I agree with Rob's points.
This article makes several statements that I interpret as somewhere between intentionally misleading and outright incorrect.
For instance, this reply says the 2.19% Fed Funds rate was the prevailing rate in 2019, and isn't intended to be a forecast of the future. But since we know the Fed Funds rate is 0% today, why would that rate be used to argue for a forward-looking change in behavior?
Similarly, the 2019 return of a short-term bond fund gives literally no information about what returns a similar fund would offer today. Indeed the beauty of the bond market is that it does offer guaranteed future returns if you hold a bond to maturity. As of today, US government bonds (which carry no risk of default) offer a guaranteed annualized return of:
So assuming an organization needed to make a grant within 12 moths, they could currently expect to make 0.10% on their cash balance. Needless to say this is 1/10th of 1%, or <1/20th of the figure cited in the post. And it seems a stretch to assume organizations hold cash for 12 months before granting it. So the likely benefit is perhaps at best 1/10th and potentially <1/100th of what's cited here.
Granted, this is not necessarily obvious stuff. However it is and should be easily understood by anyone holding themselves out to be giving financial advice to other people or institutions.
Hi Aaaron,
I'm currently the chair of OFTW's volunteer group so hopefully can help answer this. I'll take your questions together as they're related.
On the current giving as % of income rate: There's a chart of our progress on this over time about half way down the post. This year, about half of donors are giving at least 0.9% of their income.
On average all time the proportion would be lower than this. This is an area where we're making progress by a) better understanding our donor base (what makes them resistant to giving more?) b) better training / equipping our campus leaders to ask their classmates to make a larger pledge (our chapter leader training has materially improved on this front) and c) improving our donation platform settings and defaults.
We have a small (single digit) number of donors who have given meaningfully more than this as a result of OFTW. We've done some small experiments aimed at getting existing donors to increase their pledges, but haven't had much success and haven't prioritized this as much as we have training new chapter leaders and increasing our penetration rates in existing chapters.
Ultimately getting people acculturated to thoughtful, effective giving is the near term goal, because if we build that habit it gives us a platform for bigger asks. If you think about the long term there are two potential prizes: 1) get a generation of people to give to effective causes and to give more, earlier than they otherwise would, and 2) get people to give more effectively on the path they would've otherwise followed (e.g. once someone is mid career and would normally give to their alma mater, give to AMF). Clearly 1) is a much bigger, more valuable change, and we want to work out how to do it. But preserving a relationship and building affinity over time also keeps 2) alive as an option, which is valuable.
Steve
Sure:
Cash balance methodology
You say:
Incorrect and misleading statements in these four paragraphs:
In your reply to me you suggest:
Even this approach seems incorrect or misleading:
Potential returns of other investment options
You say:
Citing the one year, backward looking return of JPST is misleading, and citing the one year drawdown performance is naive:
Conclusion and staff time
You say: