Philanthropists of the World: You’re Doing It Wrong!

A new book takes issue with those who give for the wrong reasons. Does it really matter why we give, as long as we give? Here are three ways to fix charity.

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Warren Buffett, chairman and chief executive officer of Berkshire Hathaway, Inc., plays bridge with shareholders during an event in Omaha, Neb., UMay 5, 2013

As baby boomers barrel into retirement in larger numbers with better health and more energy than any previous generation, philanthropy is getting a makeover. Boomers don’t want to give time at a soup kitchen; they’d rather mentor a small business. They don’t want to throw money into the black hole of a mega-charity; they’d rather know how their money is going to be spent — and possibly have something to say about it.

This is disruption of a high order, which I explored, with co-author Ken Dychtwald, in a 2010 book, A New Purpose. Others, including the notable philosopher Peter Singer, have opined on how much the current generation of givers ought to be giving.

Now comes the self-styled philanthropist Eric Friedman with an intriguing argument about how one should give. In his forthcoming Reinventing Philanthropy: A Framework for More Effective Giving, which is scheduled to be published in September, Friedman takes all sorts of givers to task for personalizing their charity rather than weighing what most needs to be done. In his view, donors must figure out what the world needs, not what they want the world to have, and give accordingly.

“Most generous, well-intentioned donors are failing to meet their potential,” Friedman asserts. “They aren’t giving to the most impactful charities. Sometimes I felt like a jerk criticizing really good people, but it’s important to discuss this candidly.”

Friedman is hardly a household name. He’s a Chicago-area actuary who, at age 35, gives away 10% of what he makes—practicing what I’ve called Everymanthropy, giving while living in affordable chunks. He set out to give for maximum impact and quickly grew frustrated with the charitable world’s infrastructure, which he says plays to donors’ ego, self-interest, and disinclination to ask tough questions.

Friedman is not the first to attack philanthropy on such grounds. The Chinese Zen Master Chuang-Tzu argued in the 4th century B.C. that most philanthropy was meant to further one’s own business or personal interests. The 19th-century Frenchman Alexis De Tocqueville described philanthropy as “self-interest, rightly understood.” German philosopher Friedrich Nietzsche agreed.

In New Purpose, I quote billionaire Scotsman Sir Thomas Hunter taking aim at Warren Buffett, of all people, for being a lazy giver. In 2006, Buffett pledged $31 billion to the Bill and Melinda Gates Foundation. In doing so, Hunter told me, Buffett shirked his responsibility. “If you’re clever enough to make $31 billion…I would love to have your thinking in trying to solve the world’s seemingly intractable problems,” Hunter said. (Buffett has a different view: He believes the Gates foundation can do a better job giving away all that money than he ever could.)

Still, Friedman isn’t just throwing stones. He seems to genuinely wonder why folks who give don’t take a keener interest in relatively cheap but life-saving measures like a simple mosquito net or clean water to combat deadly illness in developing nations over things like art museums and university buildings. He’s all about giving efficiently, and to causes that address human suffering–personal passions be damned. It’s a what-matters-most approach to philanthropy that certainly de-clutters all the charitable options out there. In the end, Friedman puts forward a three-point plan for reinventing charitable giving:

  • More critical thinking. Today’s dominant paradigm is giving to causes that you care about, such as your alma mater, the opera, or an illness that touched your life. But giving based on emotional ties has much less impact than giving based on trying to make the biggest dent in the world’s toughest problems, Friedman says. He adds: “We should reserve the highest praise for donors with the most altruistic motives.”
  • Better vetting systems. The most popular charity evaluators focus on things like a nonprofit’s overhead and the percentage of expenditures that go directly to the cause. This is useful information but does not address whether a charity’s programs are effective. For that kind of analysis, Friedman recommends Givewell.org and givingwhatwecan.org.
  • Donors need to roll up their sleeves. Only 35% of donors do any research and just 9% do more than two hours of research before giving, according to Hope Consulting. Donors should think not just about what tugs at their heart but about the world’s greatest problems and the charities that address them. “The irony is that as donors make their giving decisions based less on emotional appeals and more on evidence about what works best, the increased conviction they have in their giving will ultimately provide even greater emotional satisfaction,” Friedman writes.

I’m not sure Friedman has got it exactly right. Without an emotional response would people give as generously? Shouldn’t giving bring us joy, even if it comes at the cost of some efficiency? Should we really abandon, say, the arts, as strict adherence to Friedman’s guidelines would require? In my view, all giving is good regardless of motive. But a little more attention to what matters most probably makes sense.

