This NGO has given away 1 billion in cash! – Podcast #3

Basti Schwiecker: Let me step in — how, why did you choose this course?

Harris Roberts: I wish I had a great answer. It was just like, there were so many and it looked really interesting. And I thought, I really know very little about this. And it was really quite fascinating to go all the way through the course and read all of the studies and be part of it. But then it was quite a while before I got back into sort of the impact space. I had been traveling in sort of the middle of my career. I think you can sort of optimize your career for a few things. You could be optimizing for money. You could be optimizing for impact, or you could be optimizing for lifestyle. And I think at that point, I was optimizing for lifestyle. I was traveling around. This was 2015, 16, working remotely, freelancing. And I was also in a number of contexts that were really quite poor, and I thought to myself, I should probably do something other than just being here as a traveler or tourist. And I remembered a podcast I had heard about GiveDirectly years before. And so I started becoming a monthly donor at that point. And then years later, I moved to New York, which is where GiveDirectly is headquartered. And I went to a donor event and spoke with the team, and they were starting to build out their fundraising and growth team. And so I joined as the second growth hire, and that was almost seven years ago now. So that’s sort of been my journey to GiveDirectly. And I think it was really sparked by interest as a donor about how can you do the most good with a limited amount of resources.

Basti Schwiecker: Yeah, but it also meant that you gave up your organic popcorn company you also started.

Harris Roberts: Yes, in university I started an organic popcorn company during a summer for an internship project.

Basti Schwiecker: Yeah. All right. So let’s not focus on that maybe, but rather on your work at GiveDirectly. So since you studied business administration and probably had some other projects like exposure to the for-profit world, and also when you worked at a digital marketing company, I’m sure you didn’t only have nonprofit clients. What would you say is the main difference working for a nonprofit in a position as you do? Is it very similar? Is it very different? What are the challenges?

Harris Roberts: I think one of the big challenges is the expectations that people have when they donate to a charity, is that it’s really highly efficient. And I think that’s important, but often people think that means you shouldn’t spend any money to do your work, or that costs should be low, or that you should pay below market rate for talent. And I think this is really quite challenging, because if you want to create a really highly efficient organization, you need to spend money in certain places. I think like an example is ads, for example, when you go out and buy ads, you’re competing against a number of other organizations who are also sort of bidding for those ads or buying ads on those platforms. And so it’s okay for some of those for-profits to buy ads that are not profitable, because they’re VC backed, or it’s part of a larger play. But for a charity, it would be very hard for you to say to your donors, I’m spending two euros to raise 86 cents.

Basti Schwiecker: Yeah. I mean, even harder. I mean, for one reason, like Christmas season or giving season, as we call it, is the most important season. That’s also highly competitive during that time to pay for ads. And even if you like for a for-profit company, if you spend one euro on an ad and get one euro and one cent in return, that might be a great way to spend a lot of money. And I would have a very tough time to explain to our donors that we use one euro to raise one euro and one cent. They would expect us to raise 10 euros or 20 euros or whatever. And in general, as you also mentioned, with paying market rate for talent or so, that’s a tough expectation from some donors, at least. Not all donors, luckily. But in general, I would say, to reduce your overhead ratio. And reducing your overhead ratio, one way to do it is just pay shitty salaries, basically. And if people are not independently wealthy or so and need to pay rent and prices going up and so on, you have to pay them. And it’s fair that they look at their salary. And it’s just hard to get good people if you are constrained in that way.

Harris Roberts: I think it’s a fair critique that not all charities and nonprofits are perfect. And there is like a lot of waste historically in the system. And so, I think it’s a fair critique to ask where the money is going. And a lot of organizations are quite opaque. It’s not very clear exactly where your money is going. And so, I think this historical context makes it difficult for people today to really trust or invest or think about it the way they would a for-profit. But I think maybe a little bit needs to happen on both sides. Both that people need to be possibly open to spending more or paying market rates if they want great talent. But also from a sector perspective, there just needs to be more transparency and people need to understand what the actual impact of their work is.

Basti Schwiecker: Yeah, so a good way to come to my next question, not going even more meta about the nonprofit sector, but going back to GiveDirectly, where you work. So what is GiveDirectly? Give me your elevator pitch.

Harris Roberts: Sure. So GiveDirectly is an organization where you can donate money. We take that money, and we transfer it to people who are living in extreme poverty. So we send the money to them on a phone, and they are able to spend that money however they want. It’s not a loan. It’s no strings attached. And what you find is that each person has a very unique set of needs, and the money allows them to prioritize what’s most important for them. So there might be one person who wants to send their kids to school, and so they might pay for school fees and buy a backpack. But there might be someone else who wants to put a new roof on their house, or needs to get glasses, or wants to start a business. And so basically the idea is that everyone has a very unique set of challenges and priorities, and by giving them the resources, they’re able to prioritize what’s most important to them. And there’s a lot of research, over a thousand studies on cash today, that show it’s incredibly impactful across a number of different indicators. And so we’re really excited about the dignity and choice that this gives people to allow them to choose how they want to improve their life.

Basti Schwiecker: Yeah. I mean, I spend a lot of time on GiveDirectly and we are recommending GiveDirectly since like day one, since Effektiv Spenden exists and so on. But I’m sure people and actually at the beginning, including myself, are kind of skeptical or even might sound crazy to them, like just give people money, what are they going to do with it? I don’t know, buy alcohol or just waste it on some other stuff or just on short term consumption, even if you can relate to it or so, wouldn’t it be better to buy them a cow or teach them some new skill? There’s this old saying, don’t give a man a fish, but teach him how to fish. And you never have to help this person again or so. But this sounds like you’re handing out fish. So what’s your answer to this?

