I never felt like this story got enough coverage. This modern day Chuck Feeney[1] demonstrates the precise sort of selfless generosity we need more of, but most of my news feeds are busy baiting me with the latest bit of gossip.
I don't have solutions I guess, just grumbling. But thinking about that makes this historical act of kindness a little bittersweet.
The benefit to society from donating to charity can range from positive, to zero, to negative. Often negative. Anyone with money can donate, but it takes a lot of work to donate to things that make the world better. The Pineapple fund seems to have put in the effort to donate to projects with high positive impact, in a way that does the most good. (It's possible to donate to good projects in bad ways, such as by requiring them to use the money to build a building with your name on it.)
Doing the work can be exasperating, because you think "I'm giving away money, and I have to do all this work too???" But it's the work that makes the difference.
Personally, this year I donated money via https://app.effectivealtruism.org/funds. I somewhat trust them to do something reasonable with my money, if that's naive of me I hope somebody will tell me.
I used it work in that world (specifically effectivephilanthropy.org). Givewell is and was one of my favorite organizations. This group appears to be affiliated and think similarly. I do not believe you are being naive, I think this is a very good approach.
If you care about helping the most cost effective charities with proven track records to deliver well researched interventions than you are doing the right thing! :)
Thank you for investing the time to research and think about this topic! If you are in the tech space and thinking about great causes to work on you can also check out https://80000hours.org. They are also Effective Altruism affiliated and recommend areas that need more attention by smart people! :)
Scared Straight is a well-known program that has been well-studied and found to cause significant harm. "In 2004 the Washington State Institute for Public Policy estimated that each dollar spent on Scared Straight programs incurred costs of $203.51."[0]
It was based on an intuitive idea: if teenagers see how bad jail is, they'll want to do anything they can to avoid it. That turned out pretty poorly - they instead built social connections with criminals, and were substantially more likely to get involved with crime themselves.
A lot of attempts at charity have backfired, often due to cultural differences between the benefactor and those on the receiving end, or a lack of oversight or poorly-thought-out plans. See: PlayPump [1], UNICEF's Cluster-bomb-colored food drops [2], etc
> Can you explain to me why you believe the benefit to society from donating to charity is often negative?
For one thing, the fact that it is tax deductible itself results in it being the focus of self-serving tax dodges that aren't really charitable. If charities remained tax exempt but donations weren't tax deductible, the abuse incentive would be removed.
There's also, of course, well meaning but counterproductive charities, but the subsidy also probably increases the share of donations that goes to those, since it reduces the incentive for donor diligence.
A ton of reasons, but a big one is that external involvement weakens local infrastructure. Eg. dumping free food in poor countries seems like a lovely idea from a distance, and is the sort of thing people like to donate to, but in practice it undermines local producers and sabotages the local food economy.
The food thing is probably well recognized at least among reputable charities (as opposed to opportunistic religious charities or whatever), but in general the role of external donors in weakening local infrastructure is still a live issue.
Charities range from high-impact, through useful, mostly useless, to ones having good intentions but really causing damage, and at the very end of the spectrum, outright scams.
It probably doesn't take much work to ignore the latter, as long as you ignore emotional appeals and use a little bit of reason instead. But it takes some work if you want to go up the spectrum, if you want to find the more effective charities. If saving lives is your primary concern, then GiveWell does great jobs in rating charities by their effectiveness (in dollars per life saved). If you're interested in different types of social impact, then you'll likely have to do this work yourself.
I can't speak for the parent, but I've personally known people with parents who ran charities and political campaigns for the sole purpose of collecting donations and spending 100% of the donations on "operations"; paying their salary while they do nothing other than the occasional fundraising as the well dries up.
Even with good intentions, predicting outcomes is difficult. When you donate to a charity(or any organization), you are giving them more influence while delegating decision making. The best option seems to be: find something you really care about and get your hands dirty.
Occasionally the idea crops up in my mind to make a website called something like "ifihadabilliondollars.com" where people could nominate and discuss worthy causes. The philanthropists who actually have the money are inundated with requests worthy and otherwise.
It would be nice to give them a resource where they have access to good information and can pick without pressure.
How do you prevent this from effectively becoming a marketing/popularity contest? Seems like if it actually became popular then you're right back where you are now, where the charities that get the money are the ones with the best marketing and not the best impact.
You could replace Bitcoin with lottery winnings and get the same takeaway. I'm glad that someone who decided to gamble on Internet Fun Bucks has decided to do something worthwhile with their windfall, but nothing here is inherently tied to crypto.
