Take the growth approach to evaluating startup non-profits, not the marginal approach

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In its first 2 years, Google made no revenue. Did this indicate it was a bad idea to invest or work there?

We spent the summer in Y Combinator, and one of the main things we learned about is how Y Combinator identifies the best startups. What we learned made me worry that many in the effective altruism community are taking the wrong approach to evaluating startup non-profits.

In summary, I’ll argue:

  1. There’s two broad approaches to assessing projects – the marginal cost-effectiveness approach and the growth approach.
  2. The community today often wrongly applies the marginal approach to fast growing startups.
  3. This means we’re supporting the wrong projects and not investing enough in growth.

At the end I’ll give some guidelines on how to use the growth approach to evaluate non-profits.

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Stop assuming ‘declining returns’ in small charities

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Amazon is one of the world’s largest companies and is still achieving lower marginal costs as it gets larger. Organisations with just a few people will frequently do much better as they get larger.

We often hear people in our community state, as if obvious, that becoming the 5th employee of an organisation creates less impact than becoming the 4th employee. Similarly, later donations are thought to create less impact than earlier donations. This sentiment was widespread in recent discussion about whether to donate to Giving What We Can, discussions on the EA forum about where to donate, and in discussions I’ve had with people about where to work.

The reason stated is “diminishing marginal returns”. The first staff members take the best opportunities, so the extra opportunities available at the margin are worse, so each extra staff member has less impact.

The problem is, assuming diminishing returns to small organisations contradicts basic economic theory.

According to economics, as an organisation scales up, there’s two opposing forces:

  1. Economies of scale.
  2. Diminishing returns.

Economies of scale are a force for increasing returns, and they win out while still at a small scale, so the impact of the 5th staff member can easily be greater than the 4th.

Economies of scale are caused by:

  1. Gains from specialisation. In a one person organisation,

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Are our most engaged readers overweighting career capital?

We’ve spoken a lot about the importance of building career capital. But now, it seems like some of our most engaged readers are putting more weight than we think they should career capital, and not enough on short-run impact.

A situation many people face is something like the following:

  1. The interesting project: Do something where there’s a small chance you really excel, achieve something exceptional and have a big impact.
  2. The safe project: Do something that offers a clear path to good options in the future.

The first option is usually something like doing a for-good startup, capitalising on a side project, or taking an unusual job with a mentor. The second is usually something like doing consulting, working at a prestigious large firm or doing graduate study.

The debate usually boils down to the following: the first path has a higher impact, but the second offers better career capital. Then people reason that since career capital is more important than impact early in their career, they should go with the second option.

That’s often going to be the right answer, but here’s a couple of reasons it might be a mistake.

You might be biased

There’s several biases that push in favour of the safe project.

  1. Ambiguity aversion. Usually it’s relatively clear what the safe project involves and what concrete next steps it’ll lead to (e.g.

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In case you missed it: Open Phil would like to fund a science policy think tank

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It appears to us that the strongest scientific funders have little interest in policy analysis and advocacy, while the strongest funders of policy analysis and advocacy tend not to take interest in the scientific research issues discussed in this post. We’re interested in the idea of combining – in a dedicated organization – great scientists and great policy analysts, in order to put in the substantial amount of work needed to develop and promote the best possible proposals for improving science policy and infrastructure. It would be a high-risk, potentially very high-return project to attempt. We aren’t aware of any attempts to do something along these lines at the moment, and we think it could be a risk worth taking.

So far, we haven’t been able to find a person or organization who seems both qualified and willing to lead the creation of the sort of organization described in this post. We plan to continue looking for such a person or organization, while continuing to discuss, refine and reflect on these ideas.

If you might be able to get into a position where you’ll have the right expertise in a couple of years, that could be a good option to pursue. Check in with Open Phil to learn more about what they’re looking for.

Read more.

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Why and how to found a (GiveWell) non-profit

We’ve argued against non-profit jobs as an early career move, because many have little impact and you often don’t get good career progression.

However, there’s a certain type of non-profit opportunity that we think is very exciting: start a non-profit focused on implementing an evidence-backed intervention in international development i.e. try to make the next Against Malaria Foundation.