Harris Roberts: Yeah, I think this is a common question. I think a lot of people were maybe raised and told that we shouldn’t just give money to people who are poor. But if you think about poverty as being the lack of money, if you would like to end poverty, which globally I think we all want to end extreme poverty, you can give people money and then they’re less poor. It’s very foundational to the problem. And there’s a lot of research as well that people are not increasing their spending on what we would call temptation goods like alcohol or tobacco. And so we both have a lot of research, also evidence of positive outcomes. And so it is a common question. But I think over time, people are asking that question less as it becomes more normalized. I think particularly with COVID, quite a lot of countries did cash payments and had to go remote with a lot of their programming. And so it’s becoming more and more normalized. And we get those questions less often today than we did 10 years ago.

Basti Schwiecker: Yeah. Also, I think one of the misconceptions might be that a lot of people don’t really know what extreme poverty means. I will link to a video in the show notes that was made by some of your colleagues from the field, where she described how crushing it is.

Caroline Teti: So this story is about a woman who was abandoned by her husband, remains with her three children, seven, four, and two. Every day, she has to eke a living to bring food to the table. One of these days, she’s not able to bring food to the table, and the children, not knowing what is happening with their mother, sit around her cooking stove waiting for food. The mother, unable to explain what is happening with her, puts three stones inside a pan and lights the fire and starts cooking three stones insistently. No water in the pan, no nothing. She is literally boiling stones. And why is she doing this? She’s putting hope in the eyes of her children that something is coming soon. And she knows at the back of her mind she’s waiting for them to fall asleep. And true to her word, they fall asleep. And she turns off the fire and they all go to sleep hungry. That is poverty.

Basti Schwiecker: And if it’s a challenge for you to feed your children, both of us are fathers now, and just imagining I can’t feed my kid, and then I get some money, and the first thing is I buy some beer or whatever, that sounds crazy. What do you have to think of people that you expect them to do this in such dire need of basic goods? And since what I thought about is like, I mean, there probably isn’t a Späti in like rural Kenya or rural parts of extreme poor countries. So it might actually be quite hard to get it, but that’s a different thing. Yeah, so, when did GiveDirectly start? It’s like 10, 15 years ago?

Harris Roberts: Almost 15 years ago now.

Basti Schwiecker: Yeah. And you just hit the milestone of $1 billion. So you distributed $1 billion to people in need. So that’s obviously quite impressive. Also, probably the biggest NGO we are recommending or supporting on Effektiv Spenden. And when you started, did you imagine it to become that big that fast?

Harris Roberts: No. When I joined, I think the organization was just hitting the 200 million milestone. And so it’s been really impressive to see the growth and acceptance of cash from individual donors and institutions.

Basti Schwiecker: Can you say after you joined, just the rocket ship started?

Harris Roberts: I think part of what happened was we had a COVID response, both in countries in sub-Saharan Africa, where we were working, and also in the United States. And the fact that our model is remote, and that you can send the money to the phone, and that it’s traceable, and you know exactly where it went, this really appealed to people in a time when there were very few things that you could do. In-person operations were closed. And so this is when really a lot of people were introduced to this idea. And the billion dollar milestone is really exciting for GiveDirectly and the fact that we’ve transferred this money. But when you look at the problem of extreme poverty, there’s 830 million people in extreme poverty. And the models today don’t see that decreasing unless we change something. And so we’re really excited about not only the amount of money that we deliver via cash, but how can we also impact the rest of the sector, other influencers, how can we help governments, et cetera, so we can do more cash programming and more effective programming. What goes with cash as a complement that works better together. I think there’s a lot of opportunity here because we need to change and there’s also a lot of urgency. I mean, to the point you said earlier, people who are living in extreme poverty, I sort of explain it to people as having to make impossible choices. Like you mentioned, do you feed your child or do you clothe your child? Do you try to invest in a new business or you try to buy medical treatment that you need. And so it’s these sort of challenges which are not only physically demanding, but also mentally really quite taxing. There’s a real burden of living in extreme poverty on your physical health, on your mental health. It’s really, I think, very impossible sort of for us to understand sitting here today.

Basti Schwiecker: Yeah. I remember reading that one thing a lot of people bought with the money they got from GiveDirectly is a new roof, which sounds like, I mean, nice, but more like consumption or so on. Again, people or even I thought like, well, why not invest in a business or so. But then I heard like actually paying for a roof is kind of investment with rather good returns. Can you tell us more about it, or generally maybe how consumption could be kind of an investment?

Harris Roberts: Yeah. And I think back to your question about putting on a new roof, most people are living in a small one-room home. So it would be like mud walls and a thatched grass roof. They might have windows, they might not have windows, and they will have a door. They might not have a lock on the door. So like roofs, but also a lot of people will buy a lock for their door because it’s nice to be able to leave your house and go maybe farming for the day and come back and realize that all your things have not been stolen, right?

Basti Schwiecker: Sounds nice.

