Can you have more impact working in a foundation than earning to give?

Photo credit: Flickr – Refracted Moments

Key points

  • Working to improve grants at a foundation could well be more effective in terms of the impact of the money moved than earning to give. Which is better will usually come down to how good your personal opportunities are to make money, or get a job at a large foundation working on an important cause.
  • If you know of a cause area or organisation that is many times more effective than what any foundations you could work at would make grants to, then earning to give is likely to be better.
  • There are other issues, like the impact on your long-term career trajectory, that you have to consider as well as the direct impact of the money you move.

As soon as we thought of the idea of earning to give, we started thinking of ways to beat it. One idea that was floated in the very early days of 80,000 Hours was working in a foundation to allocate grants to more effective causes and organisations. Since a foundations grantmaker might allocate tens of millions of funding, far more than they could earn, maybe they could have a greater impact this way?

In this post, we provide a model for comparing the impact of foundations grantmaking and earning to give, which some people may find useful for specific scenarios where they have more info on the inputs. We also provide some very tentative estimates using the model to demonstrate how it works.

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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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If you want to save lives, should you study medicine? Probably not.

About 1 in 200 people become doctors, many of them because they want to cure the sick and generally make the world a better place. Are they making the right decision?

To help answer that question, we’ve produced an exploratory career profile on medical careers.

The conclusion of our research is that most people skilled enough to make it in a field as challenging as medicine could have a bigger social impact through an alternative career.

The best research suggests that doctors do much less to improve the health of their patients than you might naturally expect. Health is more determined by lifestyle factors, and most of the treatments that work particularly well could be delivered with a smaller number of doctors than already work in the UK or USA.

However, medicine is high earning and highly fulfilling, and we expect there are more promising opportunities to help others through biomedical research, public health, health policy and (e.g. hospital) management.

Overall, we think going to medical school would be the best way to have a social impact only if someone felt they were a significantly better fit for medicine than the other options we recommend.

Dr Greg Lewis, a practicing physician in the UK, wrote most of the career profile.

Key findings

  • Having more physicians in the developed world has a surprisingly small impact on the health of recipients.

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Why are wages less stable in skilled professions?

There is some evidence, in fact, that markets for highly skilled workers, such as engineers and other specialized professionals, exhibit systematic periods of boom and bust…1

Earnings tend to fluctuate significantly more in highly skilled professions than in others, rising to high levels for a number of years before plunging and, ultimately, rising again. Why is this the case? Here’s the explanation put forward by Harvard economist George Borjas in his leading textbook on Labor Economics.2

What’s going on?

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I want to make a difference. Should I work in marketing?

If you want to make a difference, should you work in marketing? The short answer: probably not. Although marketing may have positive effects through informing consumers, there’s also arguments that marketing is harmful, so it’s overall effect is unclear.

However, marketing is a valuable, transferable skill. So spending several years in marketing keeps your options open and could open up positions in high-impact organisations.

It’s also well paid, so worth considering for earning to give.

Overall, it’s worth considering as an early career option, especially if you’re stronger on verbal rather than quantitative skills, and don’t want to work in consulting (which is also highly paid and keeps your options open).

Read our full new career profile.

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Should you go into journalism to make a difference?

We just completed an exploratory profile on journalism. To write the profile, we interviewed an NPR correspondent and a writer for the New Yorker, and spent a day reading the best advice we could find on the career.

When it comes to having a social impact, journalism might not be the first career you think of, but we think it’s actually a pretty good option, because you can use it as a platform to promote neglected causes to a big audience. The main downside is its competitiveness, which is exasperated by reductions in the number of positions over the last decade. Spending a couple of years in journalism is also better for career capital than it first looks, because you can use it the build a good network.

Read the rest of the profile.

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The rise of income inequality and what it means for your career

One of the most important (though maybe regrettable) long-term trends effecting the outlook of many careers is the rise in income inequality. In countries such as the United States and the United Kingdom, the difference in earnings between the best and worst paid has risen sharply for the last few decades, with the top earners taking a higher and higher proportion of total income. From the early 1900s to the 1970s, income inequality gradually decreased. However, in Anglo-Saxon countries it began to rise again from the late 1970s. The rise was sharpest in the United States, where the income share of the top decile of earners rose from 33% to 48% in forty years, while the share of the top percentile rose from 8% to 17%.1 In Japan and the rest of Western Europe on the other hand, inequality was either steady or rose much more gradually.

