Givewell revisited

The Givewell discussion has been continuing on MeFi and Gifthub, which is where I've been posting more thoughts. There was a point last night, when I read these two comments, when my visceral disgust grew so strong that I almost checked out, but I'm glad that I did not. The MeFi folks in particular are raising a number of useful points.

A couple I want to highlight here.

First, this tasty comment by fourcheesemac:

There is a generational shift here, and it seems *way* over-invested in the internet as the be all and end all of social change. Amusingly, none of them ever really deal with the issue of community at all, except their own communities. What every social scientist who works with poor people knows (I be one) is that strong communities help themselves, and that the first challenge of any social improvement plan is to re-inspire a sense of community in a depressed or defeated or terrorized social group. None of these kids seems to even consider this bigger picture issue.

It's an observation you could actually extrapolate to charity more generally. Time and again we rush toward the latest shiny things that promise to Change The World and attract donors, and time and again our well-meaning but naive programs muck up as many things as they cure. But hey, they doesn't matter, because when things get all fuxored we blame the stupid yokels and move on. I've been in this gig long enough that I've seen this multiple times in multiple forms, and I'm tired. Hence the name of this blog, a reaction against the numbing recitation of the "civil society" mantra as a panacea for the world's ills.

The solution, methinks (and have long thought) lies in the direction pointed by 4cm: we need to understand all systems from the inside out if we are going to have any chance of making a positive difference. And that includes the system of do-gooding, which at present is merely lurching from fad to fruitless fad.

The other comment is from Miko, who has over the course of this week been an invaluable resource of helpful insight. It's a reaction to a Givewell blog post criticizing foundations for distributing only about 6.6% of the assets annually:

This last comment is noteworthy because it also critiques large private foundations for giving away about 5% of assets a year, betraying an ignorance of endowment management. The conservative figure for endowment investment is that endowment can be expected to generally throw off 5% a year, which forms the budget used for grantmaking purposes. Minimum spending is set at 5% because that is what can reasonably be expeceted for income. If there is additional revenue, that board decides to either reinvest in endowment or dedicate it to that year's programming. It is not because charities are reluctant to give away money or enjoy "sitting on" the funds, as Holden suggests. It's the way a foundation endowment is supposed to work. All on open, public record.

That Miko had to explain this points to a serious weakness in how many in the social enterprise movement see financial sustainability. For many charities--and this has been true for decades--financial sustainability derives from an array of income resources, including donations, endowment assets, and direct business activity. Yet the past few years have seen a steady devaluation of the first two resources, as if the only valid mode of financial sustainability is income derived from selling goods and services. From this perspective maintaining an endowment appears to be a symptom of greed and fear, the archaic residue of obsolete tradition now being swept away.

Um, no. What it is is shrewd long-term management of a diverse asset pool.

Which is what makes Givewell's rhetoric so puzzling. It claims to embody the values of Wall Street, but you'd think folks from Wall Street would be familiar with the practices of institutional investors. What Givewell's standard--spend down that endowment, spend it DOWN--actually reflects is the attitude of 1960s' Congress critters who were trying to eradicate private foundations by forcing them spend down all of their assets over twenty years.

And that leads to an issue I don't have time to address now but have been chatting about a bit in my public talks. A teaser: could this so-called reform movement actually reflect a shift in public policy away from private charity?

Stay tuned . . .