Why would charities behave any differently than profit-making assets?
The difference (for some) isn’t in uncertainty, it’s in utility, which isn’t really made clear in the OP.
Risk aversion for personal investment stems from diminishing marginal utility: Going from $0 to $1,000,000 of personal assets is a significantly greater gain in personal welfare than going from $1,000,000 to $2,000,000. You use the first million to buy things like food, shelter, and such, while the second million goes to less urgent needs. So it makes sense to diversify into multiple investments, reducing the chance of severe falls in wealth even if this reduces expected value. E.g. for personal consumption one should take a sure million dollars rather than a 50% chance of $2,200,000.
If one assesses charitable donations in terms of something like “people helped by anyone” rather than something like “log of people helped by me” then there isn’t diminishing utility (by that metric): saving twice as many people is twice as good. And if your donations are small relative to the cause you are donating to, then there should be significantly diminishing returns to money in terms of lives saved: if you donate $1,000 and increase the annual budget for malaria prevention from $500,000,000 to $500,001,000 you shouldn’t expect that you are moving to a new regime with much lower marginal productivity.
But you might care about “log of lives saved by me” or “not looking stupid after the fact” or “affiliating with several good causes” or other things besides the number of people helped in your charitable donations. Or you might be donating many millions of dollars, so that diminishing impact of money matters.
The difference (for some) isn’t in uncertainty, it’s in utility, which isn’t really made clear in the OP.
Risk aversion for personal investment stems from diminishing marginal utility: Going from $0 to $1,000,000 of personal assets is a significantly greater gain in personal welfare than going from $1,000,000 to $2,000,000. You use the first million to buy things like food, shelter, and such, while the second million goes to less urgent needs. So it makes sense to diversify into multiple investments, reducing the chance of severe falls in wealth even if this reduces expected value. E.g. for personal consumption one should take a sure million dollars rather than a 50% chance of $2,200,000.
If one assesses charitable donations in terms of something like “people helped by anyone” rather than something like “log of people helped by me” then there isn’t diminishing utility (by that metric): saving twice as many people is twice as good. And if your donations are small relative to the cause you are donating to, then there should be significantly diminishing returns to money in terms of lives saved: if you donate $1,000 and increase the annual budget for malaria prevention from $500,000,000 to $500,001,000 you shouldn’t expect that you are moving to a new regime with much lower marginal productivity.
But you might care about “log of lives saved by me” or “not looking stupid after the fact” or “affiliating with several good causes” or other things besides the number of people helped in your charitable donations. Or you might be donating many millions of dollars, so that diminishing impact of money matters.
Addressed in another comment