Increasing income inequality means a better outlook for many high-earning careers. It may also reflect trends in which skills are most in-demand and useful as technology changes, making it important to understand if you want good career capital in the future. Finally, it may mean the financial rewards of being at the top of a profession (compared to the middle) are increasing, and this means the importance of personal fit is increasing.

The top decile income share: Europe and the U.S., 1900-2010
This graph is taken from Pikkety (2014) 2

In the rest of this post, we’ll look at the reasons economists have put forth for the increase in income inequality, and speculate on whether the trend will continue.

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New in-depth profile on management consulting

We’ve released a major update to our career profile on management consulting.

See the updated profile here.

See the new in-depth report upon which it’s based here.

Overall, our recommendation is similar to before:

Consider a job in consulting if you have strong academic credentials and you aren’t sure about your long-term plans and want to experience work in a variety of business environments, or you want to pursue earning-to-give but not a good fit for quantitative trading or technology entrepreneurship.

But we’ve gone much more in-depth into:

  • The chances of becoming a partner, showing that it’s about 10% but requires a great deal of dedication.
  • Common exit options, showing that consultants enter a very wide range of fields when they leave.
  • What proportion of people who want to become consultants actually make it.
  • The potential for direct impact, arguing it’s worse than other common alternatives.

This is our first ‘medium-depth’ career profile, and we hope it will act as a template for further work.

Thank you to Nick Beckstead for carrying out the research.

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The camel doesn’t have two humps – update to software engineering profile

In our current software engineering profile, we say:

Programming ability seems to roughly divide into two groups: those who find it relatively easy and those who don’t. If in the past you’ve done well at mathematics and science and can think abstractly, then it’s likely you can learn to program well enough to get an entry-level job within about six months.

In evidence of the first claim, one piece of evidence we cited was a paper called “The Camel Has Two Humps” by Dehnadi and Bornat.

However, we’ve just discovered that Bornat has publicly redacted this paper. He says:

It’s not enough to summarise the scientific result, because I wrote and web-circulated “The camel has two humps” in 2006. That document was very misleading and, in the way of web documents, it continues to mislead to this day. I need to make an explicit retraction of what it claimed. Dehnadi didn’t discover a programming aptitude test. He didn’t find a way of dividing programming sheep from non-programming goats. We hadn’t shown that nature trumps nurture. Just a phenomenon and a prediction.

Though it’s embarrassing, I feel it’s necessary to explain how and why I came to write “The camel has two humps” and its part-retraction in (Bornat et al., 2008). It’s in part a mental health story. In autumn 2005 I became clinically depressed. My physician put me on the then-standard treatment for depression, an SSRI. But she wasn’t aware that for some people an SSRI doesn’t gently treat depression, it puts them on the ceiling. I took the SSRI for three months, by which time I was grandiose, extremely self-righteous and very combative – myself turned up to one hundred and eleven. I did a number of very silly things whilst on the SSRI and some more in the immediate aftermath, amongst them writing “The camel has two humps”.

Based on this, we’ve removed the paper from the profile, and removed the claim about the distribution dividing into two clumps.

We intend to do a more thorough review of the predictors of success in this field when we release our full profile of software engineering in the new year.

Did we make a mistake in this case? The profile was only at the “considered” stage, so not the result of in-depth research. Even so, when most skills and abilities are normally or log-normally distributed, we should have been cautious about the existence of a bimodal distribution without relatively strong evidence.

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Why and how to keep your options open

Keeping options open is important for everyone, it’s especially important if you want to make a difference, because the most effective career opportunities are likely to change in the future. Indeed, we think it’s usually more important to keep your options open to make an immediate impact.

Many people think that ‘keeping your options open’ means being non-committal and avoiding tough decisions. We disagree. The best to keep your options open is to commit to building flexible abilities and resources, such as transferable skills, money and a public platform.

For more, see our new page on the topic.

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Should you wait to make a difference?

The issue

One big picture consideration in career choice is the question of how important it is to make a difference now versus later. Here’s the issue: suppose you could either work at a charity next year or go to graduate school. If you work at the charity, you’ll be making a difference right away, speeding up progress. If you go to graduate school, you’ll be investing in yourself and able to have a larger impact later. Which is better?

If you think it’s better to make a difference as soon as possible, the more you’ll value your immediate opportunities for impact. In our framework, you’ll put more emphasis on path impact potential. If you think it’s better to invest and give later, the more you’ll value activities that build your skills, connections and credentials (career capital), and the more you’ll value learning about the world so you can make better decisions in the future (exploration value).