15 comments
ReginaldMacMurran
ReginaldMacMurran

I've heard all the Wealthy Philanthropists theories on The dos and don'ts of giving to Charities, my first question is, Do the wealthy really have the correct advise in giving,Secondly, Do the Wealthy really know what it's like being poor and in need,and thirdly, I believe they outta take a long look in the mirror, and maybe they'll realize, it is World-wide Greed and They participate in it, each and everyday. So instead of giving Your Elite advise on Giving to Charities, perhaps You should challenge The Rest of the Worlds Money hungry Elite to do the Right Thing, after all, it is not the middle-class and poor  that created the Worlds Problems!

jaygoulart
jaygoulart

I love the concept of blaming the customer to bring about change. 

BrianLacy
BrianLacy

I'm disappointed in the author.  I feel they have a pretty obvious bias and feel pretty certain they know which non-profits are most impactful and worthy.  I see ego in this article ... but the ego I see is the authors.  If I choose to donate most significantly to my church, to Christian radio and other ministries am I doing something wrong because I am not following the authors plan?

GordonJayFrost
GordonJayFrost

The criticisms of leading philanthropists in this article are reminiscent of Tweens rolling their eyes and emphatically giving driving directions to their parents from the back seat of the car.  They're often right about the destination.  And sometimes about how to get there.  But the fact they haven't yet driven, not to mention their predilection for criticizing everything done by the preceding generation regardless of its value, makes many of their recommendations suspect.

bgood
bgood

People give for a variety of reasons: because they really care, want to support a friend, want to brag, or avoid taxes. Some give by volunteering, or inspiring others to participate. I applaud the discussion on how to make sure that dollars given have the biggest benefit possible.

What is also important is that people and organizations are inspired to give. For this to occur, I would argue that individuals, companies, and charities require the proper arena to discuss, plan, and act toward addressing the issues they care about, and be able to do so with others who have a similar interest. 

Perhaps it would be useful to consider Quantitative Philanthropy. Competition is a great motivator. If properly harnessed, competition can be used to encourage (okay, pressure) companies to increase their contributions, and that of their employees’, to charitable causes.

Right now there are numerous companies that truly care and materially contribute to the related causes. For example, Patagonia’s ‘1% for the Planet’ is a reflection of a true belief, and caring for the environment is deeply ingrained in the company culture. Unfortunately, many companies are not as ernest and merely view helping the communities they operate within as a necessary cost of doing business. Recently, I met with the executive director of a charity that helps the visually impaired. She said it clearly: “If one more company comes to paint that wall outside for a good photo opportunity, I’m going to go crazy!” Sadly, lots of companies are good at telling you what they have done. But, when it comes to really doing it and showing it, they are less capability.

To drive competition that generates the desired results (more giving), the key is to accurately measure the correct factors. So, I suggest for consideration, that we quantify what they and their employees have done, or contributed. It will not be perfect for sure, but we’ll at least then be able to compare one company to another, within an industry.

Simply put: Total Company Contribution equals (1) company donations, (2) employee donations, and (3) volunteer hours (which get converted to a dollar amount, using the average hourly wage.) Here is an illustration:

Total Company Donations: $7,500,000

Volunteer Hours: 750,000

Ave. Wage/Hour: $23

Est. Value of Volunteer Hrs: $17,250,000

Total Company Contribution: $24,750,000

Total Employees (or Sales); 34,400

Ave. Employee Contribution: 719 (contribution index)

By using this index, it would be possible to compare companies’ contributions, and the differences would be plain for everyone to see. And, of course, companies would then be under peer pressure to improve against a competitor, or else lose credibility to those buying their products and investors.

Bloomberg conducts analysis to track a company’s ESG (Environmental, Social, and Governance). It reports this data for a number of companies, since many investors want to factor in such variables when making investment decisions. The biggest indicator in the ESG matrix right now is environmental impact. In the second half of 2010, 5,000 unique customers in 29 countries accessed more than 50 million ESG indicators via Bloomberg's screens. The index requires tracking many different reports, and is not as scientific as many would hope. 

This index would not displace Bloomberg’s ESG. However, it would be much easier to track and verify, and has relevance to all companies, without an emphasis on those with carbon footprints. I think there is a good chance that this index could be accepted within the investment and corporate community. 

For consideration and discussion.

Bradley Good, CEO OurGroup.org

leach
leach

Good points, but often the failure of philanthropy is in not checking with the recipients for what is needed, and  instead providing what a far distant, culturally/geographically oblivious donor has decided is THE answer.  The reason that community organizing works is that it begins with those who are most affected and gives them the tools to help create the changes they know in practice to be needed. 

stfree
stfree

@BrianLacy Let's substutute your words "the author's plan" for the words "a plan that examines worthiness and effectiveness" because that what is being proposed.  That way we can address the merits rather than egos.  

