Blessed by the Potato

Here is a recent TED talk on philanthropy and advertising you should go watch.

This is an interesting perspective. As someone who is currently “overhead” I can, to a certain extent, agree. Besides my current day job, I also recently picked up an interesting freelance gig. A donor hired me to rewrite and revamp a fundraising brochure for a local hospital. Because I’m being paid directly by the philanthropist and not the foundation, my fees will not appear in their books as overhead, though I hope that the work that I’ve done indeed helps multiply the donations they eventually receive regardless. (You can see a PDF of the brochure here.)[Update: I did a second related one.]

To some extent there is a need for scale in philanthropy. A charity attempting to say fund research looking for a cure for cancer is not going to be able to make much of a dent with an annual budget of $100k — that’s barely one research grant (and even then the lab has to have some other source of core funding). It takes millions to be able to have enough to get together a panel of peer reviewers to examine grant proposals, or to buy expensive pieces of infrastructure such as PET scanners. And that takes some kind of investment to scale up — whether resources for advertising, or the volunteer effort to go viral on the internet.

But there’s a limit. At some point you could just be raising money to pay people to try to raise more money. In the talk he mentions that charitable giving has been stuck at 2% of GDP for decades. If there is some sort of mechanistic reason for that — it’s the amount people are capable of giving, or some sort of unconscious philanthropy budget in the population as a whole — then pushing for more overhead is just shifting the charity spending around, and in fact a net negative due to the overhead. It is possible that, by being able to tackle large challenges smaller organizations could not, we would be better off with one (or a few) massive billion-dollar charities spending a total of $240B than with a bunch of smaller million-dollar charities spending $275B with lower overhead costs. But if outcomes are directly related to dollars spent, more overhead would indeed simply mean more waste.

Consider a parallel with investing: you could pay a brilliant manager some percentage of your funds under management, and they might be able to beat the market for you. But there’s only so much return out there to be had: if everyone else hires an investment manager then everyone is on an even footing and is back to getting basically average returns… less the overhead to the managers.

There were three other points of his I want to discuss.

The first was on compensation. The big unanswered question for me was whether you would get value for that extra $300k spent on talent in his hypothetical. Perhaps everyone is better off if the MBAs pursue for-profit $400k salaries and donate $100k to the charity, who can then hire an $87k/year executive. If the charity tried to hire someone for $400k, would they get more than the ~$300k difference back in value? Charities, after all, don’t have all the things to manage that for-profit businesses do: maybe the extra money buys you advertising and capital markets experience, which you just don’t need as a non-profit. And why doesn’t that logic apply all down the chain? We pay grad students and post-docs a disgraceful pittance for trying to find the cures to our modern medical ailments, but brilliant technically-minded and driven people can make far more in the private sector. Would we have long since solved this pesky cancer problem if we were only willing to retain top talent in the research enterprise by setting post-doc starting salaries at $400k, and grad student stipends at $75k?

The second was on the whole comparison of the for-profit and not-for-profit sectors. You see, the two are very different fundamentally. When I give my money to Coca-Cola for a beverage, or to Amazon for a book, I am transacting with them for something. I don’t care how much they spend on overhead, because I am making my decision on whether or not to give them money based on what they are giving me in return at that moment. I need to only extend a small amount of trust to them (trust that Coca-Cola hasn’t diluted my Coke Zero, trust that my book from Amazon will arrive undamaged in a under a week), and I have recourse if my trust is violated: I can demand my money back, sue for breach of contract, etc. But once I send my money to them and receive my item, it is no longer my money. It’s their money, they can do with it as they wish.

Giving money to a charity is a completely different thing. I’m not getting a thing or a service, I’m giving my money to the charity to make the world a better place. I am trusting them to put my money to good use. Though the money is out of my hands and I have no recourse to get it back once I give, at no point do I consider it “their money” to do with as they please. Maybe they could give me a better “product” if they spent three times as much on overhead as I had reasonably expected — but that is a lot of trust for me to give. While only people donating staggering amounts of money expect to be able to direct their donations precisely, I still expect that, in general, my donation will be used for the stated purpose — ultimately mostly directed towards some kind of program spending rather than churning overhead or as risk capital. Their use and governance of the money will continue to be the concern of the donors, and so there is a very real reason for spending on overhead and risky activities to be perceived differently than in the for-profit sector.

In an analogy to investing, let’s say that there was a company that raised $100M in a stock offering to pursue a business idea. They went out the first few years and spent $90M of the money doing what had to be done (hiring people, renting office space, advertising etc.). After a few years of losing money they discover that the business model is just not viable. To continue is to throw good money after bad so they wind up operations. As a shareholder, through the first few years you would have been obliged to let management take the risk and pursue the business, spending your capital on whatever “overhead” was needed to do so. After it failed, you would expect that any residual money ($10M in this example) would be returned to you as the business was shuttered, and promptly. If they dragged their feet in the wind-up, paying salaries for years, burning through your capital with no purpose you would rightly be pissed at that loss.

