maybe previously a charity would have sold 20% of their impact for $1 million, but now they sell it for $5 million because lots of impact investors are competing.
What you are describing here is demand for funding shifting due to increased supply. But that demand isn't infinitely elastic. Scaling an organization is much more complex than just throwing money at it (this recent article has a good overview of the problem). That's why I'm talking about a demand-constrained market.
charities would also be able to set their own terms, so they could choose between selling 20% for $5 million or a smaller amount for $2 million.
I don't understand that part. How would they pick the number? To my understanding the "impact credits" are internet points with no inherent value.
If I understand the 1/(t+5) schedule correctly, it means the price of capital can't move in response to supply. In the for-profits investment markets it does: more investors competing to invest = less equity for the same dollars, because capital that's easy to replace has less counterfactual value.
If AI money suddenly makes funding abundant while vetting capacity doesn't grow accordingly (which seems to be the most likely scenario right now), we end up precisely in this sort of demand-constrained market. I'm curious how you'd adjust to account for that.
This article was brought to my attention by a discussion with @Austinhere. My main critique is in line with @harfe, cross-posting here:
[In the proposed impact market model] An org's valuation is implied by how much money it raises later. This measures how well a funder anticipated other funders, not the actual impact.
At a surface level this appears congruent with how the for-profit world operates. Startup valuations are also set by the money raised in later rounds. However there's a crucial difference - the value of firms is ultimately grounded in the expectations of future output in a way that value of non-profits can't be. Equity prices are guesses about very concrete future cash flows from people buying things the firm offers. The accuracy of those guesses can be ultimately checked against something that isn't another investor's opinion. The output is uniform - a dollar earned on a grocery store chain is the same as a dollar earned on an AI company[1].
In contrast, EA orgs aim for "positive impact" which can be quantified only by a very subjective evaluation with multiple assumptions, not by any market mechanism. The output is not uniform. Even if we had perfect measurement (we don't) I might value 1 human QALY above 1000 shrimp QALYs while you do the opposite.
This results in money invested being a much worse proxy for outcomes in a non-profit world than in the for-profit one. If I invest $1 M in Uber instead of Intel, I signal to everyone that I believe Uber is more likely than Intel to be worth more in some time horizon. If I invest $1 M in AMF instead of AWF, the signal is not clear. I might consider AMF to be more efficient than AWF but I might instead assign a higher value to human lives or simply have funds which are earmarked for GHD.
At least to a good approximation. Individual investors may choose to price in externalities, e.g. treat a grocery store dollar as "better" than the same dollar coming from an oil or tobacco company.
I think we're talking past each other on one specific thing: input dollars and output dollars aren't the same dollars.
Firms compete for earned dollars. That's the output, and it's what credits the firm for the value it creates (by spending money, customers signal that they value what the firm provides above its monetary cost). Invested dollars are an input. They happen to share a unit with the output, but that doesn't mean that they measure the same thing.
I read the recent substack post on impact markets and I think this is where it runs into trouble. An org's valuation is implied by how much money it raises later. This measures how well a funder anticipated other funders, not the actual impact.
At a surface level this appears congruent with how the for-profit world operates. Startup valuations are also set by the money raised in later rounds. However there's a crucial difference - the value of firms is ultimately grounded in the expectations of future output in a way that value of non-profits can't be. Equity prices are guesses about very concrete future cash flows from people buying things the firm offers. The accuracy of those guesses can be ultimately checked against something that isn't another investor's opinion. The output is uniform - a dollar earned on a grocery store chain is the same as a dollar earned on an AI company[1].
In contrast, EA orgs aim for "positive impact" which can be quantified only by a very subjective evaluation with multiple assumptions, not by any market mechanism. The output is not uniform. Even if we had perfect measurement (we don't) I might value 1 human QALY above 1000 shrimp QALYs while you do the opposite.
This results in money invested being a much worse proxy for outcomes in a non-profit world than in the for-profit one. If I invest $1 M in Uber instead of Intel, I signal to everyone that I believe Uber is more likely than Intel to be worth more in some time horizon. If I invest $1 M in AMF instead of AWF, the signal is not clear. I might consider AMF to be more efficient than AWF but I might instead assign a higher value to human lives or simply have funds which are earmarked for GHD.
