Epistemic status: 90% confident.

Inspiration: Arjun Narayan, Tyler Cowen.

The noblest charity is to prevent a man from accepting charity, and the best alms are to show and enable a man to dispense with alms.

Moses Maimonides.

Background

Effective Altruism (EA) is "a philosophy and social movement that applies evidence and reason to determine the most effective ways to improve the world." Along with the related organisation GiveWell, it often focuses on getting the most "bang for your buck" in charitable donations. Unfortunately, despite their stated aims, their actual charitable recommendations are generally wasteful, such as cash transfers to poor Africans. This leads to the obvious question - how can we do better?

Doing better

One of the positive aspects of EA theory is its attempt to widen the scope of altruism beyond the traditional. For instance, to take into account catastrophic risks, and the far future. However, altruism often produces a far-mode bias where intentions matter above results. This can be a particular problem for EA - for example, it is very hard to get evidence about how we are affecting the far future. An effective method needs to rely on a tight feedback loop between action and results, so that continual updates are possible. At the extreme, Far Mode operates in a manner where no updating on results takes place at all. However, it is also important that those results are of significant magnitude as to justify the effort. EA has mostly fallen into the latter trap - achieving measurable results, but which are of no greater consequence.

The population of sub-Saharan Africa is around 950 million people, and growing. They have been a prime target of aid for generations, but it remains the poorest region of the world. Providing cash transfers to them mostly merely raises consumption, rather than substantially raising productivity. A truly altruistic program would enable the people in these countries to generate their own wealth so that they no longer needed poverty - unconditional transfers, by contrast, is an idea so lazy even Bob Geldof could stumble on it. The only novel thing about the GiveWell program is that the transfers are in cash.

Unfortunately, no-one knows how to turn poor African countries into productive Western ones, short of colonization. The problem is emphatically not a shortage of capital, but rather low productivity, and the absence of effective institutions in which that capital can be deployed. Sadly, these conditions and institutions cannot simply be transplanted into those countries.

A greater charity

However, there do exist countries with high productivity, and effective institutions in which that capital can be deployed. That capital then raises world productivity. As F.A. Harper wrote:

Savings invested in privately owned economic tools of production amount to... the greatest economic charity of all.

That is because those tools increase the productivity of labour, and so raise output. The pie has grown. Moreover, the person who invests their portion of the pie into new capital is particularly altruistic, both because they are not taking a share themselves, and because they are making a particularly large contribution to future pies.

In the same way that using steel to build tanks means (on the margin) fewer cars and vice-versa, using craftsmen to build a new home means (on the margin) fewer factories and vice-versa. Investment in capital is foregone consumption. Moreover, you do not need to personally build those economic tools; rather, you can part-finance a range of those tools by investing in the stock market, or other financial mechanisms.

Now, it's true that little of that capital will be deployed in sub-Saharan Africa at present, due to the institutional problems already mentioned. Investing in these countries will likely lead to your capital being stolen or becoming unproductive - the same trap that prevents locals from advancing equally prevents foreign investors from doing so. However, if sub-Saharan Africa ever does fix its culture and institutions, then the availability of that capital will then serve to rapidly raise productivity and then living standards, much as is taking place in China. Moreover, by making the rest of the world richer, this increases the level of aid other countries could provide to sub-Saharan Africa in future, should this ever be judged desirable. It also serves to improve the emigration prospects of individuals within these countries.

Feedback

Another great benefit of capital investment is the sharp feedback mechanism. The market economy in general, and financial markets in particular, serve to redistribute capital from ineffective to effective ventures, and from ineffective to effective investors. As a result, it is no longer necessary to make direct (and expensive) measurements of standards of living in sub-Saharan Africa; as long as your investment fund is gaining in value, you can rest safe in the knowledge that its growth is contributing, in a small way, to future prosperity.

Commitment mechanisms

However, if investment in capital is foregone consumption, then consumption is foregone investment. If I invest in the stock market today (altruistic), then in ten years' time spend my profits on a bigger house (selfish), then some of the good is undone. So the true altruist will not merely create capital, he will make sure that capital will never get spent down. One good way of doing that would be to donate to an institution likely to hold onto its capital in perpetuity, and likely to grow that capital over time. Perhaps the best example of such an institution would be a richly-endowed private university, such as Harvard, which has existed for almost 400 years and is said to have an endowment of $32 billion.

