5 Keys to Balancing Passion and Impact in Charitable WorkJanuary 2023
5 Keys to Balancing Passion and Impact in Charitable Work
Philanthropists often engage in long and spirited debates about whether their donations should go to causes for which they have a personal passion or those that purportedly create the most impact for beneficiaries. Of course, these two goals are not mutually exclusive, but the topic quickly gets complicated, especially since nonprofits must court donors with complex motivations for giving. One trend that has gained steam over the past decade is impact investing or effective altruism, which has rapidly grown in popularity and boasts many popular backers. Financial support for foundations guided by effective altruism has rocketed over the past decade. Clearly, this movement and the approach underlying it are here to stay.
While the idea of targeting donations to make the greatest impact sounds uncontroversial, the approach becomes far more complicated in practice. Additionally, the effective altruism movement is not without its controversies, whether in its moral philosophy or the exploits of its leaders. With the recent fall from grace of prominent impact investor Sam Bankman-Fried and the collapse of his company FTX, it's important to reappraise how this approach works in practice. Here are five ideas to consider when balancing impact and passion in your philanthropic work:
1. When choosing between two comparable programs or causes, give preference to those that demonstrate greater impact
It is not usually easy or practical to make a direct, apples-to-apples comparison between two organizations and measure the impact, efficiency, and efficacy of their programs. Few organizations are identical and, even if two can be found which are, context plays a big role in their ability to make meaningful change for their beneficiaries. Obviously, however, if donors are given a clear choice between supporting two highly similar programs and one demonstrates a more cost-effective way to produce better results, that organization should clearly earn more of their support. Donors possess scarce resources and they should generally be inclined to support interventions that produce the best social outcomes possible with the least resources possible.
This broad philosophy drives the effective altruism movement, which explains its goals to "use evidence and reason to find the best ways of helping others, and to put those findings into practice," a hardly controversial set of priorities. Effective altruists seek to support organizations and causes that they believe will create the most positive change in the world with the least financial investment, regardless of their personal attachments to any specific causes. While effective altruists often go above and beyond to incorporate charitable giving into their lives (e.g., choosing careers and places to live to maximize philanthropic impact), donors can clearly adopt the general giving strategy without embracing a radical change to their way of life.
2. Prioritizing impact is not a value-free exercise that leads to one best answer.
While the general idea of prioritizing cost-effectiveness and objective measures of impact has its merits, this process cannot be reduced to simple exercises of math and scientific planning. With some exceptions, the impacts of social change work are difficult to quantify in the best of circumstances and even more difficult to reduce to theories of change or models that can be compared between organizations. Proponents of effective altruism often weigh three factors when considering social causes: importance or scale, solvability, and "neglectedness" or how undervalued a cause is by donors. However, each of these concepts is incredibly fraught and contested even in the abstract, let alone in the context of local conditions. Donors can also fall into the trap of approaching every local social problem from a Western lens and ignoring the local environment and perspectives that shape the issue.
Additionally, the importance and scale of particular causes and interventions need to be assessed complexly and in the context of their specific locations. Evaluation metrics for programs should always be plural, including measures of the scale of services, outcomes and changes, the duration of positive impacts, administrative efficiency, and many more. No single measure can capture the reach or efficacy of a social program and each set of metrics must be tailored to the individual program, which makes comparisons even more difficult.
3. Hold space for donors and volunteers who support causes purely out of passion.
As attractive as the premise of impact investing is, it risks being both unrealistic and counterproductive in its approach to donors who want to support a cause largely out of personal connections or passion. Effective altruists often chafe at the idea of supporting organizations that do not operate at a large scale or create long-term changes. While this is an understandable perspective, however, it can be a hard sell for people who feel deeply moved by a social problem and want to give but feel overwhelmed by the prospect of trying to change the whole world. Additionally, nonprofits risk alienating donors whose interests in philanthropy are focused on issues without cost-effective solutions or for which social change is not a priority (e.g., providing joyful experiences to children fighting cancer). Tackling the social problems of the world requires holistic and wide-ranging approaches, as well as the support and diverse talents of individuals who have a passion for a cause.
4. Recognize the limitations of determining how effectively an organization operates.
For the vast majority of nonprofits, comprehensive evaluation and reporting are often prohibitively expensive, which limits the ability of donors to assess the true efficacy of an organization's programs. Evaluations are often mandated by grantors without additional funding to conduct them, leaving nonprofits with an unfunded mandate that they can only address by paying for outsider evaluators. This can create particularly onerous barriers for newer organizations and those run by people of color, which can reinforce systemic barriers in the sector. As much as impact investing relies on valid measurements of efficacy, this strategy has clear limitations that risk undervaluing and underfunding vital organizations.
5. Keep a critical eye on philanthropists who move in circles of power and influence.
While the effective altruism movement and its leaders do not have a monopoly on the idea of impact investing or even the desire to create social good, it is important to interrogate the leading figures in light of their influence over individuals in the philanthropic sector. Of the $600 million in grants made in 2021 by foundations espousing effective altruism, the vast majority of this funding came from three individuals, FTX founder Sam Bankman-Fried, Facebook co-founder Dustin Moskovitz, and Moskovitz's wife Cari Tuna. While many in the movement prefer decentralized funding models, the institutions representing effective altruism are dominated by super-rich donors likely Bankman-Fried who command tremendous influence, often with dire consequences.
In recent weeks, Bankman-Fried has come under investigation for fraud by the Securities and Exchange Commission for allegedly transferring funds improperly between FTX and another of his private companies. FTX has also declared bankruptcy as a result of a run on its currency and has exposed its investors, including a pension fund, to billions of dollars in losses. While the investigations are ongoing, it is clear that Bankman-Fried abused the money and trust of countless donors in the effective altruism movement and the wider public. This episode highlights the relevant need to question and scrutinize those who run in powerful circles, like Bankman-Fried, even if the philanthropic ideas they promote may have some merit.
Even as the members of the effective altruism movement work out the future of its strategic direction in the wake of damaged trust, donors and nonprofits should continue to think seriously about how they balance impact and passion in their charitable work. While there may be few easy answers on how to perfect this dynamic, nonprofits can improve their connection with their donors by engaging in these conversations and learning how best to channel their philanthropic goals.
Want to Do More Good? This Movement Might Have the Answer by Time Magazine
Impact Investing at 15--A Look at Three Field Perspectives by the Nonprofit Quarterly
Beyond 'X Number Served' by the Stanford Social Innovation Review
Is Your Organization Actually Hurting Those It Is Intending to Help? by Nonprofit Pro
Foundation Demands for Expensive Reporting From Grantees Means Long-Neglected Groups Are Still Left Out by the Chronicle of Philanthropy
Sam Bankman-Fried's downfall sends shockwaves through crypto by the Associated Press
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