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Investing for Good


ElstonG
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I’m curious how many invest with an explicit goal of maximizing expected contributions to charity, and thought I’d start a thread to share ideas or related thoughts.

 

Personally, my primary motivations are financial self-sufficiency and simple enjoyment, but my secondary motivation is to accumulate capital beyond my and my family's needs that can be allocated to cost-effective charities (ie., those that do the most good per dollar) during my lifetime. I am a fan of the effective altruism (“EA”) community and approach when it comes to the latter (disclosure that I work for an organization that gives large amounts of money to EA-related charities and can be considered EA-affiliated). The main challenge I have is balancing the tradeoff of giving money away now, which cuts into my rather meager capital base, vs. waiting and letting it compound over time. While WEB opted for the latter, I obviously do not expect to be a WEB-level capital allocator, so that option seems less obvious when you consider arguments that a life can be saved in expectation today for ~$4,000 via donations to GiveWell top charities for example, or Peter Singer’s drowning person thought experiment.

 

I’m interested in whether others have takes on “now vs. later” philosophies, or specific charities they recommend and consider high-impact (my personal favorite is GiveWell, which allocates across several global health charities). For those inclined, I think charity allocation strategy and debates can be as fun as general investment strategy and debates.

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Interesting topic. My wife has opened my eyes to being more generous financially. I had that same mind sight of let it grow and give it later but she turned me around to he fact that there is a lot of good that can be done now. I still find it hard to appreciate good charities and where the money is best used, I pretty much let her decide but would love any suggestions

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This is a complicated issue.  

 

My approach is to try to maximize my wealth, subject to my ultra-conservative personality.  I take an approach that embraces high-conviction positions, which is seemingly at odds with the conservatism, but in some respects might be completely aligned with risk-adjusted wealth maximization (without being a big swinging dick like @ERICOPOLY who does absolutely insane things in terms of high conviction positions).

 

One of my motivations for growing wealth is that I can't quite say exactly how much money I'll need for my time on earth.  I am a cheap bastard careful with my money, so I have more than I likely will require, but who knows?  End-of-life can be a hell of a thing and you can burn through a pile of cash over 5 or 10 years.  So, my approach is to accumulate now to the extent of my ability and if I find myself overwhelmed by wealth in 15 years then that's fine (there's a good chance that will happen).  I will then be faced with the "good" scenario of struggling to find an appropriate balance between bequeathing that wealth to family and to charity.  How shall it be split, and amongst whom?  It is almost certain that there will be a considerable surplus and the end-of-life challenge will probably be to rationally allocate it.

 

So is it a good thing or a bad thing to wait to donate your wealth?  You noted that Buffett has mostly elected to wait.  I think that is a rational decision if your rate of return exceeds your perception of the social discount rate.  So if you think you can grow your wealth sufficiently rapidly that it exceeds the social discount rate, the world is better off if you retain your capital and bequeath it upon your death.  This approach involves winners and losers due to the intertemporal nature of the decision, but like all aspects of life, trade-offs are a reality.    IMO, Buffett should not have given a penny to charity before his death because he almost certainly has been able to compound his money at a rate that exceeds the social discount rate.

 

On a personal note, I anticipate that the bulk of my charitable donations will await my death.  This is a function of two things: the first is the ultra-conservativism of not wanting to ever run out of money and be a burden on anyone while I remain alive, and the second is the cocksure arrogance that I can grow my wealth more rapidly than the social discount rate, meaning that my wealth will do more social good in the future than it would today.  Am I right?  Who the hell knows?  But those two personality flaws are what drive my decisions with respect to charitable giving.

 

 

SJ

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45 minutes ago, StubbleJumper said:

This is a complicated issue.  

 

My approach is to try to maximize my wealth, subject to my ultra-conservative personality.  I take an approach that embraces high-conviction positions, which is seemingly at odds with the conservatism, but in some respects might be completely aligned with risk-adjusted wealth maximization (without being a big swinging dick like @ERICOPOLY who does absolutely insane things in terms of high conviction positions).

 

One of my motivations for growing wealth is that I can't quite say exactly how much money I'll need for my time on earth.  I am a cheap bastard careful with my money, so I have more than I likely will require, but who knows?  End-of-life can be a hell of a thing and you can burn through a pile of cash over 5 or 10 years.  So, my approach is to accumulate now to the extent of my ability and if I find myself overwhelmed by wealth in 15 years then that's fine (there's a good chance that will happen).  I will then be faced with the "good" scenario of struggling to find an appropriate balance between bequeathing that wealth to family and to charity.  How shall it be split, and amongst whom?  It is almost certain that there will be a considerable surplus and the end-of-life challenge will probably be to rationally allocate it.

 

So is it a good thing or a bad thing to wait to donate your wealth?  You noted that Buffett has mostly elected to wait.  I think that is a rational decision if your rate of return exceeds your perception of the social discount rate.  So if you think you can grow your wealth sufficiently rapidly that it exceeds the social discount rate, the world is better off if you retain your capital and bequeath it upon your death.  This approach involves winners and losers due to the intertemporal nature of the decision, but like all aspects of life, trade-offs are a reality.    IMO, Buffett should not have given a penny to charity before his death because he almost certainly has been able to compound his money at a rate that exceeds the social discount rate.

