Charity is Not a Zero-Sum Game

April 24, 2017; Vox

“Life it is not just a series of calculations and a sum total of statistics, it’s about experience, it’s about participation, it is something more complex and more interesting than what is obvious.”—Daniel Libeskind

Marc Gunther, who blogs about philanthropy at Nonprofit Chronicles, contributes this article to Vox, “Rich charities keep getting richer. That means your money isn’t doing as much good as it could.”

In addition to the title of the article, Gunther makes a number of assertions, including the following:

  • The “Trump bump” in giving (discussed frequently at NPQ, including here, here, here, and here) has been unequally distributed, leaving lesser-known organizations “vulnerable.”
  • “Charitable giving is a zero-sum game” and the big “brand-name” charities are winning—even colossal nonprofits like the Red Cross, which has been “pilloried for its inept responses” to natural disasters. “You can think of this as the nonprofit sector’s inequality problem.” Smaller organizations “are left to muddle along.”
  • Gunther names two primary problems: (1) donors do not have sufficient information to make the most “impact” with their giving, and (2) donors focus their giving on the U.S. because donors do not realize how far their dollars can be stretched overseas to help people facing more distressing situations.
  • “While most individual donors say they care about nonprofit performance, nearly two-thirds do no research at all before making a donation. Nor do they demand evidence of effectiveness from charities.”
  • Unlike in the private sector, startups languish.”

There’s an old saying that if you’ve seen one charity, you’ve seen one charity. Sweeping statements made about nonprofits and their donors based on summary data offered by the likes of Giving USA tell us little other than summary numbers arrived at as best the research methodologies will allow. Few nonprofit CEOs and boards agonizing over their particular budgets will be referencing national statistics.

Of the million or more nonprofits that Gunther counts to make his case, perhaps less than a third are actually fundraising. For nonprofits that do rely to some extent on contributions, on average two-thirds or more of their revenue likely results from government contracts, fees for service, and other means apart from fundraising. Therefore, momentary spikes in giving that result from natural disasters and political upheavals make great headlines and even greater paydays for a few charities easy to identify, but it is merely a curiosity to most nonprofits.

Giving is not a zero-sum game. One charity’s win does not mean everyone else loses. NPQ did not experience an enormous spontaneous rush of contributions following the presidential election. Still, we were comforted by the money that flowed to the ACLU and to Planned Parenthood , and we are confident NPQ will continue to thrive in its own way.

Donors give almost always because someone asked them for a gift. Fundraising is about relationships, not data. Data may be of help for that rare donor in search of a charitable cause, but donors do not normally behave that way. Foundations may talk among themselves about what grantees are producing the best results, and individual donors surely appreciate receiving confirmation that their gifts are making an impact, but giving by all sectors of donors is trumped by relationships. That U.S. donors give mostly to U.S. causes has more to do with relationships than any ignorance of or indifference to international causes.

Nonprofit startups languish? Tell that to charity:water. Perhaps statistically this is the case, but they also languish statistically for for-profits in Silicon Valley. To compare nonprofit revenue models with that of Snapchat-like, for-profit “pink unicorns” completely misses the purpose and wherewithal of the nonprofit sector.

Gunther laments that there are only a few organizations evaluating the effectiveness of charities beyond Charity Navigator’s simplistic star ratings for donor review. When most charities have a difficult time evaluating their own operations and almost no charity can afford third-party longitudinal studies, when will that ever not be the case? Even if every fundraising charity were to receive a rock-solid evaluation, what donor would ever appreciate being told what to do with her or his charitable dollars?

Yes, the ACLU and a few others experienced a momentary windfall in donations. The important question to ask now is not why everyone else did not benefit in the same way, but what is the ACLU doing to convert their new donors from the peripheral actions of reactionary giving to making sustainable philanthropic investments in the years to come? In other words, can the ACLU develop meaningful relationships with its new donors? The ACLU’s gain is everyone’s win—except for maybe Trump.—James Schaffer

  • Ken Davenport

    I agree 100% with Marc Gunther and find Schaffer’s rebuttal to be very, very shallow. In San Diego, one of the ten largest urban areas in the nation, start-up nonprofits do struggle and charity is, indeed, unevenly distributed to large brands that donors know by name. The University of San Diego recently found that 62% of all nonprofits here have budgets of less that $50,000 — meaning that they are failing to reach any kind of scale that can actually solve problems. I run a nonprofit that helps other nonprofits with operational capacity, and I can tell you that more than 90% of the 165+ clients we have worked with over the past five years are heavily dependent on one or two funders that, should they pull their support, would require these organizations to make radical cuts or force them to go out of business entirely. We have also found an almost total indifference among donors and funders to true outcome tracking and ROI measurement — which again reinforces Gunther’s point that donors are driven by their heart, and not their head. Until we have an honest conversation about the broken nature of the capital market in philanthropy we are going to continue to see the rich getting richer, and innovation and risk-taking deemphasized.

  • Jim, the skinny budget proposed by Trump and his plans for cut taxes on the wealthy, foreshadows a profound shift in the social contract with Americans from the government to the community. While philanthropy is not a zero-sum game yet, if passed, the massive cuts to government funding for the social safety net and the social sector infrastructure, will become a negative-sum game pretty fast. I do not believe it serves the nonprofit community well to prop up a myth of generosity when wealth redistribution and concentration accelerates at the top and wealth of the middle continues to stagnate or erode. Nonprofit strategy must accomodate a worse case scenario in planning. If there are not winners and losers yet, economic Darwinism in the coming years will create asymmetry among nonprofits.