In the not-for-profit sector, overhead spending that is going to have a multiplicative effect is difficult to discern from the telemarketer full employment program. How do you know whether you’re in the phase of risk capital spending that is pursuing the innovative business model with lots of potential, versus the phase that is basically the insiders stealing from the other contributors of capital? The risk-reward equation is not the same in the not-for-profit and for-profit examples, and the governance is different: profits are much easier to measure than “impact” or “do-goodery”. And as unethical and despicable as it was for the executives in the hypothetical example to burn the remaining shareholder capital after it was clear nothing would come from it, it is even more morally repugnant to live large off people’s charitable donations — hence the aversion to overhead spending.

And the last point I wanted to discuss was that of spending more overhead as a percentage to scale up. In the presentation he just kind of implicitly assumes that to scale up an organization might have to spend a larger percentage on overhead. But should this be so? Shouldn’t scaling up offer economies of scale? If instead of spending $100 to raise $1000 at a bake sale, a charity should spend $100M on organizers for a massive event and TV air time, then shouldn’t that investment be expected to pull in $1B for program spending, rather than just $250M as his 40% figure would indicate? Now again, maybe the efficiencies come on the spending side (perhaps spending $250M in one organized way with a unifying strategy does more cumulative good than spending $1B in separate $1M chunks).

So while I can see some of his points about needing large-scale charities to tackle large-scale problems, and that sometimes investments have to be made (to train people, to build infrastructure, etc.) and sometimes more overhead has to be spent (for strategy, for advertising), I do not fully agree. Sometimes overhead is just money not going to program spending, and I would hope that scaling up would bring about more efficiency rather than less. The not-for-profit and for-profit sectors are have larger fundamental differences than he suggests. And when you come right down to it, I want to be able to know that my charitable donation is going towards the stated purpose and not to the Canada Foundation for Telemarketer Employment. Maybe looking at the percentage of spending on overhead is not the best way to choose where to donate — perhaps we need some impossible measure of impact per dollar donated — but we will naturally gravitate towards metrics that are easily enumerated.

This has been a really weird spring. A week into April, and we still have hail and snow, including just this past Thursday. On that miserable morning, with the cold April wind blowing and the hail falling down, in the middle of rush hour the TTC decided to put a train out of service. At Davisville — one of only two outdoor stations on that line. In the hail.

WTF were they thinking? Unless the train is actually on fire, there is no reason for pulling it in the middle of rush hour halfway down the leg — take an extra 40 minutes to finish the loop and, if for some reason it must be pulled at Davisville, pull it on the northbound leg. Or given the weather, why could they not have limped one more station to the indoor St. Clair? It makes me wonder whether malevolent spirits haunt and possess the TTC, for that is the only explanation.

Then that same day on the way home, the train lost power at York Mills.

Including leap years, assuming my vacation days escalate with the corporate schedule, that there are 11 stat holidays in a year, that I will have on average 9 flex/lieu/sick days per year, and that I retire at 60, there are only 5699 more days to deal with rush hour on the TTC…

Cyprus has been in the news a lot lately for the seizing (“taxing”) of some assets. Some have questioned whether the same could happen here. The sad truth is that there is always the possibility of the government deciding to seize your assets; whether they’re insured or not, in a bank account, mutual fund, or real; through legislation, crooked courts, or by military force.

But it is not an event that happens often or lightly. In general, governments do not suddenly seize assets — that’s not what good governance is about. Of course, if the hole is big enough and the options limited (as in Cyprus) they may not have a choice, which gets into a moral lesson about not choosing “bread and circus” leaders.

There’s a slightly higher chance of loss with more “virtual” assets and those that can be divided for tax (e.g., the income trust Halloween massacre). But the government could decide to appropriate your house, eliminate your principal residence capital gains exemption, or tax your assets instead of just your income.

This knowledge may not help you sleep well tonight. Do remember that it is quite unlikely. Ideally, your government would be open and logical, so you could anticipate such moves (or rather, sleep soundly anticipating the lack of such moves). Of course, for the Harper government that was my big beef with the income trust fiasco — not that they decided to tax them, but that they broke an explicit promise not to do so, with no justification given. How were we to know what the next materially important decision would be? Ditto with strategically important takeovers — there was next to no way to anticipate what might or might not be allowed. In the depth of the US financial meltdown some (e.g. John Hempton) complained that the FDIC just stepped in and closed certain banks over the weekend, arbitrarily deciding to make bondholders whole while wiping out equity and preferred holders — though in a more controlled liquidation and wind-up, it’s likely that either the bondholders would take a haircut, or the preferred shareholders would be left with some value. The process is often just as important as the outcomes…

I’ve been saddened by a rash of product shutdowns by Google. Lately the announcement that Reader was being shut down is making waves, but that’s the third Google product I use that got shut down.

