To illustrate what I meant, if you are giving to charities that aim to cure a fatal disease that you happen to have - then that means you have an increased risk of ruin if your donations don't help - broadly similar to the one that investors diversify their portfolio to help prevent if their individual investments don't pay off.
Of course, that is not selfless altruism - but it is still giving money to charities with the aim of helping the charities to meet their goals - rather than for signalling purposes.
This still isn't enough to invalidate the argument against diversifying. I'm not fully convinced by it, but...
Suppose your money would be enough to increase charity A's chance of finding a cure from 50% to 50.08%, or charity B's chance from 50% to 50.06%, or by splitting the money increase A's to 50.04 and B's to 50.03, I'm pretty sure you're better off giving it all to A, which can increase the chance of at least one finding a cure from 75% to 75.04%.
Suppose both charities have diminishing returns so funding to increase chance beyond 55% is less effective...
Related: Purchase Fuzzies and Utilons Separately
We genuinely want to do good in the world; but also, we want to feel as if we're doing good, via heuristics that have been hammered into our brains over the course of our social evolution. The interaction between these impulses (in areas like scope insensitivity, refusal to quantify sacred values, etc.) can lead to massive diminution of charitable impact, and can also suck the fun out of the whole process. Even if it's much better to write a big check at the end of the year to the charity with the greatest expected impact than it is to take off work every Thursday afternoon and volunteer at the pet pound, it sure doesn't feel as rewarding. And of course, we're very good at finding excuses to stop doing costly things that don't feel rewarding, or at least to put them off.
But if there's one thing I've learned here, it's that lamenting our irrationality should wait until one's properly searched for a good hack. And I think I've found one.
Not just that, but I've tested it out for you already.
This summer, I had just gone through the usual experience of being asked for money for a nice but inefficient cause, turning them down, and feeling a bit bad about it. I made a mental note to donate some money to a more efficient cause, but worried that I'd forget about it; it's too much work to make a bunch of small donations over the year (plus, if done by credit card, the fees take a bigger cut that way) and there's no way I'd remember that day at the end of the year.
Unless, that is, I found some way to keep track of it.
So I made up several jars with the names of charities I found efficient (SIAI and VillageReach) and kept a bunch of poker chips near them. Starting then, whenever I felt like doing a good deed (and especially if I'd passed up an opportunity to do a less efficient one), I'd take a chip of an appropriate value and toss it in the jar of my choice. I have to say, this gave me much more in the way of warm fuzzies than if I'd just waited and made up a number at the end of the year.
And now I've added up and made my contributions: $1,370 to SIAI and $566 to VillageReach.
A couple of notes:
Let me know if you start trying this out, or if you have any suggested improvements on it. In any case, may your altruism be effective and full of fuzzies!
ADDED 12/26/13: I've continued to use this habit, and I still totally endorse it! A few addenda: