Megaphilanthropy – Can You Even Get Your Head Around It?
Extra, extra, read all about it! There’s good news, and there’s bad news. First, the good news:
- According to the Chronicle of Philanthropy, more of America’s billionaires are starting to give away their fortunes before they reach middle age. Among 2012’s top 5 philanthropists were 3 couples under the age of 40. (Mark Zuckerberg, 28, Facebook founder along with his wife Priscilla Chan, 27 – $498.8MM; John Arnold, 38, founder of hedge fund Centaurus Energy and his wife, Laura Arnold, 39 – $423.4MM; and Sergey Brin, 39, Google co-founder and his wife Anne Wojcicki, 39 – $222.MM).
Life is changing. Drawn to the possibility of influencing social issues for decades to come, the young and super-rich are turning philanthropy into a newlywed activity instead of a deathbed one.
But now the bad news:
- The top 50 donors on the Chronicle’s list committed a total of $7.4 billion to charity in 2012. The median gift was $49.6 million, down significantly from 2007’s high of $74.7 million.
OUCH!
Other interesting factoids:
- As with everything else wealth-related in this country, the results are skewed on the high end. The top 3 donors out of 50 on the list accounted for more than 50% of the assets committed to charity from the whole group. The top donor, Warren Buffett, 82 years old, gave $3.1 billion to three family foundations, the Howard G. Buffett Foundation, the NoVo Foundation, and the Sherwood Foundation. By itself, this $3.1 billion represents 42% of the top 50’s contributions.
- 72% of the dollars pledged went to big, elite institutions of higher education, arts and culture, hospitals, and private foundations.
- On the flip side, community foundations won eight gifts from top donors last year totaling about a billion dollars. This was more than the total of the last 10 annual lists compiled by the Chronicle! Way to go, community foundations!
- And, most importantly — today’s philanthropists are choosier about where they give and demand workable plans for long term results. For example, in the past, a donor supporting college scholarships might have been interested in how many recipients actually graduated as a result of his/her gift. Today, many of these same donors want to know about the long term results of their “investments” – for example, how the recipients are doing years after entering the professional world.
This is all good stuff, but it also points out that, while philanthropic giving in this country is significant, it pales when compared to governmental outlays and the overall gross domestic product.
To illustrate: According to Giving USA, in 2011 Americans gave $298.4 billion to charity, which was up 4% in current dollars over 2010 but only up .9% in inflation-adjusted dollars. It is too early to tell what 2012 looks like vis-à-vis 2011, but early indications from BlackBaud are that we will see a similar result – around $300 billion. Any way you slice it, that represents only 10% of expected total US Government budget outlays for fiscal year 2013 ($3,803 billion) and only about 2% of expected gross domestic product ($16.335 billion). My point in citing these numbers from President Obama’s 2013 Budget Message to the Congress is not to start a debate on the integrity of the numbers themselves, but to try to put an order of magnitude to the issue. Only 2% of estimated GDP is contributed to charity – compared to 10% expected to be paid out by the US Government for the entitlements of Social Security, Medicare and Medicaid. It has been suggested that cuts in social programs can be made up by increases in charity. My simplistic analysis suggests otherwise, particularly given the less than robust growth in charitable giving in recent years.
Because philanthropy is a market like any other, it is naïve to think that private donors can replace government as the permanent provider of the social safety net. Private donors have the power of choice to fund those programs that speak to them and to ignore others, and that is how it should be. The “marketplace of philanthropic impulses” is neither government-controlled nor societally-dictated but evolves from donors’ perception of societal needs and is funded by those who want to try to fill those needs. Because the investment decisions made follow the choices of independent and sophisticated donors, the application of philanthropic capital to societal needs will be erratic, at best. The social safety net cannot be significantly replaced with such a market-based solution. But it, as well as other worthwhile charitable causes, can certainly be enhanced by robust private charitable giving.
