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benelliott comments on Open Thread, September 15-30, 2012 - Less Wrong
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Kind of a stupid question:
It's a truism in the efficient charity community that when giving to charity, we should find the most efficient group and give it our entire charity budget; the common practice of spreading donations among groups is suboptimal. However, in investing it's considered a good idea to diversify. But it seems that giving to charity and investing are essentially the same activity: we are trying to get the highest return possible, the only difference is who gets it. So why is diversification a good idea for one and not the other?
The difference is very simple.
Is it better to have $100,00, or a 30% chance of $1,000,000 and a 70% chance of being homeless. Obviously the former
Is it better to save 1 life, or have a 30% chance of saving 10 lives and 70% chance of doing nothing. Obviously the latter.