GiveWell: How Data Transparency Leads Donors to Better Charitable Giving

Two young financial analysts make good money in the hedge fund business and decide to give a chunk of it away to some worthy humanitarian cause. The only problem: How to give effectively?

When Elie Hassenfeld, now of the San Francisco-based nonprofit GiveWell, faced that dilemma a decade ago, he and his fellow Ivy League grad Holden Karnofsky were frustrated by the paucity of data on charitable effectiveness in the public domain. So they started cold calling charities from the trading floor, asking questions that charities are not used to answering.

Their questions made the charities uncomfortable: What kind of data do you have to show evidence of your effectiveness and impact? How do you measure cost effectiveness? Can you demonstrate the need and capacity to justify more funding from a donor? How transparent are you in sharing this kind of data publicly?

Most charities don’t report such information, because most donors never ask. “Unfortunately, 65% of individual philanthropists give based purely on emotion, without any research behind their gifts,” said Laura Arrillaga-Andreessen, wife of Marc Andreessen, in an interview published last month in The Wall Street Journal.

Donors often respond to charities with the slickest marketing appeals or the most aggressive fundraising teams, at large institutions in education or the arts. Or they chase ambulances with large checks after a disaster. Yet, as Arrillaga-Andreessen observes, “They have no idea what success will look like for their gift, no idea how their generosity will translate into the world being a better place in a specific location, for a specific population.” Heavily funded foundations may have those answers, but they “typically exist in silos. They do not share knowledge.”

Enter Hassenfeld and Karnofsky and GiveWell, the nonprofit that grew out of their interest in finding ways to measure, analyze and publicize charitable effectiveness. GiveWell gives individual donors access to information previously available only to large foundations. It delivers a transparency that could transform the notoriously opaque nonprofit sector for donors just as business models like have changed the travel business for travelers.

Charity Navigator, a web site that tracks the financial health of charities, is better known but offers inadequate information about charitable impact and results, argues Ken Stern in his new book, With Charity for All: Why Charities Are Failing and a Better Way to Give. Stern, the former CEO of National Public Radio, notes that a solid financial statement at a charity won’t tell you if that charity is actually making a difference in the world. According to Stern, if the largest humanitarian relief agencies had invested more in administrative effectiveness (think logistics preparedness, rather than fundraising prowess) prior to Hurricane Katrina and the earthquake in Haiti, the outcomes after those tragedies would have inspired more donor giving, instead of the public relations disasters that ensued.

So who tops GiveWell’s recommended list of most effective charities? At a recent glance it was an outfit in the UK called the Against Malaria Foundation. For four or five dollars (or euros, or pounds), this nonprofit can supply people in Africa with a net to shield them at night from disease-carrying mosquitoes for up to two years. That equates to a cost of less than $2,000 to save a human life. Not only is AMF effective where the need is great, “They use data analytics,” Hassenfeld says. “They survey the people they help and monitor the impact. And they share that information in a dashboard on their website.”

Here at EMC, we like this model and the way it advances smarter data analysis in nonprofit work. That’s why our Global Marketing organization will make GiveWell and AMF the focus of our annual team charitable activity this year.

Check out GiveWell online. It will change the way you give. Your gift could change a life.

About the Author: Carter Wilkie