Case study: Working in the financial sector to promote a flourishing long-term future

By Benjamin Todd · Published November 13th, 2013

Introduction

This post is a write up of an in-depth case study, exploring one person’s decision about where to work in the financial sector, from the perspective of helping the long-run future.

Key recommendations made

If you particularly care about long-run impacts, these are some of the interventions that have been pursued.
We rate cause prioritisation research and advocacy as high priority (to be explained in an upcoming post)
If you’re pursuing prioritisation research within finance and don’t want to pursue earning to give, then we recommend generally aiming to build career capital, building a community of people who support prioritisation, and promoting areas of social finance that seek to assess the social value of different projects. Though note that this is a judgement call.

What we learned

We prepared this list of ways that people are trying to improve the far future.
The direct impact of doing ‘impact investing’ (attempting to invest in socially beneficial companies) doesn’t seem high relative to donations to cost-effective charities, but the industry might be improvable, could produce useful research and could move more resources into altruistic causes (as we’ll explain in an upcoming report).
Impact investing seems like a reasonable area for someone looking to build career capital and promote prioritisation, though we don’t have much confidence in this.

Summary of the study

Plans before starting

Roles:

Work in socially responsible investment – 50% probability
Return to quantitative risk management and do earning to give – 30% probability
Consult social enterprise – 10% probability
Other (social impact bonds, author, start-up) -10% probability

Causes:
Broadly interested in contributing to establishing the conditions needed for a flourishing future. Expected to contribute to this by improving how the financial sector measures and takes account of the social value of different investments.

Questions considered

David’s initial question was: “What job should I enter in order to have more impact in finance?”

During the case study, we also considered:

What cause should he support?
Which sector is most promising given that cause?
Is impact investing high impact, and how might it be improved?

What we did with him

Helped him clarify his initial plans
Discussed which causes to support
Helped him develop a framework to evaluate his potential next steps

How much time did 80,000 Hours staff spend on the study? ~35 hours between July and October 2013

Information gained

We introduced David to the latest research concerning how to improve the long-run future of humanity
We did an analysis of the impact of impact investing and made a list of ideas about how impact investing might be improved.

Plan changes

We didn’t cause a broad shift in David’s role plans, since he still listed entering socially responsible investment as his best guess, though we helped him decide to focus on pursuing jobs in impact investment.
However, we did alter his cause plans. We introduced him to the arguments in favor of prioritisation research (research aimed at prioritising different projects in order of their expected social value) being among the best ways to help the long-run future, and he now intends to use a job in finance to build a community interested in prioritisation.

Other benefits

We may have made some contribution to helping him land a job at a start-up impact investment firm:

I think that my discussion with you about prioritisation over the last couple of months has given me inspiration and a clarity of purpose that has perhaps made me a more interesting candidate in interviews…While it is probably likely that I would have been at the same networking events and met these people with or without 80,000 Hours’ help, I may have not found them as interesting, and they might not have found me as interesting, if I didn’t have the clarity of purpose that came from our discussions.

What is he doing now?
David started a job in impact investment, until unfortunately the start-up closed down. He’s currently pursuing quant finance and impact investing jobs.

Full write-up of our research

In the rest of the post, we’ll overview the steps we went through with David and our main research findings.

Background

David has just finished a 5 year stint in quant finance consulting. Over that time, he came to care more and more about making a positive impact with his career. He came to us during a period of reflection. He had just left a job in financial risk management, in which he was doing earning to give, and was wondering how he could have more direct impact. He has strong maths skills, and went to university at a young age.

Initial Cause and Plan Discussion

We initially started by clarifying David’s career model over a long meeting and several emails. This involved stating his best guess role and cause over the medium term, as well as his best guess next steps.

Before moving on to discuss jobs, we decided it was important to further clarify David’s cause. We’re sympathetic to David’s view that the most important thing we can do today is establish the conditions needed for a flourishing long-term future. However, we were concerned that he was too narrowly focused on achieving this aim via promoting socially responsible finance.

We wrote a report, which lists the ways that people in the effective altruism community have aimed to contribute to building a good long-run future.

We also discussed our current best guess about how to help the long-run future. We tentatively think your primary concerns should be: (i) having more research done into what causes most help the long-run future and (ii) building a community of people who will act on this research. We’ve written a report arguing for more long-run focused cause prioritisation research, which we shared with David (forthcoming on the blog).

David was persuaded that these aims are higher priority than focusing on improving socially responsible finance, however, he still suspected that it would be best for him to find a way to further these aims within finance (or related areas like social enterprise), since he already has relatively strong career capital in the sector.

