Why Fewer, Larger Donations Beat Spreading Money Thinly

These are listed in the order worth acting on, which with concentrating giving on fewer organisations is not the order they are usually presented in.

The fixed cost of receiving anything

Processing a donation involves a payment fee, a database entry, a receipt and, in many jurisdictions, a tax record that must be retained for years. Most of that cost is fixed rather than proportional, so it consumes a much larger share of a small gift than of a large one.

Card fees typically combine a percentage with a flat charge per transaction, and it is the flat component that hurts the smallest donations. None of this makes small gifts worthless, but it does mean that ten separate contributions cost noticeably more to handle than one combined one. The same logic applies across organisations, since each charity you support runs its own copy of the same administrative machinery.

The cost of keeping in touch

Once you appear on a database you become someone the organisation communicates with, and communication has a unit cost whether it is postal or digital. Charities forecast the lifetime value of a donor and spend against it, which is rational but means a low-value donor can be cultivated at a loss.

A donor supporting twelve organisations receives twelve appeal cycles, twelve annual reviews and twelve reactivation campaigns aimed at the same wallet. Some of that spending would not have happened had the donor concentrated, and the money saved is not visible to anybody in the transaction. Opting out of communications reduces the effect and is worth doing regardless of how many organisations you support.

Attention is the scarcer resource

Checking whether an organisation is well run takes real hours, and the number of organisations anybody can genuinely evaluate is small. Spread across twelve recipients, the research budget per organisation collapses to the point where the choice is effectively made by advertising. Concentration lets you read actual accounts, follow the work over several years, and notice when something changes for the worse.

That noticing is the only quality control an individual donor really has, since no regulator assesses whether a charity is effective at what it does. A donor who cannot name what their money funded has outsourced the decision to whoever wrote the most affecting appeal letter.

Why the investing analogy fails

Spreading investments reduces risk because returns are what you care about and they are uncorrelated across holdings. Spreading donations does not work that way, because you are not trying to hedge an outcome, you are trying to cause one. A tenth of a sum given to ten organisations does not produce a tenth of ten outcomes; it produces very little in each, plus ten sets of overheads.

Where scale genuinely matters, such as funding a post or a piece of equipment, a fractional contribution may not move anything at all. The exception is where an organisation is large enough that any individual gift is marginal, in which case the argument for concentration weakens considerably.

When spreading is the right call

If you are deliberately funding several small local groups that could not each absorb your full budget, spreading is exactly correct. Concentration also carries a governance risk, in that a single organisation becoming dependent on one donor changes the relationship in unhealthy ways. Some donors split between a long-term core commitment and a small discretionary pot for the things friends and neighbours ask them to support.

Over a funding cycle, that structure keeps the social obligations of giving separate from the part of the budget meant to accomplish something specific. The distinction worth holding is between giving as a relationship and giving as a purchase, because they answer to different rules.

Building a shortlist you can defend

Start from the problem rather than the organisation, since the same cause is usually addressed by bodies of wildly different competence. Read two consecutive years of published accounts, which most jurisdictions require registered charities to file and make publicly available. Look for whether the organisation describes what did not work, because an annual review with no setbacks in it has been written by the marketing department.

From the receiving end, commit for at least three years if you can, because the value of a donor to a charity rises steeply with how long they stay. Then stop looking, and let the compounding effect of a stable relationship do the rest.

Everything above, in order of what to do first

1. The fixed cost of receiving anything. Processing a donation involves a payment fee, a database entry, a receipt and, in many jurisdictions, a tax record that must be retained for years.
2. The cost of keeping in touch. Once you appear on a database you become someone the organisation communicates with, and communication has a unit cost whether it is postal or digital.
3. Attention is the scarcer resource. Checking whether an organisation is well run takes real hours, and the number of organisations anybody can genuinely evaluate is small.
4. Why the investing analogy fails. Spreading investments reduces risk because returns are what you care about and they are uncorrelated across holdings.
5. When spreading is the right call. If you are deliberately funding several small local groups that could not each absorb your full budget, spreading is exactly correct.
6. Building a shortlist you can defend. Start from the problem rather than the organisation, since the same cause is usually addressed by bodies of wildly different competence.

The takeaway

Pick the small number of organisations you can actually keep an eye on, then stay with them.

Passed on beats recycled, and both beat replaced.