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For the reader in a hurry, this gift-giving guide comes in two parts: one for those with $45 billion to spend and one for those of slightly more modest means. Please feel free to skip to the part which is more applicable to your budget for presents.

If you have $45 billion to give

First off, congratulations and thank you.  You have done something wonderful that can and should change the lives of many millions for the better.  I support higher taxes on the wealthy, I’m not too keen on the charitable tax deduction, and I’m very much in favor of and grateful to rich people who give away their money to good causes.  Some commentators seem to think you have to choose between these positions; I can’t see why.

More important: how to spend it. One way to think about this problem is to ask “how much money is $45 billion, really?” In global terms, it isn’t so impressive. In 2005, the World Bank estimated global wealth at $708,000 billion — your fortune is just 0.007% of that (perhaps next year’s edition of this gift guide should include a section on “if you have $100 trillion to give”). Or compare $45 billion with some other numbers: developing countries in sub-Saharan Africa have annual (nongrant) government revenues of about $377 billion.  Annual aid flows to developing countries are on the order of $150 billion — you would add one third of one year’s total to that.  There are about 900 million people living in extreme poverty — you could give them all a one-off gift of $50 (if you could find them).  That would make a big difference in their lives, but not necessarily a transformative one. That $45 billion just isn’t very much to compete (even) with the world’s poorer governments in terms of making a difference where they are already spending money.

That said, it is certainly enough to have global ambitions.  A lot less can have a dramatic impact: think of the paltry $276 million spent worldwide between 1967 and 1979 to wipe out smallpox.  It is proving more expensive to eradicate polio (about $1 billion a year at the moment), but still well within your means to fund single-handed.  And even smaller amounts have changed the world: think of the less than $100 million the US government spend on NSFNET and ARPAnet backbones that helped launch the Internet revolution and, coincidentally, many an entrepreneur on the road to riches.  I’m with Felix Salmon: you should be investing in high-risk, long-payoff innovations and initiatives that — if they work — could be world-changing.

The two different ways of thinking about “how much is $45 billion” suggests a particular area for your philanthropy: high-risk, long-payoff innovations and initiatives where governments aren’t spending very much. And it is easy to spot the area where many such investments are likely to lie: global public goods like technology and disease eradication.  National governments are terrible at funding global goods: UN peacekeeping gets a total of $8 billion a year, for example (less than 2 percent of the US defense budget to fund sixteen peacekeeping operations), while the main international body for agricultural research, CGIAR, has an annual budget of $1 billion. 

I think Bill and Melinda Gates have done a good job of leveraging their money by shaming governments into spending a bit more on global public goods. Rich countries in Paris just agreed to increase annual global funding for renewable energy R&D from a paltry $10 billion to a slightly less paltry $20 billion (which will still leave it at less than annual US expenditures on pet food). That worked in part because Bill Gates put together a bunch of incredibly rich people (some of whom you will know intimately) to say they would finance a lot more R&D for renewables themselves. The main fund for global vaccination programs, Gavi, has spent about $12 billion, out of which the Gates Foundation provided $2.5 billion, most crucially in the early years to help build wider support from governments. I hope you follow a similar path.

In short, there’s a temptation to use a large fortune to try to do what government does, but better. But no existing fortune is big enough to do that at scale. It’s far better to use that fortune to support things governments aren’t doing enough of or at all, and fostering innovation in the provision of global public goods falls squarely in that category.

If you don’t have $45 billion to give

First off, I feel your pain.  I think we would spend $45 billion very well if we had it.  Second, some might argue that if the marginal $45 billion donation is best spent one way, the same is likely to apply to the marginal $10. If you agree, skip back to the start of the blog post. But I’m not sure most people feel like that, so if you don’t, read on.

This holiday season, a lot of people will be giving gifts of donations in the recipient’s name.  It is a wonderful and appropriate thing to do during what is meant to be the season of goodwill to all.   But if you are going to do it, and show that it is a thoughtful gift, you should choose a cause that really makes a difference.  And that is where GiveWell comes in.  It rates charities in how effectively they would use the money that would otherwise go to buying your father in law his 67th silk tie. 

One of Give Well's top charities is called Give Directly, a charity that simply hands cash to poor people.   And there is a good reason they rank high.  Some families may be poor for lack of a goat or chicken, some may be poor for lack of a solar lantern or cookstove.  Some may suffer disproportionately for lack of shoes.  Supporting the provision of any of these goods to a very poor person would be well intentioned gifts.  But one thing you can be virtually certain of is that a poor family is primarily poor because they don’t have money.  And the immense inequality we see worldwide means that you can make a huge difference in their wealth by giving a relatively small amount of yours.

Some will use that money to buy a chicken or goat or solar lantern or a pair of shoes. But whatever they buy, their guess as to what will help them alleviate — or even help them escape — their poverty is almost certainly going to be better than mine or yours.  Remember the three kings: each gave a gift that was small, portable, and easily tradeable.  A lesson to live by.  And remember the spirit in which those gifts were given: certainly not from a position of superiority.  Cash says “I care enough and know enough to understand that, given we’ve never met, I know nothing about you and have vastly different economic circumstances, you’ll probably pick out a better gift for yourself than I will.”

Perhaps you feel giving cash to someone else in the name of your beloved lacks the personal touch.  Fair enough.  In which case give that someone else the gift of giving themselves.  A vaccine or a bed net doesn’t just benefit the recipient.  By helping break the chain of transmission for malaria or measles or pneumococcal infections, your gift helps the recipient help others who might have got sick in turn.

“Dear love, in your name I bought a bed net that may save a child from fevers and perhaps death. And if that child stays healthy, the chance that other children in the community get sick is reduced.” It may not be the most poetic text for a card, but surely it would be one of the most beautiful.

Or take one step further removed and give to organizations that fight to make the world a fairer place for poor people — to Oxfam or Twaweza for example.  It may seem odd at first glance to give a holiday present of advocacy on behalf of the poor, disadvantaged, and dispossessed, but if you think about the person whose birthday is at the center of a lot of the festivities, it makes a fair amount of sense.

I’d be dissembling if I didn’t end by noting CGD is largely supported by donations from individuals and foundations (including the Gates Foundation), and I’m very, very grateful for that financing.  Among other things it means that my family can enjoy the holidays in a style to which I wish the vast majority of the world could get accustomed, and I’m happy to work with a group of people who share that as a goal.  And whatever presents you make or buy, happy holidays and merry giving.

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CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.