You’ve pinpointed it: the only difference is who gets it. When investing, diversification as the receiver of the return is useful because you’d rather gain slightly less than often lose everything. When … living, diversification as the receiver of the return is useful for the same reason.
When investing, you’d like your buyers to diversify… but there’s only one buyer, so that buyer needs to diversify. But when giving charitably, the world would like its buyers to diversify, and there are lots of buyers. Assuming its buyers are sufficiently independent, the world gets enough diversification just because its buyers make different decisions. So as long as sufficiently many people make different charitable giving decisions than you, feel free to buy only what you think are the most efficient charities.
The world doesn’t care how much you help it, the world only cares how much it gets helped overall.
I’m not sure if the arguments for diversification in investments actually apply to charity. You want to diversify your investments because you’re risk averse. I would not, for example, bet $1000 on a coin flip; losing $1000 is more painful to me than gaining $1000 is pleasurable. In other words, your utility is not linear in money in your bank account.
However, for charity, I think it makes perfect sense to have linear utility in money donated to charity. If you value saving two lives twice as much as saving one, and the cost per life saved is constant, then you should value each dollar given to charity as much as the last. Given that, you shouldn’t really care about variance; you can focus on expected returns. As such, I don’t think you should diversify charity donations at any scale, personal or on a worldwide scale; just donate to the most efficient charity, and then when that charity becomes less efficient, donate to the newest most efficient.
You’ve pinpointed it: the only difference is who gets it. When investing, diversification as the receiver of the return is useful because you’d rather gain slightly less than often lose everything. When … living, diversification as the receiver of the return is useful for the same reason.
When investing, you’d like your buyers to diversify… but there’s only one buyer, so that buyer needs to diversify. But when giving charitably, the world would like its buyers to diversify, and there are lots of buyers. Assuming its buyers are sufficiently independent, the world gets enough diversification just because its buyers make different decisions. So as long as sufficiently many people make different charitable giving decisions than you, feel free to buy only what you think are the most efficient charities.
The world doesn’t care how much you help it, the world only cares how much it gets helped overall.
I’m not sure if the arguments for diversification in investments actually apply to charity. You want to diversify your investments because you’re risk averse. I would not, for example, bet $1000 on a coin flip; losing $1000 is more painful to me than gaining $1000 is pleasurable. In other words, your utility is not linear in money in your bank account.
However, for charity, I think it makes perfect sense to have linear utility in money donated to charity. If you value saving two lives twice as much as saving one, and the cost per life saved is constant, then you should value each dollar given to charity as much as the last. Given that, you shouldn’t really care about variance; you can focus on expected returns. As such, I don’t think you should diversify charity donations at any scale, personal or on a worldwide scale; just donate to the most efficient charity, and then when that charity becomes less efficient, donate to the newest most efficient.
Now that I have read your answer, it seems obvious in retrospect. Very nice, thanks!