How charities are actually wasting your money (video and infographic)

Charities are not wasting your money the way you think they are. The most common way people think charities misuse donations is by paying their CEOs exorbitant salaries or spending it all on fundraising and administrative costs. So the nonprofit sector has made a big deal of advertising the fact that “100% of your money goes directly to the poor” or “all of your money goes to program costs”.

But that’s completely missing the point. At the end of the day, you probably don’t really care about the money going to the program; what you truly care about is helping people. What’s the difference? Well, all of your money could go to a program that doesn’t actually help, or it could go to a program that’s incredibly inefficient at doing so. Allow me to illustrate.

Imagine two charities, Stop AIDS (a made up charity for illustration’s sake), and Homeopaths Without Borders (sadly, a real charity). Stop AIDS provides antiretroviral therapy to AIDS patients - a clinically proven medicine that dramatically improves the quality and quantity of life for an HIV positive person. Homeopaths Without Borders provides ‘medicine’ that has been proven to not work, and also tries to teach people about how their method works better than that ‘evil Western stuff’. The catch is they have very little overhead. They’re mostly volunteer-run. Stop AIDS, though, spends a lot on marketing and research and development. Who would you rather donate to?

Now, I chose the most obviously ineffective charity I could find to prove my point, but there are many charities that have no scientific evidence of impact. In fact, it is the norm.. And there’s a fair few that have active evidence finding that they don’t work, such as Scared Straight and PlayPumps. Yet, they still actively seek and accept funding. And don’t count on them telling you outright that they have no evidence whatsoever, or evidence that they don’t work. Any fundraiser caught doing that would be fired immediately.

What if the charity does have evidence that it works, though? Then they’re probably not wasting your money, right? Not really. While the charity not actually working is a very big problem, it’s not the biggest one. The biggest problem is charities being inefficient at accomplishing their goals.

Take, for example, giving children an education in a developing country. The classic way to do this is to pay for a kid’s education directly in the form of a scholarship. If you spend $100 on scholarships, you get about 3 months of education. That’s $33 per month: not bad! The reason many kids don’t go to school isn’t money, however, it’s health. They’re too unwell to go. One common health reason is snail fever, a worm that infects children via water and quite literally sucks their blood. It only costs 50 cents to cure, but their family often can’t afford it. If you spend $100 on deworming children, you increase time spent at school by 13.9 years.

There are two ways of looking at this - the pessimistic and the optimistic way. The pessimistic way is to say that a scholarship charity is wasting 98% of your potential impact. The optimistic way,my favorite, is to say that by switching from scholarships to deworming you can increase your impact 50 times. That’s pretty amazing.

There are millions of examples such as these, where, if you think strategically. you can help hundreds of times more people by donating to a more cost-effective charity. It’s kind of exciting, because it means that if you donate strategically, you can help more people as a middle-class citizen than a millionaire philanthropist who gives inefficiently would.

So what’s the solution, if the real way charities are wasting your money is by spending it on programs that don’t work, or if they do, work inefficiently? Well, there’s a research organization, called GiveWell, that looks through the scientific evidence, and finds charities whose methods are are both scientifically proven and cost-effective. They then find the best of the best, so that you can be sure that no charity wastes your money again. There’s also us, Charity Science, who takes their research, livens things up, and presents the information in videos, infographics, and blogs (like this one!), while basing them on GiveWell’s rock-solid research.