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How to talk about cash like an expert

Over the years, we’ve had lots of conversations with folks about whether it’s a good idea to simply give money to people who don’t have much of it. It’s a great conversation: it gets to some pretty core issues about human nature, and (spoiler alert) there is good news to share!

To help you have that conversation with friends, we’re sharing notes on the main points we usually cover. Remember, there is no magic formula and it’s always important to begin by listening. Still, these may help add some structure and address a lot of the common questions we all hear. On our end, we’d love to keep learning alongside you as you have these discussions – let us know what questions you’re hearing, what insights you have.

Here’s the basic story:

  1. GiveDirectly is the first nonprofit that lets donors like you and me send money directly to the poorest people on the planet, with no strings attached. Crazy as it may seem, we weren’t able to find this back in 2011 when we were looking for a way to give away our own money, and that’s why we created GiveDirectly. And yes, a lot of people thought we were crazy at first – one of our first big funders initially told us we “must be smoking crack.”
  2. Like many people, we had grown up hearing this was a bad idea. We worried that recipients would waste the money, or even use it in ways that harmed themselves like spending on alcohol or tobacco. We worried that they wouldn’t work as hard to improve their own situation. We thought that you have to “teach a man to fish.” (An aside: in the data, we are actually quite bad at teaching people to fish.)
  3. But now for the first time we have evidence – a lot of evidence – from rigorous experimental evaluations. Experimental impact evaluation didn’t start in a big way in development until the early 2000s, but since then there have been 100s of high quality evaluations of the impacts of cash transfers, including many randomized controlled trials.
  4. The bad things we worried about haven’t happened. A systematic review by economists at Harvard and MIT found no evidence that people work less when they receive transfers; another one by economists at the World Bank found that not only did spending on alcohol and tobacco not increase, it actually went down on average.
  5. Instead there have been positive impacts on just about any measure of well-being you can think of, including health, education, nutrition, assets, earnings – we even saw a study recently that found evidence cash transfers reduced suicides. There is no one answer to the question “what happens when you give money to poor people,” which perhaps shouldn’t be surprising: the whole point is to give people the flexibility to pursue the goals and opportunities they think are most important.
  6. At the same time, advances in payments technology have made it cheap and safe to reach the very poorest people on the planet. We send most payments over mobile money, which let us reach people in East Africa living on just $0.65 / person / day and deliver around 90% of each donated dollar into their hands. We’ve proven this model at a large scale – currently around $50M / year, similar to the scale of many government cash transfers programs – and could easily be moving two or three times as much with current capacity.
  7. Given this, we think that giving directly should be the default way of helping people who don’t have much money. Globally, we are already spending more in foreign aid and private charitable giving than it would take to end extreme poverty, at least in a purely financial sense. There will be times when we can do better – by creating a public good like a vaccine, for example. But we think we should always start from a place of respect: treat donated money as if it belongs to the poor, and ask if there is a good reason to believe that we can create more value for them by spending it ourselves than by letting them decide.