Those of you who have been following Createquity for a very long time will remember my utter fascination with a radically transparent donor-advising think tank (and sometime grantmaker) called GiveWell.  The organization was founded by two former hedge-fund workers in their twenties with significant financial backing from their coworkers and associates. I’ve posted about GiveWell three times in the past: in late 2007, after head honcho Holden Karnofsky had landed a profile and online chat with the Chronicle of Philanthropy,providing the group with its initial exposure to mainstream media; last summer, after an astroturfing scandal set the organization back on its heels and cost Karnofsky his position as executive director of the organization he founded; and earlier this year, following a period of regrouping and the winning of a substantial grant from the William and Flora Hewlett Foundation. Now, a day before I head off to the Yale School of Management Philanthropy Conference, which happens to be where I first became aware of the organization two years ago, GiveWell is back in the news.

The occasion is, on its surface, a pretty silly one: nothing more than a press release, authored by one of GiveWell’s board members, that touts GiveWell along with several other organizations as resources for donors to consider when thinking about their holiday giving priorities this season. The press release emphasizes the limitations of the overhead ratio (how much of each donation is spent on programs vs. administrative costs and fundraising) as a tool for evaluating charities, going so far as to label it “the worst way to pick a charity.” That theme has become a common refrain, not just for GiveWell but for many in the ranks of the philanthropic intelligentsia including Sean Stannard-Stockton, the Hewlett Foundation, Dan Pallotta, and so forth.

Yet this seemingly ordinary press release has caused a minor earthquake in the philanthropy blogging community, almost entirely due to the appearance in its text by Ken Berger, CEO of Charity Navigator. Charity Navigator is almost universally recognized (and pilloried) as the entity responsible for popularizing the overhead ratio in the first place as the most important way to choose recipients of donations. Its entire reputation has been built on such ratings, and charities have been known to structure their financial reporting mechanisms to score favorably with the agency. Berger, however, is fairly new on the scene, and has previously recognized the need to expand our toolbox of understanding beyond financial metrics. He explains his decision to sign on to the press release here, and gets major kudos from longtime critics Stannard-Stockton (who now has an advising relationship with Charity Navigator) and Karnofsky.

Lost in some of this discussion is the progress that GiveWell has made since its early missteps. Watching this organization mature from afar has always been an interesting experience to say the least, enriched immeasurably by GiveWell’s commitment to making its organizational records (including audio recordings of its board meetings) public. This radio reality show doesn’t always broadcast on schedule, but as unscripted theater the meetings still pack a dramatic punch: the December 15, 2008 episode, in particular, is a great study in what happens when a board meeting lasts longer than anyone wants it to.

GiveWell recently revamped its website with a bunch of new reviews of international charities, and recommended a few while continuing to lament the lack of hard data available in the sector. GiveWell sets a high bar for its recommendations: Karnofsky and cofounder Elie Hassenfeld are only looking for organizations with proven, scalable approaches that can demonstrate an actual need for additional capital. Their approach is emotionally frustrating on many levels, but logically compelling: they reason that for casual individual donors like their coworkers and former selves who don’t have the time or expertise to gain deep insider knowledge, the best strategy is to funnel money towards interventions known with certainty to be effective and organizations who can show that they are delivering them. Moreover, unlike most donor advisors, they do not shy away from judging the relative merits of causes: they make a fervent case for supporting good works in the developing world rather than closer to home, and they are much more favorably inclined toward health-related initiatives than other areas like education.

Recently, they’ve used this heuristic to poke holes in some of the nonprofit sector’s most sacred cows: UNICEF, Kiva, and Smile Train (who subsequently got caught in some website-scrubbing in the wake of GiveWell’s criticism). Even the venture philanthropy darlings at the Acumen Fund have received the GiveWell treatment, though arguably with kid gloves. For Karnofksy and company, no charity, no matter how sexy or well-regarded in the media, is worth large-scale investment without rigorous evidence to show that things are working.

It doesn’t take a rocket scientist to predict that the arts do not fare well in such a context. Normally, I would be tempted to chalk their omission up to ignorance on the part of the decisionmakers, but GiveWell’s relentless logic has its roots (whether they realize it or not) in Maslow’s heirarchy of needs. The arts clearly have their place at the top of that pyramid, self-actualization, rather than at the bottom with basic physiological efficacy. GiveWell’s philosophy leaves open the question of what’s more important on a grand scale — after all, Western education, technology, etc. have created much of the economic wealth that is now available to help raise the standard of living in the developing world. But in the context of existing, reasonably high-profile nonprofits and NGOs, it’s hard to argue with their approach.

Just because GiveWell doesn’t pay much attention to the arts, though, doesn’t mean the arts shouldn’t pay attention to GiveWell. The organization’s draconian demand for scientific rigor would have been a laughably unrealistic standard in a previous era. Now, though, the ability to distinguish between objective truth and wishful thinking will only become more and more relevant as nonprofits become more sophisticated and we find ourselves closer and closer to a data revolution. Moreover, its commitment to information-sharing and open-source reasoning is perfectly in line with the principles that are making that data revolution possible. GiveWell may still be just an experiment, but it just may be Generation Y’s most significant contribution to philanthropy thus far.