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Dan Pallotta: The way we think about charity is dead wrong
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I think the question is - would you have donated, to any cause, without your Uncle?
I'm not asking to be combative - it's a legitimate question millions have to ask themselves. My friends and I participated in the ice-bucket challenge. We would not have done what we did w/o such a ridiculous, yet fun, method of virality.
To me, it is about 'effective' money. With your uncle + the organization, was the money more effective with or without?
There is an interesting TED talk from 2013 that highlights a semi-counterintuitive problem - if you can't pay top dollar, you can't get top dollar talent except in extremely narrow cases.
My interpretation is, we would love 100% of our charitable donations to reach the village who needs water or a toilet, but the reality is, people who run the org need to get paid as well.
Measuring a charity by how stingy it is might actually be less effective overall.
Anecdote: Bill and Melinda Gates foundation absolutely pays top dollar (of charities) to gain some of the smartest former execs in the industry. They're wildly effective.
⬐ fooblatI certainly would not have known about this particular charity without my uncle. However, had he told me it was an important cause to him and simply asked me to join him in donating, I would have.
I guess another question is whether my uncle would have made that effort without the marathon.
Non-profits can draw large salaries:
These are all medical, so that is the right comparison, but charities can also have high salaries:
And, I am not taking a position here, but if you feel strongly that this should not be the case, there is this video for the counter-argument:
⬐ pseingatlSuch as the Susan Kamen Foundation. Huge salaries, no funding of research, events to promote "awareness." A scam.
I mostly agree with you, but I wouldn't entirely blame nonprofits. There's a lot of public pressure on nonprofits to reduce costs as much as possible because everyone is obsessed with "overhead". This TED talk explains the problems with this situation really well:
Choice quote: "so in the for-profit sector, the more value you produce the more money you can make, but we don't like non-profits to use money to incentive people to produce more in social service. We have a visceral reaction to the idea that anyone would make much money helping other people; interesting that we don't have a visceral reaction to the notion that people would make a lot of money not helping other people."
⬐ taphangum"Interesting that we don't have a visceral reaction to the notion that people would make a lot of money not helping other people."
If for-profits didn't help people, they literally would not exist.⬐ NickM⬐ tvanantwerpI think you're misinterpreting what he's saying (which might be my fault for expecting the quote to make sense outside the context of the talk). The quote is referring to the fact that we frown on people making money from running charitable organizations that help people, but making money from running a for-profit business that helps nobody is considered fine and admirable.Strongly agree. The external pressure from well-meaning but uninformed donors to "cut costs" isn't helping the situation.
I mean, at heart this is easy to agree with. We all want to think that there is waste. And there probably is a ton of it. The problem I have is the cost of fighting some waste is more expensive than it is worth. I realize this is about charity, but https://www.ted.com/talks/dan_pallotta_the_way_we_think_abou... is one of the few TED talks I actually still like. I'd be very interested in seeing rebuttals.
There is also the argument that corruption follows money. And that is certainly true. Doesn't do a lot to help the many people in underfunded locations of our nation.
I think this is a healthy and needed swing towards holding charities accountable for what they actually do. Sure I do feel a little bad for the Red Cross but come on.
We also need to take care on looking too much at a nonprofit's overhead spending. This is a great TED talk on that subject and will really make you think about the whole sector. https://www.ted.com/talks/dan_pallotta_the_way_we_think_abou...
EDIT - Oops just noticed iamapipebomb had linked to this too.
It'd be nice if there were also a metric for number of lives improved. Like meals consumed, beds slept in, etc
We don't charge any management fees, you can donate through EA funds, and we'll pass on 100% of the money we receive to the charities.
We don't consider a charities' overhead when evaluating effectiveness, in the same way that you don't consider how much Tim Cook gets paid when you decide whether to buy an iPhone. Historically, groups like Charity Navigator have looked at overhead ratios for one simple reason - they're much easier to measure. Unfortunately, overhead ratios are simply not a useful measure for evaluating charity effectiveness, and they are easily gamed by unscrupulous charities trying to raise funding. Instead, we look at the total costs a charity incurs, and add in any costs that they don't include in their budget, but are necessary to deliver their program. Then we look at the outcomes the charity achieves for that funding as a whole. I'd check out Dan Pallotta's TED talk if you want to know more the overhead myth. https://www.ted.com/talks/dan_pallotta_the_way_we_think_abou...
