I worked in Accounting (the dept that did it, not the one that taught it) IT at a major public university for several years. Something like half of the software complexity was in keeping track of each dollar's origin, and making sure that it was spent on only what the source approved it to be spent on. Whether the source was the federal government, the state, corporate donors, or wealthy individuals, they all had strong opinions on what the money could be spent on. It was much easier to get money donated for a new building, than to maintain an old one, so you can have a situation in which new buildings are being built while old ones fall apart.<p>The most surprising thing to me was how small a percentage of the budget was under the control of the president of the university; it was only a tiny amount. Virtually all of the money was controlled by the source, not by the administration.
Over the years my opinion of non-profits has become less, shall we say, “charitable”; society has a tendency to glorify non-profits because they “don’t have shareholders” but, in reality, a lot of non-profits give peanuts to those at the bottom (with some even working for free) while executives get far more than a living salary. And whether you’re an educational institution, an insurance provider, or an NGO, being an executive comes with lots of perks like travel, entertainment, lavish offices, etc. So while “no shareholders” is often a selling point for supporting a non-profit, there are still people getting an oversized benefit out of non-profits, who in some disturbing cases are the founders and their family members.<p>If I wanted to donate a large amount of money to a non-profit, I would structure it as a zero-interest loan, and would just keep deferring the repayment of the loan as long as the org stays true to its mission, compensates executives in reasonable proportion to regular employees, etc. Brian Acton (who co-founded WhatsApp, and later left Facebook) is supporting the Signal Foundation with tens of millions in deferrable, interest-free loans. I think it’s absolutely genius, and wish more people would follow his example.
He didn't mention the little problem of the fungibility of money. If a school gets two $100k donations, and one comes with a "no stem cell research" restriction, then it usually isn't a problem to spend the other donation on that, and the restricted one on the road maintenance that would have been done anyway. So a restricted donation is really only effectively restrictive if it significantly outweighs the rest.
I've done a fair amount of volunteering for nonprofits, one in particular[1], and I will say that nonprofits are full of the most overworked, underpaid, and passionate people you will meet anywhere. They need every penny they can get, and very often people mistake nonprofits spending money on essential activities like marketing or event planning as "overhead", when such expenditures generate multiples of revenue for every dollar spent. Wouldn't you rather the $1 you donate generate leverage in new donations?<p>One thing that PG doesn't mention here is fungibility: if you restrict your donations, nonprofits will still route unrestricted funds to where they need to be spent. It's still sub-optimal, obviously, but people who donate restricted don't always understand that they don't have as much control as they think they do over where funds will be spent, and that's a good thing.<p>[1] Liberty in North Korea is the best way you can contribute to the wellbeing and success of the North Korean people directly...one $ donated to resettle refugees can return 100% ROI after just 2 years: <a href="https://www.libertyinnorthkorea.org/" rel="nofollow">https://www.libertyinnorthkorea.org/</a>
I would also suggest donating only to non-profits that make
everything they do as open/transparent/public domain as
possible.<p>In my limited experience there seems to be a correlation between
an organization's productivity in solving their existential problem
and how open the org is.<p>The more
secretive the organization (and the less public domain content it produces) the more likely it spends a
significant amount of its resource on fundraising and cushy
salaries for its management.<p>Allen Institute, Wikimedia, Internet Archive, are examples where $1 in inputs leads to $100 in public domain output.
> Which means a restricted donation is inherently suboptimal<p>Maybe so, but maybe it's a compromise as well. If not, no funding at all would have been given which maybe would be a net-loss long-term. Receiving money to do research might not always include research you want to do, but you'll gain more experience overall and do better once you get to the research you want to do.<p>I'm thinking from the perspective that if I got to choose where my taxes went to. If I could decide which areas 50% the money goes towards, I think I would have been more happy paying taxes and maybe would add more, in order to fund efforts I believe in personally.