Perhaps your giving IS accomplishing something worthy and effective.  Perhaps it is not.  By asking the question "Am I doing something wrong..."?, it seems as if you are seeking a answer beyond mere validation.  

So how DO you know?  Have you, as suggested, done any research on to what end and to where your money goes?  Have you examined the works to clearly see that the outcomes, not just intentions, are happening as you'ld expect?  Can you asure yourself that the recipients of your money use it for the good of others? 

When you can demonstrate those things to yourself, not anyone else, then you will have found your answer.

stfree
stfree

@GordonJayFrost Had it not been for the inclusion of Sir Thomas Hunters criticism of "leading philanthropists" for abdicating their due diligence, your point might have some weight.  Hunter is hardly a "Tween" and the criticism is valid on it's own merits.


stfree
stfree

@leach I must agree. I recall conversing with one zealous contributor/member of a relief organization.  Her organizations goal was to provide water wells for a isolated and drought strickened population in Africa.  This organization did, on first examination, manage to cause some wells to be constructed.  They had even gone so far as to design the construction so as to be supportable and maintainable by the intended recipients. But what troubled me was that the contributors would regularly make personal trips (from personal funds) to the distant areas for the purpose of "working" on the construction. There sincerity is not to be questioned but each such trip consumed many thousands of dollars in airfare and subsistence en route.  After examining the actual effectiveness of this organization, I came to the conclusion that four times more wells could be provided if the organization hired a knowledgeable on-site manager who then hired local labor and if the volunteer "workers"  stayed home and contributed the funds otherwise spent on travel.  The locals would have some employment and gain from effecting a benefit for their own community. 

GordonJayFrost
GordonJayFrost

@stfree @BrianLacy I'm certain that Brian's question was rhetorical.  And I'm also certain he knows precisely what those organizations are doing and how effectively they are managing that activity.  He knows the nonprofit sector intimately.  I agree with the author of the article that fundamentally "all giving is good."  My personal disagreement is with the broad brush characterization by Friedman of philanthropists, saying that “most generous, well-intentioned donors are failing to meet their potential...They aren’t giving to the most impactful charities." The problem is that impact is clearly not as objective as many suggest in making these types of criticisms.


GordonJayFrost
GordonJayFrost

@stfree @GordonJayFrost Just making an analogy, of course.  As to Hunter's statement, the author properly notes that "Buffett has a different view: He believes the Gates foundation can do a better job giving away all that money than he ever could."  A quick perusal of the Gates Foundation's giving shows that quite a bit of due diligence is indeed employed.  

leach
leach

@stfree @leach Another example would be the earnest folks who contributed small motorized fishing boats to Madagascar fishing villages.  There was neither the infrastructure to provide the gas and oil, nor the mechanics to maintain the engines. Shortly, the engines were discarded and the fishermen used them as best they could in the traditional way.

friedman_eric
friedman_eric

@GordonJayFrost @stfree @BrianLacy I appreciate the feedback on the article above about my upcoming book, “Reinventing Philanthropy.”  I agree with the comment that there is not an objective best way to give.  The book challenges each donor to think about how to maximize the impact of their giving.  In doing so, it articulates a framework of questions and issues donors can think about when they decide where to give, and it explores some of the difficulties of donating effectively.  It doesn't try to define a single path for all donors.  One common practice it addresses is giving to the charities most familiar to the donor without considering whether other options can do more good for the world.  As an example, a lot of donors give to support the type of art they enjoy, the university they attended, or a particular disease that affected their lives.  Sometimes these donations are carefully thought out in terms of maximizing impact, but most of the time they are based on other criteria.  The advance manuscript has received strong praise from some well-known members of the nonprofit community (the quotes are posted on the Amazon profile), and I hope you’ll read “Reinventing Philanthropy” when it comes out and continue to share your feedback. 

stfree
stfree

@leach @stfree Try as we might, sometimes it just goes wrong.  Some years ago, I witnessed a heroic relocation of refugees from war-ravened Ethiopia.  They were snatched out of a ancient agrarian/tribal environment in the nick of time.  No expense was spared to bring them to their new home.  They were provided with all the modern conveniences but without thinking it through very thoroughly.  One of the more humorous incidents occurred when the facilitators helping to integrate the immigrants to modern life glossed over a small detail.  When shown their new and very modern high-rise apartments, the new-comers asked "where do we cook our food"?  The naive reply was "In there, of course", pointing to the built-in wall ovens.   After several trips were made by the fire brigade to put out the WOOD FIRES built in the electric ovens, the facilitators became more attuned to their clients.