Harris Roberts: The other thing about the roof is it provides a lot of different benefits. So one is that it’s no longer leaky when it rains. You can imagine sleeping on the floor with maybe a little bit of matting, but really not a bed. Or you can think about trying to sleep on that floor when it’s wet and having your children be there and having your children get sick. So the roof provides protection, but also it’s quite a bit more cost-effective over the long term because you have to continually replace that grass roof. And if you have a iron sheet roof, you’re able to avoid that cost every few years of having to replace it. You also can collect the rainwater off of the roof. There was a study that the metal roof actually also reduced malaria rates because you don’t have as much standing water, et cetera. And so just a lot of benefits that are not intuitive when you think about, oh, someone’s putting on a new roof. It’s really quite transformative for people.

Basti Schwiecker: Yeah. And you also mentioned a lot of studies were done with regards to cash transfers. And I think it’s kind of in your DNA, right? I mean, you were founded by people who were doing their PhDs or about to become professors in economics or development economics. So can you tell a little bit more about these studies and also how do cash transfers compare to traditional aid work? Or are there any studies comparing these things?

Harris Roberts: Yeah, so GiveDirectly was founded, as you mentioned, by four co-founders who were doing their PhDs at Harvard and MIT. And at the time, there was a lot of evidence coming out about cash. GiveDirectly is not the first organization to do cash. We didn’t invent cash. A lot of studies were coming out of Latin America. What GiveDirectly did is they created an organization that anyone could donate in cash. And still today, I’m actually quite surprised that there’s no other large growing organization that’s just doing cash. Many other organizations do cash, but GiveDirectly is, I think, the largest today where we’re solely focused on cash. So you know if you give a euro that it’s going to be distributed by cash.

Basti Schwiecker: Really interesting so far that we mentioned $1 billion, which is a lot. Unfortunately, it’s so tiny compared to the problem or the challenge. But for an NGO that isn’t that old, it’s a really big number. And in the for-profit world, you would get a lot of competition. Like if you’re growing so fast with this new approach or so, there would be a lot of copycats all over the world probably. And unfortunately, not many copycats in your case. Why is that? I mean, through Effektiv Spenden and other partners, you’re also raising money in Europe and other parts of the world, I’m sure. Even there’s no dedicated cash transfer organization here in Germany or other countries. So that’s disappointing. But do you have any explanation for it? Is it just lack of market forces?

Harris Roberts: I mean, one of the things that’s really challenging about nonprofits is that it’s a sector that’s based on trust. And a lot of that trust comes from historical brand recognition. And so the amount of time that it takes as a new charity to gain trust in the market, I think, is not incredibly conducive to starting something new and growing it quickly. And as I mentioned at the beginning, you can’t just go buy a bunch of ads to tell people about it or pay for a bunch of sponsorships. But I think one of the reasons that GiveDirectly grew so quickly, as you mentioned, is because of the evidence. And I think people really were excited about both the evidence and the dignity and trust and autonomy that you’re giving recipients to make their own decisions and the flexibility that you’re giving them. I think these two things together are a really unique package that many interventions don’t offer that cash does. And so at GiveDirectly, we’ve run, it must be over 25 studies now, either finished or in progress. And we’ve shown a number of different indicators that cash moves. I think this is one of the things that’s really exciting is if you care about nutrition, there’s a cash story for you. If you care about consumption or economic development, there’s a cash story for you. If you care about infant and child mortality, there’s a cash story for you. Yeah.

Basti Schwiecker: There was a recent study, right, with regards to child mortality that you found out that cash transfers can reduce child mortality by what, 48% or some crazy sounding number?

Harris Roberts: Yeah, this is in Kenya, this research just came out and it’s really quite astounding. People who received the cash transfers right before giving birth, you saw this decrease in mortality. And this number is really high comparatively. I think we were all really amazed by this. And it was something that we were shocked to see. And then when you start to look into it more and you start to understand the mechanisms, you start to say, OK, this actually makes a lot of sense. You can see how this works.

Basti Schwiecker: Yeah, that’s one comparison I really like. And depending on whom I talk to, try to use as a pitch is comparing GiveDirectly to an index fund or ETF, like the investment comparison is. So there might be other programs that could be or maybe are more, even more effective than just giving out cash or so. but probably very few. And you have to really have good reasons to believe that you can do better than cash and better than the people themselves deciding what to do. So for almost everyone just going with the ETF, the index fund, you’re probably doing better. And maybe you are Warren Buffett, and props to you. Please go ahead and do something even better or so. But probably you’re not Warren Buffett. Goes for state aid, like countries giving aid and so on. I mean, my first job was in official German development aid or so. And the way they choose where to spend the program, I mean, I still try to figure out what the heck they are doing and so on. But I’m pretty sure on average, they won’t beat cash. Is that your experience? Or what are your thoughts on maybe this comparison, but also on how states spend their money? Do you think they should spend more money on cash or other evidence there?

Harris Roberts: Yeah, I mean, I think there’s many programs that are valuable outside of cash. And there’s many things that cash also can’t do. So cash is not going to build roads or infrastructure. It’s not going to fix institutions like the quality of policing or the judicial system. It’s also not going to sort of improve services. It could improve access to those services. You could see more people going to the hospital to deliver births, for example. But it’s not going to improve the care at the hospital. And so there’s some things that cash can’t do, and there’s other programs. But for many other indicators, cash is one part of the story. And I think it would be great if we moved and really, especially as government budgets are decreasing, look at what are the most effective uses of the funding that we have, and how can we stretch the funding to go further? I think you’re seeing actually the opposite of that, where people are starting to look at some of the things that are easier to defend, like nutritional programs, where you just give people the food. There’s a lot of costs in doing that, and so sometimes just giving the money directly to people is more effective than trying to run a large logistical program to move and deliver food, for example, on the nutritional side.