Very true. I've been running non-profits to help the security of journalists and human rights defenders for years (<a href="https://www.secfirst.org" rel="nofollow">https://www.secfirst.org</a>). One of the big issues is that donors often only want to fund projects which means core costs (accounting, IT or whatever) often are not covered or are only partly covered.<p>To an extent project specific funding also means that some organisations have to make sacrifices or do projects that aren't central to their mission. Mission creep can happen with some NGOs. Without core costs covered it's also a lot harder to develop new concepts as there isn't really much room essentially for R&D.<p>Core costs in general also become a bit of a barrier to entry for new non-profit ideas and organisations. Core costs usually are only granted by big donors and usually will only be granted to big organisations. It's very very hard as a small org to get core costs paid for so it's hard to scale a lot of things. Collaboration in the NGO field is very varied, a lot of big orgs talk about it but when it comes down to it, often are very lacking. This leads to lots of inefficiency, overlap and duplication.<p>Also the project based funding tends much more towards new ideas rather than maintenance. Maintenance and sustaining projects just doesn't get the same level of funding. For example we built our open source Umbrella App for learning about security with project specific funding. Nearly all of which gets spent specifically on that project. It's very hard for us to find donors willing to fund the ongoing maintenance of the apps. The rest of our core costs has to come from our training and consultancy work with organisations. That's tricky as we love doing it but it means we can't focus as much on our core tool building.<p>Because of the core cost issues, the non-profit space is often very inefficient. It doesn't really have the same culture of startup, mergers, takeovers etc. To extent what you often get is zombie NGOs which become big and inefficient but soak up the donor money and keep smaller/better organisations out of the market. The way big donors work, many are very slow and risk adverse. So that means for example a lot of the big funders will never find any organisation that hasn't been around for at least three to five years. Imagine a VC not finding any company that hasn't been around for more than three to five years!
Having spent many years volunteering for various nonprofit, and having been deeply involved in fundraising and budgeting, I cannot upvote this enough!<p>Restricted donations add overhead while making it harder to fund important things like bookkeeping, rent for an office, and staff salaries. If you believe in the nonprofit's mission, just let them figure out what to do with the money!
The one restriction I insist on is that they leave me off their mailing list! I get it, the odds are good that a previous donor will donate again, but especially for small donations it ends up feeling like all I accomplished was to purchase a bunch of spam & kill some trees!
The article mentioned the Gates foundation which has terrible records in education initiatives:<p>- The big failure in small schools initiative: <a href="https://marginalrevolution.com/marginalrevolution/2010/09/the-small-schools-myth.html" rel="nofollow">https://marginalrevolution.com/marginalrevolution/2010/09/th...</a><p>- The big failure in teacher evaluation initiative: <a href="https://www.businessinsider.com/bill-melinda-gates-foundation-education-initiative-failure-2018-6" rel="nofollow">https://www.businessinsider.com/bill-melinda-gates-foundatio...</a><p>- The big failure in Common Core initiative:
<a href="https://www.washingtonpost.com/news/answer-sheet/wp/2016/06/02/gates-foundation-chief-admits-common-core-mistakes/" rel="nofollow">https://www.washingtonpost.com/news/answer-sheet/wp/2016/06/...</a><p>Now it is funding anti-racist math: <a href="https://equitablemath.org/" rel="nofollow">https://equitablemath.org/</a>
I work at a non-profit, and, anecdotally, I think it is more complicated as there might be 3 areas of funding concentration:<p>1. Areas that are overfunded because restricted donations tend to concentrate there.<p>2. Areas that leadership want to fund, and would direct unrestricted donations to.<p>3. Areas that neither restricted donations nor leadership want to fund and thus tend to be chronically underfunded (e.g. payroll and staffing in certain departments)<p>I think thoughtful restricted donations have a place then, but a key is understanding of the industry and transparency in operations
I recently helped to found DigLit.ca, and non profit that helps build technology for other nonprofits. What we've found when dealing with nonprofits is that a lot of the smaller organizations are, suprise suprise, struggling to survive. They're trying to carryout their general missions, but unless they have some kind of consistent funding model, a lot of their energy is turned towards keeping the organization alive. I don't think there's anything wrong with that, it's just the nature of the nonprofit game. But our organization acts a bit like a technology donor, and we've definitely had to restrict the nature of our services to mission facing purposes. Aside from the technical challenges of contributing to the survival of an organization, we've also found that developers want to help with problems directly.
