With Charity for All. Excerpts below.

On the role of the charitable sector:

The charitable sector... includes areas as diverse as education, global health services, shelter for the homeless, ...arts and culture, and some of our most important scientific research. We support this broad array of services because absent a robust charitable economy, these functions would either cease or devolve to government — an unpalatable option in a time of rising public debt and dwindling faith in the efficacy of government. In effect, we have privatized these public functions in the belief that charities can perform these tasks better and with greater efficiency than government.

[Even] in this results-obsessed country, the public rarely demands measures of how effective charities are in implementing their services and meeting their service goals. And... when the public generally and funders more specifically do not press for results-oriented organizations... charities respond accordingly...

...the market incentives in the nonprofit world push charities toward happy anecdote and inspiring narrative rather than toward careful planning, research, and evidence-based investments, to crippling effect...

...The glossy fund-raising brochures, the moving videos, and the carefully crafted inspirational anecdotes often mask problems that range from inefficiency and ineffectiveness to outright fraud and waste. There is little credible evidence that many charitable organizations produce lasting social value. Study after study tells the opposite story: of organizations that fail to achieve meaningful impact yet press on with their strategies and services despite significant, at times overwhelming, evidence that they don't work.

...This could have been a bleak book. My early research was not promising. I found story after story of organizational and service failure... But over time, another story began to emerge, of a nascent movement to rethink how the charitable sector works, to build market mechanisms to reward effective charities and discourage ineffective ones, and to create tools that will allow people to turn themselves from donors to investors. This book begins with... a narrative of systematic shortcomings, but it ends with a glimpse of those who are beginning to reshape the charitable world and show us what it can be.

The Red Cross as an example of charity ineffectiveness:

With Hurricane Katrina bearing down on New Orleans in August 2005, the American Red Cross geared up for action... In many ways, it was the largest peacetime call-up in American history, ultimately activating 250,000 employees and volunteers across a thousand miles of the southern United States.

...The human resources and material aid were tremendous, but the system of quality control was in absolute tatters. Volunteers were assigned to tasks without adequate training or any attempt to match their skills to the work. Goods poured into the Mobile warehouse, but often without regard to need... Whatever came in was shipped out to the field, regardless of its usefulness to the relief effort... goods coming into the warehouse were not registered or recorded; pilfering was common... Shelters were under- or incorrectly supplied, goods rotted in warehouses, the wrong things went to the wrong places, cash disappeared, supplies walked away... At one point, it was reported that fully half of the goods supplied to the Red Cross could not be traced to confirm that they made it to their intended destination.

The Red Cross failures during Katrina unfortunately do not stand out... they mirror, on a much larger scale, the inefficiencies and ineffectiveness displayed by hundreds of other nonprofits seeking to respond to the disaster.

These problems were magnified by the policies of the IRS, which fast-tracked more than four hundred new Katrina-related charities in the wake of the storm, in some cases granting tax-exempt status within hours of receiving an application. Not surprisingly, the vast majority of those new charities... have since failed, disappeared, or been diverted to other purposes...

The roots of the Red Cross's failures during Katrina and other crises lie in its inability—a failing shared by virtually all charities—to make the necessary internal investments that are the hallmark of all good organizations, be they for-profit businesses, charities, or government agencies...

When even the highest-revenue charity in the country is bound together by rubber bands and duct tape, it is a sign of profound misunderstanding of how to build effective charities.

On the creation of Givewell:

In the summer of 2006, eight friends working in the financial services industry decided to... research and share information on different charities... They discovered that the Charity Navigator rankings were unhelpful, as they were based largely on ratios of overhead to programmatic spending that they quickly realized had no correlation to organizational effectiveness and impact. [Moreover,] Charity Navigator depended on self-reports from the charities, which could easily, and frequently did, game the ratings... When pressed for more information... the charities often furnished their own confidential internal reports and data — the inadequacy of which led the group... to understand that the charities themselves did not know whether they were helping or hurting a given situation.

…[The group] concluded that there had to be a better way of evaluating charities... In the summer of 2007, Karnofsky and Hassenfeld left Bridgewater to set up GiveWell... Their approach was based upon the methodologies they had learned at Bridgewater: in-depth, research-driven evaluations supported by facts and data, not formulas and marketing brochures...

Over the past five years, Givewell... has produced over five hundred investment grade reports, both on entire charitable sectors and on individual charities. After all this work, it has identified only eight organizations that can fully demonstrate material and effective impact and efficiently use additional funds.