Dan Pallotta's Ted Talk on charity - "The Way We Think About Charity is Dead Wrong"
Wildly changed my worldview with regard to charities.
I actually think it's a good thing for charities to spend more on fundraising than they do - it's a harmful metric to judge them by. Here's a discussion of that: https://www.ted.com/talks/dan_pallotta_the_way_we_think_abou...
However, IIRC all the fundraising and admin costs are covered by separate donors so that any additional donations go to nets. AMF doesn't have much of a fundraising operation as it gets its funding through GiveWell and Good Ventures primarily.
⬐ DrScumpWell, sure, if a little money spent fundraising yields far more in donations and/or broadens your audience to your cause.
it's a good thing for charities to spend more on fundraising than they do
What raises concern for me is when the percentage of receipts spent on fundraising is disproportionately high and/or spent on overpaid insider salaries.
There's nothing wrong on making money even in this space: http://www.ted.com/talks/dan_pallotta_the_way_we_think_about...
⬐ nipponeseMaybe it's just scruples or a mis-understanding of charities, but earning financial gain in the name of altruism seems morally bankrupt.
Related TED Talk: http://www.ted.com/talks/dan_pallotta_the_way_we_think_about...
It's amazing to me that you would accuse DFW of myopia and hypocrisy when your argument here is, well, hypocritically myopic (not to mention one might say that DFW's overarching thesis in all of his work was encouraging his readers to be less myopic e.g. )
To tackle a problem like world hunger and homelessness takes an incredible amount of effort across a huge number of domains by an enormous amount of people. DFW was obviously not someone best suited to go e.g. repair "pissing corners and walls", and we should not expect him to be. Instead, he did many things to inspire many people to lead more altruistic and less self-centered lives. This was his talent, and it's probably done more good for the world than any amount manual labor he could have done in his lifetime. Ignoring this aspect of helping the afflicted is the same strain of myopia that thinks charities should give 100% of their fundraising to researchers/etc, as if raising awareness and paying competitive salaries were not the lifeblood of said charities.
I'll leave your rant about how "power giants stealing money have never helped the poor" alone, as your rhetoric and ignorance of evidence to the contrary clearly imply you're not about to have a rational discussion about it.
Well, this does sidestep the argument of whether certain forms of philanthropy should be encouraged over others. I do think this is more of a cultural problem than otherwise.
I'm not overly fond of TED talks nowdays, but this one still sticks out as awesome. http://www.ted.com/talks/dan_pallotta_the_way_we_think_about...
Basically, I think the argument is more that we might be better off if philanthropy was viewed as just another form of consumption.
⬐ bicubicI agree with the sentiment, but at the same time I think some widely metric for a nonprofit's efficiency must exist. Overheads is not a suitable metric, but neither is the 'size of their dreams' which is basically what he's advocating.
I want to know that my donation is being used to further the cause as effectively as possible. Find a way to communicate that to me, and I will donate regardless of overheads.
Reminds me of this: http://www.ted.com/talks/dan_pallotta_the_way_we_think_about...
College presidents act as a face of an institution, paying someone extra 100,000 could mean bringing in millions extra in donations/tuitions/fees etc. Big money attracts talent.
That's not usually the best way to think about charity overhead. Check out this TED talk: http://www.ted.com/talks/dan_pallotta_the_way_we_think_about...
This is a great move for YC. They've never been about making ludicrous amounts of money which is one reason they've been able to be so successful. I loved that they funded Watsi and agree wholeheartedly that non-profits can benefit from YC/startup advice in general.
As a side note, I think that we've as a culture have been approaching non-profits entirely wrong . Instead of letting them build structure to actually maximise the help they can give, we require them to be stripped-down organizations so their metrics can show they're giving as much money away as possible. This is why we've seen such a surge in for-profit-but-that's-not-the-main-point companies like Tom's Shoes lately. It's simply the best way to do the most good.
⬐ icebrainingHe was also in an hour-long episode of Econtalk: http://www.econtalk.org/archives/2013/06/pallotta_on_cha.htm...⬐ notahackerWith donor funded nonprofits the "product" is fulfilling the donors' wish to see money spent on X, so the litmus test for spending the money for donor-funded organizations should be if donors knew we were spending on this, would they change their mind about the donation. Rational, reasonable people won't mind some of their donation being spent soliciting further donations, but they will mind nearly all the money being spent on fundraising activity, to the point where it's essentially a marketing matrix giving little more than an "image rights" fee to the good causes.