Bitcoin has done nothing but waste energy and computational resources in order to reallocate money between nerds and the unfortunate normies that've been duped into thinking it'll make them rich quickly. That's not something we should be celebrating.
>Bitcoin has done nothing but waste energy and computational resources in order to reallocate money between nerds and the unfortunate normies that've been duped into thinking it'll make them rich quickly. That's not something we should be celebrating.
This thread is about a fund that was created because of bitcoin earnings. So I'm sorry but your rude and tasteless comment does not hold water.
Where the money came from is irrelevant. And wasting energy and computer equipment to create play money for idiots who want to ignore why decades of banking regulation have been implemented is way more "rude and tasteless" than mean words on the Internet. The fact that a small amount of money being shuffled around went to a good cause is nice but doesn't offset the truly exquisite amount of waste the entire crypto ecosystem generates.
What about the waste generated by the banking system? Banks have to use electricity in order to operate, right? I haven't seen anybody complain about them as if they are eco-friendly or something. Or is it that since we are depending on our banks, they can do whatever they like but bitcoin being a ponzi scheme (or that's what I read on reddit) is an easy target to comment about on the Internets? As if Chinese miners have hooked their ASICs in your neighborhood's power supply. It is fascinating how people turn eco-friendly just to bash something but are part of a totally anti-ecological society.
The banking system's energy use is incidental and embracing greener practices is entirely within reach. Bitcoin, on the other hand, has energy waste as a feature that cannot be divorced from how it works. The entire thing works because computers are burning energy to find nonces, and the more people are using Bitcoin, the harder the hashing becomes, which uses even more power. The entire proof of work concept system is irredeemably linked to wasting energy and gets even worse with more adopters for a system that can barely handle 10 transactions a second. At least the banking system accomplishes something for its energy usage and that usage isn't intrinsically part of its functionality.
> energy waste as a feature that cannot be divorced from how it works
Er, this is entirely false. Proof of Authority, Proof of Stake, and a handful of other schemes which do not require large amounts of compute are possible. Bitcoin itself has not "switched" due to stagnated innovation and politicking, but it's entirely false to say that PoW "cannot be divorced from how [bitcoin] works"
I'm sure we're all victims of our own bias, but yours seems particularly vitriolic. There are nations out there bending over backwards to subsidize coal, build missiles, frack the earth, etc. Some compute being used on BTC instead of JavaScript or Videogames or whatever else would be consuming those CPUs is _hardly_ some vast evil.
He was specifically talking about proof of work though, which indeed is inherently wasteful. And seeing the whole block size issue, it seems impossible bitcoin would ever move away from proof of work.
I'm not sure you realize the scale: Bitcoin uses more electricity than entire countries. It uses as much electricity as 6 million US households. It's magnitudes more than VISA, despite the latter handling many more transactions.
Bill Gates may have done some questionable business practices but he has donated more than most of us could ever dream to earn.
Yes, when he passes it will be interesting. But not because your reasoning, because his foundation will have his wealth as a trust to continue doing good.
Edit to add at top: I fudged my numbers relating to benefit that charitable donations will have on taxes, I will research proper numbers and update them if I ever get around to publishing something more official - and yeah, I look like an idiot because instead of properly researching my distaste rushed a reply. I believe the concepts I otherwise write about are valid.
And I pasted my reply below - I'd appreciate conversation to get into the depths of others understanding if you have contrary thoughts to mine, and so if you believe my thinking is wrong then I can further refine my understanding and nuances:
There's likely no generosity here. All of the donations were likely related to countering capital gains taxes. Depending on where this person lives, let's say their capital gains taxes are 40%: for them to owe $55,000,000 they would have sold and removed roughly $140,000,000 from the ecosystem; How a qualified appraiser reasonably determines "fair market value" in something as volatile at incentivized crypto-assets - I don't know - it's probably going to end up gouging society via taxes as well.
Likewise, they potentially did absolutely nothing except do mining early on (or make a good bet) and promote Bitcoin et al, getting more people to adopt/buy them - allowing them to then sell with where we're at in the scheme.
These incentivized crypto-assets are also a Ponzi-Pyramid structure, where like in a traditional Ponzi scheme it's usually the early adopters who gain more and the later adopters who lose more; technically with a single stock broker making the decisions, they would get to decide exactly who profits from the investment, and who's money they run or exit with.
It is possible they donated more than they required to counter taxes, however I doubt they'd verify that with independently selected third-parties - and it'd be naive to merely take their word for it.