This article touches on non-profits, but I feel it comes from a deeper well. We are wired in our culture around how we give donations.<p>We only give money to people who we think would spend it most wisely. We walk past all the people in San Francisco on the street because we know that if we give them money it will only go to more drug use. We drive past the person on the left turn lane because we don't want to encourage him to be there.<p>When I spent 2 years traveling by motorbike all over Vietnam, Cambodia and Laos, I saw first hand what donations do from birth... little kids in the middle of nowhere would run up to me and say hey DOLLAR, give me DOLLAR. They were trained for that.
I stopped donating (with a few exceptions) because of the general lack of transparency in where your money really goes, and the stories of fraud, absurd salaries of CEOs/management and cold-calling which turns out to be so expensive that the first 1 or 2 years you are effectively paying for the call center. Etc. etc.
As a board member of two nonprofits, I STRONGLY agree with pg. Restricted donations are not only an administerial headache, they strain the donor/recipient relationship and lead to suboptimal spending.
> <i>Usually the way the donor wants the money spent is not the way the nonprofit would have chosen. [...] If a nonprofit doesn't understand better than its donors where money needs to be spent, then it's incompetent and you shouldn't be donating to it at all.</i><p>The situation might not be "understand", but "choose". The donor's interests in donating might not be 100% aligned with the effective mission of the charity.<p>For one example, I imagine the donor might have a particular problem they want addressed, and that overlaps incompletely with the activity of the charity, but the charity otherwise seems the best vehicle for addressing that particular problem.<p>For a less admirable example (but still perhaps beneficial to society), I imagine a donation might have PR or social status value for the donor, and a donation for a particular cause/effort sounds better than some of the less-fashionable work of the nonprofit. Or the donor might want the PR/status of their name on a center, and want to make sure that the center has funds to keep paying PR/status dividends.
Oh, it’s good to be back enjoying a PG essay! :) Even if it is just a short message rather than a grandiose statement (maybe that’s the reason I like it).<p>I worked with nonprofits (and philanthropy advice in particular) for a long time and this is a great message to send. I don’t think it will change things much, as I don’t think PG has as much influence in the nonprofit world as he has in the startups world, but worth the shot.
And yet a constant theme I keep hearing on HN and other places is that “I would only donate if I could support X initiative at Y foundation”<p>Mozilla comes to mind here. People often claiming they would donate if they could support only specific parts of the organization.<p>This article shows there is much more nuance to think about here than just supporting a specific part of an organization
This highlights an issue that the article doesn't touch: how to choose trustworthy donation targets?<p>It implies you should not to trust places with your money if you don't trust them to allocate it, which is correct, but how to know who to trust?<p>I generally stick near-exclusively to GiveWell as a result.<p><a href="https://www.givewell.org/" rel="nofollow">https://www.givewell.org/</a><p>Each year they use a small fixed percentage of donations to research the most human benefit per dollar spent, and then use the remainder on that one single thing, maximizing the positive impact per dollar. The only thing the donor needs to know is that they have it handled. Any money you give them will go 100% to the thing they have determined is maximum impact that year. (One year recently it was mosquito netting, to prevent malaria, if I recall correctly.)<p>This might sound like an ad but I'm not affiliated in any way, just a happy donor who is glad they exist.
Am mid-founding a startup which will give 5% of its profits to charity from day 1. Customers won't have a choice about this - either the amount or the charities chosen - so this will be intrinsic to doing business with us. Trade with us if you like that, don't if you don't. Will be on a tiny scale compared to the donations PG refers to, but customers (who are donating indirectly) will have to trust us, while we trust the charities we give to. There's no meddling or options to choose from, by design, for the same reasons PG describes.