Coming back to your original post - it considers Money, Taste and Dealflow as separate components, but in our discussion you seem to propose to base the attribution primarily on Money. VC doesn't do that. Limited Partners supply the capital and get returns proportional to capital. General Partners supply taste and dealflow and get carry. The carry exists precisely because "whose money was it" and "who found the deal" are understood to be different things. A regrantor is a GP, not an LP.
So I stand by my point that it's more relevant to look at how attribution works inside firms (which also cannot rely on markets here) than to default to the amount of money invested, just because it happens to come in a familiar unit.
At least to a good approximation. Individual investors may choose to price in externalities, e.g. treat a grocery store dollar as "better" than the same dollar coming from an oil or tobacco company.
Build low-commitment on-ramps: paid advisory engagements, board seats, fractional/interim senior roles, and short fellowships that let a mid-career professional contribute without a full career leap.
Is there evidence that "fractional/interim senior roles and short fellowships" actually help bring mid-career professionals on board? My intuition as a mid-career professional is the opposite - quitting my job to take on a time-bound opportunity feels significantly riskier than taking a permanent position. Double so if I'm aware that the ecosystem I'm trying to join has a strong preference for hiring from within.
nonprofit grantmakers should approximate their own assessment of impact as a function of "what fraction of the best nonprofits did I fund? For what size? How early?" - aka the same considerations that a for-profit vc considers for return on investment.
This approach only makes sense if you consider your available funding as a VC/grantmaker to be ~unlimited. In the VC world this might work for a16z or YC. Your regular VC fund/angel investor doesn't ultimately care what fraction of good deals they pass on or how early they joined on a deal but what literal ROI they get: net profit divided by money invested.
I fully agree that attributing the impact is very important as a signaling mechanism. However I don't get why we should prioritize "who gave the money" over "who identified the opportunity" for this attribution.
Admittedly, I have zero background in non-profit grantmaking. I'm coming from the for-profit world of software products. In my world what counts as impact is counterfactual outcomes, not resources spent.
Imagine that John, the leader of team A, identifies a gap that is turning customers away, gets team B to deliver a fix and as a result the sales double. I'd say that John made the biggest counterfactual impact here, even if he didn't lift a finger on the delivery part. Without further context, I'd also consider John leveraging team B, rather than his own, as a positive signal, showcasing that he can think outside the box to deliver desirable outcomes.
Yeah, such solution does lead to more credit being claimed in total for the same work across the entire organization. It's the inherent cost of collaboration on anything non-trivial. There's very few environments where that cost would outweigh the benefits of collaboration and, at least in my intuition, non-profit grantmaking ecosystem isn't likely to be one of them.
I have one important caveat for the topic of dealflow. While I agree that the EA community has a lot to learn from VCs, there's one crucial difference: startup funding has a much larger competitive component.
A for-profit investor wants the company they invest in to succeed, while maintaining an equity stake in it to profit from that success. This means they can win only if the company accepts their investment.
In contrast, a non-profit grantmaker is (or at least should be) concerned almost exclusively with helping the organization succeed. Whether it's their or someone else's money isn't very relevant.
This makes some lessons to be learned from the VC community irrelevant or actively harmful (if grantmakers start competing for the same projects). At the same time, it enables a level of collaboration and common infrastructure that wouldn't make sense in the for-profit world and which needs its playbook written from scratch.
Is THAT the problem? Not being involved in the hiring, I actually didn't know WHO was getting hired. If they are the most qualified and the most capable of creating the positive outcome I'm hoping for, then I'm happy for them and the system.
If we frame the problem as a talent gap, it's more about which roles aren't filled - not only in the sense of positions remaining vacant but also including cases where the process takes a long time, seniority gets lowered or organizations work around the lack of talent, e.g. by shifting tasks to other roles or resigning from certain growth directions.
