From an early age, humans are taught the importance of kindness, and each of us placed upon a path of our own morality. A personal sense of morality guides the lives of almost everyone, but social entrepreneurs and impact company startup founders are especially driven by a need to create net-positive outcomes in the world—to manifest their own guiding morality into the universe, and to help to build a future for the world to inherit that is better than today.
Effective Altruism is a movement within philanthropy guided by a quantitative approach to charitable giving. Effective Altruists work on measuring impact of what is, arguably, the most human (and therefore unquantifiable) among all metrics: good human outcomes. Effective Altruism measures these outcomes, from the act of giving directly without any expectation of receiving anything in return, for the purpose of evaluating the outcome-driven allocation philanthropic donations.
The way most people traditionally think about charitable giving (or even about how giving a charitable donation makes them feel), the thought of decideing how to give through projected human capital ROI metrics—or really, attempting to measure these types of personal human outcomes in any way—can often feel like an overly cold and calculating approach.
Yet this cold and clear honesty is exactly what motivates Effective Altruists to value these mathematical outcomes as worthy of status among the guiding principles of their philosophy. According to William MacAskill in his paper Effective Altruism: Introduction,
Effective Altruism is the project of using evidence and reason to figure out how to benefit others as much as possible, and taking action on that basis.
Specifically, Effective Altruists focus on returning the greatest charitable lifesaving impact, or delivering the "best" predictable results, given the actual resources available.
So, what can Entrepreneurs learn from Effective Altruists?
Lesson 1: Measuring Impact
Social entrepreneurs today need to do much more than just tell a feel-good story: they need to demonstrate tangible results for the good they do. Impact companies must anchor themselves through key social impact metrics, and be able to easily report on how their businesses are scalable affecting positive-outcome changes.
To help impact entrepreneurs quantify the good they do in the world, the Founder Institute will soon be releasing our framework for measuring impact KPIs (Key Performance Indicators), based around each of the sub-goals of the United Nations 17 Sustainable Development Goals.
Like Effective Altruists, for-profit social impact entrepreneurs need to be data-driven in their approach to creating and measuring positive social or environmental outcomes.
The world’s greatest challenges—from hunger and disease, to climate change and universal access to justice, health, and education—can all be addressed, at least partially, through the work of dedicated impact company founders. And these social entrepreneurs’ efforts, in scaling up solutions to meet complex global challenges, can also be complemented by the work of Effective Altruists and philanthropic supporters.
Lesson 2: Radical Candor
Another lesson Effective Altruists highlight implicitly for impact entrepreneurs is the importance of Radical Candor—a form of straightforward feedback that is always based purely on the facts as one sees them in front of themselves.
Similar to how the concept is used in philanthropy, where Effective Altruists develop logical allocations of financial resources—rather than being swayed by empathetic or emotive decision-making factors in their philanthropic donations—social entrepreneurs can also use Radical Candor as an intentional attempt at unbiased objectivity, in order to drive clearer decision-making.
Radical Candor can be applied to management and interpersonal professional relationships in practically any startup. Specifically, the concept can be used in building a culture of honesty and straightforwardness, especially when hearing the “real truth” as unfiltered and fast feedback is critical to advancing the company’s mission and work.
Effective Altruist progenitor Peter Singer, an ethicist and philosopher and the author of influential EA book “The Life You Can Save,” said,
If we can put a man on the moon and sequence the human genome, we should be able to devise something close to a universal digital public library.
Radical idea? Maybe. But the candid concept sounds very true in principle. And for innovators who work from a “first principles” mentality, the interpersonal approach of Radical Candor will be familiar and comfortable.
Lesson 3: You Don’t Have To Be A Billionaire to Change Lives
The lens of Effective Altruism, when applied to the lives of average consumers living their normal lives, demonstrates how anyone can choose to live a life that creates measurable impact in the world. Effective Altruist Peter Singer said in a TED Talk,
Becoming an Effective Altruist gives you that meaning and fulfillment. It enables you to have a solid basis for self-esteem on which you can feel your life was really worth living.
Singer and other EA evangelists assert that anyone can become an Effective Altruist, and that while an ability to give more may well be admirable, that ability is also disconnected from the self-worth that individuals derive through knowing that, whatever amount they can give, their efforts are measurably meaningful.
Viewing an environmental or social impact company through that same lens of measuring outcomes, social entrepreneurs are increasingly embracing key concepts of Effective Altruism.
Measuring impact, by using well-defined impact KPIs as guidelines for developing scalable solutions, founders can tell a compelling, data-driven narrative. This is just as true even when the startup is very early-stage and the venture’s impact is still small, because as long as the impact solution scales with the core business, the positive-outcome results generated through the growth of the company will be clear upfront for impact investors.
In his TED Talk, Singer highlighted that even many of the most philanthropically-minded people will tend to conceptualize their charitable giving through the percentage of their earnings that are donated. Instead, he argues that in order to make the biggest impact possible, Effective Altruists should actually consider pursuing high-paying careers as their goal - through higher earnings, individuals are able to give more in absolute figures (even if less as a percentage) and maximize their individual net-positive impact.
This focused, scalable philosophy is part of what is now being adopted by social entrepreneurs: by creating new jobs, generating revenue, and earning profits, social entrepreneurs build systems that allow for ever-greater amounts of funding to be allocated in ways that create direct positive-outcome impact in the world.
As entrepreneurs, an end goal is always success—but being successful can mean many different things to different founders, from solving a global issue, to attaining a big exit, reaching sustained profitability, or just taking an idea and making it into a reality.
For social entrepreneurs who seek both financial returns and the chance to scale their impact meaningfully, Effective Altruism offers many lessons for how to measure impact from scalability and ROI perspectives, and that should be embraced in the strategic decision-making of social impact companies.
Straightforward Examples & Further Resources:
While the principles of Effective Altruism can be applied to almost any type of socially impactful venture, at its core, the movement is about guiding individuals towards creating their own biggest personal impact possible.
For further exploration on this topic, are a few leading examples of initiatives and organizations that tap directly into Effective Altruist philosophies:
- GiveDirectly is a nonprofit organization operating in East Africa that helps families living in extreme poverty by making unconditional cash transfers via mobile phone.
- Deworm the World initiative is a program led by Evidence Action that works to support governments in developing school-based deworming programs in Kenya, India, Ethiopia, and Vietnam.
- Founders Pledge is a London-based charitable initiative where entrepreneurs commit to donating at least 2% of personal proceeds to charity in the event they sell their business.
- Omidyar is a network of innovators, entrepreneurs, technologists, and investors employing a diverse set of tools to reimagine capitalism, unleash beneficial new technologies, and discover emergent issues.
- GiveWell is a nonprofit focusing on the cost-effectiveness of the organizations it evaluates, rather than traditional metrics such as the percentage of an orgization’s budget that is spent on overhead.
- Good Ventures is an impact investment fund founded by Facebook Co-Founder Dustin Moskovitz, which works with GiveWell to allocate its funds.
- 80,000 Hours is an organization helping individuals determine the best personal ROI and impact strategies built atop planning for a successful and financially rewarding career.
- Animal Charity Evaluators takes a similar AE approach as GiveWell, but focuses exclusively on animal-related causes, covering everything from where donations have the greatest impact to donors can best give their time to animal causes.
If you’re an entrepreneur building a social or environmental impact company to address a global challenge, join us and apply to the Founder Institute today.
Founder Institute portfolio companies are creating positive social and environmental impact around the world, using structured processes to define impact KPIs that scale sustainably with their business. Read the most recent featured reports on our impact companies at FI.co/good, or learn about the Founder Institute's own global impact at FI.co/impact.
