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Glo Dollar is basically designed to be a GiveDirectly revenue-generating engine. The larger the market cap, the more we will donate. But we could just as easily fund some other charity and some other cause, like Malaria Consortium or Hellen Keller International.
Here are five reasons why GiveDirectly is the right choice for us:
- We have a really high opinion of both cash transfers and GiveDirectly as an organization.
- Cash scales magnificently.
- We are less certain about the benefits of public health interventions (vs. cash transfers) than GiveWell, a prominent charity evaluator, is.
- In light of that uncertainty, we favor the simplest, most autonomy-compatible intervention, which is cash transfers.
- GiveDirectly was the natural choice when we pivoted in July 2022.
1. We have a really high opinion of both cash transfers and GiveDirectly
1.1 the case for basic income
We think that cash transfers can lift people out of extreme poverty. Not every time, not everywhere—poverty is complex—but overall, the evidence for their efficacy is very strong.
High-quality randomized controlled trials find that GiveDirectly’s programs lead to large increases in consumption and monthly well-being, and a substantial rise in overall demand in places where recipients live (“a local transfer multiplier of 2.5,” in econ jargon).
Caveat: nothing is a panacea, and researchers who studied cash transfers in the US and Uganda found that observed effects tended to dissipate in the long term. Moreover, a 2018 paper that studied cash transfers from GiveDirectly found that while recipients tended to have more assets than control subjects three years down the line, recipients’ neighbors tended to have “lower consumption and food security” than people who lived far away from recipients. The researchers attribute this finding to the “sale of productive assets”—imagine someone using their cash transfer to buy a cow from a neighbor who needs cash right away, but lowering the neighbor’s income in the long run.
Fortunately, GiveDirectly’s ongoing basic income program addresses this concern by distributing $34/month in cash transfers to “every adult in a village.”
Results from this modified program are still forthcoming—the preliminary, COVID-era finding was that “transfers significantly improved well-being on common measures such as hunger, sickness and depression in spite of the pandemic,” though only modestly—but we’re very keen on where things are going.
As Dylan Matthews puts it, “cash works best when everyone gets it.”
1.2 the case for GiveDirectly
GiveDirectly is an outstanding charity with transparent, clear financials and excellent underlying research. They also have very low overhead; for every dollar they receive in donations, about 89c goes directly to a recipient.
We also really like how well GiveDirectly learns and adapts, which they demonstrate amply in this blogpost about lessons learned from distributing cash in the US during Covid.
2. Cash transfers scale magnificently
About 700 million people live in poverty. We aspire to help them all. That would mean giving aid to a huge, diverse group of people with equally diverse needs, and what works in Burkina Faso might be irrelevant in Bolivia. So we can’t be too invested in any one theory of poverty alleviation and hope to reach our goal.
Cash is the most agnostic, person-centric form of giving. Giving cash means trusting people to know what’s best for themselves and not second-guessing them as outsiders. We’re confident that essentially everyone living in extreme poverty would appreciate having a basic income.
3. The case for cash is strong relative to public health interventions
It’s great that cash transfers theoretically scale to all of planet Earth, but our rationale for funding them should also work here and now. If Glo Dollar were a $2 billion stablecoin generating $48 million of annual revenue for a charitable cause, some people might argue (reasonably!) that some other organization could use that money just as well or even better.
GiveWell is a charity evaluator that advocates for donating to highly effective charities. They’ve identified four “top charities ” that are all, by their estimates, at least “10x as cost-effective as GiveDirectly’s cash transfer program.”
GiveWell has put a lot of work and thought into its cost-benefit analyses, and they are well trusted by prominent donors. So if we’re comparing GiveDirectly to alternatives, GiveWell’s Top Charities Fund makes sense as a benchmark.
We prefer GiveDirectly for two main reasons: cash transfers rely on fewer imposed assumptions about what people need and what they should value, and the evidence supporting GiveDirectly is unusually rigorous. (Apologies in advance that this is somewhat technical/in the weeds.)
3.1 GiveWell, a prominent charity evaluator, relies on strong assumptions in its analyses
In the words of GiveDirectly:
[GiveWell’s] process for deciding what outcomes matter most, and which programs produce those outcomes most cost-effectively…incorporates the values (or “moral weights”) of GiveWell staff, donors, and a survey of people living in Kenya and Ghana, alongside estimates about cost, program details, and other factors.
Ultimately, this results in a spreadsheet. This framework combines the views of a relatively small number of stakeholders and then applies those outcomes to millions of people.