First there was Sync, which was awesome. It was a blackberry app that synced my contacts, some other crap, and importantly, my calendars with my BB. After shutting it off there is still a mechanism to sync the blackberry calendar and contacts list with Google’s — but it is far inferior. In particular, Google Sync was able to figure out that I can have more than one calendar in my account, whereas the crap I’m left with will only sync the main calendar, forcing me to manually sync up with my shared calendars.

Then iGoogle was given the kiss of death. It still operates, but constantly reminds me that it will be “sunsetting” soon. For those that didn’t try it, it was just a way to customize your Google homepage. You’d have your usual search box, and then boxes for RSS feeds or little widgets. It was basically what the Windows 8 start screen was except better and properly encapsulated in a web browser. And now, Reader will be going too.

The thing is, I don’t understand why they’re being killed off. Was Sync really so hard to maintain? Does syncing all my calendars through an app take up much more Google bandwidth than having my BB sync one?

We bought the Graco Snugride 35 carseat initially because all the safety research suggests that keeping kids rear-facing longer is safer. Rated up to 35 lbs, we figured that this car seat — though large and heavy — would keep Blueberry rear-facing until she was pretty much two years old. Though it’s large for an infant carrier, I was able to fit it in the Prius and still manage to get my seat to a decent position for driving (it’s about an inch further forward than I had it when I positioned my seat without any such constraints — not the most comfortable position but a workable compromise). Blueberry is very tall for her age (obviously a mix-up at the hospital), and though she still has over 10 lbs to go before hitting the weight limit she’s getting close to the maximum height for her infant seat. Time to move up.

So now we’re off shopping for convertible car seats, the next step up that can be either rear- or forward-facing. With these larger seats, it’s almost impossible to find ones that can fit behind a front seat well enough for me to drive or for Wayfare to comfortably sit. I’ve been checking various forums for tips and reviews and pictures of how they fit, and it seems like the two on our shortlist are the Britax Marathon/Boulevard or the Diono Radian. I’ll spare you my pro/con lists, coin-flipping, and hand-wringing on this decision (though feedback on those seats is welcome in the comments).

What really got me in our search was the oft-stated fact that carseats are improperly installed some huge portion of the time. I heard numbers ranging from 80% to 95% depending on the source, and it got me thinking: where does this bit of conventional wisdom come from? I’ll grant that installing the old-fashioned way with a seatbelt is difficult both in terms of skill and strength required, but I really had no issues with the LATCH install. After all, that’s what LATCH is supposed to help with. Plus, the epidemiology data all says that kids in car seats are safer, so either the install error-rate is over-stated, far more people are managing to get/pay for a professional installation, or seats are safe even if installed incorrectly. I started to wonder just how true this conventional wisdom was, or if perhaps this factiod had been invented by the stores offering a $25 installation service and picked up by the media, so I went off in search of a source.

There are some NHTSA reports that seem to be the origin of these figures. This one, for instance, gives a high error rate for installation, topping 95% for first-time installers, who in this study (or a similar one I just read) were recruited from a university’s volunteer pool (i.e.: first-year psych students giving their very minimum effort for $10 and a course credit).

The most common error is loose installation: a carseat, when properly installed, is supposed to be able to move less than an inch. Now, a carseat that can be wiggled an inch and a half is not meaningfully more dangerous than one that can only be wiggled an inch; likewise, the carrying handle for a removable carseat has a specified position for use in the car for each brand (and it is often different for each model) — though many first-time installers got it wrong, it’s also not usually critical. If they apply a severity score, then “only” about 30% of seats were incorrectly installed in a really bad way. The good news: the error rate drops in half once parents/caregivers who have carseat experience are tested, rather than novices. The bad news: that’s still a nearly 50% error rate. To pick out one more interesting factoid, there was a higher error rate for those who drove cars with leather seats.

I’m surprised that even digging into the data, the “legitimate” error rate still appears to be shockingly double-digits high. That really says that something needs to be done to make carseats easier to install safely. Some kind of standardization is most likely the answer: either continue with LATCH but standardize the connectors, or create a universal base that the manufacturer’s individual seats can clip into. Angle adjusters with a wide range of motion are also likely going to be needed — far too many official installation instructions include the use of towels or pool noodles (sold separately) to prop up one part of the base, which is frankly ridiculous. Many require a great deal of strength to tighten properly, or that the adult put their full weight on the seat to jam it down into position — a ratcheting belt-tightener would be a great feature on many of these seats.

As an aside (and not necessarily a product recommendation) this car seat is a neat one from a human factors point of view, with sensors and a display to help ensure correct installation. The video there is only about a minute long if you want to go have a watch.