make “Labs Divisions” or “Startup Studios”

Allow new teams to experiment with different ideas and team compositions for a while. Provide them with operations support and council. If things go poorly with the projects, but the team members are strong, you can then move them to other places in the organization. If things both go well and there are strong reasons for the project to later be fully independent, they can spin out then.

More Fiscal Sponsorship Programs

I like the model of Rethink Priorities and Effective Ventures of providing a fairly “heavy-weight” charity sponsorship.

More Mergers and Acquisitions

I see these frequently in the corporate world, but barely in the nonprofit world. I’d bet that we’re not doing these frequently enough.

Mergers and acquisitions lead to some executives losing power. In the corporate world, this is counterbalanced with substantial payouts. This is messier to do around nonprofits, so there would have to be some thinking here. 

Invest in Management and Operations

A lot of the reason to make new orgs is because of a lack of internal management and operations resources. Building out management and operations can take a lot of time and money. You need spare capacity to support new projects.

Right now it feels to me like a bunch of EA problems come from management debt - areas where we haven’t properly invested previously. This is not a big surprise, because I’d claim that this is often a key problem in organizations and ecosystems. One great thing is that as the EA community ages and grows, we naturally have access to more experienced candidates. 

Try to Mimic Organizational Strengths 

Even if we keep with “lots of independent organizations”, there are steps we can take can do to minimize the typical disadvantages of these situations. 

• We could have strong consultant businesses/organizations for operations/management tasks. (Antientropy is an example here)
• We could have coordinated efforts to help ensure that boards are run well and have good members on them. (The EA Good Governance Project is doing some work here). Maybe we can find legal ways to identity and compensate good board members, even in the UK.
• Organizations could set up and normalize programs to allow employees to work at other related organizations for different lengths of time. 
• Funders could take on more management duties. They could be responsible for telling organizations to make large changes or not.
• We could normalize hiring practices more between certain organizations. Ideally, we’d have setups so that strong employees that do well in one organization and can be expected to do so in a different one, don’t have to go through another lengthy hiring process to move. 
• We could have cross-organization roles like a cross-organization “COO”, who could have some powers to assist with coordination and quality control. This has been recommended for the US government, which also has power awkwardly split between a bunch of heterogenous turfs.

When is it good to make new nonprofits?

I think that making or spinning out nonprofits is often reasonable, I just think that EA tends to do it too frequently.

Some situations where it’s a particularly good idea include:

1. A large part of the organization’s job is to oversee/evaluated senior people or organizations.
2. The organization would present a severe brand or legal liability.
3. The organization has important donors who either don’t like other organizations or would only donate with significant legal charitable limitations.
4. The organization has a significant chance of becoming large and would do so adversarially with existing organizations. 
5. The organization is a student/local/social group, and it would be very weird for it to seem controlled by another organization. (Note: If funding mostly comes from a narrow set of funders, then arguably this group might de-facto be controlled by a central entity anyway, so this is a strange circumstance.)

It’s often the case that a certain founder has little other choice but to create a new organization. However, the flip side of this can easily be, “The ecosystem has not done a good job of enabling new groups to develop within existing organizations.” So in some of these cases, I think it might be a reasonable choice for the founders, but in the bigger picture, a mistake or weakness of the ecosystem.

Thanks to Angelina Li for providing comments
 

rime @ 2023-06-25T11:16 (+3)

I mused about this yesterday and scribbled some thoughts on it on Twitter here.

"When should you pool all resources into your current best bet vs spread them across N ~independent parallel plans each of which will have lower probability of success?"

Investing marginal resources (workers, in this case) into your single most promising approach might have diminishing returns due to A) limited low-hanging fruits for that approach, B) making it harder to coordinate, and C) making it harder to think original thoughts due to rapid internal communication & Zollman effects. But marginal investment may also have increasing returns due to D) various scale-economicsy effects.

There are many more factors here, including stuff you mention. The math below doesn't try to capture any of this, however. It's supposed to work as a conceptual thinking-aid, not something you'd use to calculate anything important with.

A toy-model heuristic is to split into $N$ separate approaches iff the extra independent chances counterbalance the reduced probability of success for your top approach.

One observation is that the more dependent/serial steps ($k)$ your plan has, the more it matters to maximise general efficiencies internally ($c$), since that gets exponentially amplified by $k$.^[1]

1. ^{^}

   You can view this as a special case of Ahmdal's argument. If you want. Because nobody can stop you, and all you need to worry about is whether it works profitably in your own head.