This is an important point. If you look at GiveWell’s cost-benefit spreadsheet, you’ll notice a sharp discontinuity between the value assigned to saving the life of someone under 5 vs over 5. Intuitively it makes sense that we assign more value to saving a child’s life than an adult’s, but how much weight we give to that distinction, and where we draw the line, are not empirical questions, but values questions. These values reflect the preferences of GiveWell stakeholders. GiveWell gives donors “60% weight” on this question. (To their credit, GiveWell discusses the pros and cons of its work with candor, and they further caution that their “cost-effectiveness estimates should [not] be taken literally.”)
By contrast, cash transfers let each person decide what they value most. The basic income program that the Glo Dollar supports provides each recipient with $34/month, which is enough money to buy three of the four interventions that GiveWell’s top charities provide. If a bed net is what a person needs most, we trust them to know that and to purchase it if given the chance. GiveDirectly is all about giving them that chance. It’s clearly not that simple—people in extreme poverty might not have easy access to markets for everything they need—but there’s a strong default case for empowering people to help themselves.
This is, again, partly an empirical question and partly a matter of values. About the empirics, we’re happy to report that people in extreme poverty generally spend their money on necessities rather than temptation goods. About values, we’re very aligned with GiveDirectly, whose #1 value is “recipients first.”
3.2 the evidence for cash transfers comes from scientific research of the highest quality
This is complicated and we’re only going to skim the surface, but the research supporting GiveDirectly’s work is exceptional. The corresponding papers have been published in top journals and generally show an unusual level of attention to detail. For example, Haushofer and Shapiro (2016) “hired two graduate students to audit the data and code for this paper,” which probably explains why the impact evaluation group 3ie was able to replicate the paper successfully. (See Chang and Li (2017) for an overview of why this is important, and how rare successful replications are.)
The evidence supporting GiveWell’s top charities, by contrast, tends to be somewhat more preliminary (e.g. published by an impact evaluation group, without yet having gone through peer review or outside replication) or older. For instance, the studies supporting GiveWell’s top charity, Seasonal Malaria Chemoprevention, were all published more than 10 years ago, and according to a Cochrane review on the subject, were collectively “underpowered to reach statistical significance” on the question of “all-cause mortality.” (See “GiveWell should fund an SMC replication” for more on this, if you are interested.)
This isn’t to say that GiveWell’s top charities aren’t great groups doing great work: they are. Rather, the question of comparing one cause to another is not just a matter of looking at the facts, because differences in research quality create unmeasured, nonstatistical sources of uncertainty. And making judgements under uncertainty is always going to be a question of values and judgment calls.
We make that judgment call in favor of the simplest, most robust intervention available, which is cash transfers.
4. Uncertainty should bias us towards simplicity, and cash transfers are the epitome of simplicity
People, and their needs, are complex. There will probably never be a definitive, universal answer to the question of what helps the most. In the face of this uncertainty, we think there is a strong argument for defaulting to a simple, well-validated intervention that empowers people to make their own choices.
Ezra Klein frames it beautifully: “when giving to ease human suffering, sometimes the simplest strategy is best.”
5. GiveDirectly was the natural choice when we pivoted in summer 2022
Glo Dollar began life as a pretty different product called Global Income Coin. It was to be a free-floating cryptocurrency that harnessed the power of seigniorage—the minting of money—to create a universal basic income. The plan was to distribute UBI in the currency itself. (You can read more about that original vision in our press release from April 2022 or our May 2022 effective altruism forum post.)
Then, two things happened;
- Terra/Luna death spiraled, which made releasing an even remotely similar product much less appealing;
- Treasuries started generating yield again, which made a stablecoin a more attractive product.(Stablecoin issuers typically earn money by investing a portion of the stablecoin's backing reserves in government bonds, which generate interest.)
So we pivoted our product to a stablecoin that generates basic income for people in extreme poverty, called Glo Dollar, in July 2022.
We also simplified our plans by outsourcing basic income distributions to GiveDirectly, a nonprofit that provides unconditional cash transfers (UCTs) to poor people around the world. As we put it in an EA forum post announcing the pivot, that choice let us “focus on solving one core problem: getting a stablecoin adopted as a means of exchange.”
Basically, when the Glo Foundation pivoted, we had to make hard choices about what to change and what to keep the same. We decided to keep to the mission of distributing basic income, but dropped the part where it would be in crypto. (GiveDirectly uses mobile money technology to distribute money in local currencies.)
We could have pivoted further and supported some other model of improving people’s lives. But as we've argued here, we believe that cash transfers and GiveDirectly are both great.