 

On a personal note, I anticipate that the bulk of my charitable donations will await my death.  This is a function of two things: the first is the ultra-conservativism of not wanting to ever run out of money and be a burden on anyone while I remain alive, and the second is the cocksure arrogance that I can grow my wealth more rapidly than the social discount rate, meaning that my wealth will do more social good in the future than it would today.  Am I right?  Who the hell knows?  But those two personality flaws are what drive my decisions with respect to charitable giving.

 

 

SJ

 I share this same sentiment. 

 

Additionally I think the big thing for me is the inability to know specifically how contributed dollars are being used. There has been quite a bit of outcry over the years regarding how contributed dollars are used....i.e .03 on the dollar actually make it to the starving kids in Ethiopia (facetious example). I know the CEO of Goodwill came under some scrutiny. 

 

I've never been one to think that Alumni contributions are worth while (personally) because it never seems to reduce student/professor ratios, increase quality of the education and I dont care if my name was on a building, to me that seems to cheapen the idea of giving in a way. Is my donation really to further the common good, or is it hubris and Im really after the "John A. Doe HALL" recognition. To each their own. 

 

The way that I am charitable while still alive, is to give to family members who genuinely need it ie. taking care of an unexpected bill, or groceries (dealt shitty cards) no-interest short term loans to friends, random anonymous acts of kindness for people in need. I spend the money, I see the benefit, Im in charge. This is simpler with 4 figure amounts....7 figure amounts after Im gone would need help obviously. 

 

There are tremendous opportunities for charity all around us. It doesnt have to be a big name charity...is there a little old lady next door that needs her lawn mowed/drive shoveled that you can pay someone to take care of for her for the year? Perhaps something around the house that you can pay for and fix/repair or pay someone else to?  I had a girlfriend once who went to help orphans in Jamaica. It was organized via her church group. Now dont get me wrong...good for them. But I couldnt help but ask some questions that didnt go over well. In order to go, it cost her around $3k...to fund this she set up a donation account for friends and family to contribute (and it ended up being fully funded for her). So this church group of mid 20's (at that time) head down to Jamaica IN JANUARY and come back with a bunch of pictures for their social media playing with kids on the beach. It was basically a PR stunt for them and a "free" vacation under the guise of a spectacular charitable act via the church and orphanage. My questions were...what about the orphan kids in Iowa? Why pick Jamaica in January when its -40F here? Why do they charge you $3k for 7 days, I had just gotten back from a week long trip to Italy I did on a shoestring for around $1k. And to be fair, I wasnt volunteering, who am I to ask questions? But I couldnt help but think that the money wasnt being used in the best way possible....why not just send the orphanage $3k...surely that would help them more than sending down a 20 something Midwestern girl to play with kids on the beach and eat seafood...

 

To be fair, I felt the same way when I saw the masses at St Peter's in Rome...the shear opulence of that building and the surroundings, gold leaf everywhere etc  admittedly made me think a bit, when next to the starving/homeless in the streets.  (This is not a religious hate statement, just an observation) 

 

For now I give in the ways I best see fit, and with smaller amounts I feel Im the best one to designate how that is distributed. The traits that have allowed me to be in the position to help are also the ones that make me apprehensive to allow others to dictate how those dollars are allocated. 

 

I (hopefully) have time to consider the best way to distribute funds when Im "done" with them. Something that would appeal to me would be to set something up wherein the amount is managed and the principle would remain and potentially grow, thus stretching the contribution out further than a one time payment. If I remember correctly that is how J Paul Getty structured his will and it has grown considerably. (Disclaimer: Obviously those sums are magnitudes larger than anything coming from me, but I like the idea of continued benefit for many over a long period)

 

These are IMO deep philosophical questions that can only be answered by each individual

 

 

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All of 'us' in the 'we' do an update every 3 years - what's changed, what we can do, how, why, etc. Any of us can do more than we've agreed, but its on his/her own dime. We take the view that charity starts at home, the first $$$ go to mortgage/debt retirement, thereafter local projects where we have involvement. Ideally personal involvement, alongside a modest financial donation to make the project 'happen'.

 

Projects have ranged from 'Secret Santa', to helping family vendors stock specialty product at xmas/easter, to various business limited partneships, to converting a gravel pit into a paying public garden. Almost always a business approach, capital compounds and pays forward. A great many local projects are part fundable via government grant, whereby patrons put up 1/3 and the government puts up 2/3. Being a local patron, and tripling the projects money, has a certain appleal to the 'value' minded investor!

 

The 'legacy' thing is still there, but we have zero interest in feeding the masses today. We would far rather spend the money on teaching fewer, in our own backyard, how to fish - with ideally an overwighting of 'boiler makers' in the pile. If only to ensure that future generations of family will always remain grounded! 

 

The female side of the family includes two UK magistrates, and a council women that date back to the very early 1900's - before women were allowed the vote. Apparently the ladies justice were quite ruthless, and thoroughly enjoyed themselves! 

 

Different POV.

 

SD

Edited by SharperDingaan
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"St Peter's in Rome...the shear opulence of that building and the surroundings, gold leaf everywhere etc "

 

Years ago I had a discussion with Italian friends, and asked 'Why didn't everyone just ransack the buildings, and steal both the artwork and gold?. Some of the statue work would look great in my bathroom!" Following a extended silence, much twinkling in the eyes, and a tap alongside the nose - I was told "2%". Another extended silence ... and Cin Cin, Alla Nostra Salute!  

 

SD

 

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