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ChristianKl comments on Can You Give Support or Feedback for My Program to Alleviate Poverty? - Less Wrong Discussion
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Comments (39)
Why do you want to do this as a nonprofit instead of a for profit company?
Thanks for your question! This particular project is charitable in nature and would probably require funding to get off the ground and expand more rapidly. Since it is not expected to attract for-profit support, especially because it would probably not be a particularly profitable venture, most funding would probably come from people/organizations with non-profit motives. People/organizations with non-profit motives generally only donate to nonprofits, which have a better public image and are more trusted to pursue altruistic goals like donors expect. We can also offer tax-deductible donations to donors, and we do not get taxed on donations or income, which gives us a financial advantage for attracting more donations and for earning more income. The only benefits to starting a for-profit venture I can think of would be greater freedom in compensating supporters and in our operations, but since this project is not expected to be a huge profit maker and has charitable intentions, I did not choose the for-profit path, although of course I could consider it in more detail.
I agree with ChristianKl. you said:
why won't it be profitable? Can't you make it profitable? There is a market failure connecting people in places where minimum wage is too high to employ locals with employees willing to work for less. (in that its not easy to hire an international team)
I would be interested in getting involved in a for-profit version of this idea. (and was taking small steps towards researching similar ideas)
The venture could be profitable, yes. Would it generate massive amounts of income? That is also possible. I did not consider a for-profit version of the idea because the project itself was supposed to be charitable in nature. I am considering starting a for-profit branch of this idea, and would be open to hearing other people's ideas and motivations. Is your motivation and other's in getting involved in a for-profit implementation of this idea to earn money?
To elaborate more on profits, the initial implementation of this idea might not be incredibly profitable because we are relying on third party virtual employment services like the aforementioned upwork.com to ensure the initial implementation (this summer!) would be a success and members would be able to find guaranteed work. Directly contracting with people and organizations wanting virtual workers is expected to be a lot more profitable.
To frame it from the "capitalist virtues" perspective...
If you squint a bit, your version sounds a lot like "we're going to create a lot of value for a lot of people, in a way that is neatly measured in dollars, and therefore we can't possibly make a for-profit company." That is... really weird, from where I sit.
Alternate perspective: if you're creating a lot of value for a lot of people, but you can't extract any of it to compensate yourself for the infrastructure you build and the risks you take building it, are you actually really sure you're creating as much value as you thought you were?
The way I see it, making the project a nonprofit allows it to better compete with for-profit companies because of tax-advantages. It can also get donations. A for-profit corporation has the advantage of attracting investments from people hoping to make a profit, but I am quite sure that I would not be able to attract large sums of investment capital. That pretty much gives starting this program as a nonprofit the only logical choice.
Regarding your point about re-compensation, I don't think I cannot extract the value, it will just be difficult to pay myself an extraordinarily large sum of money all at once, in the hundreds of thousands of dollars. If that ever did become a reality, then hypothetically I could create a for-profit branch of the organization that could partner up with the nonprofit branch in managing core revenue generating operations, thus allowing me to siphon income out of the nonprofit.
That's a mistake.
On of the core ideas of effective altruism is to focus on effective structures instead of focusing on signaling that one is charitable.
I'm having trouble seeing how a for-profit corporation would create more good and be a more effective structure in this case. A non-profit organization can operate without income tax and attract donations which can be tax-deductible to donors. A for-profit organization could get investment capital, but I think it's highly unlikely I would be able to find any interested investors, and it otherwise performs worse compared to a non-profit with the same business model.
You are likely underrating the difficulty of raising charitable funds.
If the business model doesn't work for a for-profit it's unlikely from an outside view to think that you create much value in a nonprofit structure.
Charitability and profitability are not opposites. Perhaps you interpret for-profit as "grab as much as you can" but it does not necessarily have to be so. You can keep 51% ownership to yourself and take 0 pay as a compensation for your work and reinvest all the profits into the organization, making it effectively non-profit, while the 49% shareholders will make their gains through share prices going up if the organization is expanding based on the hope that at some future day you will pay them dividends.