Why would charities behave any differently than profit-making assets? Do you think that charities have less uncertainties?
The confusion concerns whose risk is relevant. When you invest in stocks, you want to minimize the risk to your assets. So, you will diversify your holdings.
When you contribute to charities, if rational you should (with the caveats others have mentioned) minimize the risk that a failing charity will prove crucial, not the risk that your individual contribution will be wasted. If you take a broad, utilitarian overview, you incorporate the need for diversified charities in your utility judgment. If charity a and b are equally likely to pay off but charity a is a lot smaller and should receive more contributions to avoid risk to whatever cause, then you take that into account at the time of deciding on a and b, leading you to contribute everything to a for the sake of diversification. (It’s this dialectical twist that confuses people.)
If your contribution is large enough relative to the distinctions between charities, then diversification makes sense but only because your contribution is sufficient to tip the objective balance concerning the desirable total contributions to the charities.
The confusion concerns whose risk is relevant. When you invest in stocks, you want to minimize the risk to your assets. So, you will diversify your holdings.
When you contribute to charities, if rational you should (with the caveats others have mentioned) minimize the risk that a failing charity will prove crucial, not the risk that your individual contribution will be wasted. If you take a broad, utilitarian overview, you incorporate the need for diversified charities in your utility judgment. If charity a and b are equally likely to pay off but charity a is a lot smaller and should receive more contributions to avoid risk to whatever cause, then you take that into account at the time of deciding on a and b, leading you to contribute everything to a for the sake of diversification. (It’s this dialectical twist that confuses people.)
If your contribution is large enough relative to the distinctions between charities, then diversification makes sense but only because your contribution is sufficient to tip the objective balance concerning the desirable total contributions to the charities.
This is the most insightful thing I’ve read on LW today.