John Paulson recently gave Harvard $400 million. Unfortunately, this meant he came in for a torrent of criticism from people claiming he should have given the money to poor Africans, etc. I hope to see Effective Altruists defending him, as he has clearly followed through on their concepts in the finest way.

Further thoughts and alternatives

• Some people say that we are currently going through a "savings glut" in which capital is less productive than previously thought. In this case, it may be that Effective Altruists should focus on funding (and becoming!) successful entrepreneurs in different spaces.
• I am sympathetic to the Thielian critique that innovation is being steadily stifled by hostile forces. I view the past 50 years, and the foreseeable future, as a race between technology and regulation, which technology is by no means certain to win. It may be that Effective Altruists should focus on political activity, to defend and expand economic liberty where it exists - this is currently the focus of my altruism.
• However, government is not the enemy; rather, the enemy is the cultural beliefs and conditions that create a demand for the destruction of economic liberty. To the extent this critique, it may be that Effective Altruists should focus on promoting a pro-innovation and pro-liberty mindset; for example, through movies and novels.

Conclusion

There is a class of problems that I noticed comes up again and again in various scenarios. Abstractly, you can formulate it like this: given a time limit, how much time should you spend increasing your production capacity, and then how much time should you use your production capacity to produce utility? Let's take a look at two version of this problem:

Version 1:

You have N days. You start with a production capacity C=0 and accumulated utility U=0. Each day you can either: 1) increase your production capacity (C=C+1) or 2) use your current production capacity to produce utility (U=U+C).

Question: On what days should you increase your production, and on what days should you produce utility to maximize total accumulated utility at the end of the N days?

It's trivial to prove that the optimal solution looks like increasing capacity for T days, and then switching to producing utility for N-T days. What is T? In this case it's really straight-forward to figure it out. We can compute final utility as U(T)=(N-T)*T. The maximum is at T=N/2. So, you should spend the first half increasing your production and the second half producing utility. Interesting...

Version 2:

You have N days. You start with a production capacity C=1 and accumulated utility U=0. Each day you can either: 1) increase your production capacity by a factor F (C=C*F), where F>1 or 2) use your current production capacity to produce utility (U=U+C).

Same question. Now the final utility is U(T)=F^T*(N-T). Doing basic calculus, we find the optimal T=max(0, N-1/ln(F)). A few interesting points you can take a way from this solution:

1) If your growth factor F is not large enough, you might have to stick with your original production capacity of 1 and never increase it. E.g. F=1.01 and N=100, where optimal T=max(0,-0.499171).

2) The bigger the N, the lower growth factor you can accept as being useful, i.e. T>0.

3) For most scenarios, you should spend 80-90% of the time increasing the production. Example. With larger F, T will approach N. This reminds me of Reducing Astronomical Waste post.

Questions for you: where have you seen these types of problems come up in your life? Is this a known class of problems?

EDIT: Based on criticism below, I am reconsidering how to proceed with this idea (or something in the neighbourhood).

A topic that has been on my mind recently is where, in our complicated lives, there might be low-hanging fruit ready to be picked by a motivated rationalist. Actual, practical, dollars-and-cents fruit.

In possibly-related news, here is how the writer of About.com's beginner's guide to investing describes the stock market:

Imagine you are partners in a private business with a man named Mr. Market. Each day, he comes to your office or home and offers to buy your interest in the company or sell you his [the choice is yours]. The catch is, Mr. Market is an emotional wreck. At times, he suffers from excessive highs and at others, suicidal lows. When he is on one of his manic highs, his offering price for the business is high as well, because everything in his world at the time is cheery. His outlook for the company is wonderful, so he is only willing to sell you his stake in the company at a premium. At other times, his mood goes south and all he sees is a dismal future for the company. In fact, he is so concerned, he is willing to sell you his part of the company for far less than it is worth. All the while, the underlying value of the company may not have changed - just Mr. Market's mood.

I have heard this narrative many times before, and I'd like to test whether it is accurate - and in particular, whether LWers can consistently beat the market.

The skeptic may well ask: why should LWers have an advantage? Why not go to the professionals - investment advisors? Also, isn't there a whole chapter in Kahneman about how even smart people suck at picking stocks? And what do you, simplicio, know about this anyway?