Which sector is best within finance?

After this initial discussion of which cause to support, David asked us which opportunities within finance might be best for improving the long-run future, with a particular focus on social finance. Note that David wasn’t strongly interested in pursuing earning to give, so we didn’t spend much time on earning to give paths.

Our first recommendation was that the immediate impact of the different roles was not likely to be highly important relative to more indirect benefits, like building a community interested in prioritisation or carrying out more widely applicable research, which are two of our high priority causes (as we’ll write about shortly). This is because we’re sceptical that social finance directly creates much value, as we outlined in an upcoming report on why impact investing might not have much impact.

Instead, we recommended focusing on:

Building a community of people interested in taking an evidence-based approach to solving social problems.
Developing improved methods for assessing the social value of companies and projects
Gaining general career capital (useful skills, connections, and credentials) that could be turned to good ends in the future.

After further discussion, we came up with a list of seven factors to evaluate his sector options in terms of their potential to further these aims:

Network potential
- How big is the industry, and how large could it be?
- How influential are the people who take it seriously?
- How much money would you be directly influencing?
Potential to be ‘impressive’
- Can you do something new and be successful?
- As a way to make this more concrete we asked: Could the project be impressive enough to appear on the front page of the New York Times (or similar)?
Skill development
Relevance to top cause: How closely do their current projects relate to building a community interested in far future focused prioritisation and furthering prioritisation research?
Flexibility: To what extent can you redirect the aims of this sector as you learn more about what’s most important?
Comparative advantage (use of prior skills): Does it allow you to use your mathematical knowledge?
Lifestyle and Earnings

Why these factors?

The first three are focused on career capital, since we thought that David’s next job is most likely to be a stepping stone to some better opportunity to make an impact, rather than the end goal.

The next two are focused on evaluating the potential for impact in the job itself: To what extent might it help the broad goal of building a community that wants to help the far future and furthering prioritisation research?

The sixth is another heuristic for building career capital, and was important to David for personal satisfaction.

Finally, we included a lifestyle and earnings factor to capture the most important personal considerations. Earnings are also important because David plans to continue making significant donations.

We didn’t include his interest in the jobs, because besides the extent to which the jobs include mathematical skills, he didn’t think it would be an important differentiating factor. We also didn’t include value of information as a factor since it didn’t seem that one path offered much higher value of information than another.

We feel fairly confident that they capture many of the most important considerations, though would not be surprised if we had missed something important.

The assessment

David assessed the following sectors on these factors:
* Institutional socially responsible investment – buy or sell side (investment funds that invest partially on the basis of social returns, and in particular, avoid investing in harmful industries)
* Impact investment funds (investment funds that aim to invest in (often small) companies with high social returns)
* Social entrepreneurship (starting business that aim to have high social returns)

He ruled out social entrepreneurship at this stage, since he doesn’t feel he has a good enough idea to start a company (but he can revisit it in the future). Working at an institutional socially responsible investment firm seems promising, because these firms have more flexibility in what they offer (whereas the sell-side focuses on serving the existing needs of clients) and there seems to be more scope to introduce improvements to the sector.

Overall, impact investment seemed best, because it has many of the advantages of large buy side socially responsible investment, but is also rapidly growing and seems more flexible to innovation.

He decided to begin a job search in this area by reaching out to his network and making applications.

Job applications

David was soon offered a place on the founding team of an impact investing start-up as the result of his networking. We both agreed this was a highly promising, if high risk, option for building career capital (in part because we think entrepreneurship in general is promising for building career capital), potentially bringing new ideas into the finance sector and for finding other like minded people interested in taking an evidence-based approach to building a good future.

Unfortunately, this start-up was disbanded in the following months due to disagreements among the founders. David is now looking for jobs within quantitative finance and impact investing.

How to improve impact investing?

David also asked us to look into the size of the positive effects created by impact investing as it exists now, and how it might be improved. Our initial suspicion was that most impact investing wouldn’t have especially large positive effects relative to making donations to GiveWell recommended charities. This was borne out by our analysis, which we will release in an upcoming report.

Nevertheless, we did conclude that certain forms of impact investing could have a positive impact. Since David would be working in impact investing, he’d be influencing 10-100x as much money as he could donate himself, so even if impact investing has a relatively small impact, the larger scale could make it significant.

In addition, we outlined a variety of ideas for how the sector might be improved, intended as a starting point to further investigation.

Extending this work

We’re still in touch with David to help him select jobs and find ways to improve social finance.