I’ve been pushing hard for impact certs (aka equity for charities; aka retroactive public goods funding). But people outside the startup space often don’t see the benefits
A reminder: impact certificates are like a VC funding ecosystem for charity. Charity founders with good ideas sell shares in their proposed projects. Profit-seeking investors buy shares of (“invest in”) projects that they expect to succeed. This funds the project; if it does succeed, altruistic people/foundations (“final oracular funders”) buy the impact, compensating the investors.
(Courtesy of Scott)
Nice things about impact certs
Aka why Capitalism is Good
- Impact Certs separate out risk takers (profit-seeking investors, angels, VCs) from impact buyers (large philanthropic donors, governments)
- Impact buyers want results (impact), not risk
- Impact buyers can focus just on evaluating what good things happened in the past, and paying bounties for things they liked
- Risk takers want positive returns on investment
- Risk takers can focus on getting to intimately know founding teams and assessing project ideas for chance of success
- Separating out these roles allows for division of labor or comparative advantage
- Contrast: Today’s grant-based funding model is kind of like Kickstarter. Philanthropists see a pitch or application for a project, and have to decide if they want to buy it up front.
- But look around your room. How much of the stuff you bought was through Kickstarter-like upfront funding, vs just going onto Amazon and buying stuff that was already made
- With Kickstarter: things take a long time; projects sometime fail entirely or are fraudulent; flashy demo videos win money instead of products that are actually good to use
- For-profit capitalist ecosystem makes buying products a really good experience. The manufacturers are funded via loans or equity, go make the product, and then sell it to you after the product exists
- It would be good if buying impact were this efficient for philanthropists
- Impact certs allows charity founders to get rich — and this is a good thing! (contra Scott)
- Makes “founding a charity” much more competitive with “founding a startup”, so smart talented ambitious folks will be more interested in founding charities. This makes charities that are more effective at achieving their goals
- Also, means that successful charity-minded folks will end up having money to direct completely at their own discretion
- Status is nice and all but money is the unit of caring - and more importantly, decisionmaking
- It’s a tragedy that Holden Karnofsky (founder of Givewell and Open Philanthropy) isn’t a billionaire. He’d likely allocate the money much better than wherever it ended up flowing to
- Sure, Holden can ask eg Dustin Moskovitz for money to fund something he likes, but in practice the inconvenience likely means it happens less than if Holden just had that money
- Also, risky things can feel embarrassing to ask for funding, even if the EV is high. Extrapolating from my own n=1, anyways
- When distributed to employees, impact certs give employees equity in the outcomes
- Less cash cost for salaries: like startups, early-stage charities don’t have much cash on hand. But startups manage to attract great employees (vs Google-like cash comp) through the promise of huge returns on startup equity
- More alignment - now the employees get to see that if the charity does well, their personal finances will be taken care of; so they no longer have to trade off between caring about the charity’s mission and their own finances
- Investors are motivated to help charities, since they now have “skin in the game”
- Manifold’s (for-profit) investors provide advice, introduce us to potential hires and other funders, tell us when we’re making mistakes, complain when the product has bugs
- Meanwhile, grantmakers will… ghost you for a while on actually getting the funds, and don’t have a culture of providing feedback (they’re too busy evaluating other grants??)
- The longer they hold onto their check, the more control/decisionmaking capability they have
- Speaking personally: going through with a grant or donation I’ve promised always feels much less urgent to me compared to getting in on an investment opportunity
- The price of the certs are a quantifiable, numeric signal to charities about how valuable their projects are
- From impact investors: signal of how promising their work seems
- From impact buyers: signal of how effective their work ended up being
- Ludicrous that Givewell-type evaluation, and eg Nuno’s critique of Open Phil is done so rarely in the charity space
- These signals are useful to others as well - later founders can look at these as credible signals about whether their project is worth pursuing, since investors and buyers have actually put down money
Q: If founders and employees and investors are getting rich, aren’t we taking money out of the hands of impact buyers or impact recipients?
- I’m a bit skeptical this would be the case
- But… maybe, to some degree. Would recommend starting with smaller tests.
Q: Is there actually enough money in the ecosystem?
Maybe charities pay low wages for the same reason video game companies pay low wages: it’s a passion project, meaning that the supply of talent exceeds the supply of dollars. If so, without shifting more money out of the rest of the economy, there won’t be enough potential for gains for investors to get interested…
- Again, this is kind of a fixed-pie worry, whereas my belief is that improving resource allocation among charities would cause them to be more effective overall
- Wild guess: ultimately, governments would have to step in and be the final final buyer of impact. But this probably won’t happen anytime soon
- TODO: Ballpark some numbers?
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