"Unfortunately restricted donations tend to generate more publicity than unrestricted ones. "X donates money to build a school in Africa" is not only more interesting than "X donates money to Y nonprofit to spend as Y chooses," but also focuses more attention on X."<p>Seems like you could arrange the donation, get the charity to tell you what it would be for, and then use that as the announcement. You might get less attention getting descriptions, but I feel like it would still be net-moral to get a little creative with how you described it.
> Many donors may simply never have considered the distinction between restricted and unrestricted donations. They may believe that donating money for some specific purpose is just how donation works.
And to be fair, nonprofits don't try very hard to discourage such illusions. They can't afford to. People running nonprofits are almost always anxious about money. They can't afford to talk back to big donors.<p>In other words they smartly are thinking they don't want to kill 'the sale'. When businesses sell products do they typically list all the potential downsides or defects in their product or service when doing so might discourage the purchase?<p>Maybe as I said in my other comment they realize that less money would come in because they would rain on a parade going on in someone's mind.<p>Example let's say someone wants for vanity purposes (an entirely valid reason) to have a building named after them. The non profit (could be a school or some research institution) then says to them 'well you know we can do that but why don't we put the money toward this cause instead after all why does it have to be about you and your family name being perpetuated!!!?'.<p>That's an exaggeration sure (in terms of how the words would go. However principle is that the person donating would then have a negative ie 'the wrong reasons' attached to what they were convincing themselves was a selfless act.
"And to be fair, nonprofits don't try very hard to discourage such illusions. They can't afford to. People running nonprofits are almost always anxious about money. They can't afford to talk back to big donors."<p>Nonprofits can be realistic about this without being cynical about it. I worked with a very good nonprofit that had the fundraising mantra "don't give until it hurts, give until it feels good." As in, recognize that donors give because giving makes them feel better about themselves and the world they live in, and that's OK and something to encourage -- you just have to connect it to the mission.<p>That means, yeah, you have to take restricted funds and do benefit dinners and other partially-wasteful stuff, and you have to emphasize the photogenic parts of your work more than others. But more importantly, you have to clearly tell the story about your theory of change to your donors, so you're attracting the right donors and educating them to support your mission. They're the "right" donors because the more they learn about how and why you're spending their money, the better they feel about themselves and the world. That sets up a virtuous cycle where you're adequately funded and you're incentivized to do better at your actual mission so you have more to share back.<p>If you get _that_ wrong, and your donors feel good about their donations for fundamentally different reasons than what you're actually spending them for, that's when you end up with funding undercutting the mission.
Here is an essay showing how women's higher education in the U.S. was boosted by restricted donations to universities:
<a href="https://www.jamesgmartin.center/2021/02/feminist-college-funders-and-the-problem-of-donor-intent/" rel="nofollow">https://www.jamesgmartin.center/2021/02/feminist-college-fun...</a> .
I like to donate when I know a person involved. I find it hard to trust an organization or title. I donate cash to the local food bank, which is run by neighbors. I donate to my son's college student organization, run by folks he knows. I donate to a guy I see on the street frequently, who has been camping since he became homeless in 1985.
100% this.<p>SO much of what is considered "non-profit dysfunction" is a direct result of funders restricting donation utilization.<p>Only X% for opex, y% for capex, z% for comms, where x+y+z == around 5% of funds donated.<p>Can't run an organization like that well.
This is why billionaire philanthropy is such a scam. It's just a tax-free way for oligarch to create societal infrastructure that further entrenches their hegemony.
