Along with the rest of the HBG Book Club, I am currently deep in chapter 6 of Winners Take All; the Elite Charade of Changing the World by Anand Giridharadas. At the same time, I’m reading “Four Pathways to Greater Giving; What will it take to unlock dramatically more philanthropy from America’s wealthiest families?” a new white paper published by The Bridgespan Group.
Reading these two together with the soup in my head from Henry Timms’ and Jeremy Heimans’ book New Power, David Callahan’s The Givers, and Jake Bernstein’s Secrecy World that the book club also read over the past year is starting to create some very interesting new synapse pathways in my brain.
In Winners Take All, Giridharadas carves his imagery with a razor-sharp pen to describe many ways that the ultra-wealthy give with one hand while taking with the other; sometimes unthinkingly, other times purposefully blindered.
The Sackler family, as one example: sought-after and globally engaged philanthropists whose business product and company practices has enabled the most terrifying health crisis of our generation.
Giridharadas also describes a literal boat-load of millionaires and billionaires at “Summit At Sea”, where a few thousand concerned elites spend “a typical American’s monthly salary” to discuss inequality and social justice while partying from port to port. He suggests that the cruisers find that answers to the world’s problems are much more comfortable to consider at sea than on the ground where the affected populations actually live.
Populating what he calls “MarketWorld” are MBA-degreed (or tech-company incubation pros) problem-solvers who gather in conference rooms to come up with business school case-based solutions to the world’s problems. Entrepreneurs are the leaders in solving business problems; why should they not be at the forefront of solving social problems using business techniques, too?
Philanthropy is easier at a remove, Giridharadas implies of the elite donors. That may be one reason why elite donors feel better supporting (and being supported by) large institutions that can absorb large donations and which have the infrastructure to support donor-centered philanthropy. There’s a comfort in that relationship. It doesn’t actually change inequality, but it makes everyone feel good about doing their part, he implies.
Bridging the gap between elite donors and social justice organizations
And, as I say, at the same time, I’m reading The Bridgespan Group’s report on encouraging elite donors to give in “Four Pathways to Greater Giving”. Ditkoff, Powell, Gardner and Tierney’s new white paper discusses the barriers they see (and donors self-report) for why ultra high net worth (UHNW) philanthropists aren’t giving to their capacity and, further, why these donors typically don’t support on-the-ground social justice nonprofits.
One of the barriers elite donors report is finding someone they can trust to help point out the most efficient/most innovative/most effective nonprofits doing the work they are looking to support. Wealth managers are great at pointing out investment opportunities. Family office managers are great at coordinating their lives. How do they find a philanthropy advisor who doesn’t have a conflict of interest that they can trust to help them identify non-Establishment Institution nonprofits doing innovative work?
Additionally, the Bridgespan team says that the lack of infrastructure and access that small nonprofits have to attract and engage with UHNW donors in the first place is a huge issue. Not to mention figuring out how to absorb, administer and scale a transformative gift.
Another barrier cited is the simultaneous lack of and too much urgency. Dire situations exist here and all around the world, and always have. That can cause either a sense of urgency to act immediately or a sense that no matter what is done, nothing changes. To risk spending money on a poorly run nonprofit, throwing good money at a solution that doesn’t work, or investing in an existing organization rather than something new and innovative a donor can build themself (after years of making money as an entrepreneur) can cause inertia.
And that inertia is a real problem. We keep hearing about the intergenerational transfer of wealth that’s happening now and over the next 20 years. Marry that with the serious decline in establishment of traditional foundations (with their required 5% payouts) and the rise in donor advised funds (DAFs) with no payout requirements, and it’s not hard to see that the Third Sector generally (and small nonprofits specifically) are about to have a real problem on our hands in terms of attracting HNW donors.
Most UHNW donors give around one percent annually. This level of giving is a major challenge for Giving Pledgers who have said that they will give half of their fortunes away during their lifetime or on their death. According to Bridgespan, in order to meet that goal, a typical UHNW family would have to give away more than 11 percent of their assets per year. They’re making money faster than they can give it away, and at the rate they’re currently giving, there’s no way they’ll be able to honor that (non-binding) pledge.
Unless, of course, they dump it in a DAF.
Which is exactly what Bridgespan suggests as one of their four solutions to help fund social change:
- Path 1: Aggregate collaborative superfunds, like portfolios, for donors to select and fund.
- Path 2: Create a ‘nation-spanning community foundation’ – a DAF-like entity that supports carefully curated ‘nonprofits and initiatives across a variety of sectors aimed at improving economic mobility in America’.
- Path 3: Create a philanthropy advising hub similar to a wealth management company aimed at providing highly personalized, trusted advice and services to UHNWI.
- Path 4: Strengthen capacity in ‘high-quality’ social-change nonprofits.
A hygge opportunity for UHNWIs
So we have a short-windowed opportunity here to help build infrastructure and jobs in our sector, ensure that donor funds actually help causes now rather than (just) enriching DAF vendors like Fidelity (largest “charity” by assets in America, guys), and to figure out how to expand UHNW giving beyond just Establishment Institutions to smaller organizations working in social justice (and conservation, and animals, and all the other less-funded sub-sectors).
The Bridgespan authors propose that building more large institutions to manage PhilanthropyWorld for the support and benefit of MarketWorld leaders is just what’s needed to heal the world’s problems. If we provide donors with comfortable spaces to learn more about society’s needs and funding opportunities, and give them curated, personalized guidance on the best nonprofits in which to invest, the Bridgespan report posits that there’s a real possibility that UHNW giving could possibly even double, from 1 to 2 percent.
Giridharadas proposes that solving the underlying inequity in our society will come through expert-advised, systemic and (infra)structural change. For him, this comes from collaborative participation and support of the public sector; HNWIs, nonprofits, and the government working together to solve the root problems of social injustice so we build firm ground that doesn’t need financing to bridge the gaps.
It’s been a fascinating reading season, from the boundless optimism of Timms and Heimans expounding on a new form of people power; the market-based solutions of Bridgespan; and the siren sound of Giridharadas in full warning mode. All three have important things to say about fixing our sector and the constituents we serve – now and in the immediate future.
