A while back, I wrote a piece that looked at “nine reasons that rich people don’t give away more money”—including many billionaires who strongly embrace philanthropy.
Now comes a study that takes up a more interesting question: Why don’t rich people who do engage in large-scale giving place more bets aimed at bringing about social change?
The study, by a quartet of experts from the Bridgespan Group, looked at donations of $10 million or more between 2000 and 2012—gifts representing big bets by donors—and found that just 20 percent of these bets, by dollar value, went to social change giving. The rest went to major institutions, like universities, hospitals, and cultural institutions.
Why is that?
One answer we’ve often heard to that question is that wealthy people, who benefit enormously from the status quo, aren’t much interested in social change. They’d rather feather their own nests—boosting their alma maters or the private hospitals that treat their families or the museums they frequent.
But this study offers a different explanation. In fact, argue the authors, most top donors do want to achieve social change, broadly defined here to include progress in the spheres of human services, the environment, and global development. The problem is that they can’t figure how to do that as philanthropists, running up against various barriers to making big bets for social change.
One problem is that there are limited “shovel-ready opportunities,” the authors say, for donors who want to put big money toward creating social change. Finding such deals is thus more likely to require donors to roll up their sleeves, whereas universities and hospitals have strong systems in place for negotiating large gifts. As well, donors may not have the personal relationships with social change organizations needed to feel comfortable about making major investments. And then there’s the problem of measuring the return on such gifts. While donors can actually see a new wing in a hospital or university research center, the authors say, the results of social change gifts can be less tangible and take longer to materialize.
Meanwhile, another set of barriers also steer donors away from big bets on social change, say the authors. Such gifts have a higher bar for success and are subjected to more scrutiny, which means more potential for embarrassment and failure. The authors mention the example of Newark and Mark Zuckerberg, and they have a good point. Think about it: If Mark Zuckerberg had given $100 million to a university in Newark, it would have been a one-day news story.
In some ways, the findings of this study resonate for me. We write all the time at Inside Philanthropy about boring yet safe major gifts to universities and hospitals, but are struck by how seldom donors write really big checks to social change organizations. We wonder: How can donors stand to give huge gifts to Harvard or the Met when they could have so much more impact elsewhere? This study offers important insights in that regard.
As well, Inside Philanthropy has reported on the heavy lifting that some donors, like Herb Sandler, have done to find suitable places to invest big money aimed at creating social change. Sandler is cited in this report, stressing how important due diligence is and how much work it can take.
Still, though, I can’t help but feel that the authors of this study let donors off the hook too easily, buying excuses that don’t hold up to scrutiny. They note that Bridgespan works with many top philanthropists, and those relationships help explain why this report is so informed and valuable. The downside is that the authors seem to have overly internalized the viewpoint of skittish and controlling donors, without enough consideration to how nonprofit executives might see things.
The authors write that “a capacity problem can be a real barrier for big bets on social change, where organizations that are effective enough and large enough to make good use of a big investment may, in some fields, and some geographic areas, be few and far between.”
I’ve italicized a few words above, because one could easily make an opposite point: That in many fields, and many geographic areas, there are plenty of organizations that can handle big bets.
The authors quote James Jensen of the Jenesis Group saying, “There’s a relatively small number of organizations that can effectively metabolize seven- and eight-figure checks.”
Really? Try out that idea on the heads of the numerous major NGOs that fight poverty in the United States and abroad, work to improve education, aim to protect the environment, and so on. Plenty will tell you exactly how they would spend a lot of extra money.
In fact, Inside Philanthropy recently went through this very exercise, asking executives at eight top environmental groups what they might do with substantial extra funds to fight climate change. All offered very detailed and, to us, credible plans for deploying extra funds. I’m sure we’d find something similar if we talked to top NGOs in other fields.
Nearly every effective major nonprofit has a list of additional things they’d love to do to be even more effective. If a donor can identify a nonprofit that is having an impact, there’s a good chance that the nonprofit will be able to present a strong plan for using a big gift. Even more easily, a donor can give to organizations that have already demonstrated a capacity to absorb lots of new money. As the authors write: “Obviously, one of the best ways to find an organization capable of handling a big bet is to look for those that have already received one.”
Obvious, indeed. And there are more such groups around these days, in our era of big philanthropy, working on different issues. The study lists over two dozen of them, and there are plenty more where those came from. So why do the authors give such credence to claims that it’s hard to find organizations to “metabolize” big money?
While donors may say it’s hard to give a lot of money wisely to achieve social change, this view isn’t widely shared by those actually working in the trenches for such change. They point to the opposite problem: that there’s never enough money, especially to fund core operating expenses.
Whatever the case, there’s more expertise available now than ever before to enable donors and nonprofits alike to accomplish their goals when it comes to giving or growing—from consulting groups like Bridgespan to intermediaries like NEO Philanthropy. The idea that donors need to “roll up their sleeves” for big bets to happen feels incongruous, given the many players who now offer advice on where to put money, and who are also available to do the hands-on work of ensuring that it’s well spent. Indeed, as the authors note, intermediaries that regrant funds, such as the Robin Hood Foundation, are already the recipients of many big bets. I’m betting the leaders of these organizations also wouldn’t have much patience for the claim that it’s terribly hard to find places to invest money for social change.
As for supposed donor qualms about measuring “impact,” come on. It’s hard to think of venues where donors get less bang for their buck than at wealthy colleges and universities, which draw many of the major gifts over $10 million. Yet such gifts keep flowing. Does anyone really think donors give to Harvard and Stanford, instead of, say, Save the Children, because those schools offer more compelling metrics for impact?
I’m not trying to argue with the study’s findings regarding why donors say they are reluctant to make big bets. But even as this study breaks important new ground, it underlines the need for a more critical examination of what might really be going on with wealthy donors.
I suspect that a deeper dig into these questions would lead to issues of control—a recurring theme in philanthropy. Much has been said about how many foundations prefer to dole out funding in the form of program support—an arrangement that puts more power in the hands of grantmakers and less in that of grantees. Clearly, some of the newer donors emerging from the private sector also enjoy being in the driver’s seat (although I think it’s true, as I’ve argued, that they’re less prone to be controlling.)
Overall, this study strikes me as further evidence that there’s a disconnect in the sector—between nonprofit leaders who are confident in their judgements about how to tackle major societal challenges, and funders who question that judgement and insist on exercising a high level of control over how grant money is used. The views held by donors channeled through this study verge on insulting, and underscore a power imbalance that nonprofits endlessly complain about.
This disconnect needs to be explored further, and more critically, especially with more major donors coming on the scene.