Who is getting hired (and more importantly: who isn't) is a highly correlated but a different issue in my eyes. Even if all the vacancies got easily filled by people perceived as the most qualified, I'd argue that keeping the ecosystem closed to outsiders is still a major problem. Beyond the obvious equitability angle, it also encourages the homogeneity of thought and reinforces the perception of EA living in a bubble.
Overall I feel like communications is a very specific edge case here. Forgive me if I oversimplify but "understanding what and how to signal in order to convince a group of people from a different culture to take certain action" sounds exactly like the job description of a communications specialist, especially for an area like AI safety.
A recruitment process requiring this skillset to navigate does actually optimize for good comms specialists. At the same time, it will filter out talented software engineers, project managers, subject matter experts, etc. based on gaps in an area that has little impact on their actual on the job performance.
I feel like it's a circular problem. The hiring pipelines within EA are heavily optimized towards "traditional" hires - fresh grads of elite universities and people jumping from one EA org to another. Recruiting experienced professionals from the outside world requires a significantly different approach. In organizations comprised primarily of traditional hires, few people can even see that problem, much less solve it.
I don't think the EA community at large really understands just how insulated this ecosystem is.
What you are describing here is demand for funding shifting due to increased supply. But that demand isn't infinitely elastic. Scaling an organization is much more complex than just throwing money at it (this recent article has a good overview of the problem). That's why I'm talking about a demand-constrained market.
I don't understand that part. How would they pick the number? To my understanding the "impact credits" are internet points with no inherent value.
If I understand the 1/(t+5) schedule correctly, it means the price of capital can't move in response to supply. In the for-profits investment markets it does: more investors competing to invest = less equity for the same dollars, because capital that's easy to replace has less counterfactual value.
If AI money suddenly makes funding abundant while vetting capacity doesn't grow accordingly (which seems to be the most likely scenario right now), we end up precisely in this sort of demand-constrained market. I'm curious how you'd adjust to account for that.
This article was brought to my attention by a discussion with @Austin here. My main critique is in line with @harfe, cross-posting here:
At least to a good approximation. Individual investors may choose to price in externalities, e.g. treat a grocery store dollar as "better" than the same dollar coming from an oil or tobacco company.
I think we're talking past each other on one specific thing: input dollars and output dollars aren't the same dollars.
Firms compete for earned dollars. That's the output, and it's what credits the firm for the value it creates (by spending money, customers signal that they value what the firm provides above its monetary cost). Invested dollars are an input. They happen to share a unit with the output, but that doesn't mean that they measure the same thing.
I read the recent substack post on impact markets and I think this is where it runs into trouble. An org's valuation is implied by how much money it raises later. This measures how well a funder anticipated other funders, not the actual impact.
At a surface level this appears congruent with how the for-profit world operates. Startup valuations are also set by the money raised in later rounds. However there's a crucial difference - the value of firms is ultimately grounded in the expectations of future output in a way that value of non-profits can't be. Equity prices are guesses about very concrete future cash flows from people buying things the firm offers. The accuracy of those guesses can be ultimately checked against something that isn't another investor's opinion. The output is uniform - a dollar earned on a grocery store chain is the same as a dollar earned on an AI company[1].
In contrast, EA orgs aim for "positive impact" which can be quantified only by a very subjective evaluation with multiple assumptions, not by any market mechanism. The output is not uniform. Even if we had perfect measurement (we don't) I might value 1 human QALY above 1000 shrimp QALYs while you do the opposite.
This results in money invested being a much worse proxy for outcomes in a non-profit world than in the for-profit one. If I invest $1 M in Uber instead of Intel, I signal to everyone that I believe Uber is more likely than Intel to be worth more in some time horizon. If I invest $1 M in AMF instead of AWF, the signal is not clear. I might consider AMF to be more efficient than AWF but I might instead assign a higher value to human lives or simply have funds which are earmarked for GHD.
Coming back to your original post - it considers Money, Taste and Dealflow as separate components, but in our discussion you seem to propose to base the attribution primarily on Money. VC doesn't do that. Limited Partners supply the capital and get returns proportional to capital. General Partners supply taste and dealflow and get carry. The carry exists precisely because "whose money was it" and "who found the deal" are understood to be different things. A regrantor is a GP, not an LP.