Profit making companies like Tom's Shoes that see philanthropy as a core brand value, are a different matter. There's room for more of them irrespective of how the charitable sector organizes itself.⬐ dragonwriter> With donor funded nonprofits the "product" is fulfilling the donors' wish to see money spent on X
I disagree. With donor funded nonprofits, the product can be to fulfill the donors wish to see their money achieving outcome X, not seeing their money spent on outcome X (it can also be as you present; different donors have different motives.)
I don't think that necessary challenges your conclusions, but I think it is an important distinction.
There was a great TED talk a while back about this. 
People talk about nonprofits being "irresponsible" when they behave like for-profit corporations: advertising, perks for engineers, whatever. And yet the for-profits do these things because they work; advertising gets sales, perks get you better engineers (and it's usually cheaper than just bumping up salaries, because macbooks are shiny). If these things don't work successful corporations will stop doing them, and if they DO work we should stop giving nonprofits shit for doing them too.
That said, your point about Mozilla in particular coming crumbling down is interesting--I'm not sure I disagree. However, if they need smart people to pull them out of the hole, offering free macbooks isn't a bad way to do it.
I would be interested in your take on Dan Pallota's perspective (below, several times); he seems to have a lot of exposure with his claim that nonprofit isn't working as well as it could, primarily because of the focus on "overhead".
Dan Pallotta: The way we think about charity is dead wrongPallotta on Charity and the Culture of the Non-Profit Sector
> nonprofits [...] are rewarded for how little they spend > -- not for what they get done
http://www.econtalk.org/archives/_featuring/dan_pallotta/ (1 hr EconTalk podcast)Uncharitable: How Restraints on Nonprofits Undermine Their Potential
> The use of overhead as a measure of effectiveness makes it difficult for > charities to attract the best talent, advertise, and invest for the future
http://amzn.com/B003BLY740 ($15 340 pg. Kindle book)
> double-standards place the nonprofit sector at extreme disadvantage to > the for profit sector on every level
⬐ glaughThere's been some rejoicing in my nonprofit nerd circles about a recent acknowledgement by a few important nonprofit rating orgs that overhead is a bad measure of effectiveness: http://www.guidestar.org/rxa/news/news-releases/2013/2013-06...⬐ dnautics⬐ jseligerit's not universally bad, it's just important to acknowledge corner cases. It's important to remember that a 'high overhead' though, does correlate to bad performance.⬐ j_sDan Pallota's entire point is that this line of thinking is wrong.
> It's important to remember that a 'high overhead' though, > does correlate to bad performance.⬐ dnauticsI don't think either of us have real statistics on this. I do know within certain nonprofit (mostly research, but not exculsively) organizations I've been in/worked with, increasing overhead has correlated with my personal dissatisfaction. The place where I volunteer, for example, spent a lot of money on a posh warehouse to prepare food, which was very different from the church that it operated out of - meals then were only delivered MWF instead of daily, and the client base shrunk, there may be a bit of mission creep too (but I'm not quitting volunteering for them quite yet). When I lived in DC, I was dismayed at that location's "parallel" (i.e. does the same thing, but unrelated) organization for similar reasons, except it had gone down the other side and was no longer delivering hot meals even, so I chose a different place to volunteer.
In the sciences, high overhead (as charged on top of grants given by taxpayer-funded organizations such as NIH, NSF, DOE) inevitably means questionably high payouts to the executive-level presidents, and what not. Now that I know how to read 990s, I am looking through the history of a particular nonprofit science research org; 10 years ago it was entirely run off of its endowment and had a promise to the researchers of independence from the tyrrany of grants. Over the course of the decade, the active scientist corpus has shrunk by 3/4, the president gets paid 3x more, the endowment is < 20% of what it used to be, and PIs are being pushed to apply for soft money, and they are negotiating overheads of 60% or more.
Then there are spectacularly bad organizations such as the Harlem Boy's Choir, which I have no personal experience with, but certainly serve as cautionary tales.I heard the Econtalk, and he's correct. The problem is that a relatively small number of nonprofits will abuse overhead, which is how you end up with the perennial exposé of some nonprofit where the senior managers drive Ferraris and expense $500 lunches, and then everyone thinks administrative costs get a bad name and wants to restrict them; this is similar to the "every check has a cost" idea Paul Graham writes about here: http://www.paulgraham.com/artistsship.html. Since charities' real clients are funders, charities artificially hold back "administrative" costs, at the cost of effectiveness. Often some form of creative accounting gets used.