There’s a similar issue with charitable giving. If you have some money, you can either give today, or you can invest your money, which will grow over time, and give a larger amount later. Under what circumstances should you invest rather than give now?

Summary

Overall, we favour investing in your human capital and wealth early, so that you make a greater difference later in your career. Why?

  1. You’ll be able to find better opportunities to make a difference in the future, because you’ll get wiser and be able to use better research in which causes and careers are most effective.
  2. Early-to-mid career, most people can make investments that significantly increase their career capital, such as learning new skills, doing a graduate degree and building a professional network. The returns from these investments more than justify the cost of waiting.

Nevertheless, there are a few other reasons to start making a difference now: it will teach you about the world; it will help you find collaborators; it’s motivating; and it will help you build altruistic habits.

So, overall, we suggest that early in your career you mainly focus on building career capital and learning more, though still put some weight on your immediate impact. If choosing between two jobs, this could mean choosing the one that best builds your career capital, using immediate impact as a tiebreaker. As you get older, put more and more weight on your immediate impact.

Read on to see a full discussion of the considerations and our reasoning.

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Update: 7 career strategies for making a difference

We recently released a page on “top career strategies”, featuring two strategies for building your long-run potential, and five for immediate impact:

  1. The experimenter: Finding a career that’s the right fit for you is important, but it’s also difficult to do just by thinking about it. It can therefore be a good strategy to try out a number of different areas in order to learn more about your own interests and skills.
  2. The self-developer: When you’ve narrowed down which area you want to enter, focus on investing in yourself to build your career capital.
  3. The effective worker: There are many non-profit and for-profit organisations that have a large impact, which are short of specific types of human capital. If you’re a good fit for a high-impact organization, it’s an option worth considering. By high-impact organisations we mean those that are well-run and work on an effective cause.
  4. The entrepreneur: If you’ve got potential as an entrepreneur, attempt to found new effective non-profit organisations or innovative for-profits that benefit their customers and create positive spill-over effects.
  5. The philanthropist: Some people have skills that are better suited to earning money than the other strategies. These people can take a higher-earning career and donate the money to effective organisations. We call this strategy ‘earning to give’.
  6. The researcher: Some people are especially good at and interested in research – attempting to create new knowledge. If this is you, and have you have the opportunity to work in a field that seems particularly important, tractable and neglected, then this could be a way to have a large impact.
  7. The advocate: If you can take a job that gives you a public platform, good network and credibility, you can use it to promote and unite people behind important ideas.

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Cause overview: cause prioritisation

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Introduction

I recently conducted a ‘shallow investigation’ (see GiveWell) into cause prioritization, with the help of Nick Beckstead. It covers the importance of cause prioritization; who is doing it, funding it, or using it; and opportunities to contribute. We had conversations with eight relevant people. The full document is here and the collection of related interview notes and such is here. This blog post is a summary of my impressions, given the findings of the investigation.


Cause prioritization research seems likely enough to be high value to warrant further investigation. It appears that roughly billions of dollars per year might be influenced by it in just the near future, that current efforts cost a few million dollars per year and are often influential, and that there are many plausible ways to contribute. It also seems like things are likely to get better in the future, as more work is done.

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What does economics tell us about replaceability?

Introduction

‘Replaceability’ has become a core concept in discussions of career choice among Effective Altruists (EAs) – put simply, people should not simply consider the ‘direct impact’ from doing a job, but instead the difference in outcomes resulting from taking that job, relative to not taking it. Ben Todd and Seb Farquhar have both written blogs introducing this concept, and the importance of counterfactual reasoning in general (read these first if you’re not familiar with replaceability!); Paul Christiano and Ben Kuhn (among others) have written blogs further exploring the concept, and its various representations and applications. Some Effective Altruists (EAs) have noted that representations of replaceability have varied in their sophistication, and Will MacAskill summarises this nicely as the ‘simple view’, ‘simplistic replaceability’ and ‘correct replaceability’.

‘Correct replaceability’ is particularly nuanced and complicated, and comprises taking into account the full set of counterfactual outcomes not only in your (potential) job, but in any other jobs affected by the employment decision, through knock-on and labour market effects. Given this, and that ‘replaceability’ varies significantly across different industries and jobs, Will MacAskill and Ben Todd asked me to think about what Economics has to tell us about the concept. For clarity, rather than think about the ethical considerations of ‘replaceability’ as a whole, they asked me to answer a sub-question, namely: “according to mainstream economics, if I add myself to the labour pool for job type X (being a doctor, or an aid worker, or a banker), then how many more type X jobs come into being (on average)?”. Although these issues have been discussed before, this blog post is a first attempt at providing a thorough analysis of this question.

