As hedge-fund analysts, Holden Karnofsky and Elie Hassenfeld made six-figure incomes deciding which companies to invest in. Now they are doing the same thing with charities, for a lot less pay.
Mr. Karnofsky and Mr. Hassenfeld, both 26, are the founders and sole employees of GiveWell, which studies charities in particular fields and ranks them on their effectiveness. GiveWell is supported by a charity they created, the Clear Fund, which makes grants to charities they recommend in their research.
Their efforts are shaking up the field of philanthropy, generating the kind of buzz more typically devoted to Bill Gates and Warren E. Buffett, as charities ponder what, if anything, their rigorous approach to evaluation means for the future.
“I think in general it’s a good thing,” said Thomas Tighe, president and chief executive of Direct Relief International, an agency that GiveWell evaluated but did not recommend. Like others in the field, however, Mr. Tighe has reservations about GiveWell’s method, saying it tends to be less a true measure of a charity’s effectiveness than simply a gauge of the charity’s ability to provide data on that effectiveness.
Mr. Karnofsky and Mr. Hassenfeld met at Bridgewater Associates, an investment management company in Westport, Conn., which they joined at roughly the same time.
In the fall of 2006, they and six colleagues created what Mr. Karnofsky calls a “charity club.” Each member was assigned to research charities working in a specific field and report back on those that achieved the best results. They were stunned by the paucity of information they could collect.
“I got lots of marketing materials from the charities, which look nice, you know, pictures of sheep looking happy and children looking happy, but otherwise are pretty useless,” said Jason Rotenberg, a former member of the club and now a $50,000 donor to the Clear Fund. “It didn’t seem like a reasonable way of deciding between one charity and another.”
By the end of that year, Mr. Rotenberg and other club members were frustrated, but Mr. Karnofsky and Mr. Hassenfeld soldiered on, at once fascinated and discontented by their inability to get data that would illustrate charities’ impact.
“There are huge foundations out there whose job it is to find great organizations doing great things,” said Robert Elliott, a club member who is now the Clear Fund’s chairman, “but when you call them and say you’d like to leverage the information they’ve already collected to make a smart donation, it’s a closed book.”
GiveWell’s findings are available on the Internet, without charge, at www.givewell.net. In evaluating charities, Mr. Karnofsky and Mr. Hassenfeld press them for information, analyzing the numbers in much the same way they did at Bridgewater. The Smile Train, for instance, a charity that repairs cleft palates, was asked how much it spent in each region and each country to treat how many patients in each.
Mr. Karnofsky and Mr. Hassenfeld argue that widely available existing systems for charity evaluation, which rely largely on the charities’ tax forms, known as 990s, are basically worthless because charities are given wide latitude in how they classify information. For example, some charities count fund-raising costs as money spent on programs.
Charity Navigator, a Web site that rates charities based on their tax forms and has some five million users, is Mr. Karnofsky’s particular bête noire.
“I have literally read thousands of 990s, and they tell you nothing about whether a charity helps people,” he said. “I can tell you exactly how to get a four-star rating on Charity Navigator without doing anything charitable at all.”
Trent Stamp, the president of Charity Navigator, is put off by their approach. “I truly do wish them well,” Mr. Stamp said, “but the way they’re going about it seems a bit counterproductive to me. I’m not sure why they feel the need to tear down those who are also attempting to help donors, nor why they need to tell donors who use those services that they’re stupid.”
www.nytimes.com
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