What is effective altruism?

Imagine you’re taking half of what you have in your portfolio and invest in company A. What you’re doing is that you’re putting your money into the company in hopes that it will use the capital effectively to grow the business. As a result of good governance and business growth, you see your investment grow in the form of capital gains and dividends. You’ve struck gold and took profit. Your first multi-bagger stock pocketed.

Then, let’s take the other half of your money and invest in company B. Alas, because of the company’s outdated business model, the business is losing its market share and competitors bloomed. You see the stock price plunge over time and suffered massive losses.

In hindsight, you would’ve wished that you put your second half of capital in company A, won’t you?

Let’s take that same money and imagine you’re putting it into charity vs a drunk gambler. The charity organization makes full use of your money to setup shelters for the homeless and donates food to the retrenched low-income individuals impacted by COVID-19. The drunk gambler put a big chunk of your money into slot machines of a casino, and bought more alcohol to drink away his sorrow as he loses it all.

So, who do you prefer to donate the money to?

Let’s take a look into what Peter Singer has to say about effective altruism on his TED talk.

Criticisms

Now, there are also select few who object this notion and even call the effective altruists as elitists.

Some say that animal charities are not the most effective. Does that mean we should not donate to them? What of the poor suffering animals if SPCA lacks of funds for animal food?

What I Think

From time to time, I would contemplate about the concept of early retirement. Should we really retire young? If we can keep earning money while we’re able and continue to help out as many people as we can, why should we stop? Maybe, I will find out why as my body grows old and becomes weary from the many challenges ahead in my career. Maybe my mind will change as I have kids of my own.

I am in support of the idea of effective altruism. The thought of making the world a better place is good. But if someone can make it even better, wouldn’t it be a wise decision to help that someone out, so more lives can be impacted positively?

Above all, what if you apply your investment strategies in helping people out?

For example, construct a portfolio of effective charity organizations to put your money into. Diversify and donate to multiple causes of your choice. Rebalance your portfolio at a regular interval and determine if there’s a need to move the money to a more effective organization. Dollar cost average and donate regularly. Time the market by focusing your money on those causes that are in need of the money the most.

If we can collectively assist those in need with effective altruism in our minds, I’m certain that the world will be a better place. Sure, it may not be a perfect solution, but at least we’re making an effort right?