In today’s Finshots, we get a little philosophical and explain Effective Altruism and why the entire world is talking about it now
The Story
The year is 2002. William MacAskill is an undergraduate student at Oxford and like most undergraduates, he’s loving life. He is downing beers, climbing roofs and playing the Saxophone in a funk band. You know, typical college student stuff!
But one day…everything changes.
MacAskill finds a paper from 1972 titled ‘Famine, Affluence, and Morality’. It’s written by an Australian ethical philosopher Peter Singer and has a simple premise — “If you have money, you have an obligation to donate and help those who are less fortunate.”
MacAskill is shaken! Reading the paper gives him just the clarity he needs to turn his life upside down and find a purpose.
He starts saving money instead of spending it on beer. He starts thinking deeply about wealth and equality. And 10 years later, he spearheads a movement called ‘Effective Altruism’ (EA) with a relatively simple goal — put money to the best use possible! He asks people to be more generous with their wealth. But unlike traditional charities, he wants their generosity to be effective. He wants them to adopt a rational and mathematical approach while resolving moral quandaries.
And the idea stuck.
At its core, EA looked at 3 key things.
- How much good can you achieve by working on a problem
- How solvable is the problem
- How neglected is the cause
Let us give you an example.
Do you remember the Ice Bucket Challenge? It was all the rage back in 2014. You had to empty a bucket of ice water on your head, record the video and share it on social media nominating three other people to do the same thing. It wasn’t just a fun activity. It was meant to get people talking about a deadly neurodegenerative disease called ALS. And it worked. The Ice Bucket Challenge helped raise $115 million for ALS that year. People donated!
Sounds like a brilliant way to raise money for a worthwhile cause, no?
Well, an effective altruist would disagree. Quite vociferously, in fact.
You see, according to them, ALS already gets a lot of attention. It’s not entirely neglected. So it doesn’t satisfy point three. Also, developing a cure could take several years since progress has been slow. So it’s not easy to solve. There goes point 2. And you could argue that by donating more money to ALS, you’re depriving other more worthy causes of money.
And that’s not us speculating. Here’s what the co-founder of the effective altruism movement, William MacAskill, wrote in 2014: “The key problem is funding cannibalism. That $3 million in donations doesn’t appear out of a vacuum. Because people on average are limited in how much they’re willing to donate to good causes, if someone donates $100 to the ALS Association, he or she will likely donate less to other charities.”
In his opinion, the Ice Bucket Challenge did more harm than good.
So, what does an effective altruist consider as a worthwhile cause then?
Well, there’s malaria.
Yup, as the official website of effective altruism put it, “The Against Malaria Foundation is one of the most effective global health charities in the world, and the single most common donation target for EA Survey respondents (as of 2018).”
Why’s that?
Well, there’s the humanitarian element — 450,000 people die from malaria each year. And 70% of deaths occur in children under the age of 5.
So, how can money effectively save lives?
Just $2 can buy a mosquito net. And using a net can reduce malaria cases by 50%!!! Also, every $1 million that goes into fighting malaria can improve the GDP of that country by $12 million. Very little money can have an extraordinary impact.
That’s exactly what the EA wants! It ticks all 3 boxes— highly effective, quickly solvable, and a cause that not many people find appealing.
So far so good?
Alright then. Because here’s where things take a turn. The Silicon Valley folks soon got in on the EA movement. And considering they were already making a lot of money, the idea appealed to them. Earn-to-give became the mantra and MacAskill became the toast of the town. People read his books, invited him to conferences, and they were eager to listen to his ideas.
But then November 2022 happened…
MacAskill woke up and found that his world was falling apart. There was a glitch in the matrix.
Wait, what happened, you ask?
Well, remember Sam Bankman-Fried? The brain behind the meteoric rise of cryptocurrency exchange FTX? Well, FTX collapsed rather spectacularly a couple of weeks ago. We wrote about it here explaining how he may have acted against the best interests of his customers.
But if you’re confused about why we’re jumping from deeply philosophical questions on moral obligations to the crypto-verse, well, let us explain.
When the EA movement was taking root way back in 2012, MacAskill met Sam Bankman-Fried (SBF)— a student at MIT who at the time was considering a career in politics. During the meeting, MacAskill convinced SBF to drop the idea and focus on maximizing wealth instead. He believed SBF could drive change by making boatloads of money and then giving it away to effective causes. And SBF loved the idea. He decided to do just that. He joined a trading firm on Wall Street and started raking in big money. But soon, he decided it wasn’t enough. So he set up his own firm FTX to make even more money. And he promised to donate all his wealth.
His backer Sequoia Capital even penned a 14,000-word tribute or what read like a love letter to SBF. (After the collapse of FTX, they’ve taken it off their website. But the internet never forgets!) They titled this crazy piece of writing, “Sam Bankman-Fried Has a Saviour Complex — Maybe You Should Too”. Sequoia was waxing eloquent on the altruistic impact of SBF.
SBF had become the poster child of the EA movement.
He also set up the FTX Future Fund. It was a multimillion-dollar fund dedicated to the EA movement. And it claims to have invested $130 million across 262 projects as of June 2022. Rational, decision-backed projects!
And guess who was an adviser here?
MacAskill, of course!
Is it making more sense now? Can you see how SBF’s collapse could spell doom for effective altruism?
So the moment FTX collapsed, the financial consequences became obvious.
See, a large part of SBF’s donations went towards funding the EA movement — most notably to charities that EA promoted. The FTX Foundation planned to distribute at least $1 billion this year. Without SBF, the money dries up. Charities are left in limbo and their plans will be in disarray. People who deserve the money won’t get it anymore.
The second consequence is reputational! And that’s a much bigger problem.
Because people are now thinking if MacAskill’s ideas nudged SBF to take these crazy risks. After all, here’s what Sequoia Capital wrote: “SBF’s purpose in life was set: He was going to get filthy rich, for charity’s sake.”
Did SBF believe that a noble end justified the wicked means?
Did he think that he could cut corners and get rich quickly?
Maybe he did. And if that were the case, did MacAskill’s influence help create an evil Ponzi scheme?
Maybe.
Maybe not. But either way, people are now second-guessing the entire idea altogether. Effective Altruism is now firmly in the spotlight and its poster boys are struggling to salvage the brand.
Quite sad if you think about it.
Until then…
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