Basti Schwiecker: Yeah, I think especially when it comes to disaster relief, right? I think maybe you can talk about a little bit what GiveDirectly was doing there. So if an earthquake hits or a tsunami or something, and obviously a lot of help is needed, and a lot of organizations or even states kind of hopefully rush to help people or so. But even there, cash could be a better or one of the better answers to this. Can you say more about it?

Harris Roberts: Yeah, and this is a place where actually cash is more accepted and being done more often than in the development sector. A lot of it is through vouchers, for example, but there’s a lot of opportunity there. If you look at the last 20 years, maybe about a billion people have been brought out of extreme poverty. But that’s not a clean line of just every day the same people move out. People move in and out of poverty all the time depending on their circumstances. And one of the things that pulls people back into poverty is these shocks, right? And so natural disasters and climate shocks are going to become more common with climate change. And so there’s a real need to be able to provide assistance to people when one of these sort of intense shocks happens because otherwise you have all these people who had maybe had just escaped poverty and now they’re being pulled back down. And so there’s a lot of need there and we see a real opportunity for cash to play a role.

Basti Schwiecker: Okay, looking a little bit more on the micro side of things or how it actually works. So if I would donate 50 euros to GiveDirectly, what are the concrete steps to the money ends up in the hands of people in poverty and how much from this 50 euros or let’s say 100 euro to make it even easier to calculate it, how much of this 100 euros actually ends up in the hands of the people in poverty in need?

Harris Roberts: Right. So today, about 85 cents of every euro that’s donated will end up in the hands of a recipient. And that looks at all costs. That looks at transfer fees. That looks at call center enrollment staff. It looks at paying for salary of sort of the global team and legal and compliance, all these things, 85 cents of every euro will get into the hands of recipients. And that’s really important to us to have this transparency. We call this efficiency. It’s a little bit different than overhead, which most organizations benchmark against. But this way, you know exactly how much of your money is going into the hands of recipients.

Basti Schwiecker: Yeah. Yeah. And I mean, you mentioned it, but I want to make sure people understand it. This doesn’t mean you have an overhead ratio of 15%. I mean, besides I could have a whole rant about overhead ratio and you shouldn’t even look at it or so. But if you talk about overhead ratio or Verwaltungskosten as it’s called in Germany, and that’s a different thing, because if a typical NGO says like 85% goes into the programs, then from these 85% which might be about an average number. A lot of money goes to staff costs, even people like in Germany or the US also, not only overseas staff and so on. So far less than if your overhead ratio is 15%, that doesn’t mean 85% really ends up in the hands of the recipient, but there’s still some other things involved. So the 85% is actually quite impressive, I would say.

Harris Roberts: Yeah, I mean, our overhead is still really quite good when you compare it. It’s around 12% in costs. But I think what you’re talking about is just how manipulatable the overhead number is. And one example of that is, imagine you give to a large organization, and they subgrant it to another organization that then subgrants it to a local implementer. Each of those organizations can claim, let’s say, 90%, that they have 10% overhead costs. And then they take that $90 that you gave, and then they do it again. And they can claim their 10%. And so they can sort of take the costs off at each level. And you, as a donor, you would just see which percentage went into programming, not which percent actually ended up helping the person on the other end.

Basti Schwiecker: Yeah, yeah, definitely. But yeah, you just gave an example like how much which is actually which is the person in need. But you have different programs, right? Are you experimenting with different programs like giving people money monthly or once a year or like a lump sum or so? Can you talk a little bit about this? What different programs are you running and what about your findings? What works best or is it depending on the circumstances of the countries or how do you decide what to do?

Harris Roberts: Yeah, so the context matters a lot. And this is one of the reasons that we run studies in different countries, because each country is really quite different in the economics of that country, the broader landscape of challenges that people are facing. And so we want to test and see what’s the most effective version of what’s the most effective version of what you’re trying to do. mortality study that came out earlier. And so now we’re running a program specifically for mothers, so trying to target mothers. Because that study where you saw that huge drop of mortality data, that was just a study where we gave everyone cash. And so we could become quite a bit more effective if we were really targeting people. You also could do targeting around agricultural seasons, for example, there’s different ways of thinking about how can you stretch the dollar to make it more impactful. And so those are all sort of things that we’re considering. You also mentioned flow payments, as they’d be called, like a universal basic income, a UBI. And we have a 12-year study that’s ongoing right now in Kenya, where we’re testing that. There’s sort of a few groups. So it’s a randomized control trial. There’s one control group that’s not getting paid anything. And then there’s another group that’s getting monthly payments for two years. There’s a third group that’s getting the equivalent amount at once as a large payment to the two year. And then there’s one group that’s getting 12 years of monthly payments. And so we’ll compare sort of what are the impacts and costs of all these groups at the end.

Basti Schwiecker: So, how far along are you? Like, when will 12 years be over?

Harris Roberts: I think 12 years is 2030 is when it ends. I think it was 2018 that the program started. And so we’re getting close. We have some results from two years, which have been published. It’s independent researchers who are doing it. And it’s really interesting because across all of them, you’re not seeing increase in temptation goods, like I mentioned. But the other thing that people ask is, does it decrease work? Are people working less? And the answer would be no. In all groups, they’re not working less. What was really interesting is that the group that got the large transfers is actually doing better on some things like consumption than the ones that were getting the investment of assets than the ones that are getting the monthly payments. Both are beneficial, but at two years, the large payment is generally more effective, except for if you care about nutritional consumption or if you care about mental health. Those were a little bit higher in the monthly group.