In addition, it's prestigious / sexy to see a staff person handing food over to someone, or providing an ear exam to a kid, or whatever. It's not sexy to get a functional CRM or logistics manager or whatever.
This concept was discussed recently on the EconTalk podcast http://www.econtalk.org/archives/2013/06/pallotta_on_cha.htm...
> building itself less like a university and more like a for-profit corporation
"The way we think about charity is dead wrong" http://www.ted.com/talks/dan_pallotta_the_way_we_think_about...
Uncharitable: How Restraints on Nonprofits Undermine Their Potential http://www.amazon.com/dp/1584659556/
⬐ nijkPalotta is just providing cover for the parasitic fundraising class.
He has zero connection to actual work in the field of charity accountability and measuring effectiveness. Contrast against GiveDirectly, Against Malaria Foundation, GiveWell, and J-PAL.⬐ joonixCharity is very profitable for many elites especially in places like NYC and DC. Just because they don't distribute dividends doesn't mean they don't distribute salaries. Most "connected" people here come out of school and get hired by their friends at non-profits. They sit around, raise money, and don't do much with it other than pay themselves.⬐ rossjudsonSadly, I have seen this myself. Expensive "gifts" for doing odd jobs for charities (that far exceed the value of the task), first-class travel plans and ludicrously expensive hotels...it's sad, really.
Of course this was a while ago. I don't know if the tax laws have changed to make these sorts of things more difficult to do.
What matters is how much money is eventually spent for the cause. See http://www.ted.com/talks/dan_pallotta_the_way_we_think_about...
This will seem a bit OT, but it is relevant: http://www.ted.com/talks/dan_pallotta_the_way_we_think_about...
I'm bothered that we as a society have trouble recognizing the point and purpose of overhead.
Your writing made me think a lot about the crazies/true innovators, and I agree with how you see those people adding value to our world. But I also think that there are not enough people who seek to shift paradigms, not just through the products and services that exist in them, but through inviting everyone into a discourse of change. I'd be curious to hear from you how (and if) this TED Talk relates to your writing:
I can't help but think some of this relates to this: http://www.ted.com/talks/dan_pallotta_the_way_we_think_about...
The pressures that we put researchers under to deliver nothing but positive results is terrible. There is an overhead to research. There is an overhead to progress. Why do we try to eliminate it with such prejudice, when the consequences seem so obviously dire?
⬐ frozenportI have a theory that the change is due to the communication revolution. It is significantly easier to submit a proposal, and many proposals are now unsolicited, before you needed an 'in' and now you only need to submit the document through a website.⬐ HarryHirsch⬐ anigbrowlNIH proposals are, as always, solicited three times a year, and the paperwork is also the mostly the same as always, except that some extra forms were added a few years back.
What has changed is the fact that research is getting more expensive, and that the financing model of state universities changed in the last decade - state funds have declined, and there is a greater pressure on professors to bring in external funding. The NIH budget, on the contrary, has not grown.
This is getting off-topic, but universities are in for an interesting time. A greater financial burden is placed on students, who then cannot find jobs thanks to the recession, the scramble for grant funding is increasing, there will be greater emphasis on teaching faculty, which at some point you cannot pay peanuts any longer. Altogether a perfect storm for deans.I strongly agree. I was struck by the mention that in the 60s 2/3rds of research projects were funded, whereas nowadays only 1/5th are. This is not just due to stinginess; there are more research labs chasing funding and grant applications have become professionalized, if not commercialized. Maybe this is also a function of more people pursuing academic success as a career path, because the rise of IT has resulted in a significant devaluation of labor-intensive work and thus the earning power of people engaged in it.⬐ marcelsalathe1/5? That would be nice... NIH funding levels are at 1/10 nowadays.⬐ plgPaylines at many institutes are even lower, around 8% It's only going to get worse with the sequester
⬐ qxf2Well expressed idea and worth watching. Key point is that we think of 'overhead' and 'cause' as separate things in a charity, like overhead does not count towards the cause and hence has to be minimized. This kind of thinking has led to a world where smart, talented and willing people need to make a choice between 'doing good' an having a career.
⬐ opminionInteresting talk about how the role of growth and non-profits. But I was put off by the very weak argumentation and the reactions by the sympathetic audience to unwarranted claims.
This case is suitable for a debate, rather than a monologue.
⬐ gaileessoooo good