Philanthropy – Get over Yourselves and Spend That Money!

Money

December 26, 2012; Source: Reuters

Writing for Reuters, Felix Salmon has an enjoyable column on the things that mega-philanthropists do wrong with their philanthropy:

  1. Meddling with the internal operations of the recipients of their giving: Salmon correctly points out that donors’ “experience in the for-profit world is not nearly as valuable” as they might think;
  2. Setting up their own foundations: Salmon calls foundations “the classic waste of money and resources…expensive things to run, both in terms of overhead costs and in terms of opportunity costs;”
  3. Making donations “to Harvard, or any other large endowment”: Salmon suggests that the marginal utility of donations to big endowments “is probably smaller…than anywhere else” and describes such gifts as “just another way of not actually spending your money;”
  4. “(F)und(ing) architecture: Salmon says “mission-building is more important than edifice-building;”
  5. “(E)ncourag(ing) mission creep”, that is, attaching strings to a donation that “essentially force a non-profit to do something it never particularly wanted to do in the first place;”
  6. Assuming that the donor’s presence on the board is inherently valuable: Salmon sees that the money is what’s valuable, and to a nonprofit, the value of the donor’s “presence on the board is the implicit or explicit financial commitment that comes with it;”
  7. Teasing nonprofits, forcing them to “put a lot of effort into buttering up donors and potential donors” rather than simply deciding to give or not give without the rigmarole;
  8. “(C)onfus(ing) philanthropy with social climbing”, that is, “buying the admiration of…friends and peers by ostentatiously giving money to their favorite causes;”
  9. Thinking that “going to charity balls constitutes charitable activity:” Salmon writes that if a donor doesn’t need the black tie rubber chicken self-congratulation kind of stuff, “just take the money you would otherwise spend on a table, and donate it to the organization directly. That way the charity gets all of the donation, and you get four hours of your life back;”
  10. “(P)ut(ting) your name on a building, or anything else, for that matter:” Salmon’s only comment is “why?”;
  11. “(T)ransactioniz(ing)” philanthropic giving: Salmon criticizes the “tit-for-tat” dynamic of charitable giving in contrast to the Jewish tradition of “tzedakah [which] calls out anonymous gifts for especial praise.”

The obvious theme in Salmon’s essay is humility. He is actually focused on individual mega-donors with outsized egos and expectations, spending a piece of the essay on the University of Virginia’s effort to get $15 million from hedge fund billionaire Paul Tudor Jones, trying to get him off his idea for endowing a center for yoga toward a somewhat broader concept of a “contemplative sciences center” approved by Jones’s personal yoga consultant. For those nonprofits smaller than UVA that are unlikely to be wining and dining hedge fund guys, the outsized egos most likely to be encountered are in the executive suites of private foundations. A dose of humility might be very useful there as well.—Rick Cohen