Basti Schwiecker: And why do you think that is? Because if you get lump sum, you’re rather invested in some kind of business activity? Or what’s the reason behind it? Do you know?

Harris Roberts: Yeah, I mean, I think on the nutritional consumption side, you can imagine how getting a small amount each month, you’re spending that as part of your nutritional spending. And then on the mental health side, you can imagine how having the guarantee that you’re getting money every month is going to reduce the burden of the cognitive load of being in poverty. But what it doesn’t allow you to do is make these large investments like you meant. Like if you want to start a business, that might cost $500, $600. And if you’re getting $50 a month, it’s going to take a long time to save up. During that time, you’ll have some shocks. And so the larger amounts allow you to invest in larger purchases. And so this is one of the things that is very unique about GiveDirectly is we’re giving out about $500, $550 US dollars per person. And so for a family, that’s almost equivalent to an entire year’s of earnings. So it’s a really significant amount of money, which allows them to really invest in things that they prioritize.

Basti Schwiecker: Yeah. And I also find it very interesting that you guys are actually running the biggest UBI, Universal Basic Income test in history, probably. 12 years is, I think, the longest that has ever taken place. And I think it’s much more relevant to look at such a long time horizon, you know, I mean, I’m kind of interested in UBI for quite a while, independently of GiveDirectly. And I think that also is one reason why people are drawn to GiveDirectly or interested in it. But when in rich countries, there were any experiments, usually there were one or two years, and I was always wondering, how can you say anything about it? It’s like, if you give me 10,000 euros or whatever you get about in a year or 12,000. So yeah, obviously nice. But I know I will have to work again, so there isn’t even an option to chill for the next 10 years or so, because I wouldn’t get the money. And so there’s not a lot of, doesn’t really help for the decision, like should we implement it or not or whatever. And And 12 years at least seems much more meaningful in this regard. So yeah, I’m kind of curious what the findings will be.

Harris Roberts: It’ll be really interesting to see with that group that’s getting the payments for 12 years at what point they surpass the group that got the two-year lump sum amount. Because at some point, you would expect that actually they’re doing better.

Basti Schwiecker: Well, if they, after three or four years, get used to it, then they will. Nice, I can get used to it and then who knows what happens like in 12 years in the future. So but yeah, I mean, I’m kind of optimistic but yeah, let’s see what that does to people. So let’s go to a little bit more critical question. Originally, Effektiv Spenden started to recommend and raise money for GiveDirectly because it was recommended by GiveWell. GiveWell is this charity researcher we are still working with. And GiveDirectly was one of GiveWell’s top charities for quite a while. And now it’s not anymore. So what happened?

Harris Roberts: Hmm. So GiveWell, as you mentioned, is this great charity rater. They do an incredible amount of research. They’re sort of putting together some of the most evidence and best recommendations of where you should spend for global health and sort of development. That’s their area of focus. And so for many years, we were on the list of recommended charities, and we were what they were calling sort of the bar or the line of which you have to beat to be on the list, essentially. If you are better than cash, then you can be on the list per how they determine that rating.

Basti Schwiecker: So they were looking for the, to go back to my analogy, looking for the Warren Buffetts, you know? Cash is like a very good baseline or so. And if you’re even better, great. But if you’re below cash, we won’t recommend you because, well, then just let’s do cash. it’s scalable, and we know it works.

Harris Roberts: And I think this is a question that many people should ask, which is, if your program is not better than cash, improve your program or just do cash. I think those are your two options. And so yes, when this change was made, essentially what this change was made, essentially what they did is they raised the organizations that are x times better than cash. They did not decrease the rating of GiveDirectly or their evaluation of GiveDirectly. They just sort of said that this is how we’re calculating the list now. And so I think that’s their decision to make, where they draw that line and what multiple is important to them. I think all the charities on the list should be funded, and we should try to fully fund these. But one of the challenges for me when I look at it is, how can you think about trying to scale to those 800 million people in extreme poverty? And the list of interventions on the list are incredibly helpful and impactful, and we should definitely do them. But they will not be able to reach all 800 million people. And one of the really unique things about cash is the scalability. And so what I said at the beginning is, how do we try to transform more of the sector to be focused on highly evidenced interventions? And how do we try to scale cash and get more adoption of cash? Because I think the opportunity in cash is less about what’s the very, very best. We know cash works very well for many different outcomes. How can we try to get the best outcomes for as many people as possible? And that will be a mix of interventions. It won’t just be one intervention or three interventions. There’s a lot of work from a lot of different partners and governments and organizations to get there.

Basti Schwiecker: Yeah, and we, I mean, we at Effektiv Spenden still recommend GiveDirectly and for several reasons. One is, I really like to push the baseline argument, as you mentioned, like every other charity and every euro or dollar spent from governments on development aid should kind of justify, be justified why it’s better than cash and so on. So just pushing this narrative, I think it’s worth something. But more importantly, GiveWell also updated their thinking about GiveDirectly again and kind of upgraded them recently. Can you talk a little bit about that?

