A debate on charitable giving

Last night, I debated what is the best way to give away our money. Charitable giving is a tough topic to tackle with no right answers, and I invite you to join this debate. I will try to give you all the positions you can take and the rationale for each position. I will tell you my positions and reasons, but I don't claim I am "right" and I may change my positions.

Which causes should you support?
There are many causes, or "themes", that you can support with your money. Here are a selection for you to consider:

The people in need - the poor, sick, and hungry: You need to give money to the poor, sick, and hungry. If you wait another day, they will die. How can you hold back from giving to them when you know they are dying? Do you not have compassion?

Education: You need to invest in education. If we give people education, they can work or build businesses, buy or grow their own food, and learn how to stay healthy. We need to educate doctors to heal the sick, scientist and engineers to create solutions to the world's problems, and teachers to guide our future generations. If we don't educate people, we will forever be stuck in this state. As the saying goes: "Give a man a fish, you feed him for one day. Teach a man to fish, you feed him for a lifetime." Why solve the problem for one day when you can solve the problem for eternity?

Businesses and work: You need to invest in businesses. If we give people work, they can have the money to support themselves while producing goods and services that will help others live a better life. If we don't invest in businesses and give people work, they won't be able to buy food, water, or a house because they don't have money and no one is working to produce them. If we don't invest in businesses and give people work, they won't be able to enjoy life with live music, massages, and other experiences because they don't have the money and there isn't anyone to delivering these services. The side effect of investing in business is you may earn more money and be able to give more in the future. This idea may be pushing the boundaries of what most people think is "charitable giving", but why shouldn't you finance businesses in third world countries so they can improve the economy and lift the society from poverty?

Engineering, science, and technology: You need to invest in engineering, science, and technology so we can solve the world's problems. Imagine what better engineering, science, and technology can bring us: We can grow food in previously non-arable land so people in those areas can feed themselves. We can grow more food per unit of resource (acre of land, ton of water, BTU of energy, etc.) and transport them more efficiently, making it easier to feed the world. We can cure cancer and save billions of people from suffering. We can cure acute diarrheal illness and respiratory infections and spare the lives of millions of children who die each year from these illnesses. If we don't invest in engineering, science, and technology, how can tomorrow's world be any better than what we have today?

Animals: We are one of many living organisms on this planet, yet we have pushed some to extinction and others to over-population by destroying their habitats and causing ecological imbalances. Shouldn't we spend money to help endangered species? Should we (or, do we have the right to) cull over-populated species to restore ecological balance? We need to help the animals because if they all die, we won't be around for much longer either.

Plants: We need to help the plants. We have cut down so many trees and destroyed the environment for many plants to grow, we need to restore them as our duty to this planet. If we don't, we will run out of food to eat and resources to use, so we would die too.

The question, then, is... which cause is more important? Which cause should you contribute to? How much should you contribute to each theme?

My position: I would prefer to give more to education, engineering, science, and technology, with a smaller portion going to help those in need today. Why? (1) It's easy to have the impulse to help the poor, sick, and hungry for today, so many people will help when moved by news stories and charity drives. (2) The self-interest of people will cause them to invest in businesses and those businesses will eventually, directly or indirectly, help the poor, sick, and hungry. (3) There are plenty of environmentalists who have a passion to help the animals and plants, something I don't have as much passion for. (4) If we save the people in need for one day, we will only prolong their current state of suffering. If we solve the root causes of the world's problems, then we will truly improve their lives.

Targeting short-term vs long-term problems
There are problems that we need to solve now, but there are also problems that must be solved over the long-term. Which problems should you tackle with your money?

Short-term problems: People need help immediately. If you don't give them food today, they will die tomorrow. How can you allocate your money for other purposes while you watch these people die? But if we keep trying to solve the problems of today, the world will forever be the same and the problems will forever remain.

Long-term problems: You can change the world over the long-term - the hungry can grow their own food and the sick can be cured of their illness. But what about secondary and tertiary effects? With more people alive, won't we run out of food to feed them or run out of space to live? Or, perhaps there won't be no one around to benefit by the time we realize this better future.

My position: I would prefer to give more money to solve long-term problems and less for short-term problems. As stated above, if we save the people in need for one day, we will only prolong their current state of suffering. If we solve the root causes of the world's problems, then we will truly improve their lives.

Giving money that matter vs money that doesn't
If you have $100 and need $50 to live a comfortable and happy life, you can give away $50 to charity without affecting your life. Should you give away $50? Or should you spend less on yourself and give away more?

Giving money that do matter: There are people in this world who need your money far more than you do. By keeping $50 and giving $50, you are giving yourself the right to enjoy life at their expense. Who are you to say that you have more rights to enjoy life and they don't deserve even the necessities of life? But, if you give away more, what will happen if you encounter a financial emergency or get sick? Will you become a burden for the society?

Giving money that doesn't matter: Some philosophers say the purpose of life is to be happy. You should not deprive yourself of the right to enjoy life. If you need $50 to live a comfortable and happy, then you should keep the $50 you need and give away the other $50. You need to be responsible for your own life and take care of your own financial security before you take care of others.

My position: I believe in we need to first be financially responsible for our own lives. But I also believe in frugal living... we don't need to buy expensive houses, faster cars, or luxury brands to be happy. Beyond the basic necessities for living, what makes our lives enjoyable and worth living are relationships and experiences. While I'm young and alive, I am willing to donate money but I will do so within the bounds of maintaining my financial security. When I'm old and upon my death, however, I won't hesitate to give away most of my money.

