Gift Hub

Why Philanthropy as Business is Foolish and Will Fail

As philanthropy becomes more businesslike we must confront the donor prejudice (or revulsion) against "overhead," or what in business is called "operating expenses," "loads," and "profit margin." The donor ideal is to see 100% of every dollar go directly to projects that make the world better. How, then, can we expect to extract basis points, fees, profits, and our operating expenses, when we (our making out like bandits) does not in itself make the world a better place, other than making us happier? We can jabber on about how this is really social investing, a philanthropic industry, a social capital market, but donors (or social investors) will likely see through the high quality, MBA-inspired, BS and realize that we are battening on their gifts, extracting tolls and levies and loads designed to make our cushy lives better. We are cynically exploiting the charitable motive, as capitalism exploits all motives, until the last human goes comatose on Prozac, for lack of a vital community founded on love and justice.

What then is the answer, if loads there must be? Align the load with social benefit. Have the entity extracting loads be mission-aligned with the donor.  Have the load-extractor positioned within the donor's circle of trust, love, and concern. Have the load-extractor be a beloved nonprofit, and mainstay of a community in which the donor and the donor's family dwells in solidarity, kneels in prayer, or works as a volunteer in a spirit of shared service. In a way, that is what we already have in community foundations, inefficient and often ineffective load-extractors, who are mission-aligned with their donors. Rather than competing with Fidelity and Vanguard on being "businesslike," which is certainly a losing proposition, why not compete on passion and alignment with social good? In that game, Fidelity and Vanguard have little to offer. They are almost ideally efficient and effective firms, making two families (their owners) very rich, but mission-aligned with what?

You know, when people get businesslike about philanthropy, they end up writing bad poetry about how giving is really investing. And they end up creating lousy pseudo-businesses competing poorly with businesses  with one bottom line. Why not recognize that philanthropy is a child of the graces, a civic virtue, a blind drive like the sex drive, a child of Dionysus no less than Apollo, a friend of the prophets, and a cousin of the muses? Giving is gratuitous. From a selfish perspective, giving is senseless, very often, as is any sacrifice, whether to the gods or for our fellow humans.  Being enthralled by business is not salvation. Donors are moved to give the businesslike exactly 0% of the donation - exactly o%. If less than 0% were possible, they would go for it. Don't you see that? So, to extract a percent or two, how do you do it? You either must align that extraction with mission or disguise it with the false poetry that redescribes giving as investing.

Will Donors Pay for Grant-Making Advice?

Sean at Tactical Philanthropy is asking good questions: Will donors pay for grant making advice? Will calling giving an "investment" motivate them to put more dollars into grants (or "social investments")? The Chronicle picks up the discussion with comments from Jed Emerson, Anne Ellinger and others. 

Legacy Planning Inspired by Women

If we say that philanthropy is gendered female, and that self-respecting male or male-identified advisors "don't do touch feely," we can better understand why philanthropic estate planning limps along with tax driven strategies and so little passion, virtue, or wisdom.

Recently with several strong women I have been embroiled in a heated conversation about the role of the wealth coach in the legacy planning process. Why do we need such a life coach, I asked, who calls himself or herself a wealth coach, when the client already has a trusted advisor? How can anyone bill himself or herself as a wealth coach if he or she has no credentials in tax, legal, and financial fields? Why do wealth coaches sit around commiserating with clients when they should be calling the advisors, closing open loops, and forming a good team?  Then it became apparent what is really happening. In most planning situations for a married couple or for intergenerational families, the decision makers are male. The mother or daughter are not necessarily consulted, except for their signatures. The women folk may be given a little philanthropic budget to play with, but their views do not drive the strategic plan for the family's overall finances. The woman sits in the parlor giving away nickels and dimes, while father and brother work in the counting house building and controlling the family fortune, by means fair or foul. Maybe that is how the world works, and must work. Kindness married to and subordinate to rapacity, animal spirits, and cunning? Maybe that is the tacit bargain of philanthropy and capitalism, or of hearth and war. If the woman gets a coach, and the coach and she are not talking to the advisors, well, that is by design, and the design is not that of the coach or the woman. They were excluded already.

