Young Duo to 'Clear' the Way for Charitable Giving

Holden Karnofsky and Elie Hassenfeld, 20-something former hedge fund analysts, left their big-money jobs and started Clear Fund, a company dedicated to helping people navigate the world of philanthropy.

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RACHEL MARTIN, host:

And so as it is the holiday season, a lot of people might be shopping, a lot of people might be giving, and giving is something my family personally has tried to do more of. Every year we get together, we give gifts and then we talk about how we shouldn't give gifts and more because of all the pressure. And you could never find the perfect thing.

ALISON STEWART, host:

Yup.

MARTIN: And so we've often talked about researching a charity and then as a family giving to a charity, but it's never really taken root. First of all, because I secretly really just want presents, and it was…

STEWART: It's not big enough to get secretive about.

MARTIN: Yeah, I know. Not so much.

(Soundbite of laughter)

MARTIN: And also we found it was kind of hard to find research about different charities and organizations that's, you know, you can get something off of the organization's Web site but it's hard to really drill down to figure out where your dollar could actually do the most good.

But there are these two young guys who have decided that this is what they want to make their life's work about, at least for the time being. They left their very high-paying jobs in the world of Wall Street to start an organization called GiveWell. It is devoted - it's an online site devoted to studying charities and ranking their effectiveness to help people like the Martin family decide where to give.

And Holden Karnofsky and Elie Hassenfeld are the founders and they join me now on the phone.

Hey guys.

Mr. HOLDEN KARNOFSKY (Co-founder, GiveWell): Hey, thanks for having us.

MARTIN: Hey, thanks for being here. I appreciate it.

So tell me - break it down, how did you did you guys decide that you were going to leave your bank jobs, where you were making pretty good money I imagined it was relatively interesting work, and you said forget it, we're going out of our own and we're starting this venture. How did that happened?

Mr. KARNOFSKY: Well it just - it started with our own desire to give some charity. You know, we were both pretty happy at our previous jobs, but when we wanted to give to charity we couldn't find the information we needed to have confidence that where we gave would ultimately impact people significantly. And what I mean by that is I would interested in the cause of clean water in Africa. And I called up a charity to ask them what they did, and they would say, well $20 saves - will provide a child clean water for life. And I would say what does that mean? How do you do that? Do you dig wells? Where do you dig those wells? How long do the well last? Why did the children need clean water? What happens to them if they don't get the clean water?

MARTIN: And they didn't have answers.

Mr. KARNOFSKY: And for - to those things they didn't have any answers. They would offer the same - the vague generality by and large of $20 gives a child clean water for life. Clean water is a necessity, you should donate to us.

Mr. ELIE HASSENFELD (Co-founder, GiveWell): Right. I mean, they just gave the answers they were used to giving; it doesn't mean they were the only answers they had, but we have kind of as we dug on this we realize that the information is really hard to get no matter how you went about it. It wasn't on the Internet. No one else was getting it, and the charities were very reluctant, at least to share it. And so eventually we said, you know, this is really important. We think this could make a huge difference in the world if we can get the information and get it out there. And then we came up with a plan to do this after that.

MARTIN: Now this is a good idea, but others have had it before, right? There are other organizations - Guide Star or Charity Navigator.

Mr. KARNOFSKY: Yeah.

MARTIN: These two well known sites. What are you guys doing that's different?

Mr. KARNOFSKY: Well, it depends who you're comparing us to. I mean, mostly guys like Charity Navigator or Guide Star will try to evaluate charities on publicly available information. And in my experience that kind of information will never tell you anything about whether a charity is impacting people's lives because it tends to be legal documents, financial documents.

And so those guys will focus on things like how much is their expenses go to administration versus program, which is a metric that first problem that occurred to us is if it's an accounting metric, it doesn't tell you anything about whether they're helping people. But also as we learned more, we realized that a lot of cases charities need to be spending more on overheads than they are, and they think so and we think so because they need more self-evaluation, they should be paying higher salaries.

MARTIN: Mm-hmm.

Mr. KARNOFSKY: They should have better technology, things that are classified as overhead and all the things that you need to do a tough job. And charities do really hard work trying to help people.

And so we believe that, you know, by trying to use the information that's easy to get, people actually distort the picture and end up finding out less than nothing. And we instead have gone after the information that's hard to get. We work with the charities. We get their internal reports, and we really look at it at the tough-to-measure stuff, you know, and then you place someone in the job and they keep the job, things you can't find online.

MARTIN: Mm-hmm. Holden, let's talk about something you said on the blog. You said that you see no reason to believe that charitable foundations are generally capable, competent or effective at anything. It's kind of harsh. Why are you so skeptical?

Mr. KARNOFSKY: Well, first, let me make a couple of clarifications about that statement.

(Soundbite of laughter)

Mr. KARNOFSKY: First, I'm referring to charitable foundations which are different from charities.

MARTIN: Yeah.

Mr. KARNOFSKY: The charities are the ones doing the hard work. I don't like passing judgment on them, although I do like saying which ones I would bet on to help people.

Foundations are the ones that are, you know, like the Gates Foundation, the Kellogg Foundation, you know, kind of these piles of money and their job is to give away money. And so when you're dealing with those, you're dealing with someone who basically was given a pile of money once and that's it, and that's the story. And unlike business or even the government, I mean, there's no one of kind of looking at them and deciding if they did a good job, and deciding whether they get to keep their money.

