Why we still need effective altruism in corporate philanthropy

What is “effective altruism” and what does the future hold for the philosophy in the wake of the spectacular downfall of its high-profile champion, former bitcoin billionaire Sam Bankman-Fried? Elliot Dellys weighs in.

On 11 November 2022, the cryptocurrency exchange FTX filed for bankruptcy as its CEO Sam Bankman-Fried (also known as SBF) handed in his resignation. This followed a revelation that its largest competitor Binance had unexpectedly pulled out of an acquisition deal, after an announcement on 06 November 2022 that it would sell its stake in FTX (via FTT tokens) due to then-unknown “recent revelations”.

What followed was a spectacular collapse, and the uncovering of a total lack of oversight and corporate controls in the company’s management. Equally shocking was the revelation that FTX had misappropriated $4.1 billion in customer funds to Alameda Research, a hedge fund operated by SBF that was nominally committed to the philosophy of “effective altruism”. Allegedly, Alameda Research was donating half its profits to effective altruism related charities for a period time.

Many are now questioning how a single person could bring down a US$32 billion company in a matter of days. Some are going as far as to speculate whether effective altruism itself was to blame, by enabling SBF to believe that any means could justify the ends. SBF has done great harm to the concept over the last few weeks, however it’s important we distinguish between a good philosophy and a bad actor that represents it.

Effective altruism is a collection of ideas with the stated goal of using evidence and reason to determine how to help others as much as possible. As a proponent of the core philosophy, but not necessarily the movement, I consider it reducible to three simple concepts:

1. Some methods of reducing harm are orders of magnitude more impactful than others
2. We should aim to reduce harm as much as we can within our means
3. A careful and data-driven selection of the causes to which we donate our money and time can therefore have a massive impact on how effective our harm reduction efforts are

Disentangling the disconnect between what feels good and what creates impact is at the heart of the philosophy. However, applying this principle to your life or business does not require becoming a Silicon-valley narcissist.

For example, a senior representative of a charity recently told me about her frustration when commercial partners offer to “paint the toilet block”. She spoke about how someone would reach out asking if the team could spend the day doing something helpful, like painting the toilet block. Their heart was in the right place, but the charity member knew full well that if the commercial partner had just stayed in their office and donated a small portion of the day’s profits, it would more than cover the cost of painting (which could instead be done by trained professionals) with enough money left over to provide substantive support to their actual programs.

This idea is called “earning to give”. SBF’s stated rationale was to amass as much wealth as possible to tackle the largest, existential risks of our time; but what was clear was he prioritised earning over giving. Amassing great amounts of wealth with the distant promise of eventually giving some or all of it away is not effective, nor altruistic. Likewise, dishonest and deceptive business practices cannot be excused by the pursuit of some high-minded concept of “the greater good”. Rather, incredible impact can be generated via the corporate sector through collective change and framing ethical business practices as a valuable differentiator.

Consider someone who wants to try and reduce the harm caused by factory farming. They may try to convince their friends to not eat cage eggs – at best saving a few eggs a day, and potentially losing some friends along the way. However, if that same person can convince their local cafe to switch to a free-range supplier, it might result in hundreds of eggs a day coming from a more ethical source. Best yet, the individual consumers need not care – or even know – that this change has occurred. However, if that same individual can drive change at a large global corporation or franchise to change their sourcing practices, that number skyrockets to tens of thousands of eggs each and every day.

This is the differential impact that makes the careful selection of where you direct your time and money to affect change so compelling. In philosophy, aiming to maximise the benefit for the greatest number of people is known as “act consequentialism”; and Effective Altruism aims to reduce this pursuit to something resembling a mathematical equation. However, in the attempt to maximise our impact, we must not lose sight of the human drivers behind charity, or the critical importance of community.

We understand this point intuitively when we think about why we love to support local cafes, op-shops, or community farms. We do so knowing full well that we may not get the very best product as a result, but we are helping to build a community. Or we may also do so because these businesses align to our vision of the kind of future in which we want to live. Or even more simply, we may think if we don’t support them, who will? This begs the question of whether we would even want to live in a society where every decision is reducible to the output of some mechanistic calculation? While it’s important to consider the differential impact of the dollars we donate or the hours we commit to a cause, obsessing about charity rankings and impact measurements risks us losing sight of our human nature at the heart of our desire to want to help others.

Effective altruism is not a one-size-fits-all philosophy that has solved the challenges of wealth inequality or existential risk. Nor is it a scam perpetrated by Silicon Valley to misguide people into funding fraudsters. SBF’s hubris lay in his inability to recognise that an obsession with “longtermism”, or the reduction in existential risk, can lead to dangerous decision making where real-world harms today are offset against the intangible long-term benefits of outcomes that may never materialise.

Tricking ourselves into believing that the good we may create via our professional lives, or through our donations to charity, somehow absolves us of the responsibility of being a decent human, completely ignores the importance of being a supportive member of our community.

But in rightly condemning an individual who has stolen from their customers and deceived their investors, let’s not throw the baby out with the bathwater by abandoning or misrepresenting a philosophy grounded in a hope of making the world a better place for all of us.