Giving now vs later
Warren Buffett made news for giving billions to charities, substantially all of his wealth. Prior to this, his charitable contributions has been limited (which led some to say that he gave for reason of tax deductions rather than for charity), but he said he always intended to give his wealth away. It was only a matter of timing.

Giving now: People need money now. If you don't give now, they will die and there won't be any need for your money in the future.

Giving later: If you are a good compounder of money, then you will be able to give away more if you keep the money now, compound it, and give away multiples more in the future. If you are a poor compounder of money, however, you should give away your money now and put them into greater use.

Say, for example, Joe had $10 million 40 years ago and that was all he ever needed to live by. If he compounds money at 20% p.a. and gave all of his returns away at the end of each year, he would give a total of $80 million over 40 years. If he compounds money at 20% p.a. and gives nothing away until the end of 40 years, he would give away $14.7 billion at the end of 40 years, far more than the alternative even if you take into consideration the effect of inflation.

My position: I would like to think that I'm a good compounder of money, but I can't guarantee that. To hedge my bets, I would give away some money every year but I plan to give the majority in the future.

Giving locally vs widely
Should you give locally, to people close to you, or people you see? Or should you distribute your wealth widely, to people far far away, to people you don't see?

Giving to your family & friends vs others: Most people are willing to give money to help their family and friends, but they are far less willing to help others that don't have a relationship with them. Are you willing to watch your family and friends suffer while you give money to others? On the other hand, do your family and friends have more right to your money just because they are born into the family or just happens to know you? Why shouldn't others be treated equally? Should you be destined for a worry-free life just because you are born into a rich family? Should you be destined for hardship and suffering just because you are born into a poor family?

Giving to stories reported in the news vs others: Sometimes stories about the plight of individuals or groups of people are reported in the news, and those news stories prompt people to donate to these individuals or groups. If you have any shred of compassion in you, will you watch them suffer without doing anything? On the other hand, should you depend on the news to tell you who you should help? What about those who aren't covered in the news because the journalists don't think it would make an interesting story? Does that mean whoever shouts the loudest and is heard most should get the most money? What about those people who are too weak to shout and no journalist take interest in? Do they deserve to suffer because of our ignorance?

Giving to your neighborhood, state, country, and continent vs others: You live in this neighborhood, state, country, and continent, you have a responsibility to your community. If they are in need, you should give to them because you have benefited from them. But what about those who live elsewhere? Should the geographic location you are in determine whether you receive help or not? Perhaps this is why the rich country gets richer while the poor countries stays poor... the rich country wants to help the poor in their own country far more than those in poor countries, and the poor countries want to help themselves but they just don't have the money or the means to do so.

Giving based on age, sex, race, etc. vs others: The young are defenseless so they need help more. But the adults need to survive to take care of the young. Women need to be helped more because they are discriminated against. Men need to be helped so they can do useful work and support the women. Give to the blacks, because they are disadvantaged from the start so we set lower admission standards. Asians are smart, so we set higher standards for them to meet before we help them. Caucasians are rich, so even the poor are doing much better than others. Who are you to judge people base on their age, sex, race, etc.? Why shouldn't everyone have the same rights? Why shouldn't everyone deserve equal opportunities? Do you not deserve help because you are now an adult? Do you not deserve help because you are a man or woman? Do you not deserve help because you are black, Asian, or Caucasian?

My position: I will give to my family and friends if they really need my help, because I believe love and relationships matter. If they have the resource to help themselves, however, then I will help others in need. I will ignore news stories, because I believe news often offer biased views of the world and facts. I will give some money to my community, because I believe I have a responsibility to the community, but the majority should go to those in need the most. I will donate without regard to age, sex, race, etc. because I believe everyone should have the same rights and opportunities to live and succeed in life.

Giving directly vs indirectly
Should you give directly to those in need? Or should you give indirectly through charities, foundation, trusts, non-profit organizations, and non-governmental organization (NGO)?

Giving directly: You should give directly to those in need to reduce agency and frictional transaction costs. You will know for sure where your money is going to and who or what is your money accomplishing. But how do you know you are putting your money to the greatest use? How do you know whether one person is more worthy of receiving your money than the other person? Do you have the knowledge, skills, and resources to allocate your money efficiently?

Giving indirectly: You should give indirectly through charities, foundation, trusts, non-profit organizations, and non-governmental organization (NGO) because they have the knowledge, skills, and means to help more people more efficiently. They are the most efficient allocators of your money. But how do you know where an organization spends your money? How can you be sure they are doing what they claim to do? How do you know corrupt persons in those organizations won't embezzle your money?

My position: I would prefer to give indirectly and delegate the hard work to those who are passionate in the causes I support. From the debate outlined above, I think it's beyond my knowledge and skills to engage directly in this endeavor. My passion and skills are better used elsewhere.

A thought experiment
I first heard about this thought experiment in a speech by Warren Buffett. Say you are about to be conceived in this world. You cannot choose which sperm & egg you will be conceived in (it will be a random event - "the great ovarian lottery", as Warren says), but you can design the society any way you want. How would you design this world you're about to be randomly born into?

I would want a world where everyone will have the same opportunities to live, learn, work, play, and enjoy life. But whether you take advantage of the opportunities is up to you... after all, I believe in free will and free markets/capitalism.

Now, over to you: How would you handle charitable giving? How would you give away your money?

Note: I am voicing different philosophies and viewpoints here so you can evaluate each position yourself. Even though I told you my positions and my reasons, but I'm not advocating them as being "correct" and I may change my positions.

P.S. If you have other topics you would like to debate, tell me! If you have other ideas you would like to add, tell me! I'm always interested in learning and expanding my mind.