Donation Alchemy

One fertile area for creativity (and anything new is creativity says John Cleese) is in the area between zero and some. It’s in these places where something moves from free to costing that behaviors change. Oh, and it doesn’t have to be an actual cost. Mental accounting works too.

There’s a concept in charitable giving called overhead aversion.

“We know that donations tend to decrease when overheads increase. That makes sense. People want to feel confident they are having a tangible impact. Interestingly, this only applies when donors have to pay for the overhead themselves. In one study when donors are informed that an initial major donor has covered the overhead, donors are more likely to take an overhead free donation option than opt for a 1:1 matching scheme — even though the matching scheme will yield more for the charity.” – Maddie Croucher

This felt right. My reaction was, well if they muck up the overhead at least I know my money was well spent. This isn’t logical, but I’m not sure it is wrong. At my daughter’s school they collect canned food for a local food pantry. There’s a celebration for the class with the largest mound outside its classroom door.

Now, it would ‘do more’ to donate cash, rather than send food of unknown cost, calories, and willingness to eat, and again I’m not sure it’s wrong. It feels good to know my money was well spent and that the food we bought won’t go to waste.

This school’s canned food drive might be partially driven by the foot-in-the-door effect:

“I always thought that asking small, an ask you can’t refuse from the godfather, works best. If you’re giving three dollars a month it’s much easier to up that to eight or ten than it is to go from naught to fifteen.” – Rory Sutherland

It’s not like I have to find cash or write a check and put it in an envelope. The kidney beans and mac ‘n cheese are within arms reach. Not only that, my kids collect it.

Charitable donation best practices are new to me but I’d wager that what works is ease. Make things financially, intellectually, or socially easy and people will do more. If the overhead is covered that removes the question: will my money go to to those who need it? A small ask might mean that people find doing easier than considering whether or not to. Charities, schools, or businesses can all remove the hurdles for their customers.


One other idea with-regards-to the classroom donations is the social lesson. The food is tangible and the kids collect it. There’s also probably some social signaling pressure among parents to ‘show up’. So net-net is a canned food drive ‘better’?

Danny Meyer is an Alchemist (and you can be too)

“A question that stymied me for years and years, a question I got almost anywhere I went, it seemed like every organization asked, ‘How do you manage to hire so many awesome people?’.

“I said to look for fifty-one percenters, people who are emotionally wired to be happier themselves when they delivery happiness to you.”

Danny Meyer, ILTB

The central idea to Alchemy is to optimize important but overlooked things, with especially large returns from inexpensive yet important finds. How to find these things? Numbers provide a good clue.

When things are easy to measure, they are numerate. These numerate items are easy to discuss, to compare, to enter into spreadsheets then sum, average, and compare again.

Danny Meyer has succeeded (in part) because he competes in new areas. In the beginning of the podcast he tells O’Shaughnessy about competing on food and wine and ambiance and all that, but that’s what everyone does. It’s hard to have THE BEST food when everyone is trying to have that.

THE BEST food has convention. It has history. There are norms. There is price. Having THE BEST food in New York City is like being the best investor in New York. Good luck.

However, being the best at something slightly different is quite a bit easier. There’s a lot more area and a lot less competition if you do things off the beaten path.

Meyer found this in hospitality. Listening, we don’t get the impression that the tag wags the dog, but it’s got to be part of the reason Meyer is around, and talking on the Invest Like the Best Podcast.

Often Alchemy is using (free) psychology rather than (costly) structure. Better service rather than better linens.

One story Meyer tells in the book is about ‘the medicine cabinet’. One establishment was having the normal rumble of friction getting its legs under it and when patrons had a bad time, Meyer and staff offered a glass of dessert wine to soothe their pain.

Not only was the wine complementary, but it was special. At the time, dessert wines were novel so it was a special treat. The kicker was that they were the cheapest wines Meyer stocked.

Alchemy is like improving weaknesses, there is a lot of return for the initial effort, often much-more than optimizing factor f for the tenth time.

Danny Meyer is an alchemist. From the people he hires to the businesses he starts.

You are an alchemist. Find something that’s important but not measured, and deliver that.