It is one of the worst cases of financial fraud in American history. The United States government has charged FTX CEO and co-founder, Sam Bankman-Fried, with using customer crypto funds to cover up company losses. Although one of the largest collapses ever of a financial company has dominated the evening news and every reliable Internet outlet, a less publicized, but just as serious event unfolded as FTX imploded.
Bankman-Fried based his pursuit of immense wealth to fulfill the goals that he established for a movement called effective altruism. His version of effective altruism hinged on supporting a wide variety of charities that concentrate on the world’s most serious issues. One of the most common questions surrounding the stunning collapse of FTX concerns the future of the effective altruism movement.
Is effective altruism all it’s cracked up to be?
What is Effective Altruism?
In 2012, the team members of 80,000 Hours and Giving What We Can collaborated to come up with the term effective altruism, as well as define what the term means. The collaboration between the two organizations led to the formation of the Centre for Effective Altruism. According to the Centre of Effective Altruism, effective altruism consists of two components.
First, it uses evidence and careful analysis to decide how to do the best with limited resources. Second, effective altruism takes action based on what a team of researchers discovers. Examples of effective altruism include discovering the most effective charities that help solve significant problems. It also encompasses helping people embark on careers that generate the greatest social impact.
Also referred to as strategic giving, effective altruism does not focus on how effective a nonprofit is in handling the funds required to reach an altruistic goal. Instead, the movement tries to recruit donors that know how to impact change by implementing effective time management strategies. The proponents of effective altruism consider a cause worthy if it delivers high social impact, as well as if other philanthropists have ignored the cause.
What Do the Skeptics Think?
One of the most common critiques of the effective altruism movement is that its focus on evidence-based results ignores worthy causes in which it is difficult to measure results. Many social movements and charitable organizations work hard to reduce or eliminate broad problems, such as racial discrimination and law enforcement brutality. These types of broad social issues make it difficult to measure progress by implementing standard data analysis tools.
Skeptics of the effective altruism movement also emphasize that an evidence-based strategy does not factor in the role of the emotional connections that develop from raising money for a charitable cause. When people decide whether to donate to a charitable cause, they often base their decisions on emotions, as opposed to the financial implications associated with making a donation.
You have heard the phrase “buyer beware” used to caution consumers to avoid businesses that follow shady practices. The same phrase has relevance when it comes to effective altruism. Although your nonprofit organization cannot afford to ignore the effective altruism movement, it should view the movement with a healthy dose of skepticism. After all, as Sam Bankman-Fried demonstrated, a philanthropist cannot be effectively altruistic if the philanthropist steals funds from customers to finance charitable causes.