Everybody seems to have a set of threshold values below which they can spend money on something and not give it a second thought and above which it is an important purchase. Clearly these thresholds differ significantly between people — some people think spending $50 on a nice dinner is no big deal and some people feel physically ill thinking about it. These thresholds also differ significantly within the same person for different categories of products. The same person (me) who will agonize when cabbage prices go from $0.69/lb to $0.89/lb will buy a $500 phone without thinking about it.
I’m sure there’s work on this phenomena in psychology or economics! However, the salient feature of this phenomena I haven’t seen discussed is how this phenomena behaves when instead of purchasing a product or service you are giving the money to someone else either as an investment or as charity. In this situation, importance usually manifests as involvement. Below the threshold, you invest/donate the money and sometimes literally forget about it. Maybe occasionally you check in on how a stock you bought is doing, read an update email from an angel investment, or look at someone’s updates on Patreon. Above the threshold, the feeling totally changes. You want to do a ton of due diligence. You want guarantees. You want to be involved. You want to see more progress. If you don’t see regular updates, you are bothered. Again, these thresholds differ wildly between people - for some people its $50, and for some it’s $50,000.
Two particularly interesting features of what I would call “caring thresholds”: first, the thresholds differ significantly depending on whether people think they can get a monetary return on it; second, people don’t actually know how their own thresholds before giving the money.
People’s caring threshold for investments seems to be much higher than it is for charity. The same person who will write a $50k angel check to a startup after hanging out with the founder for an hour and literally forget about it will agonize about a $5k check to a philanthropy and later breathe down their necks constantly. These differences don’t seem to clash with intuition, but they are intriguing. One explanation might be that in an investment, even though you might lose all your money and despite telling your brain that it should assume the money is zero, your brain still thinks of an investment as being money in your possession. By contrast, in charity, the money is clearly gone and your brain sees it as a purchase. And you get something for purchases. Speculatively, the investment/charity gap might have something to do with Knightian Uncertainty. Any possible outcome for an investment, no matter how uncertain, is going to be a dollar value.^1 This means that the “possibility” space
People not knowing where their own caring thresholds lie manifest in both investment and charity. “It’s no big deal” they tell themselves or the founder. But then they turn into the investor or patron that is constantly emailing and asking how it’s going. Money from these people is often not worth it. At best they’re distractions. At worse, they’re dangerous to organizational goals and priorities, exerting enough influence as to actually change outcomes. These latter scenarios can happen through soft influence because the organization depends on the donor/investor for future cash (or just cares a lot about what they think) or through hard influence if they e.g. take a board seat.
People are more risk averse than they think or say they are, by at least a factor of 2. — unsolicited comment from someone starting a nonprofit
^1: Assuming it’s not a Ponzi scheme that lands you in a legal shitshow. Which is in fact illustrative. Consider how your thought process about an investment would change if you learned that it was of questionable legality. You would need much more certainty that it was going to work or the possibility of a much larger return, all else held constant.