Harris Roberts: Yeah, so they re-evaluated GiveDirectly with some research on spillover effects, essentially that, let’s say you get a transfer and I don’t, that there’s an economic benefit that I receive. And so that was about 2.5 times for the community. And so they improved this in the model, and this greatly improved how they looked at the effectiveness of GiveDirectly, which we were very excited about. I think the previous model actually had a negative spillover slightly. And so we were very excited about this recognition of the research that was being done and just the impactfulness of cash. I mean, all the previous cash that has been done is also having this higher level of effectiveness. So we were really excited to see them do the reevaluation and people were excited about that. I think the other thing people can think about with going back to the ETF idea is I would ask people also who gets to make the decision of where the funding goes. And there I think is a place for experts to decide, but I also think there’s a place for individuals to decide. And so what percentage of your giving is the person all the way at the other end having the autonomy and agency to decide. And at least I personally believe that it should be some percent. You can decide if that’s 50%, 75%, 100%, 10%. But generally, I think, as you think about your investments, I wouldn’t say you should be giving 100% to GiveDirectly. You should give 100% to the number one charity on GiveWell. But you should think about what’s the right mix for you.

Basti Schwiecker: Yeah. Yeah. So I think GiveDirectly is probably one of the least paternalistic organizations out there. So, I mean, one thing, one critique of development aid in general sometimes is that some rich dudes in Europe or the United States or whatever decide how to help people in need somewhere in rural Africa and so on and tell them what they should do or eat or drink or learn or whatever. And just giving them cash is still helping. But yeah, without telling them, like, we know better what you need and what you want and what will make you happy or so. So I can definitely see that. I can also see the spillover effect. Basically, if I get more money, I will have a positive effect on my local economy because I just buy more stuff. And that will give other people jobs and increase the economy. So yeah. I think GiveWell still thinks there are other charities that are even more effective, but the difference is getting smaller again, kind of. So even according to GiveWell, the difference isn’t as big as it used to be. And also one thing I find interesting, like every year some of the GiveWell staff says or publicizes in their blog where they give their money to, where they donate. And Elie Hassenfeld, one of the founders and the current CEO of GiveWell, I think he always gives some of his money I think around 10% or so to GiveDirectly. I think it’s also a strong sign and maybe in line with your reasoning like give some money to the people and let them decide kind of out of principle almost and not only tell them what they should do. And yeah, I wanted to save it for later, but maybe we can do it right now with regards to this non-paternalistic, not telling people what to do. I mean, there are a lot of great examples, and I kind of want to hear all of them. But one I really liked I heard about is a way people spend their money you would never expect and no NGO would ever tell them. In this case, I think a 70- or 72-year-old woman got money from GiveDirectly and bought a giant water tank. So what is that about and why is that maybe a good idea? Or is it just crazy?

Harris Roberts: I think I shared this one on LinkedIn. I was scrolling through some stories internally and I saw this woman, Kato, and she was 72 and she was living in Kenya in this drought-stricken region and she bought this like 10,000 liter water tank. And you see it in the photo and it’s like, it’s enormous. It looks like AI generated or so, but it’s not. And she’s not drinking all of this water. I mean, people do buy these water tanks for their house and they collect rainwater. But what she does is she sells the water to her neighbors. Because previously, people had to walk, I think, 30 or 45 minutes each way to collect water. That water was dirty. Then you can get sick from drinking the water, et cetera. And so she pays once or twice a month for a truck to come out, and it fills the tank. And then she sells the water. So at 72, she has a business. There are no charities in the world that I have heard of that are giving 10,000 liter water tanks. women in rural Kenya who are over the age of 70. And so I think that’s a great example. But there’s many, many fun examples as well of people just being really clever and coming up with really smart uses of the money, thinking about, We’ve had a few bands that have started, people who have started bands with the GiveDirectly money. And they go around and —

Basti Schwiecker: Bands, like in music?

Harris Roberts: Yeah, they’ve bought instruments. And they’ll go around and they’ll play weddings and different events and things and celebrations. There’s a few songs. Sometimes we get songs from them that they’ll record and send in, which is fun. Another good example of a story that I think about that surprised me was I think in Malawi, there’s a specific test you take in school. And depending how you do on that test, it sort of determines — there’s a word here in English. It’s my first language, so I should.

Basti Schwiecker: Yeah, yeah. I won’t tell you here.

Harris Roberts: That determines what you go to next and how much funding you will get from sort of the government in which type of school you can go to. So it’s a very important test that happens around like 13, 14 years of age. And so, what they did is they organized like six or seven parents organized together and they pooled a few dollars each week and they paid for a teacher to come to this rural village on the weekend and do test prep for this test because they realized this is such a pivotal point for people in their education. I mean, trying to set up a program to go to one rural village once a week, and what was the cost? Like $5 per week for this program. The amount of cost it would take to administer that program, as you mentioned. People sort of create their own solutions and are self-administering, which is really impressive to see. So there’s a bunch of these stories that are really fun, and you can see the imagination that people have when they have the resources.

Basti Schwiecker: Yeah. In a way, it feels like it’s kind of you’re financing research in new kind of development programs, like giving people money. And then they come up with solutions. And maybe someone will pick them up and roll them out or push them. Or maybe it just happens naturally. You know, people spread the word about, like, we all should hire additional teachers to prepare our children or buy more giant water tanks or instruments or whatever. So yeah, that’s also kind of interesting, I would say. One unfortunate thing that happened starting last year or the last two years is that the money governments are giving to development aid decreased sharply. I mean, it decreased in Europe and Germany, unfortunately, quite a lot. And it’s about to decrease even further in the UK and France. But the US, well, seem to be in an extreme rush in this regard. So last year, when Elon Musk shortly took over the Department of Government Efficiency, his first target was development aid. And to be perfectly honest, at first, I was kind of excited. But I thought, there are ways to make it more efficient. And maybe he pushes cash as a baseline and forces everyone to justify their programs to do even better. But that seemed not to be his approach. And he cut all over the place. And also some parts of GiveDirectly, where he worked with the government, were cut. So what was that like? And how did you respond to that?