And so when I step back they might be doing a fantastic job, and I want to make that clear. So I'm not accusing them of necessarily of doing a bad job, but it seems just as easy to believe that they'd not doing a good job. It's just - they're no reason to think that they are or aren't.

There's no reason to think that just because they've been doing it for a while that they're doing it well. In a way that would change is if they share their information, and that's been another problem we've seen is that with this project we tried calling foundations and saying you guys do this stuff all the time, you're pros at it, tell us what you know and who's good. And they wouldn't share their information. They tend to be pretty closed off. Not all of them, but nearly all of them.

MARTIN: Why is that?

Mr. KARNOFSKY: It's a really good question and we've (unintelligible) it and there's kind of a debate about it in the nonprofit sector. But largely the answers we get are things like, you know, information on charities is confidential. We don't want to go on record saying some charities are worse than others and that some aren't doing their job. We don't want to get involved in controversy et cetera. Generally just thinking…

MR. HASSENFELD: I think there - just like Holden said - there are there are largely organizations that are sitting on a lot of money, and they don't have any incentive like the foundations will continue to exist even if they don't share the information.

Mr. KARNOFSKY: Right.

MR. HASSENFELD: And if they don't go on record. And so, why should they invite any type of negative publicity by doing that.

MARTIN: Mm-hmm. There's no incentive really.

Mr. KARNOFSKY: Yeah, they're set up. Most of them are set up so that they give away 5 percent of their money a year and they never, you know, they'll be here for the next 2 million years, no matter what they accomplish or don't accomplish.

MARTIN: Well, there are a lot of different issues to look at in this story. And if you guys are up for it, I'm going to keep you around after the break.

We're talking to Holden Karnofsky and Elie Hassenfeld. They are the founders of an organization and Web site called GiveWell. Stick around, we're going to talk a little more about them - with them rather. Not about you - with you. Stick around.

(Soundbite of music)

ALLISON STEWART: Welcome back to THE BRYANT PARK PROJECT from NPR News. We're on digital, FM, satellite and online at npr.org/bryantpark.

I'm Alison Stewart, along with Rachel Martin.

And coming up, the politics of sending a video holiday card. We're going to talk to politico.com's Jim VandeHei in just a moment. But first:

MARTIN: We are continuing our conversation with Holden Karnofsky and Elie Hassenfeld. They're the founders of an organization, an online Web site called GiveWell, which is dedicated to studying charities and ranking their effectiveness.

Elie, what is - what are some of the red flags that you look out for when you're evaluating a charity? What is the kind of ways that you look at and where can charities and foundations go wrong?

MR. HASSENFELD: Well, first of, you know, we see our prime aim as identifying the best charities, you know, something like a venture capital firm in the full profit markets. We just want to find great organizations that are doing great things that donors can donate their money to with high confidence that those charities are having a significant impact on the lives of the people they serve, and we want to recommend them and give money to them such that they continued to do more and more of those great things.

MARTIN: Mm-hmm.

MR. HASSENFELD: So that's our aim. Nevertheless, the things that we see that we worry about are mostly just the lack of an ability to give us a picture of what a charity is doing.

MARTIN: Transparency, yes. So transparency.

MR. HASSENFELD: Let me explain what I mean. If a charity can't make a good logical argument for why its intervention will help…

MARTIN: Or that it has helped.

MR. HASSENFELD: Right. Or give us the empirical evidence that it has helped -those two things - given the types of problems that nonprofit organizations are trying to resolve. You know, for example in a big problem in the developed world is the achievement gap that often poor, minority children do worse in - have worst educational outcomes than Caucasian children. In that problem, there's numerous ways that an organization could attack that problem. They have - we could have longer school hours. We could have better teachers. We could have after-school programs and get it more…

Mr. KARNOFSKY: The question is (unintelligible) being measured…

MR. HASSENFELD: You could offer hope in getting into college. There's so many different ways that we could try to solve this problem without any evidence that one method works.

MARTIN: Yeah.

MR. HASSENFELD: We don't have confidence donating to an organization that implements that strategy.

MARTIN: Finally, I wanted to get in a final question about the culture of giving. Philanthropy - people hear that word and they think that's not for me, that's for people who make a whole lot of money and have money to give away.

MR. HASSENFELD: Mm-hmm.

MARTIN: Is - was part of you're drive to make philanthropy, to change that stigma, to make it more accessible to people by giving them the tools to evaluate charities?

Mr. KARNOFSKY: Yeah, absolutely. And that was one of the first questions we asked when we said we've got our charity club, we're trying to figure out who the good charity is, and it takes too much work so we got to go full time or forget it.

We asked how big a deal was this that (unintelligible) just had it covered. And as you can see on our Web site, the GiveAll.net, we kind of laid it out, like maybe you don't give a lot of money but if you put us all together we give way, way more than the big names.

So Bill Gates gives about a billion a year, that's twice as much as any other foundation, and yet you put us all together and the rest of us are giving like 200 billion a year. It's not remotely close, and that's why really, you know, we matter, individual donors matter, and that's what this project is all about.

MARTIN: Well, it's the time of year to think about it.

Thank you, guys. Holden Karnofsky and Elie Hassenfeld, the founders of GiveWill.net.

I appreciate you guys being with us. Happy holidays.

Mr. KARNOFSKY: Yeah, thanks a lot.

MR. HASSENFELD: Thank you.

MARTIN: Take care.

MR. HASSENFELD: Bye.

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