Mental Models for Giving

I’ve been developing my own mental models for giving time and money away. This is a deeply personal subject and each person will think about it differently. I’m sharing these mental models to learn from others and record my thoughts at this point in time.

I gravitated towards Peter Singer’s work on Effective Altruism (if interested his Ted Talk, and Vox Podcast are a good start). Peter talks about how we are all probably consuming too much and not giving enough away. He makes the point that it may be more effective to apply yourself toward higher income activities (that hopefully you enjoy) and then giving these earnings away to the poorest people. This could potentially be a more efficient and impactful way to give (on a unit time basis) versus spending your time running a charity.

My parents have also been involved in our community in Kenya for many years – my father runs our small family foundation which supports healthcare and education, and my mother started the Elimu Foundation which supports primary education in Mombasa.

There are a few mental models that I’m currently exploring below.

Time vs. Money

It may make sense to give your time away or your money away or give a little a bit of both depending on your circumstance.

  • Money may be more effective than time: If you make a very high income, it may make more sense to spend more hours making money, and then give away that money – 1 hour of your time volunteering may be way less impactful that 1 hour of the value of your earning power.
  • All time given away is not equal: If you have a lot of expertise in a specific field (e.g. a surgery) it might be much more effective to perform operations vs. go to a village and use your body/time to dig a well.
  • Non-outcome orientated factors matter: What is most effective may also not be the most fulfilling or enjoying to you personally. This is something to take into account when you decide if and how you’d like to give.

Efficiency vs. Community

A fundamental principle of this section (re: efficiency) is that ‘every human life is equal’ and that an additional dollar given to someone in extreme poverty (<$1.25 a day) would have a larger impact than an additional dollar given to someone who is not living in extreme poverty.

  • Heart vs. Head: There is an interesting tension between giving away in the most effective and efficient way (more data driven) and giving away your community (less data driven).
  • Community giving: Giving to your local community can have additional benefits beyond the impact you’re having to the end cause. It can improve social bonds (supporting a colleagues charity run), give you a regular emotional boost (giving money to the homeless person you pass every day), improve the quality of service (tipping your building doorman a little extra) or improve your standing in your community (being thought of as generous or kind).
  • Efficient giving: There are good resources online like GiveWell that take into account levels of funding, the efficiency of the organization (what % of capital reaches the end person) and the impact of each dollar donated. This is a more rational way of investing but you don’t get the benefits of giving to your community beyond the knowledge that you are probably having more impact per $ given away.

My Current View

I personally like a barbell approach. For example, one could volunteer in a local shelter (100% time + 100% community) for a few hours a week and also donate 10% of their income to Give Directly (100% money + 100% efficiency). This helps to satisfy both heart and head.

I support Give Directly, as I worked with the folks behind it very closely and can vouch for both their character and their data driven (impact and efficiency) approach to giving. It’s an added bonus that much of the money goes to E.Africa, which is where I’m from and I’ve personally visited the communities and homes of the beneficiaries.

I also try to give, to a lesser extent, time to my community (e.g. mentoring entrepreneurs), and money (school fees for a tennis coach, or paying for a porter’s guide training course).

When and how much to give?

I don’t have refined mental models for how much (money) to give and when to give and I’m sure this will vary greatly depending on my stage of life. I have been thinking through the following open questions:

  • The biggest question I have is “give now vs give later“? Warren Buffett famously argued that it was more impactful for him to compound his money at 20%+ and donate it at the end of his life. Earlier in life, some personal wealth can also enable you to take entrepreneurial risk, or invest in your or your children’s education. On the other hand, giving now could mean that problems of today don’t spiral (i.e., social time value of money). There may also be tax benefits in the US (e.g. donor advised funds) to giving earlier in life.
  • How much of your excess capital goes into saving vs. unnecessary additional consumption as your income grows? I’m certainly guilty of this, and need better methods to quantify.
  • When you are later in life or die, how much will each additional dollar left to your family/children benefit them after a certain amount vs. the impact of an additional dollar given away? I think it’s human nature to bias towards self preservation vs. giving, for most people.
  • How much does this calculus depending on your stage of life (younger vs. older) and your total income and capital base? If you have $1,000 vs $100m in your bank account the percentage of your net worth that it’s rational to give away will change (see below for a suggestion).
Peter Singer’s Giving Scale” in the appendix of “The Life You Can Save

My thinking is still evolving and think it will continue to do so – my main motivation was to clearly articulate my thinking and learn from others in the community.

Thanks to my friend Kai Wu for reading a draft and making this post better.

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