LWers may have an advantage by virtue of being educated about such topics as cognitive biases, sunk cost fallacy, probabilistic prediction, and expected utility - topics with which investment advisors et al. may or may not be familiar on a gut level. I am not sure if we're any better, but I'd like to test it. Also, if LW turns out to be any good at offering such advice, that advice would presumably be free, unlike that of yon advisor (fees tend to kill returns on investment - just ask anybody who uses Intrade). As for what I personally know - not very much yet. But I find competition very stimulating.

Accordingly, my proposal is for a contest: over the course of 2013, I will set up & maintain a Google Drive spreadsheet. This spreadsheet will be shared with contest participants. Each participant will have say $5,000 of play money to use "buying" (or "selling") stocks on the exchange of their choice. Contestants will record the date of purchase or sale, quantity, and preferably provide comments regarding why they are buying or selling.

At the end of this contest (Dec 31, 2013?), I will commit to Paypal the winner (defined as the person with the highest market valuation of play assets as of midnight on that date) the equivalent of $50 CAD in their local currency. In the unlikely event that I win, I will donate that $50 to the Against Malaria Foundation. (Above commitment does not take effect until I actually gauge interest in this contest, figure out an end date & rules etc., and decide to proceed. If anyone else wants to throw money in the pot, please do.)

The purposes of this post are therefore:

• to find out who is interested - please leave a comment below, and e-mail me at ispollock [at] gmail.com if you want in;
• to solicit constructive and destructive criticism of the project, especially from any local experienced investors (in particular, perhaps a one-year timeframe is too short for a meaningful contest? Also, real-world experience of transaction costs in buying and selling would be extremely helpful);
• to ask if anyone knows of a better software platform for the contest than Google Drive, or knows of any extremely helpful resources I should be reading/linking to.

There's a good song by Eminem - If I had a million dollars.  So, if I had a hypothetical task to give away $30 million to different foundations without having a right to influence the projects, I would distribute them as follows, $3 million for each organization:

1. Nanofactory collaboration, Robert Freitas, Ralph Merkle – developers of molecular nanotechnology and nanomedicine. Robert Freitas is the author of the monography Nanomedicine.
2. Singularity institute, Michael Vassar, Eliezer Yudkowsky – developers and ideologists of the friendly Artificial Intelligence
3. SENS Foundation, Aubrey de Grey – the most active engineering project in life extension, focused on the most promising underfunded areas
4. Cryonics Institute – one of the biggest cryonics firms in the US, they are able to use the additional funding more effectively as compared to Alcor
5. Advanced Neural Biosciences, Aschwin de Wolf – an independent cryonics research center created by ex-researchers from Suspended Animation
6. Brain observatory – brain scanning
7. University Hospital Careggi in Florence, Paolo Macchiarini – growing organs (not an American medical school, because this amount of money won’t make any difference to the leading American centers)
8. Immortality institute – advocating for immortalism, selected experiments
9. IEET – institute of ethics and emerging technologies – promotion of transhumanist ideas
10. Small research grants of $50-300 thousand

Now, if the task is to most effectively invest $30 million dollars, what projects would be chosen? (By effectiveness here I mean increasing the chances of radical life extension)

Well, off the top of my head:

1. The project: “Creation of technologies to grow a human liver” – $7 million. The project itself costs approximately $30-50 million, but $7 million is enough to achieve some significant intermediate results and will definitely attract more funds from potential investors.
2. Break the world record in sustaining viability of a mammalian head separate from the body - $0.7 million
3. Creation of an information system, which characterizes data on changes during aging in humans, integrates biomarkers of aging, and evaluates the role of pharmacological and other interventions in aging processes – $3 million
4. Research in increasing cryoprotectors efficacy - $3 million
5. Creation and realization of a program “Regulation of epigenome” - $5 million
6. Creation, promotion and lobbying of the program on research and fighting aging - $2 million
7. Educational programs in the fields of biogerontology, neuromodelling, regenerative medicine, engineered organs - $1.5 million
8. “Artificial blood” project - $2 million
9. Grants for authors, script writers, and art representatives for creation of pieces promoting transhumanism - $0.5 million
10. SENS Foundation project of removing senescent cells - $2 million
11. Creation of a US-based non-profit, which would protect and lobby the right to live and scientific research in life extension - $2 million
11. Participation of  “H+ managers” in conferences, forums  and social events - $1 million
12. Advocacy and creating content in social media - $0.3 million