Harris Roberts: Yeah, so we did have a number of programs that were previously funded by USAID and that were cut. And so for us, the first thing we thought about were recipients, because there were people in these programs who we enrolled, who we had committed to that we would send them money, and the money was no longer there. And so we opened up a campaign and some private philanthropy and existing funding that we had. We were able to deliver on all those commitments. That’s one of the really important things to us. Our first value is recipients first. So when we think about how we do things at GiveDirectly, we always talk about recipients first. And when we make a commitment to someone, it’s very important to us that we stay true on that and that we make that payment. So we were able to do that on those programs. But obviously, the landscape has changed greatly. As you mentioned, across the entire globe, we’re seeing cuts in budgets, and I think we’re seeing less scrutiny of where the remaining funds are going. As I mentioned earlier, I think it might be an opportunity to ask, how can we make each euro go further? But that’s not really the conversation that we’re seeing. And I think that’s a little disheartening, to be honest.

Basti Schwiecker: Yeah, yeah, definitely. As I mentioned, I had kind of quite hopes and thought like that. I mean, to be honest, I wasn’t that excited about the new administration in the United States. But I thought that might be one of the areas I could get excited about. But unfortunately, it went in a different direction than I hoped for. So yeah, let’s hope it will change back again. One thing we haven’t really talked about so far is that, I mean, you mainly work in very poor countries, looking at people living in extreme poverty. And all the money that’s going through Effektiv Spenden is reserved for working in African and extreme poor countries there. But you also do some work in the United States, helping at least relatively poor people there. Why are you doing it? What exactly are you doing it? What other results do they differ from your work in developing countries?

Harris Roberts: Yeah, so we do work in the United States. We’ve done disaster work there for a number of years and a number of poverty programs as well. I mean, the United States has less of a social net or social system than Europe, for example. And there’s a lot of people who are living not in extreme poverty, but relatively quite strong and intense levels of poverty in the United States. And so being able to help these people, there’s sort of different funding buckets, I think you could say. And actually, we think that by working in the United States, we’re increasing the profile of GiveDirectly, and we’re increasing the amount of dollars we can deliver in extreme poverty context, both through awareness, like people who are aware of GiveDirectly and accept cash as an intervention. I think there’s both that portion of it. And also just that the team is also funding a large part of the broad organization of GiveDirectly as well. It’s almost subsidizing, to some degree, the Africa work. And so we don’t find them in tension at all. They’re actually working together quite well. And I think there’s other orgs like this as well. If you look at the Red Cross, for example, there’s Red Cross operating in multiple countries. And so there hasn’t been too much donor confusion, I think. You still can allocate the money to where you want it to go on the website and the default is Africa. So you have to be quite explicit that you would like to give to the US.

Basti Schwiecker: Yeah. Yeah, no, I don’t want to say that you’re confusing people.

Harris Roberts: No, it’s a question people have and I think it’s totally fair because many organizations you do just donate into a black hole and you don’t know what program or what fund it goes to. If you give fund, GiveDirectly, we’ll send you an email and tell you exactly where your money went. Your money went to this village on this day. And these are the people in that village that were paid. So that’s a level of transparency that I think donors deserve and that we would like to provide.

Basti Schwiecker: Yeah. And as I mentioned, the money that goes through Effektiv Spenden, usually we don’t tell the organizations we fund what to do with the money. In your case, we say, please just spend it in extreme poor countries. But we don’t go into further detail and let you the experts kind of decide where it is most needed. You also, I got the impression that GiveDirectly is also kind of a tech-savvy organization. I mean, also when it comes to fundraising and also how you leverage AI to start experiments on that side. But also just when it comes to distributing the money. I think, at least at the beginning, you were using satellite images to identify extreme poor areas and so on. I think you might have a new model now. Can you? Yeah. Tell us a little bit more about that, how you leverage technology to basically cut costs and give a few more money directly to the people.

Harris Roberts: Yeah, in disaster context, we’re doing a number of programs after a natural disaster. We’re responding right now in Madagascar, for example. We’ll use satellite data to look at damage levels and try to overlay that with poverty data to try to understand who are the poorest people who are also most impacted by the disaster. And we’ll try to work there. So for example, we do use it in that case. For our poverty relief programs, we usually work with government data to look at the poorest areas, and then we try to do a saturation model where everyone’s getting paid within a village or within a region. And this is just the most efficient, fastest way. All people in that area, for the most part, are really poor. It’s not worth going through all the effort of trying to administer a proxy means test, like a very long quiz, essentially. And you also have exclusion errors where maybe you actually did deserve the money and you didn’t get it. We know today as well that a lot of the benefit is from spillovers. So even if I don’t pay the neighbor, the neighbor will benefit anyway. And so it’s just a lot easier in many contexts.

Basti Schwiecker: There is like no risk and it goes to a rich person, even if you like slightly above the poverty line and you’re living the greatest life on $4 a day, I think another dollar or two could still help you in an objective way.

Harris Roberts: To be clear, the extreme poverty line is your most basic needs. Living above the extreme poverty line is still a very terrible and difficult life. And I think this is another thing that we have to grapple with, which is, yes, there’s 830 million people in extreme poverty. But at some point, the work will not be done when those people are all above. We’ll have to move to another set of challenges. And so to your point, yeah, someone who’s living on $3 or $4, it’s not a cushy lifestyle. It’s not a comfortable lifestyle by any means. It’s still quite demanding.

