Why Activists Should Consider Making Lots of Money
Summary. A number of people go to work for nonprofit organizations because they care about making a difference to the world. However, in many cases, these people might be able to make a bigger total impact by making a lot of money in business and then funding other people to accomplish the "do-gooder" work. This is especially true if the skills they would bring to a nonprofit job are easily replaceable or otherwise not highly valuable.
Introduction
Activism is about "changing the world" and "making the world a better place"--through research, lobbying, and civic engagement. So it seems quite natural to suggest that someone who wants to effect change should work for an advocacy organization, or a citizen-action campaign, or a charitable foundation. To do something different--for instance, taking a job at a big law firm or corporation--is sometimes seen as "selling out" and abandoning one's moral ideals. This common perception is reflected in the title of one Wall Street Journal article: "Social Principle vs. High Salary: Reconciling Ideals with Financial Goals Can Be a Struggle for Some in Their 20s" (by Adelle Waldmen, 2005).
Replaceability
However, there is a factor that is often ignored in this line of thinking: Namely, that when an organization hires one person for a competitive position, it thereby chooses not to hire another.
Example. Suppose Alice and ten other people are applying for the position of campaign coordinator for an advocacy group. Alice is hired and feels good about all of the work that she's doing. She forgets, however, that because she was hired, someone else wasn't. In her place, that person would have done all sorts of great work, too.
One way to think of the situation is as follows. Consider all of the nonprofits that do good work. Those nonprofits have essentially fixed budgets that allow them to hire an essentially fixed number of employees. Since nearly all of these positions will be filled by someone, much of the work that Alice does with one of those organizations would have been done by someone else in her place. Hence, the difference that Alice makes on the world is only the amount by which she's more productive than whoever would have been hired instead.[1]
In some cases, those productivity differences could be quite large. In other cases, even small differences in effectiveness could translate into large impacts. If, for instance, Alice were a slightly better fundraiser than the next person who would have been hired, she might be able to bring in millions of extra dollars over her lifetime. However, there are other options to consider.
Just as someone will not necessarily make a positive impact by working for an advocacy organization, she will also not necessarily make a negative impact by working for an employer that causes suffering. The amount by which she makes a negative impact is merely the amount by which she is more productive than the next person.
Example. Bob works as a corporate lawyer defending slaughterhouses against lawsuits brought by animal-welfare organizations. With an annual after-tax salary of $190,000, Bob is able to donate $160,000 a year toward advocacy. In particular, he finds four people who want to be activists full time but lack the money to support themselves. He pays each of them $40,000 for their work, of which he actively keeps track.
The late animal-welfare activist Henry Spira was himself partially funded in this way. As Peter Singer reports on pp. 115-16 of Ethics into Action: Henry Spira and the Animal Rights Movement,
In addition to the $500 a month [Henry] receives from his retirement fund and--after he turned sixty-five--his social security payments, he pays himself $15,000 a year from Animal Rights International and reimburses himself for up to $4,800 worth of expenses annually. Luckily, he doesn’t need to spend time raising money for his efforts because he has attracted the support of a small number of people who are prepared to make substantial donations to Animal Rights International. [... One of his supporters, Helaine Lerner] finds it much more effective [contributing to Henry] than giving funding to large organizations, where the money "can go down a deep hole and you never know what the results of it are."
A challenge with this approach is finding effective people to work for you who wouldn't otherwise have done good work on their own. But even if the people you hire would have gone to work for an effective charity dealing with the same issue, that charity should be able to find other hires instead. In other words, you're increasing the total number of people who can be employed to work on that issue. Alternatively, perhaps the people you hire would have engaged in activism anyway but would have also maintained a part-time job. By paying them, you're allowing them to devote that time to extra activism.
How much could someone make with a non-activist job?
In this paper, I present a simple formula for estimating the amount of donatable wealth, in current inflation-adjusted dollars, a person could earn by pursuing various careers; the numbers range from below $10 million to around $40 - $60 million. More detailed figures can be computed using this Java program, which tends to give results about twice as high. Both of these estimates assume an expected return on wealth of 12% (roughly the average stock-market rate over the last 80 years). Due to oversight on my part, capital-gains tax is not considered, but one might account for it by plugging in an annual expected return a few percentage-points lower than 12%. (On the other hand, if one chooses almost exclusively high-risk investments, perhaps one could earn above-average returns, in which case 12% wouldn't be so unreasonable? This piece explains why risk should generally not be a concern.)
By the way, some corporate employers offer a matching-gifts program in which they will match, dollar for dollar up to an annual limit, donations made to a nonprofit organization. If this limit is, say, $10,000 per year, then an altruist can effectively earn an additional tax-free salary of $10,000 if her company offers this benefit.
The Value of Money
In short, a person can potentially make a lot of money through a non-activist career. But how much of a difference can the money make? I'll give a few examples.
Of course, the above efforts may have side-effects, both negative and positive, that should be investigated in detail.
"But," the reader might respond, "the efforts suggested above don't necessarily address the fundamental causes of animal and human suffering. Maybe there would be greater expected benefit in changing government policy, or doing fundamental scientific and economic research, or investigating where donations can be given most cost-effectively and then encouraging other wealthy donors and foundations to redirect funds toward those efforts. This work wouldn't necessarily be done by someone else, so doing it myself doesn't prevent someone else from doing it." This is true, except for the question of where you'll get funding to pay for your cost of living. But before abandoning the making-money idea, consider this point: If you were to work for a law firm, investment bank, consulting firm, or startup venture and make an expected lifetime average of, say, $200,000 (present-day dollars) after taxes, you would presumably be able to hire two, three, or possibly more lobbyists/researchers/campaigners to do the same sort of work that you would have done on your own (though perhaps with slightly shorter working hours). Unless you have good reason to think, after accounting for Lake Woebegone bias, that you would be an exceptionally successful researcher or campaigner, it may still be more effective to make money through a high-paying career.
