Effective Philanthropy

Investing is the most effective philanthropy.

Companies create profits by providing customers what they want and providing employees a livelihood. The possibility of future profits gives investors an incentive to fund companies. This is why capitalist economies abound with varieties of things people want.

Several types of wants are not fully-addressed by companies.

Other types of wants, with few exceptions, are most effectively satisfied by companies.

The dependence of profits on providing customers what they want causes investors to select only the companies that can transcend competition to most effectively do so. That is a strong filter. Companies that do not satisfy investors do not receive the support to survive. Company operators are strictly held accountable and are therefore strongly motivated to effectively provide what they promise.

Non-profit organizations and governments do not have such a strong filter nor do their operators have such strict accountability. Most nonprofit organizations and governments declare every initiative to be a success. That is facilitated by expressing objectives subjectively. Without the possibility of failure, employees have little motivation to seek better ways of being effective.

Nonprofit organizations do not have to compete to provide their beneficiaries what they want. The main competition for non-profit organizations is in the forum of seeking funding. Success there is largely based on appeal to donors’ feelings with fairly lax regard to effectiveness of achieving the subjective objectives. Governments have no such competition. Their funding is obtained involuntarily.

The curing of diseases and sustainability of the natural environment being enabled by the genomics revolution can be most effectively accomplished by investment in companies. There are few examples of the creation of great things people want where nobody had a chance to profit by creating them. That is why investing is the most effective philanthropy.