Why budgeting in order to donate is penny-wise and pound-foolish
A reply to the writer Kelsey Piper (later a Vox journalist), who had written a Tumblr post arguing for personal budgeting as a way to free up more money for charitable giving. Alyssa agrees with most of Piper’s post but takes issue with the framing: in a social network already wired into Silicon Valley wealth — where Facebook co-founder Dustin Moskovitz is funneling billions through Open Philanthropy and dozens of other billionaires have signed the Giving Pledge — she argues that ordinary giving from ordinary salaries is not actually the binding constraint on the effective-altruist enterprise.
I mostly agree with the Tumblr post on budgeting, but I’m pretty sure it’s counterproductive to talk about going on a budget for purposes of donating — there’s just such huge piles of money sitting around unused everywhere that nobody really knows what to do with. That may sound weird, but let me give some examples of people in our social network.
As you’ve probably heard, Dustin Moskovitz is worth about $9 billion, and he plans to donate the large majority of that to charity through Good Ventures/Open Philanthropy Project. IIRC, charitable foundations are legally required to donate 5% of their assets each year, so for an $8 billion endowment that would be annual spending of ~$400 million or more. It would take ~20,000 people getting high-paid jobs in Silicon Valley, and donating 10% of their income a year, every year, for the rest of their lives, to equal one Dustin Moskovitz. And there’s every reason to think that Dustin isn’t a one-off special case; at least 137 billionaires have signed Bill Gates’s pledge to donate half their wealth, there are at least five other billionaires that AFAICT are as close to us as Dustin is in the social graph, and the EA idea is in the middle of a big publicity/coolness boom that shows no signs of slowing down.
But even forgetting about the ultra-wealthy… last week, I was talking to one of my co-workers at Google, who I’ve known roughly since he started working there in 2007. Within the company, he isn’t especially important or famous or anything; he just has a normal Google job with a normal Google salary. He casually mentioned, to my surprise, that since he started working he hadn’t bothered to cash in any of his Google stock, which by now must be worth half a million dollars or more. He has a family, he lives in Palo Alto, and as far as I know he isn’t especially frugal; he had just never had a good reason to spend any of it. After you reach a certain point, there just isn’t that much to spend more money on.
And even within the realm of spending less to donate more… doing some rough math, there are at least half a million people in the Bay Area who own houses that are worth over $1,000 per square foot. If one of them sold their house, and moved into a new house that was just 100 square feet smaller — probably a barely noticeable change — they’d have over $100,000 to donate. That’s as much as someone making the US median income of ~$40,000 taking the 10% giving pledge, and then sticking to it every year for the next two and a half decades. (Of course, you wouldn’t literally switch houses for 100 square feet because of transaction costs, but just trying to illustrate the general point.)
In spite of all that, I do think there are cases where donating makes sense even if you aren’t that wealthy. In particular, if what you want to donate to is so strange or so new or so unpopular that virtually nobody else would be willing to fund it, then donating is likely a reasonable idea (and I have donated several times on that basis). But overall, it seems likely that given the ginormous overall wealth of the Bay Area, for someone who has any use for marginal dollars beyond buying additional luxuries that they don’t care that much about, budgeting to give more is penny-wise and pound-foolish.
(Apologies if email is an awkward format for commenting, but I really don’t want to get sucked into the Tumblr flamewars that Scott Alexander describes in The Toxoplasma of Rage .)