Qualifications
In practice, I don't think a career of making money to donate is always the obvious choice, for several reasons.
Differences in productivity. Assessing your own abilities without Lake-Woebegone bias is important, but it may very well be that you are exceptional in a particular field. Differences in personal effectiveness can be huge: Some leaders of nonprofit organizations, say, probably are many times more influential than their counterparts. Certain academics are perhaps 50-100 times more productive than their colleagues in terms of consistently high-quality work. If, upon reflection, you find that you excel in a certain area, by all means pursue it, whether it makes money or not.
Transactions costs. As is true of so many theoretical Pareto improvements, the reality of transactions costs can get in the way. Hiring someone else to do a job for you requires finding that person, arranging to meet, establishing trust, traveling to meetings, maintaining communication to share information, setting up proper incentives to avoid principal-agent problems, etc. Plus, making money means paying taxes, especially if your arrangements are sufficiently informal that you can't deduct the payments as donations to a public charity. And if you do set up a 501(c)(3) for tax reasons, that involves yet more paperwork.
Eliezer Yudkowsky elaborated on this point:
I once observed that Ricardo's Law of Comparative Advantage is the theorem that unemployment should not exist. The gotcha being that if someone is sufficiently unreliable, there is a cost to you to train them, a cost to stand over their shoulders and monitor them, a cost to check their results for accuracy - the existence of unemployment in our world is a combination of transaction costs like taxes, regulatory barriers like minimum wage, and above all, lack of trust. There are a dozen things I would pay someone else to do for me - if I wasn't paying taxes on the transaction, and if I could trust a stranger as much as I trust myself (both in terms of their honesty and of acceptable quality of output). Heck, I'd as soon have some formerly unemployed person walk in and spoon food into my mouth while I kept on typing at the computer - if there were no transaction costs, and I trusted them.
Information as the limiting resource. The argument for making money to donate treats wealth as the limiting resource in efforts to reduce suffering. However, you may decide that the hardest part about making a difference is figuring out where exactly to donate at all. While differences in earnings between those in the nonprofit and private sectors can differ by a multiple of 2, 3, or perhaps 10, differences in cost-effectiveness of donations can easily vary by 100 times, 1000 times, or vastly more. (Indeed, for highly speculative causes, there's essentially no limit to how much the value of a dollar might vary from one project to the next.) If, by working for a charity, you're able to improve your on-the-ground knowledge about what kinds of activities and groups really are effective, that can be extraordinarily valuable. If, by doing research as a professor, you're able to spend time learning about details of an issue in a way that leads you to discover a vastly more cost-effective cause than you ever would have discovered as a lawyer working on mergers and acquisitions, then you've made a great career choice.
Of course, it's worth pointing out that you don't have to work on the ground yourself to get advice on what works and what doesn't: You can also make friends with people in that position and consult them. And you don't have to earn a PhD in, say, theoretical physics in order to get sound advice about the implications of cosmology for the amount of suffering in the universe: You can also establish a relationship with people who do know about such topics. While it's important not to assume that every task can be optimally traded in Ricardian manner, it's also important not to assume that you're the only one who can adequately gather information, assess options, and carry out altruistic projects. Even if information is the limiting resource, it may be best still to make money and hire experts to make decisions for you, given knowledge of your personal objective function.
Links
[1] This will usually not be quite true. For instance, consider an unrealistic model in which all nonprofits within a certain sector agree on a ranking of all job applicants from best to worst. If the nonprofits have fixed budgets and pay fixed salary amounts for each job slot, they will be able to fill a constant number of slots, and they will choose the highest-ranked applicants to fill those slots. If you then enter the pool of applicants and get hired, and if you aren't the lowest-ranked of the applicants hired, then you don't "knock out" the person who would have been hired in your place, because that person will still be hired somewhere else. Instead, you prevent the lowest-ranked applicant from being hired. In this case, the difference you make is the amount by which you're more productive than that lowest-ranked person who got kicked out would have been. (This ignores what happens to that lowest-ranked candidate; I'm implicitly assuming that he goes off to work for an organization that makes no net impact to the world.)
When we relax the assumptions made in the preceding paragraph, we find that the benefit you make by working for an organization is probably less than that model predicts. For one thing, it won't always be the case that the worst person who would have been hired will be "kicked out"; maybe someone slightly more capable would leave instead. Second, if you're more talented than other candidates, you may receive more remuneration, which lowers the total hiring power of your organization. (If you found yourself in this situation, you could always ask to keep your pay low. If you think donations to your place of employment are more cost-effective than most other uses of money, this would be a good strategy. If not, you should accept the higher paycheck and donate the money elsewhere--though tax considerations may be relevant, especially if your alternate donation isn't tax-deductible.)
Speaking of remuneration, I've been ignoring the impact of one's decision to seek nonprofit employment on salaries in that field. In general, adding yourself to the applicant pool will depress nonprofit-sector wages, possibly allowing organizations with fixed budgets to hire more total employees. The exact magnitude of this effect depends on price elasticities.