What might FTX mean for effective giving and EA funding

By Jack Lewars @ 2022-11-15T13:24 (+204)

FTX's demise is understandably dominating EA discussion at the moment. Like everyone in the community, I’m primarily just really sad about the news. A lot of people have been hurt; and a lot of funding that could have been used to do a staggering amount of good is no longer available.

I’m also aware of the dangers of publishing reactions too quickly. Many of the facts about FTX are not clear. However, the major effect of recent events on EA funding seems fairly unambiguous: there is substantially less funding available to EA today than there was a week ago.

Accordingly, I think we can lay out some early food for thought from the last year or so; and hopefully start an evolving conversation around funding in EA, and effective giving more broadly, as we learn more.

(P.s. Much of what is below has been said before but it seems helpful to summarize it in one place. If it’s your work I’m drawing on, I hope you see this as validation of what you saw that others didn’t. I’ll link to you where I can!)

We need to aim for greater funding diversity and properly resource efforts to achieve this

Saying “we should diversify our funding” is almost cringingly obvious in the current circumstances. But a lot of the discussion about funding over the last year seemed not to acknowledge the risks when ~85% of expected funding is supplied by two pots of money; and when those pots are effectively reliant on the value of 2-3 highly volatile assets. Even when these issues were explicitly acknowledged, they didn’t seem to influence the way funding was forecasted sufficiently - discussions rarely seemed to consider a future where one or both sources of funding rapidly declined in value. We may find out in the coming months that grantees didn’t consider this risk sufficiently either, for example if they bought fixed assets with significant running costs.

Funding diversity is important not just to protect the overall amount of funding available to EA. It’s also vital to avoid a very small number of decision-makers having too much influence (even if they don’t want that level of influence in the first place). If we have more sources of funding and more decision-makers, it is likely to improve the overall quality of funding decisions and, critically, reduce the consequences for grantees if they are rejected by just one or two major funders. It might also reduce the dangers of money unduly influencing moral and philosophical views in a particular direction.

In short: it's still important to find new donors, even if the amount of existing funding is very large in expectation.

Of course, it is significantly easier to say we should diversify than actually to diversify. So what could we do to try to mitigate the risks of overly concentrated sources of funding?

Bring more donors at every level into EA

It seems wise to support organizations that can broaden the funding base of EA. Recently, there has been a move to prioritize securing major donors (and, in some extreme cases, to suggest that anything attracting small donors is a waste of time). Seeking more super wealthy donors is a sensible move (see below), but there is a reasonable case for seeking more donors in general at the same time. More donors in EA means more reliable, less volatile funding overall. Additionally, even if the amounts they give seem trivial by comparison, small donors can still make a difference, for example by funging dollars back to larger donors, who can then give more to things that are less popular, more technical or higher risk. 

To this end, we should celebrate, encourage and (most importantly) fund the wide range of projects that attract effective givers - pledge organizations (One for the World, where I am Executive Director; Giving What We Can); organizations targeting specific audiences (High Impact Professionals; High Impact Athletes); and national regranting organizations (there is a fairly comprehensive list here).

These organizations not only bring thousands of new donors into EA each year - they also simultaneously increase our chances of finding new major donors, whether those are earning to givers or, rarely, Ultra High Net Worths. Even ‘entry level’ approaches like the One for the World pledge have uncovered billionaire donor prospects, by exposing enough people to EA that even very rare events become more probable, while also attracting thousands of ‘grassroots’ givers.

I’m extremely excited that Open Philanthropy now has a dedicated pot of funding and programme officer for these sorts of organizations - but the risks of this space relying on a single funder are especially obvious at the moment. Almost all of these organizations have funding gaps right now and report that they have significant funding insecurity. You can directly improve the funding diversity and security of many of these organizations today. If you would like to donate to one or more of the above, please DM me.

(It would also be amazing if effective giving could be a more prominent part of EA Groups outreach, but I discussed this in some detail previously here. For some of those who made counterarguments there, the calculus may now have shifted.)

