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 and
  • 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.