It's also other people's future money being donated - and those people are now bearing the unrealized cost, until they sell at least; not such a big deal for the receiving party of a donation, however it's a problem if they were actually purchased.
And now unfortunately these charities have become aligned and vested in these crypto-asset donations maintaining their current value, or promoting them so they go up even for (for no actual work being done) - trying to get later adopters to buy in a higher perceived value; if actual work was being done that was worthwhile to pay for, people could pay in a non-incentivized crypto-asset, if the immutable blockchain ledger is a primary value.
It's only reached such proportions because in part of its global nature, and because there isn't a single stock broker - it's an situation that's been forced on regulators around the world, and who are being influenced by lobbyists to attempt to indoctrinate regulators based on their biased understanding. It's a global pyramid of cards stacked waiting to tumble, the people making the money are the earlier adopters, and those [platforms] selling the shovels/services for this new "gold" rush.
Those who think society is oblivious to the Ponzi-Pyramid structures are going to find disappointment. The positive rallying for Bitcoin et al is because you're all aligned, incentivized to want them to work out - and that sentiment isn't equally countered solely because people keeping the system in check aren't at minimum disproportionately incentivized (e.g. they may have a government job with a salary that pays fiat currency as their incentive to do the work), nor are there the masses - the "HODL" rallying of both when a crypto-asset value is at a high and a low is interesting, to say the least: https://hackernoon.com/analyzing-every-reddit-comment-mentio...
It is great - yes - that there is at least one person who perhaps did indeed invest the majority (50%+1?; if they're telling the truth) of their crypto-assets to charities who could realize the value now (and I like a lot of those charities), or the charities may hold onto them until they crash in value. Or they will slowly sell them off as a trickle to not upset the ecosystem [as the ecosystem has seemed to have learned to manage for now] - meanwhile the remainder of the community, likely individuals with the smaller amounts invested, are doing the HODL rallying game keeping the perceived value artificially higher - meanwhile earlier adopters are extracting money at a rate that new money is coming into the system (based on the confidence the stabilized price - maintained by the HODLing - allows for).
Now what about the unknown list of bad actors who have already entered the system, who are perhaps planning to put more money into it to keep it perpetuated, and will attempt at any means to cause more-to-all of society to adopt it so the artificially perceived value - and wealth/buying power - is unreasonably and unnecessarily reallocated weighted towards them, the earlier adopters?
I would recommend everyone think through the long-term negative consequences, they aren't outweighed by the potential positives - and those positives are all achievable by non-Ponzi-Pyramid scheme incentivized means. The long-term in discussions, particularly the negatives, is rarely brought up - I imagine heavily to avoid flame wars, or you simply get "downvoted to hell" by those, as I mentioned above, incentivized to rally for their gains.
It's interesting too that they didn't liquidate the $55MM (or their full amount into fiat currency), and then donate that to charities. Aside from the negative impact dumping that quickly could have on its perceived value - like we've seen before, it's apparently better for tax reasons too to donate a crypto-asset; I imagine now that larger financial institutions are involved and other well-organized organizations have created a legitimate market structure, perhaps like Coinbase, are keeping large sums of capital at bay from investors wanting to buy a lot -- so they can buy up large quantities when necessary to avoid exposing volatility.
If you think the layman person investing say as little as $100 (that little or less for them to be aligned with the masses of the ecosystem, to be part of the mob) is educated enough to make a sound investment decision, to understand this complex holistic ecosystem, well you're wrong and if you profit off of selling your incentivized crypto-asset you're taking advantage of people. This is why stock markets were formed with regulations and oversights and due diligence for individual companies, etc. Perhaps you reading this don't fully understand it either, or didn't, and it's long-term implications. So are you going to pretend it's not a Ponzi-Pyramid scheme and hope it works out, and that society isn't actually being taken advantage of? I hope more of you sooner than later realize this. Some people do know this is the game they're playing, and they're happy to take advantage of others - however it's immoral to do if they don't know they're playing that game.
The simple truth is the proposed benefits of the structures allowed with incentivized crypto-assets don't work out long-term if you can't separate the two systems. If the system inherently has a Ponzi-Pyramid structure - you can't simply dismiss that, and you can't - as a society - allow it; the two systems being a model that leads to "incentivized collaboration" leading to independently owned services tied together through a transaction layer (that logically doesn't make sense to have an incentivized structure), and that of Ponzi-Pyramid schemes.