So I stand by my point that it's more relevant to look at how attribution works inside firms (which also cannot rely on markets here) than to default to the amount of money invested, just because it happens to come in a familiar unit.
At least to a good approximation. Individual investors may choose to price in externalities, e.g. treat a grocery store dollar as "better" than the same dollar coming from an oil or tobacco company.
Is there evidence that "fractional/interim senior roles and short fellowships" actually help bring mid-career professionals on board? My intuition as a mid-career professional is the opposite - quitting my job to take on a time-bound opportunity feels significantly riskier than taking a permanent position. Double so if I'm aware that the ecosystem I'm trying to join has a strong preference for hiring from within.
As a bit of a tangent:
This approach only makes sense if you consider your available funding as a VC/grantmaker to be ~unlimited. In the VC world this might work for a16z or YC. Your regular VC fund/angel investor doesn't ultimately care what fraction of good deals they pass on or how early they joined on a deal but what literal ROI they get: net profit divided by money invested.
I fully agree that attributing the impact is very important as a signaling mechanism. However I don't get why we should prioritize "who gave the money" over "who identified the opportunity" for this attribution.
Admittedly, I have zero background in non-profit grantmaking. I'm coming from the for-profit world of software products. In my world what counts as impact is counterfactual outcomes, not resources spent.
Imagine that John, the leader of team A, identifies a gap that is turning customers away, gets team B to deliver a fix and as a result the sales double. I'd say that John made the biggest counterfactual impact here, even if he didn't lift a finger on the delivery part. Without further context, I'd also consider John leveraging team B, rather than his own, as a positive signal, showcasing that he can think outside the box to deliver desirable outcomes.
Yeah, such solution does lead to more credit being claimed in total for the same work across the entire organization. It's the inherent cost of collaboration on anything non-trivial. There's very few environments where that cost would outweigh the benefits of collaboration and, at least in my intuition, non-profit grantmaking ecosystem isn't likely to be one of them.
Nice framework!
I have one important caveat for the topic of dealflow. While I agree that the EA community has a lot to learn from VCs, there's one crucial difference: startup funding has a much larger competitive component.
A for-profit investor wants the company they invest in to succeed, while maintaining an equity stake in it to profit from that success. This means they can win only if the company accepts their investment.
In contrast, a non-profit grantmaker is (or at least should be) concerned almost exclusively with helping the organization succeed. Whether it's their or someone else's money isn't very relevant.
This makes some lessons to be learned from the VC community irrelevant or actively harmful (if grantmakers start competing for the same projects). At the same time, it enables a level of collaboration and common infrastructure that wouldn't make sense in the for-profit world and which needs its playbook written from scratch.
If we frame the problem as a talent gap, it's more about which roles aren't filled - not only in the sense of positions remaining vacant but also including cases where the process takes a long time, seniority gets lowered or organizations work around the lack of talent, e.g. by shifting tasks to other roles or resigning from certain growth directions.
Who is getting hired (and more importantly: who isn't) is a highly correlated but a different issue in my eyes. Even if all the vacancies got easily filled by people perceived as the most qualified, I'd argue that keeping the ecosystem closed to outsiders is still a major problem. Beyond the obvious equitability angle, it also encourages the homogeneity of thought and reinforces the perception of EA living in a bubble.
Overall I feel like communications is a very specific edge case here. Forgive me if I oversimplify but "understanding what and how to signal in order to convince a group of people from a different culture to take certain action" sounds exactly like the job description of a communications specialist, especially for an area like AI safety.
A recruitment process requiring this skillset to navigate does actually optimize for good comms specialists. At the same time, it will filter out talented software engineers, project managers, subject matter experts, etc. based on gaps in an area that has little impact on their actual on the job performance.
I feel like it's a circular problem. The hiring pipelines within EA are heavily optimized towards "traditional" hires - fresh grads of elite universities and people jumping from one EA org to another. Recruiting experienced professionals from the outside world requires a significantly different approach. In organizations comprised primarily of traditional hires, few people can even see that problem, much less solve it.
I don't think the EA community at large really understands just how insulated this ecosystem is.