Why?

  • There’s lots of evidence-backed interventions that don’t have a well-run, transparent organisation implementing them.
  • Scaling up many of these interventions can be expected to have a big impact.
  • There’s a huge pool of funding for non-profits going after these opportunities, most notably from GiveWell, but also foundations like Gates and CIFF, as well as government aid agencies. These groups would like to fund more non-profits, but can’t find enough that meet their criteria.

We’ve talked about this opportunity for years – see our exploratory career profile on it – and it has become even more pressing recently. The money flowing through GiveWell is growing rapidly, but the pipeline of non-profits isn’t.

GiveWell recently made a post about exactly the sorts of non-profits they’d like to fund:

  1. Charities that implement GiveWell’s priority programs: vitamin A supplementation, immunizations, conditional cash transfers, micronutrient fortification, or even bednets and deworming (since our top charities that focus on the latter two have limited room for more funding).

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The story of 80,000 Hours (podcast)

Here’s a podcast with me by Campus Kudos on:

  • How 80,000 Hours got started.
  • How I ended up working at 80,000 Hours.
  • What it was like being in Y Combinator as a nonprofit.
  • Our plans for the next year.

I’d also recommend checking out Campus Kudos. Often the best way to learn about a career and get a job is to speak to lots of people already in that path, but when you’re at college it’s hard to get the right connections. Campus Kudos aims to solve exactly this problem. If you’re a US student, you can sign up and be introduced to people willing to answer your career questions and provide free mentoring. Check it out and let me know how you get on (ben@80000hours.org).

Listen to the podcast

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Why even our readers should save enough to live for 6-24 months

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Your ‘personal runway’ is how many months you can easily live if you stopped working. It’s a product of the cash and sellable assets you have on hand, your living expenses, and your ability to draw on your friends and family in times of need.

For instance, if you have $10,000 of savings and live on $1,000 per month, your personal runway is 10 months. If you could quickly and comfortably move back in with your parents or stay on a friend’s couch, cutting your living expenses by $500 a month, then your personal runway is 20 months. If you have non-work income, that boosts your runway further. If you’re lucky enough to have a family who would support you indefinitely in a productive lifestyle, then your runway is indefinitely long.

I think most people we advise should aim to have at least 6 – 12 months’ personal runway, and up to 12 – 24 could be good for flexibility.

I’ve noticed some people in the community who don’t have much runway and don’t appear to be saving, because they are donating a lot of income or doing very low wage work. Unless you have family or friends who’ll support you, you should cut back on donations and save until you’ve got enough runway.

Some more detail follows.

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Common investing mistakes in the effective altruism community

TRADE_L1_Pillar_headline_Graphs_o_tcm5044-9478Many in our community are investing money to donate later, as well as saving for retirement and emergencies. Here’s some mistakes I’m concerned they’re making when investing.

I’m not a qualified financial advisor, and this should not be taken as investment advice. For speed, I’m also not referencing all my claims and this piece isn’t as thoroughly researched as normal – I just want to get the ideas out there. Please do your own research before making any investments. This post is based on personal interests of mine, and was not written in work time.

This post is aimed at people who already understand the basics of personal finance and investing. Some starting points for an introduction are here and here.

In summary:

  1. Don’t expect to earn 7-10% returns from US equities. It’s more likely to be 1-7%. Adjust your assumptions about retirement savings and giving now vs. giving later calculations accordingly.
  2. The baseline portfolio is the global market portfolio, roughly 40% international stocks (half US, a quarter emerging and a quarter other developed markets), 20% corporate bonds, 30% international government bonds, and 15% real assets. If you don’t think you can beat the market, this is much closer to what you should invest in than 100% US equities.
  3. Divide your savings into a personal component and an altruistic component. Make sure you’re saving enough in the personal component to cover emergencies and your retirement.

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How to write a career plan

We see lots of career planning mistakes.

Some people simply don’t have a plan, and hope the future will figure itself out. This leads them to take steps that seem attractive in the short-run but don’t help in the long-run e.g. we’ve met quite a few people who ended up regretting doing a philosophy PhD.