"If a nonprofit doesn't understand better than its donors where money needs to be spent, then it's incompetent and you shouldn't be donating to it at all."<p>Years ago, I had a startup that was building software for non-profits. We spent a lot of time around them, talking to them, etc.<p>This problem of incompetence that PG briefly touches on is rampant to a degree that most would never realize. Most large NPs are more inefficient than you could possibly imagine with their money (if you don't believe me, go look at how much of their money goes to administration and how much the people at the top are paying themselves). The SMB NPs (the group my startup served) were typically run either by narcissists who's real goal was to look good to other people, or they were very non-business/money savvy and driven by passion (in a negative way). Both of these lead to poor decision making, one way or the other.<p>The narcissists tended to do everything they could to look good while doing almost nothing (think: hosting galas to raise "awareness" or finding ways to be involved with big important people, without actually furthering their mission). They looked great in the public eye most of the time and could flaunt their "goodness" while secretly treating their employees like trash behind closed doors.<p>Example: the director/founder of one NP I know of that had a mission of helping pregnant women in crisis forced her 8 months pregnant employee to walk for miles through DC and do manual labor for her. She chewed her out in front of the whole team for saying she wasn't physically capable and made her cry, demanding that she do something that was technically <i>her (the director's)</i> responsibility.<p>The non-business/money savvy person who is driven by passion at least has good intentions, but they let that passion run wild without tempering it. This leads to knee-jerk reactions and doing things just to do them, without taking the time to play the long game or even determine if the action they're taking is helping or hurting. It's the classic "give a man a fish vs. teach a man to fish" problem, where they don't slow down to look closer, and so find themselves perpetually addressing the crisis instead of the underlying issue, or creating sustainable solutions.<p>The NPs that manage to avoid these are so exceedingly rare in my experience that it has turned me into a cynic. I just assume that there's incompetence at play, and even outright abuse.<p>Anyway, I agree with PG, I just had to expand on that point because it almost felt like a footnote when IMO it is a huge part of the problem: finding good NPs to donate to unrestricted. Otherwise, you have to settle for incompetence and restrict that incompetence.
A way of dealing with this issue that I've seen in the jewish community (I only have extensive experience there), is to provide sponsorship opportunities: a way for the donor to restrict the usage of their money and a way for the organization to get it where it's needed. While it doesn't cover everything, it can really help reduce the requirement for having donations that can be used for anything.
> If restricted donations do less good than unrestricted ones, why do donors so often make them? Partly because doing good isn't donors' only motive. They often have other motives as well — to make a mark, or to generate good publicity<p>Bottom line is this: It's a net loss for non-profits if there is a stigma that is attached to people who donate for in part 'the wrong reasons'.
Can't a non-profit say something like:<p>"Of course we can restrict your donation to X. But we're also happy to listen to what's most important to you and work yith you to develop a plan based on our expertise, and how ot fits into a larger story."<p>The hidden mesaage in there is not just "we know best" but also, "we can help you with the PR story or legacy or whatever you want".
Also important: donate regularly.<p>Ad-hoc donations make it difficult for a nonprofit to plan their budget. It forces them to spend a lot of that money to solicit more donations.<p>My friend made a tool to donate anonymously and regularly to non-profits: <a href="https://sublimefund.org/" rel="nofollow">https://sublimefund.org/</a><p>Less spam, better for the non-profits. It's a good combination.
I help direct about $2.4 million each year to various parts of the world. We often receive inquiries about donating to a specific need or geographic location and we tell them no thank you.<p>If people believe in our mission and leadership, then they give without any qualifications to what it shall be used for. We provide accurate records, and reports of what the money goes to.
Agree 100%. I wrote a short essay [1] about the problem why charitable donations cannot achieve the intended effect.<p>[1] <a href="https://snmishra.wordpress.com/2016/03/11/why-tax-deduction-for-charitable-contributions-is-bad/" rel="nofollow">https://snmishra.wordpress.com/2016/03/11/why-tax-deduction-...</a>
Not so long ago the author warned that non-profits are a "magnet for sociopaths" because "their defining feature is to make no profit" and there's "no intrinsic accountability".
(<a href="https://twitter.com/paulg/status/1124254508232663040?lang=en" rel="nofollow">https://twitter.com/paulg/status/1124254508232663040?lang=en</a>).