The "rich people donate money to avoid paying taxes" meme has always been odd to me. If you donate $1, yes, your tax bill is lower, but you are also out $1. Unless you are corrupt and are funneling money to your own foundation or something, donating money is not a way to beat the system wrt taxes, its just a way to shift money that otherwise would have gone to the government to charitable entities instead.
Also, it results in more loss of wealth for the donator: if I owe the government $1 in taxes, I can choose to pay the government that $1 or, if I loathe the idea of the government getting that $1 and I can afford it, I can choose to give ~$3 to a charity instead.
The fact that rich people choose to donate to charity at a rate of about 3:1 instead of paying the government says a lot about their faith in the government in spending their money wisely.
Fred Wilson had a recent post where he explained how donating stock that has highly appreciated can mean a $100 donation is effectively $12 from you and $88 from federal and state governments. See https://avc.com/2018/05/giving-publicly-traded-stock-to-char...
I'm not a US tax expert, but crypto would work the same as appreciated shares in Canada with similar numbers.
Even then, you're still out $12. Though magnifying the impact of a $5M effective contribution to $55M with donations to causes that I support is tempting.
Your "charity" doesn't have to be very charitable. It can employ your friends on high salaries, it can promote your own political causes, it can promote your own hobbies/interests. It could be an art museum in the house next door to you open only by appointment with you, for a particularly transparent recent example.
Yes, that's why I explicitly stated it as a loophole, but that's not at all what we're talking about here (the Pinapple Fund somehow not being "generous" because the donator took advantage of tax breaks due to donations) or in general.
Right, you'd be out that $1 because the government is getting it -as it goes to the tax collector, and then it is distributed to all of society, or well, how that government currently allocates spending/resources.
It's not a matter of trying to beat the system, donating to a charity is an opportunity afforded by governments (not sure all of them do) to allow the individual an opportunity for the money to go to a specific cause instead of to society in general - which is why charities are regulated and have rules, albeit perhaps not regulated well enough.
Edit to add after you added to your comment:
Perhaps I better needed to separate (and improve) my understanding of taxes - and the distaste for how profits are realized in incentivized crypto-assets.
You can't donate money in place of paying taxes; for a toy model let's say this person spent $10 to buy bitcoin long ago, now it's worth $140,000,010, he wants to completely exit his exposure to bitcoin. If he converts it to cash now it he has to pay taxes on $140m of capital appreciation. Let's say he donates $55m worth of bitcoin to charities. If he wants to convert the remaining $85m worth of bitcoin to cash, he still has to pay taxes on that. Hence by making a donation, he reduces the amount of cash he ends up having. So how is there "no generosity"? Can you construct a scenario where someone ends up with more cash by making a donation?
Here's an explanation I saw once before of how the wealthy save money by donating to their alma mater:
'So what an individual can do is offer to donate, say, 10% of his company to a charity. Let's say that the company did really well last year so that guy can easily find an accountant to say that 10% is worth $10M. So the guy has a $10M tax deduction he can use as he sees fit (subject to AMT and other shit, but you get the point). The guy also knows that last year's performance was a blip and if he repeated that 10% donation this year, he'd only get a valuation of $5M. In effect he's got an extra $5M from the valuation.
When I was younger, I was on the young alumni board for the university I went to for undergrad and we used to see this all the time. Someone would donate property/illiquid securities/art/etc with an 'assessed' value of (say) $10M, but when the school went to sell it, they'd only realize (say) $3M in cash. But the guy would still get to keep the $10M tax deduction. To a guy like that, a $10M tax deduction could be worth $4m to $5M easily.
I'm sure you're wondering, and yes this is in that 'gray zone' that's just millimeters from being tax fraud. However, the IRS rarely pursues these cases 1) because they are really hard to win, 2) the school doesn't really care b/c they still just got a $3M donation, and 3) the school isn't going to 'help' the IRS (beyond bare minimum compliance) b/c the school would have to give up the $3M.'
Oh...kay? If you could end up with $1.2 million more in cash after the donation, then you'd have an argument. But in your example, the donor has facilitated an additional $8.8 million from the government, which I don't necessarily see a problem with. I certainly don't see a moral problem with it on the part of the donor. On the contrary, if you can get anybody to match you %700, then the moral case for giving to charity is only strengthened.
You are still losing access to $10 million dollars of value.
I can see taking issue with the forgone taxes or whatever, but a $10 million stock donation doesn't keep any extra money in your pocket (which is the scam proposed in the WOT above, that big donations somehow are profitable).