Other people try to figure out “what to do with their lives”, or make a detailed “10 year plan”. That doesn’t work either.

Instead, we recommend:

  1. Have a plan, but make it flexible – we call this flexible plan a “vision”.
  2. Review your plan at least once a year. Think like a scientist testing a hypothesis.
  3. Make sure you gain flexible career capital, that way you’ll be in a better position no matter what the future holds.

We recently updated our key article on career planning to explain.

For long-term readers, what’s new?
1. New content on how to make your “vision”

We added a new step-by-step process for making your plan based on “ABZ planning”, an idea we found in Reid Hoffman’s excellent book “The Start-Up of You”.

Here’s the process we recommend:

First start by asking:

  1. What does the world most need? List the 1-3 causes that you think are most pressing. If you’re trying to make an impact, then you need to start by understanding what the world most needs.

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New opportunities to work in effective altruism

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Our parent organisation, the Centre for Effective Altruism, is doing a recruitment round, and is hiring for a lot of positions. If you’d like to work at an effective altruist organisation, these are some great opportunities:

Find more details.

Please email recruitment [at] centreforeffectivealtruism [dot] org if you have any queries or would like to request any alternate arrangements to the usual application process.

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Join us as product engineer, build our interactive career guide, and help millions of graduates have a greater social impact. $1000 for referrals.

Our aim is to help as many graduates as possible maximise the social impact of their careers. We’re looking for a web product engineer to lead the development of our interactive career guide.

If you’re a good fit, this job is an exceptionally high-impact opportunity.

And the role will give you fantastic self-development. You’ll be taking a major role in a Y Combinator-funded nonprofit, that’s one of the founding organisations in the effective altruism movement, affiliated with Oxford University, and has grown engagement 25-fold in the last four months.

We’re looking for a full stack web engineer with design skills, who’s really into effective altruism, and ready to take the lead on project with huge potential for impact. The position will be in Oxford initially, then we’ll likely move to the Bay Area. Some remote work is possible.

If interested, fill out our short application form and we’ll arrange a meeting to tell you more.

If you know someone else who might be a good fit, ask them to apply and tell ben@80000hours.org. If we hire them and we didn’t know them already, we’ll give you $1,000.

What’s the role?

We’ve done four years of research into how to best choose a career with social impact. Now we want to use that research to make the career guide that every socially-motivated graduate uses.

As product engineer:

  • You’d lead on building our interactive guide.

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Will effective altruism destroy the arts? No.

158300A recent article on the Washington Post expressed concern that the growth of effective altruism could seriously reduce funding for the arts. It even mentions that the Bonfils-Stanton Foundation recently decided to focus 100% on funding the arts and culture, in part because “philanthropy, directly or indirectly influenced by the effective altruist approach, is increasingly focused on problems perceived as more pressing”.

This was astonishing to me.

Here’s why effective altruism is not going to destroy the arts.

1) Only a couple of percent of American philanthropy is influenced by effective altruism, and it’s not taking funding from the arts.

Explicitly “effective altruist” giving is well under $100m per year, only 0.03% of the total Americans give to charity each year.

If we look more broadly to giving that has an effective altruist style, even if it doesn’t explicitly use the label, the Gates Foundation is the largest proponent. But the Gates Foundation spends about $4bn per year, only 1% of the total Americans give to charity each year.

It seems hard to claim that more than a couple of percent of American philanthropy is even remotely influenced by effective altruism. One study found that only 3% of American donors give based on the relative performance of the nonprofits they donate to. Only 4% of total American giving even goes to international causes,

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How to explore in your career

Tony Blair tried to make it in rock n roll before going into politics.

We often talk about the benefits of trying out several different paths, especially early in your career. But changing job too often has costs. How can you explore effectively?

Here’s a couple of ideas from our recently updated page on why and how to explore.

Tips for exploring
1. Use your natural exploration opportunities

There are times when, money permitting, society gives you a free pass to do something random:

  • In a “gap year” between school and university, or just after you graduate.
  • In your high school and university summer holidays.
  • In university courses that aren’t your major.

Take advantage of these opportunities as much as you can.

