Patient philanthropy is the idea (originated by the economics researcher Philip Trammell) that rather than donating now, you should invest money and donate it much later. Maybe you should even set up a foundation so that the money can be invested for a century or more before it’s donated. I can think of two strong arguments against patient philanthropy: the rational preference argument and the cost-effectiveness argument.

The rational preference argument

Let’s say I have $10 billion to donate.

Option A. I donate all $10 billion now through GiveDirectly. It is disbursed to poor people who invest it in the Vanguard FTSE Global All Cap Index Fund and earn a 7% compound annual growth rate or CAGR. In 2126, the poor people’s portfolios will have collectively grown to $8.68 trillion.

Option B. I invest all $10 billion in the Vanguard FTSE Global All Cap Index Fund for 100 years. In 2126, I have $8.68 trillion. I then disburse all the money to poor people through GiveDirectly.

Option B clearly provides no advantage to the poor people over Option A. On the other hand, it sure seems like Option A provides an advantage to the poor people over Option B.

If a philanthropist has $10 billion, I think they should prefer to arrange for Option A to happen rather than opt for Option B. But there may be other options that offer even more advantages to the poor people than Option A. So, they should seek out those options and choose an even better one, if they can.

To the extent Option B looks like it has higher impact, that’s just an artefact of how we might decide to do the accounting, rather than a true reflection of the causality involved or what’s morally best — or what the recipients of the aid would rationally prefer.

A potential reply is that, in Option A, the world’s poorest people can’t realistically invest the money rather than spend it on consumption (e.g., food, shelter, medicine, transportation, household goods). However, this reply does not overcome the argument. Spending the money on consumption probably benefits poor people more than investing it and it is probably what they rationally prefer. If this is in doubt, imagine the reverse: would the world’s poorest people rationally prefer for a foundation to expropriate, say, half of their wealth or income and to invest it on their behalf for, say, twenty years? Would that be a net benefit to them?

The cost-effectiveness argument

Let’s again imagine I have $10 billion to donate.

Option C. I donate all $10 billion now to GiveWell’s top charities. Per GiveWell’s estimate of $3,000 to $5,500 per life saved, I save at least 1,818,000 lives.

Option D. I wait 100 years to donate and, by the time I do, the world’s poorest countries have the per capita GDP that the United States does today. (For this to be true, the per capita GDP of these countries would need to end up at around 50% of what per capita GWP will be if it continues to grow by 2% a year for the next 100 years.) Although in 2126 I have $8.68 trillion, the cost to save a life in the world’s poorest countries is now $7,500,000, the same as what it costs to save a life in the United States today. So, with $8.68 trillion, I can only save 1,157,000 lives, which is 661,000 fewer (or 36% fewer) than if I had donated the money right away.

This comparison is highly sensitive to highly uncertain assumptions about the long-term future economic growth of the world’s poorest countries. It depends on those countries — mainly in sub-Saharan Africa — achieving some amount of catch-up growth, similar to what has occurred in several East Asian countries.

We should consider how and when to donate to promote catch-up growth in the poorest countries in light of the rational preference argument. Since Option A is preferable to Option B, donating now to promote economic growth in poor countries is preferable to delaying donations by 100 years.

Other arguments

Several other arguments may be equally important or more important. Some discount rate needs to be applied to the foundation’s money to account for the risk the foundation will cease to exist before it can execute its roadmap. (This could happen for operational, legal, political, or force majeure reasons.) Also, major advancements in science and technology over the intervening century may make the foundation’s plans obsolete, and may also make the remaining opportunities for philanthropic giving much less cost-effective than what was available earlier.

The philosopher David Thorstad notes that patient philanthropy is illegal in most Western democracies, which seems logical, since such laws put limits on the otherwise unlimited accumulation of wealth and power by foundations. The economist Thomas Piketty has not discussed patient philanthropy directly, but has described the long-term problems — namely, increasing wealth and income equality — when the rate of return on capital persistently exceeds the rate of economic growth. Patient philanthropy relies on the rate of return on capital exceeding economic growth. Otherwise, there would be no advantage to investing funds long-term rather than disbursing them as soon as possible.

If the rate of return on capital didn’t exceed economic growth, patient philanthropy would imply a pessimistic outlook, since for opportunities for philanthropic giving to become more cost-effective in the future, it seems like the world would have to get worse over time. One alternative cited rationale for patient philanthropy is to save money that can be deployed in an emergency or when a highly cost-effective opportunity arises, but this isn’t sufficient justification for a patient philanthropic foundation to exist. Donors can invest their own money and deploy it when it is most appropriate. Other foundations that do active work and continually disburse funds can redirect their spending to respond to emergencies and new opportunities. (Other actors like governments may be able to fill that role as well.) There is no reason why putting money into a patient philanthropic foundation would be the only or best way to deploy funds in case of an emergency or a new opportunity.

There are also intuition-based arguments against patient philanthropy. For example, should the Against Malaria Foundation stop distributing bednets and put all of its funds into the Vanguard FTSE Global All Cap Index Fund for 100 years? Does that seem like it would be a net positive for the global poor?

A potential reply is that the current level of funding for the Against Malaria Foundation and other charities helping the global poor is at or above the optimal level. That is, no additional funding, beyond the current level, should go to the Against Malaria Foundation or similar charities. (All additional incremental funding earmarked to help the global poor should instead be invested by the prospective donors in index funds for many decades, or be donated to a patient philanthropic foundation that will invest the funds long-term.) 

However, it is not clear how to empirically justify this reply. How is the optimal level empirically determined? How do we know the optimal level of spending for the Against Malaria Foundation and similar organizations is not zero, or 1% of their current spending, or 10%, or 50%? How do we know the optimal level is not 2x, or 10x, or 100x more? (If the optimal level of funding just happened to be the current level, that would be a strange coincidence.)

Conclusion

Investing in the stock market for 100 years before disbursing any funds seems to be almost certainly a worse way to help the global poor than donating to cost-effective charities in the short term. It’s not what the global poor would rationally prefer, it fails a plausible back-of-the-envelope cost-effectiveness calculation, and there are more arguments against it besides, such as illegality in most Western democracies, the risk of a foundation failing to survive 100 years, and the possibility of transformative technologies accelerating the end of global poverty within the next century.

Epilogue

My meta-level takeaway is I continue to be skeptical of highly theoretical, abstract ideas that violate common sense and intuition. Inevitably, some such ideas will turn out to be right. However, most are wrong. This isn’t a reason to dismiss such ideas. It’s a reason to apply a high level of scrutiny and withhold judgment until things become clearer.

If you have an intuition that a logical-sounding yet strange idea is wrong but can’t immediately articulate an argument against it, your intuition is probably right. It may take a matter of minutes, hours, days, weeks, months, or years to come up with the argument. That middle period between hearing the idea and forming the argument is the most uncomfortable part. You may be tempted to chastise yourself for resisting an idea for no logical reason. You may feel frustrated you can’t yet turn your intuition into an argument. 

The ability to stay in that state of discomfort, confusion, and uncertainty for as long as it takes is an important part of thinking. The natural temptation is to try to prematurely resolve the discomfort by either accepting the counterintuitive idea or resorting to implausible arguments for rejecting it — whatever happens to be on hand at the time. The patience to wait out that middle part has served me well again and again throughout my life.