Yes, and I would argue that under any reasonable way of quantifying generosity your generosity would be "measured" at around $1.2m, and qualitatively I think it is fair to apply the term "generous" to you.
An isomorphic situation is if Congress passed a law matching at a 1.2:8.8 ratio every charitable donation made to Watsi, and next year you donate $1.2m to Watsi; you end up with $1.2m less, Watsi ends up with $10m more.
I don't think you understand how taxes work. Donating $55M doesn't offset owing $55M in taxes. It reduces your cap gains by $55M, and that's not the same thing. They'd still owe taxes on the $85M cap gains you describe.
I think bitcoin & other cryptocurrencies are little more than ponzi schemes, but that's kind of irrelevant here. Someone got lucky with their gamble on the coins, and they have generously donated lots of money from their winnings to worthwhile causes. They aren't doing it for fame or recognition, since they have stayed anonymous.
It doesn't matter whether or not you think this donor deserved the money in the first place. As long as the money wasn't stolen, then it simply came from other bitcoin investors/gamblers. It is their loss, and the charities' gain.
Even if donations were meant to offset capital gains it is still a generous act. I think it is impossible to make the statement "There's likely no generosity here" without knowing more information.
No, it's not. That money goes to the government and society as a whole otherwise, which you would owe - and if you didn't pay you'd eventually end up in jail.
Paying your taxes to not end up in jail isn't generosity. Paying taxes is being part of a system that you've benefit from.
If you gave more money to charity than is owed in taxes - and that was yours that you reasonably and fairly earned - then you could argue there's generosity involved.
You're correct in saying that without more confirmed information, we can't know how much or if any generosity occurred. I did however say "likely no generosity" - which is different from saying a firm statement of "no generosity here" - so my statement isn't impossible.
Someone struck the lottery and donated a ton to worthy causes. That is generous, full stop. If the government was concerned about this they wouldn't allow charitable donations to be deducted.
And since you seem so concerned, you can't donate your way out of paying taxes because your total charitable deduction can’t exceed 50% of your adjusted gross income.
Even if charity donations worked like that, they would still have donated their time and effort in selecting worthwhile charities and dealing with all the bookkeeping.
The guy sent millions to a small organization doing extremely at-odds-against-the-goverment work to help cure PTSD using MDMA, something that shows great promise and could revolutionize the pharmaceutical treatment model... All your type above is just blah blah blah in comparison to this fact
Does anybody know what's the name of psychological bias that makes me read these really grayed out comments? I mean, it's clearly marked us unlikely to be anything good. And yet I make the effort instead of choosing some "normal" one.
The Streisand effect is the phenomenon whereby an attempt to hide, remove, or censor a piece of information has the unintended consequence of publicizing the information more widely, usually facilitated by the Internet. It is an example of psychological reactance, wherein once people are aware that some information is being kept from them, their motivation to access and spread it is increased. [1]
I tend to read grayed out comments too. Maybe they're making a controversial but otherwise good point. I'll upvote / vouch those. Or maybe they're just crap. I'll flag or further downvote those.
Isn't sending to charity the exact same tax benefit as buying some equipment that is a corporate expense? Like, you're not literally offsetting taxes, you're just buying stuff for 25% off (or whatever your tax rate is). So with charity, you're making a $1,000 donation to charity, but getting $250 back from the government. You're still out $750 net though.
That's definitely not how it works in the US. Let's say you're in the 25% tax bracket. You have $100 in earnings. Normally, you would pay a $25 tax and have $75 left. If you donate that $100 to charity you simply don't have to pay the $25 tax. You're still out there $100.
There are far more effective tax loopholes than donating to charities. Also if this person really wanted to reap the benefits of taxes, they would have to reveal who they were, which is not what they want in the first place.
tl;dr for those who can't read the very light gray text or don't have time:
- discredits the generosity of givers by calculating that they "likely" saved more in capital gains taxes than they gave away (and attacking them by forcing them to undergo a public audit or allow public to assume this to be true). [Responses highlight the absurdity of this claim.]
- they don't deserve credit because they accumulated their coins early on when it was easy/cheap
- the donated coins (and all cryptocurrencies apparently) are nothing more than an elaborate ponzi-pyramid scheme, therefore the donation merits no praise
- their true motivation, at least in part, was to align innocent charities with the crypto world, thereby corrupting their interests
- they should have liquidated the coins and given away the hard currency
I don't have solutions I guess, just grumbling. But thinking about that makes this historical act of kindness a little bittersweet.
[1]: https://en.wikipedia.org/wiki/Chuck_Feeney