2. Use the “graduate school reset”

After you graduate from university, you can do something unusual and risky for a few years, then go to graduate school, then begin a regular professional career as if not much happened. More specifically:

  • You can take one to two years out before doing a PhD, and by the time you graduate, it probably won’t matter.
  • Sometimes you can use a Masters degree to transition into a new field.
  • You can do a law degree and become a lawyer or go into policy.
  • Consulting, finance and many corporate jobs accept people directly out of MBAs,

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Summary of our annual review May 2015

We’ve just published our annual review for the period ending April 2015.

In case you’re new to 80,000 Hours, this is what we do: we advise talented graduates on how to maximise the social impact of their careers. Currently, we do this through our online guide and one-on-one coaching. We help graduates find the meaningful careers they want, while moving more talent to the world’s most pressing problems.

The key documents in the review are:

In brief, this year we made major improvements to our online guide, leading to 400% growth in the monthly rate of significant plan changes (our key impact metric). Our President wrote a book that Steve Levitt described as “required reading for anyone interested in making the world better,” we quickly met our fundraising stretch target, and we were admitted to the world’s top startup accelerator, Y Combinator. We did all this despite a smaller budget and two staff with long-term illness.

We also made plenty of mistakes.

In total, to date we’ve caused 188 significant plan changes. As a result of our help, these people:

  • Have founded five professional non-profits that likely wouldn’t exist without us.
  • Have entered careers such as research and politics.

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What’s it like being a non-profit in Y Combinator?

Now the obligatory Tech Crunch article is out, I’m thrilled to announce we’ve been in Y Combinator (YC) since June. YC is widely regarded as the world’s best startup accelerator, and has supported companies such as AirBnB, Reddit and Dropbox. It provides investment and intensive coaching over three months.

I’ve had a lot of questions about YC over the last couple of days. Here’s answers to the most common questions, plus an update on our progress since we were admitted.

FAQ

What do you get as a non-profit in YC, and why did you join?

Instead of $120,000 of investment, you get a $100,000 donation. Otherwise, you’re treated almost exactly the same as a for-profit. This means:

  • There are two partners who look after you. You meet them once every 1-2 weeks. We’re looked after by Dalton Caldwell and Paul Bucheit, the founder of Gmail.
  • Kate Courteau, head of the non-profit program also looks out for us.
  • You can also request office hours with any of the other 20 or so partners. We’ve had great office hours with Kevin Hale, the founder of Wufoo, on web design, and Sam Altman, the President of YC, on strategy. We’ve also had some very useful legal help from YC’s lawyers.
  • Paul Graham is retired, but you get to meet him once. Unfortunately, we didn’t yet.
  • There’s a dinner each Tuesday where they bring in a tech leader to talk off-the-record,

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Plans for the coming year May 2015

This report explains our strategy and plans for the next year, and is part of our annual review.

Moving from discovery phase to growth phase

We’ve seen the last three years as our “discovery phase” (as explained in our last business plan). We didn’t immediately focus on growth because first we wanted to answer the following questions:

  1. Could we make significant progress on the issue of how best to choose a career with social impact?
  2. Would people listen to our research and change their career plans?
  3. Would they follow through with these plan changes and actually increase their impact?
  4. Could we bring about these plan changes scalably and cost-effectively?
  5. Do we have a working funding model?

Answering these questions took time, especially because it usually takes people a year or so to change their plans, and it takes another year or more to see if they have followed through.

Today, however, we think we can answer “yes” to each question. We believe this means that 80,000 Hours is a project with potentially huge impact: 31% of graduates say making an impact in their work is “essential”, but they have little idea what to do except work in the social sector or give up (“sell out”). So most of their potential impact is wasted.

We can potentially fix that.

As a result, we now intend to move into a “growth phase”.

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Review of progress May 2015

In this post, which is part of our annual review, we review our achievements, challenges and mistakes over the year ending May 2015.

Key achievements

Our major achievements this year include the following:

  • We made major improvements to our online guide, leading to 400% growth in the monthly rate of significant plan changes.
  • Our President, Will, wrote a book, which was released last week.
  • We quickly met our fundraising stretch target.
  • We were also admitted to the world’s top startup accelerator, Y Combinator.
  • We did all this with a smaller budget than last year and despite two staff suffering from long-term illness.