Basti Schwiecker: And one important thing is also, if you talk about the line of extreme poverty, when I first thought about it, it was $1 a day. Now it’s $3 a day, but that’s mainly due to inflation. And also, you talk about purchasing power-adjusted prices. This is already adjusted to the fact that a lot of stuff is cheaper in poor countries or so. So the $3 means like $3 worth of goods according to the US prices, basically, or so. And try to get around with $3 and cover everything from rent to medicine to food, and you will face problems pretty soon, I assume. So that is really extreme poverty. And even if you’re slightly above it, you still have room for improvement with regards to basic needs even. One thing you mentioned, what is great about direct cash transfers, that it’s so scalable. So that, I mean, outside of like war zones or like extreme authoritarian regimes like North Korea or so, you could probably reach most of people living in extreme poverty just by cash. And as you mentioned, eliminating extreme poverty, because basically it’s a lack of cash. So if we wanted to just really end extreme poverty on this planet, how much money would we need? I mean, I don’t want to push our donors too far, but that’s give us an ambitious goal.

Harris Roberts: Yeah, I mean, I think it is possible. The recent estimate is to bring it to 1% poverty level, it would be $318 billion per year, which sounds like a big price tag.

Basti Schwiecker: It sounds like we have to grow quite a lot, but yeah.

Harris Roberts: But comparatively, it’s I think, what is it, 0.3% of GDP globally to do that.

Basti Schwiecker: Yeah, yeah, yeah, that’s, yeah, it sounds like a lot, as you mentioned, but 0.03% of GDP, like of the world gross domestic product, seems kind of small, I mean, what is the economy growing worldwide on average, like 2% or so, it would mean just if we would stop growing the economy for, I don’t know, say, three months or so, now living like we used to live back in October last year, or whatever, which wasn’t that bad, to be honest, would mean we could get rid of extreme poverty forever, basically, which sounds like a fair price.

Harris Roberts: Yeah, if you think of a family that’s making 45,000 euros per year, the cost to that family would be 135 euros. Not an amount that seems impossible. Everyone, go out and cancel. Go cancel your Netflix subscription.

Basti Schwiecker: Yeah, or Disney Plus or whatever floats your boat, okay? Just spend less money on… I was about to say beer, but we are German after all, so focus on Netflix for now. Yeah, all right, though that would be a nice story to be part of ending extreme poverty. But it also sounds pretty abstract, you know? I mean, there’s some studies with regards to fundraising that if you come up with these big numbers and even if they sound impressive or so, it’s hard to touch the hearts and minds of people. So maybe let’s end with another story from the field. Is there anything else you would like to show? Have you actually been in the field during your time at GiveDirectly and have some personal experience or seen some stuff there?

Harris Roberts: Yeah, I’ve visited a few countries of our operations and worked with the field teams to sort of see their work and spoken with recipients. And it’s every time a really humbling experience and also energizing for the work that we do and the impact that you can have. I think it’s easy to think that nothing matters because the world is so big and so complicated and there’s so many terrible things happening that, you know, what is it my place to do something. But the reality is that very far away, there are people who are relatively, they’re so incredibly disconnected from the global economy and system. And they’re living in the most extreme poverty. And the fact that you as an individual can change their life with a relatively small amount of money for you, I think it’s just a really exciting opportunity. Many times you would give your money and you might not know exactly what happens with it, but in this case you can know that your money is going to end up on the other end that someone will take that money. And you know, when I speak with recipients sometimes I ask them, like, oh, is there anything you wish donors knew or that you could tell donors. And I think overall, people are just so thankful and they say, you know, at first I didn’t believe that someone who had never met me would trust me, but it meant so much more to know that that’s the intention when they gave the money. And I think that’s really just humbling because it is a sort of leap of trust, you have to trust in the other person on the other end. And there’s this sort of in this world where so many things feel broken, sort of like a beautiful opportunity to be able to empower someone and give them the choice of changing a life. And you might not directly know what that is. But for these people, it’s incredibly transformative. And I think just a really exciting opportunity. And so if enough people buy into that in our lifetime, it’s totally possible that we can end extreme poverty. And I think that would be something that globally we all can be very proud of.

Basti Schwiecker: Yeah, yeah. So let’s do it. And if you want to read more about those stories, you also can go to live.givedirectly.org where you have like, probably 1000 stories by now where people are pretty unfiltered tell what they did with the money. And I mean, unfiltered. So sometimes I looked at it, it looks a little bit rough or so, but that makes it hopefully more authentic so there’s not a lot of editing going on from the side of GiveDirectly so you get a real picture of what’s happening and how you can improve the lives of many people. And also, I mean, yeah, sometimes, especially the last couple of years, I guess you can feel overwhelmed. Like there’s so much shit going on in the world and so on, and you can feel helpless and think like, well, what can I do? But well, you can still do quite a lot of good. And yeah. Please, please do it. You can do it at givedirectly.org. You can, if you’re paying taxes in Germany, Switzerland, or Austria, you can do it through Effektiv Spenden as well in a tax deductible way. And we don’t take a cut. We just send the money straight to you guys. You can also reach out to us, to Harris, to GiveDirectly if you want to know more. And please do. And thank you so much, Harris, for spending this time and answering my questions.

Harris Roberts: Thanks for having me. This was a lot of fun.