Seek more Ultra High Net Worth (e.g. billionaire) funders

I also think we need explicitly to target more Ultra High Net Worth (UHNW) donors. [UPDATE: for example, this guy.] 

One reaction to recent events might be to swear off these funders entirely. I’m really supportive of diversification of EA and keen to grow the movement, and understand that super rich figureheads may run counter to these goals. I’m also very conscious of the general reputational risks of being too closely associated any specific individual or industry, or with billionaires in general. 

However, it seems unlikely that EA cause areas could ever get the majority of their funds from small dollar donors, unless overall amount available decreased dramatically. Almost all funding obeys the Pareto principle - and even movements that have tried to prioritize small dollar donors still receive most of their funding from a few massive ones in reality. So I suspect that avoiding UHNW fundraising entirely would be net negative. (Side note: if there are counterexamples, I’d be very interested to learn about them in the comments.)

On one level, saying “recruit more massive donors” sounds pretty facile. The benefits are fairly self-evident - more individual UHNW donors means more funding in total and, critically, less reliance on any one person’s wealth - but the execution is hard. However, I think there is some value to having this as an explicit EA goal; and to committing resources to projects that can help attract UHNW donors.

We need to recognize that each individual UHNW funder is inherently risky if their wealth is bound up in a small number of companies, whose value can change very quickly. I have heard some suggestions that a lesson from FTX’s demise is to diversify the assets of existing major funders. But this often isn’t controllable - asking FTX founders to sell FTX and diversify their wealth not only could have crashed the price of the company, it also would have been a significant barrier to convincing them to donate. It’s also not always good in expectation - holding on to significant chunks of stock can massively increase the amount of capital you can deploy in the future. As a result, finding more individual sources of massive funding is a more practical route to reducing risk than trying to restructure the wealth of existing donors.

Our best shot at achieving this would seem to be celebrating and funding efforts that are likely to generate interest from new UHNW donors. These include projects like Generation Pledge (which explicitly targets billionaire inheritors), Founder’s Pledge, GiveWell and Effective Giving. Each of these has the potential to bring new massive donors into the EA space - and, while most of them are adequately resourced, some have significant funding gaps or have small enough budgets that you can make a difference even as a small dollar donor.

Celebrate and encourage earning to give

A third reform I’d like to see is a refreshed focus on and celebration of earning to give. While FTX funding was still available, it’s understandable that earning to give seemed less impactful on the margin. But, in general, earn to givers are incredibly useful and impactful (and remained so throughout FTX’s rise and fall). They give amounts that can be extremely significant to small organizations. They can also funge not-insignificant funds back to major institutional donors if they donate to e.g. GiveWell charities; and they are often willing to fund things that are higher risk or less popular (e.g. meta charity start-ups). They also have a tiny chance of turning into mega donors, as Sam Bankman-Fried was for a period.

In general, I want to be forward-looking in this post. However, I do want to draw attention retrospectively to the apparent marginalization of earn to givers in recent years. I spent time with some earning to give people at EAG London 2021 and they all reported that they felt completely undervalued at the conference. One person, who is both an earn to giver and sits on the Board of more than one EA organization, had their initial application to the conference rejected - and the earning to give meetup was almost exclusively people considering doing it rather than people actually doing it, which suggests it’s possible that earn to givers were systematically not invited or rejected. 

Even if earning to give becomes less valuable on the margin, and even as our priorities have evolved to give more weight to direct work, we have to acknowledge how profoundly virtuous earning to give is. It was really gut-wrenching to see people who acted on EA’s best advice in its early years, and who have made huge sacrifices in their own material wealth to help other people, feeling like there wasn’t a place for them at one of EA’s biggest conferences and generally feeling like ‘yesterday’s news’ when talking to delegates.

To this end, I was delighted to see the founding of High Impact Professionals to provide a community for those earning to give; and discussions with Open Philanthropy are ongoing about how best to nurture the effective giving space with some dedicated staff, an annual retreat and so on. 

