On Giving

In writing the second post in my “On Starting to Invest” series I realized that there was a more important topic that needed to be written about first, another concept I find fascinating: philanthropy.

About 6 months ago I read a book that changed my life: Peter Singer’s The Life You Can Save. In the book, Singer lays out an argument for why all extremely wealthy (relative to the rest of the world) people should be donating much, much more to the plight of the global poor. The argument stems from a simple thought experiment. Say you’ve just purchased a new car, a shiny sports car that you’ve been saving up for for a while. You’re crossing some railroad tracks and all of a sudden it breaks down, right over the tracks. You immediately look to both sides and notice that there’s an oncoming train barreling down on you. You also notice something troubling: there’s a child stuck in the tracks. You only have time to either save the child or push your car out of the way. What do you do?

You only have time to either save the child or push your car out of the way. What do you do?

Count me among those who would save the child. I think many would consider themselves among those who would do the same. But here’s the thing, there are hundreds of thousands of children that die every day from preventable diseases. Almost half of the world (over 3 billion people) live on less than $2.50 a day. We’re just a lot more removed from them than if they were stuck on railroad tracks a few feet away. From a both a moral and Utilitarian perspective the concept of giving money away to the poor makes perfect sense. It’s the same basic concept that grounds progressive taxation systems around the world: the value of a marginal dollar is a lot higher for someone with few dollars than someone with a lot of dollars. Think of it this way, if you had no way to make a living but someone offered you $5 a day to feed yourself, you would find that $5 incredibly valuable. If that person offered that same $5 to a hedge fund manager they wouldn’t even notice it.

You don’t have to be a hedge fund manager to consider donating to an organization that is either providing assistance to some of the poorest people on earth or trying to eradicate a preventable disease. Consider GiveDirectly, which gives cash grants directly to the global poor via mobile phone infrastructure or Schistosomiasis Control Initiative, which works to eliminate parasitic worm infections in sub-Saharan Africa. While both operate mainly in sub-Saharan Africa they also share another connection. Both are among the highest rated charities by GiveWell, an organization trying to upend how we analyze charity effectiveness. For more ideas here’s their current list of top-rated charities.

If you’re thinking about giving, how much should you give? Singer recommends 15% of your income, but that’s pretty radical for most young people with an eye on the future. I’d say start by giving what you can, maybe tie your donations to certain holidays or large purchases. In a day when charities are as effective as they’ve ever been, even small donations can have an enormous impact.

So if you’re in a position where you’ve got a secure source of income, a few months worth of emergency savings and are regularly contributing to your IRA or 401k, you should think about giving a little to the millions around the world living in poverty or contribute toward eradicating preventable diseases. The causes (probably) need that one extra dollar a lot more than you.

Comments or questions? Send them to me @jeremysjacob