Improvements to our online guide

At the start of 2014, our website had little more than a blog – we had just a one page summary of our advice. By April 2015, we had a twenty page online guide with four sections and 16 career profiles.

Following the launch of the new content in September 2014, unique page views of the guide reached 46,000 per month by April. Monthly newsletter sign-ups also went up to 313, twenty times the number from the equivalent period last year.

As a result, we estimate that our online content alone is causing six significant plan changes per month, four times the rate in early 2014. (And that’s before taking account of the fact that significant plan changes will lag significantly behind traffic because it takes time to change your career.)

I think we also made significant improvements to the quality of design and writing,

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Review of program performance May 2015

Summary

In this report, which is part of our annual review, we review how our programs performed over the last year (ending April 2015).

The key metric we use to measure the performance of our programs is “significant plan changes”. A significant plan change is when someone tells us that they probably changed the career path they were going to follow because of us.

This year, the number of plan changes caused by our online guide rose from about 1.3 per month at the start of 2014 to about 6.5 per month – 400% growth. The rate of newsletter sign ups per month through the website – our key engagement metric – also grew 1600%.

Due to a shift in focus, we coached about a third as many people in 2014 as we had in 2013, and spent less time per person. As a result, significant plan changes caused by coaching declined from 21 in 2013 to 3 in 2014. They picked up again in early 2015 as we increased time spent coaching.

In total to date, we’ve now recorded 188 significant plan changes, up from 107 at the time of our last evaluation in April 2014. We estimate we’re adding about 10 per month at the margin (6.5 from guide, 2 from other (mainly community) and the remainder from coaching), up from 2 per month near the start of 2014.

The average cost per plan change has been decreasing,

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‘Replaceability’ isn’t as important as you might think (or we’ve suggested)

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Often if you turn down a skilled job, the role simply won’t be filled at all because there’s no suitable substitute available. For this and other reasons we don’t place as much weight as we used to on the idea of ‘replaceability’.

When we started 80,000 Hours, one of the key ideas we presented was the replaceability argument:

Suppose you become a surgeon and perform 100 life saving operations. Naively it seems like your impact is to save 100 people’s lives. If you hadn’t taken the job, however, someone else likely would have taken it instead. So your true (counterfactual) impact is less than the good you do directly.

I still think this is a good argument, but I’m not sure how relevant it is when comparing real career options.

In particular, I see the argument often being used incorrectly in the following two ways:

  1. Ignoring direct harm: Suppose you’re considering taking a job that some people think is harmful (e.g. certain parts of the financial sector) in order to donate, do advocacy or build skills. You reason “if I don’t take the job, someone else will instead, so the potential harm I’ll do directly doesn’t matter”.

  2. Ignoring direct impact: Suppose you’re considering working at a high-impact nonprofit. You reason “if I don’t take the job, someone else will instead, so I won’t have much impact.”

I disagree with both of these claims in most circumstances. Why?

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Update: how many extra donations have we caused?

One way 80,000 Hours has an impact is by increasing the amount our users donate to high-impact charities. As part of our annual review, we did a quick update to the figures from our last review. The process we used wasn’t as thorough as we would have liked, but provides some encouraging evidence of our impact.

What we did

We identified the largest donors we know of who (i) have made significant plan changes according to our definition and (ii) say they intend to earn to give.

We asked them the following questions via email:

  • How much have you donated over the last three years?
  • How much do you expect to donate over the next three years?
  • Where to?
  • How much of this is attributable to 80,000 Hours? (meaning what wouldn’t have been given if 80,000 Hours didn’t exist).
  • How much have you pledged to give as part of GWWC or otherwise?

For those people who responded last year, we asked for an extra year of data. You can see the answers and case studies from last year’s review in the appendix here.

We received responses from all ten people asked. Each intends to give to whichever charities they believe to be highest-impact (in practice, this mostly means effective altruist organisations or charities recommended by GiveWell or Giving What We Can). Also included in our results is last year’s highest donor (“A”),

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