Summary

  • I set out the classical, Econ 101 supply and demand model and discuss the assumptions it makes. I argue that this is a useful framework for considering our question, then show how the answer depends crucially on the elasticities of labour supply and demand. Unfortunately, empirical economic research cannot tell us much about these elasticities for individual industries.

  • There is no ‘one-size-fits-all’ answer to our question – it will vary considerably across different industries and we must try to understand how each industry functions in order to make an informed estimate.
    I believe that the supply and demand framework, or some variant of it, is useful for analysing our question for most jobs and industries, particularly those that are not highly specialised.

  • I discuss how (and whether) this framework should be applied in a few industries, most of which are seen as viable EA career paths. This framework can lead us to some (tentative) conclusions:

    • Entrance into industries with a quantity restriction (e.g. through a limited number of occupational licences) is likely to have (close to) zero impact on the number of jobs in that industry. This may apply to medical school and licensed professional industries (e.g. becoming a barrister in the UK).
    • Entrance into (narrowly defined) industries which require relatively transferable skills is likely to result in less than 0.5 additional jobs in this industry, as (potential) workers can easily substitute into other industries (labour supply is elastic). This may apply to banking and consultancy.
    • Entrance into industries in which (potential) workers have a strong preference to work is likely to result in more additional jobs (perhaps between 0.5 and 1), as workers will not substitute into other industries at such a high rate (labour supply is inelastic). This may apply to jobs in the charity sector.
    • In highly specialised industries/jobs, applying this framework may not be appropriate, as the hiring process will not resemble a competitive market. This may apply, for example, to taking a job with Givewell, who likely follow a process more akin to ‘threshold hiring’.In this case, it seems likely that taking this job may increase the number of overall jobs by close to 1.
  • This post only discusses one aspect of replaceability, and does not consider other issues related to the (direct) impact of a job, effects on the quality of employees, or long term effects of a job, such as creating social value.

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The payoff and probability of obtaining venture capital

Venture capital has facilitated the growth of many companies including Apple, Google and Facebook. But is venture capital a key to success for most startups? In this post, we answer three component questions:

  1. What are the likely outcomes for companies backed by venture capital?

  2. What fraction of companies attract venture capital?

    a) How many startups and venture capital deals are there?

    b) What proportion of applicants to venture capitalists say they accept?

  3. How much work is it to apply for venture capital?

We found that:

  • According to the data of Professors Hall and Woodward, the average venture capital-backed founder exits with $5.8 million of equity.

  • Roughly 1% of companies that aspire to obtain venture capital obtain it.

  • Finding out whether you will receive venture capital can take months to years of work.

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Which university has better entrepreneurs?

Some of the most successful companies in recent years have been founded by students of America’s most prestigious universities. The founders of Google and Facebook, from Stanford and Harvard respectively, are prime examples. So which universities have the most successful entrepreneurs? To answer this question, we’ve assessed how many students from each top US university have obtained investment in their startup, how many are worth over $30 million, and how many are worth over $1 billion. This builds upon Jonah Sinick’s work on the wealth of Harvard alumni.

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What is the average net worth of Stanford entrepreneurs?

In this post we estimate the mean net worth of Stanford alumni who made their wealth primarily through founding startups.

Our estimate is that the mean net-worth of a Stanford alumnus who founded a corporation $10.8 million as of 2013.

The reason we are interested in making this estimate is because it fits in with a larger research project to into entrepreneurship, and within that project, into the wealth that can be gained by becoming an entrepreneur.

In this post, we estimate the total net worth of Stanford alumni who have founded corporations then we estimate the total number of Stanford alumni who have founded corporations. We then arrive at our estimate by dividing the total net worth of Stanford alumni founders by the total number of Stanford alumni founders. We close with some caveats and qualifications to our estimate.

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Increasing your earnings as a doctor

Making a difference to patient’s lives is a gratifying part of medical work. However, an investigation by Dr Gregory Lewis suggests that doctors may be able to make a greater improvement to people’s lives through their donations than through their practice. In part, this is because the potentially large impact of charitable donations. For instance, research by GiveWell has shown that it’s likely to be possible to save a life for less than $10,000. This raises the question ‘how can doctors increase their earnings?’.

In this post, we explore whether doctors can improve their earnings by:

  1. Moving to a different country.
  2. Choosing a highly-paid specialty.
  3. Pursuing locum (contract) shifts.

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