I thought this was an odious and wrong thing to say for many reasons and it made me think that while he clearly has a lot of experience with non-profits of a certain kind or scale or connection to tech VC, maybe it's not so broad-based. And it's hard for me to square this attitude with this new blog post: If there's no intrinsic accountability, then how do unrestricted gifts help? Shouldn't gifts provide some of that accountability? The best interpretation I can come up with is "Apply very strict conditions to where you decide to donate, but when you do, do it unconditionally".
One of the reasons I give big cash envelopes as gifts to be deployed as recipients see fit. I do offer symbolic gifts, or small cute things, but when the monetary value of the gift is large, I give cash.
This is basically correct. Restricted donations are a <i>goddamn pain in the ass</i>. If you trust a charity is doing stuff you like, just trust them to spend the money doing stuff you like.
As a corollary if you feel like you want to make a restricted donation to a particular organization, don’t donate to that organization. Find one that’s better aligned with your values.
Wow, P.G. almost gets it. The most unrestricted donation is paying your damn taxes. Get rid of the philanthropy loophole, raise the taxes, and lets invest our surplus democratically.
the nassim taleb heuristic here comes in handy:<p>When solicited for charity funding on the literal street, usually by a young person, he always asks the that young person<p>"are they paying you to work here?"<p>If yes, he won't donate. The simple logic is, if the charity's mission is strong enough, someone will volunteer his/her own time to solicit donations. Being paid to stand there is a signal (a filter) that the cause is not strong enough. Therefore, you pass.
Restricted donations can keep the nonprofit from changing is focus. For instance, the ACLU is wavering in it's defense of free speech - if I were to give money to them, it wiuld have to be structured to support the defense of all speech regardless of content.
I strongly disagree with this. If I were donating a large sum to a non-profit that helps poor children, I would absolutely earmark it with a stipulation that it must be used to help poor children who grew up as I did (poor, no opportunities for other aid/scholarships because, well we all know why).<p>In any nonprofit or mentorship situation, I always make sure to reach the children who grew up like me because they truly have no means of assistance.
Would nudging tax rates a little higher on the highest income brackets and Congress taking steps to close the many tax loopholes that companies exploit to avoid paying their fair share of corporate taxes in this country not also help fix this vexing problem?<p>As usual, the question boils down to whether or not you prefer monopolists like Bill Gates who "beat the charges" back in 2002 or polluters like the Koch brothers deciding what "good work" gets done ... or the brilliant intellectuals that we elect to Congress like this beauty:<p><a href="https://www.thenation.com/article/archive/aoc-republicans-lies-climate/" rel="nofollow">https://www.thenation.com/article/archive/aoc-republicans-li...</a><p>Tough choices for sure.
This assumes that the nonprofit has the same goals as the donor so it’s not always true. Maybe that would be covered by the umbrella organization bit, but sometimes there’s no organization that cares so donors need to leverage existing ones to fund what they want.
So, let's unwrap this.<p>You make some money. Which is taxed in various ways. The pie gets bigger, the state (and the People) are getting a cut.<p>Then you are told you should do more. And you also think, well, why not help the world?<p>Then you are told: but don't waste your time volunteering at a shelter -- better work and donate your money instead.<p>OK, so you don't get the satisfaction of seeing the <i>humans</i> you help but you know that at least your donation helps, maybe, the same humans you want.<p>A restricted donation gives you some agency into improving the world. You are still abstracted away, you don't really see the humans you are supposedly helping, but at least the money only goes into improving the world into some dimension that needs improving and that you consider relevant.<p>But no, what you must do is just donate unrestricted. That is, have no agency, have no interaction with actual humans in need, be just a wallet that helps, maybe, something as defined by the entity that receives the money. Your only choice is who spends it and how much to give them.<p>At this point, how about we bring this to the logical conclusion that THERE SHOULD BE NO NONPROFITS. Clearly, if those with the already taxed money can't have an opinion, why should those nonprofits know what's what? You know who could spend the money: the State!<p>So, abolish non-profits, and make the State as the sole decider of how things get spent. Then you can donate unrestricted to the State or just push for some taxes being raised.