I would love us to refresh our commitment to celebrate those who earn to give, whether that’s in systemic ways, like representation at EA events, or just in our personal interactions. They are people who work incredibly hard and then voluntarily give away hundreds of thousands, and sometimes millions, of dollars that they could spend on themselves.

We should retain awareness around optics, in good times and bad

It seems fair to say that the massive opportunity of a large influx of funding led us to take optics less seriously in the last year. This seems particularly unfortunate now that the source of funding has dried up, and we are seeing further reputational damage to EA as the FTX saga unfolds.

I don’t want to suggest at all that these were easy decisions at the time. It doesn’t necessarily follow that disbursing funding quickly and (arguably) somewhat liberally was a bad idea in expectation, just because FTX has now failed.

I do think, however, that we should consider carefully steps we might take next time to mitigate reputational risks to EA. Again, I want to emphasize that I don’t think it’s straightforward to weigh up the benefits of disbursing funding really quickly versus using a slower, more structured approach. But it might seem a good rule of thumb to err on the side of registering charitable foundations to disburse grants; to avoid putting single donors on a huge pedestal inside and outside the community; and to try to avoid major sources of funding being publicly tied to any one individual or industry.

These sorts of reforms might avoid some of the issues we’re now grappling with, where FTX grantees could plausibly be subject to clawbacks of their funding in a way that wouldn’t apply if FTX had made grants from a charitable vehicle; and where FTX’s failure might cause significant reputational damage to EA by association. If calling a fund ‘The Future Fund’ rather than ‘FTX Future Fund’ helps mitigate this risk, it seems worth doing. 

To make this point a bit facetiously, Open Philanthropy Project isn’t called 'The Facebook-Asana Fund' and hasn’t seen its reputation affected by scandals at Meta, for example. It's also noticeable that Dustin Moskovitz has received relatively little adulation and exposure inside and outside EA since becoming a mega donor.

I find it notable that very few of the UHNW fundraisers above (Generation Pledge most of all, but also Founder’s Pledge, GiveWell etc.) mention Effective Altruism almost at all on their websites. Staff at several of them have told me directly that this is because of EA’s mixed reputation. This seems like a further reason to consider optics more carefully, especially if we are able to secure significant influxes of funding in the future - if we seem to have gone off-piste in utilizing one funder, we might inadvertently discourage other funders from getting involved [UPDATE: again, for example this guy.]

We need to retain nuance in discussions around funding, in good times and bad

When FTX first announced the FTX Future Fund, it represented a major change in Effective Altruism. The wealth of FTX and Alameda co-founders was estimated to make up 35% of all funding available to EA. FTX was expected to contribute ~28-40% of all EA longtermist grants  in 2022. 

It therefore made sense to update our views in light of these significant changes.

What seemed to happen in practice, though, is that nuanced discussions on this theme were received and replicated in unnuanced ways (sometimes despite the best efforts of the original authors). For example, I saw and heard the following at various times and in various places:

These are just a handful of examples. In total, though, there were repeated examples of unnuanced takes, in Forum posts and comments, at EA conferences and in general conversation.

The lesson here seems fairly simple - we need to remember that epistemic humility is a core part of EA and, as far as is practical, we need to strive to couch our opinions (or the opinions of others) with appropriate levels of nuance and context. Broadly speaking, tropes and memes like "EA is overfunded" should be used with a lot of care, so that oversimplified ideas don’t take hold.

I don’t intend to draw attention to this in a mean-spirited way - I think a lot of people were arguing in good faith, and also the fact that these statements are no longer true doesn't necessarily mean they were definitely false at the time. I more want to emphasize that we need to have this level of nuance front and center if we secure other major funders in the future.

Things I’ve missed

As I said at the start, this is just a collection of personal thoughts - I hope it can be the start of an evolving conversation about what the FTX saga teaches us. I’m also sure I’ve missed things, so please do jump into the comments if you think I’m wide of the mark or should add extra sections to this post.