I like Indian food more than sushi. And I like sushi more than Italian food. When going out for dinner and choosing which to eat, does this mean I always choose Indian? Of course not. I’d tire of Indian food.
On my savings account, I like earning 3% interest more than 2%. And I like earning 2% more than 1%. Suppose three banks offer accounts identical except for the interest rate: would I always choose the 3% account? Or might I say, “Hey, 3% is boring, I think I’ll try 2%?” Of course not. I’d stick with the bigger payoff.
Yet when it comes to charitable giving, most people spread their money around. Why is this? And is it an effective strategy for helping people, or just a way to make ourselves feel good?
I look at this three ways:
First, we might think that even the best charity can absorb and wisely spend only so much money — that the impact of our next dollar is lower than the impact of the first. So we give to several worthy causes. And this may be the prudent approach for huge givers like Bill & Melinda Gates, Mark Zuckerberg, and Warren Buffett — but most of us don’t have to worry about that.