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The Impact of Charity Entrepreneurship on the NGO Sector



Founding a new organization has a wide range of effects on the charitable sector as a whole. If a charity is good, it can raise standards in a field, spread or stabilize key concepts, build the EA movement, or encourage the allocation of more resources to an area. There are hundreds of effects that a new charity can have on the sector as a whole, both positive and negative. This post covers a few of the most important positive ones.


RAISING THE BAR


The presence of an effectiveness-focused charity can raise the bar for a whole cause area. It allows donors and staff to have higher, but still realistic, expectations for other charities. In areas that are not very effectiveness-focused, donors will often not even know what an impact-focused charity would look like. Yet after they see one, they can become a strong advocate for expansion of the principles. This higher bar can cause multiple charities to strive to be more effective -- for instance, GiveWell reinforces its top charities’ focus on cost effectiveness and encourages every organization to strive for higher impact.


SPREADING CONCEPTS


Sometimes the biggest impact an organization has is in its concepts, not in its direct impact. Many concepts and ideas from the effective altruism (EA) universe have not spread far or are limited to a particular cause area even within EA. Often, a highly impactful charity can be founded by someone who brings knowledge and a way of thinking that is uncommon in that area. When a new charity enters the space with concepts like a focus on cost effectiveness or counterfactuals, these models can spread to nonprofit partners that otherwise would never have heard of them. Some of these concepts are easy to understand and can lead to a large difference in the way charities are run. Charity-to-charity transmission can happen through staff who learn lessons and then move on to other organizations, and by working in partnership on projects. Charity Entrepreneurship incubatees were inspired by other great charities and will be the inspiration for future charities yet to be founded. Good habits and ideas can be passed on, as can bad ones -- which increases the importance of running an impactful organization.


INFLUENCING DONORS


Donors are affected by strong charities as well. A donor might like that you are so transparent, and then make it a requirement for other charities they fund. Frequently, funders and others are affected by concepts they learned in one field and can apply in others. For example, over time The Gates Foundation became a supporter of open science, and now all research they fund is published openly. This change is arguably more impactful than any grant the foundation gave in the open-science field, but was likely caused by their initial interest and investment in the space.


IMPACT ON THE EFFECTIVE ALTRUISM MOVEMENT


Sometimes, a charity or individual goes further than just learning a few concepts, and can become a member of the growing effective altruism (EA) movement. The effective altruism movement is still largely populated by science and philosophy majors in the USA and UK. By having more organizations and jobs in EA-minded organizations, the movement can slowly expand and diversify. Many of those who would most benefit from effective-altruism concepts are those already implementing interventions in the field. Field staff are usually not hired with a strong effective-altruism background, but get acquainted with the concepts through a daily connection to an organization they feel is doing good work. Similarly, funders often hear about effective altruism via connections to a single cause area or charity. There are many areas where there could be an effectiveness-minded donor who has not gotten much exposure to effective altruism concepts simply because the movement has little presence in this area. Environmentalism, family planning, and mental health have many donors who could be interested in effective-altruism concepts but have not heard of them. Bringing in people with these backgrounds also has large benefits for the EA movement. Historically, there have been concerns that there is a lack of practical knowledge and understanding of the cause areas. Starting something as practical and direct as an impactful charity can show that the EA movement practices what it preaches and tests its abstract considerations and philosophy in the real world, where feedback loops are quicker and clearer. These feedback loops can provide key information that a purely theoretical movement would not be able to access. New organizations can also provide a stabilizing force to the EA movement. Organizations tend to outlive social movements. Nonprofits tend to be slower to change or fade than the movements they are part of. As a result, they can give a movement multiple points of failure. It can also take the pressure off a single organization -- if a movement is supported or endorsed by many nonprofits, a single mistake made by one of them will result in fewer ramifications to the movement as a whole.


DRAWING RESOURCES INTO AN AREA


If you’re a strong charity in an area, people will have more positive thoughts about that area in general. For example, if you start a strong charity in tobacco taxation, more EAs will be interested in the area, and more donors will consider it as a possible field and support the area as a whole. This can also work on a broader scale. If you make a strong case to funders that global health is a promising cause area, you can also direct interest from one very broad area to another; for example, from microloans to global health, or from environmentalism to animal welfare. If funders feel that your area is impactful as a whole, they might donate not only to your charity but also to other charities in your cause area. When you run an organization, you will have supporters who back you for purely impact-based reasons, but you will also have supporters who are interested in a different reason. Sometimes an area looks promising, but a single limiting factor is preventing it from moving forward. If a new organization can reduce this limiting factor, it can open up large pathways to impact. For example, some areas have very large and interested funders (e.g. tobacco taxation, contraceptive health) or have a new, much larger source of funding (e.g. natural disasters, the animal movement). Donors interested in these areas can struggle to find room for more funding among impactful charities. Sometimes, the only areas left to fund are marginal improvements on a good charity (after they have accomplished 90% of their impact/effort) or large improvements on a disappointingly weak charity. Both are not attractive cases for donors to support. One new impactful charity, however, can create a considerable amount of “room for funding”.


GOVERNMENT INTEREST AND UPTAKE


Government interest and uptake is another possible limiting factor that charities can help with. Governments tend to be very slow-moving, and are often more likely to take on a project after it has been proven to work in their specific context. A strong, measurement-focused charity can give a government the confidence to run a national or state-level program. Not only do charities often serve as proof of concept, but they also create some norms and methodologies around implementation that can later be used by a government. Of course, often the charity will work directly with the government to apply for a program after the charity has run it on a smaller scale. This process can allow an area to receive a huge amount of resources that the government would otherwise have spent elsewhere.

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