I think the point is that investments pay a return to you, so a single point of failure really hurts you where it counts.
Charities, on the other hand, pay their return to the world. The world is not horribly damaged if a single charity fails; the world is served by many charities. In effect, the world is already diversified.
If the charity you gave all your donations to fails, you may feel bad, but you will get over it. Not necessarily the case if the investment you sunk all your own money into fails.
Sure, I get that. The thing I was responding to was jsalvatier's comment that "It's important to understand why you normally diversify. The reason why diversification is a good idea is because you have diminishing marginal utility of wealth." S/he wasn't talking about charity there, I don't think... though maybe I was confused about that.
Reposted from a few days ago, noting that jsalvatier (kudos to him for putting up the prize money, very community spirited) has promised $100 to the winner, and I have decided to set a deadline of Wednesday 1st December for submissions, as my friend has called me and asked me where the article I promised him is. This guy wants his god-damn rationality already, people!
My friend is currently in a potentially lucrative management consultancy career, but is considering getting a job in eco-tourism because he "wants to make the world a better place" and we got into a debate about Efficient Charity, Roles vs. Goals, and Optimizing versus Acquiring Warm Fuzzies.
I thought that there would be a good article here that I could send him to, but there isn't. So I've decided to ask people to write such an article. What I am looking for is an article that is less than 1800 words long, and explains the following ideas:
but without using any unexplained LW Jargon. (Utilons, Warm Fuzzies, optimizing). Linking to posts explaining jargon is NOT OK. Just don't use any LW Jargon at all. I will judge the winner based upon these criteria and the score that the article gets on LW. Maybe the winning article will not rigidly meet all criteria: there is some flexibility. The point of the article is to persuade people who are, at least to some extent charitable and who are smart (university educated at a top university or equivalent) to seriously consider investing more time in rationality when they want to do charitable things.