"Metanoia" is a Greek work that means "mindshift." It is translated in the King James Bible as "repentance." Somehow the conversation about wealth coaching with these strong women I have had a change of heart and a change of mind. I now notice in speaking to mixed groups of male and female advisors or donors how important it is to acknowledge that women's ways of relating to the world have been marginalized in the traditional planning process. When men marginalize women's wisdom, about family, community, and our responsibilities to one another, we men lose a part of ourselves. We mechanical men, haunted by our own ghosts. We become a caricature of masculinity: over-weening, belligerent, bullying, coarse, selfish, controlling, and contentious. We begin to sound like tax attorneys.

Poetry, dance, philanthropy, love, history, music, wisdom - the muses are female, so are the graces. The inspired man is the one - clearly - who hears and heeds the divine feminine. I knew that, at some level, but somehow this contentious conversation brought it home to me. So, thank you, the women to whom I lost this battle.

Pharisees, Scribes, Rabbis, and Fools in Philanthropic Estate Planning

Approximately:

• Under 10% of Americans leave anything in their will to charity
• Perhaps 50% have no up to date will at all.
• 95% of those who fail to complete their estate plan say it was because they could not see how it connected with their goals.
• 97% of attorneys whose clients did not complete their estate plan said they were "unconcerned."
• Over 93% of clients who did not complete their work said the attorney made them "uneasy."
• Other common complaints from clients were to the effect that the plan was mystifying, and the advisor "talked down" to the client.
• Still, despite these challenges, over 80% of planned gifts are actually bequests.

I observe, as a trainer of advisors to the wealthy:

• They are mostly male, or adopt the macho mode, if female
• They are proud to say, "I do not do touchy feely."
• They are proud to sound like attorneys, see it as a badge of honor, and have no shame or compunction about talking in the jargon of their trade.
• Mystification suits them down to the ground. They find it ego-gratifying.  And a mystified client is a good prospect for complex, costly techniques, once the client goes passive and defeated.
• That the client never finishes the plan does not much matter when billable hours are collected on time.
• Literary sensibility, refinement of sentiment, a cultured understanding of the the needs of society, a religious sensibility, good listening skills, empathy, are not part of what it means to "think like an attorney."

I observe in working with nonprofits:

• Many fundraisers are women, often with degrees in English, History, Art, Dance, Sociology, Mythology, Psychology, Philosophy, History of Religion, and other useless subjects.
• Fundraisers often have highly developed interpersonal skills.
• Nonprofit personnel are often good role models for sacrifice and for devotion to something larger than themselves.
• Often fundraisers have limited knowledge of the tools, techniques, and processes of financial planning, estate planning, and investment planning.

My hope:

• Nonprofits will open a space for wealthy constituents to consider their "last will and testament," not as a dry legal subject, but as the constituent's last act on earth, whether tragic, comic, wise, foolish, vain, visionary, faithful, or inspired.
• Nonprofits will see major gift fundraising as an extension of their mission, as an extension, say, of the liberal arts, if they are a college or prep school devoted to those, or as an extension of pastoral care if the nonprofit is a religious organization, or as an expression of social justice if the organization is devoted to that. 

Who is the Rabbi here?

• I have been told by advisors, "Look, Phil, get off it. I am not the client's Rabbi."
• OK, so where is the client's actual Rabbi? And why is the Rabbi who is out fundraising not raising the ultimate issues? Who else will? Rabbis, Priests, Fools and Liberally Educated Fundraisers. The attorneys won't. Meaning and truth and solidarity or love and human kindness are not attorney work, and will if engaged in disgrace the profession.
• How, then, can our nonprofits, who are the soil in which living traditions of value grow, nurture their constituent's and help them be fruitful, so that when the apple ripens and falls, its seeds will grow another orchard? Is that not, as we say, in bidnis, a win win situation?

Sales of Prison Beds Booming

Jennifer Gonerman in Mother Jones:

Nearly one in four of all prisoners worldwide is incarcerated in America..... Today, one in nine African American men between the ages of 20 and 34 is locked up. In 1970, our prisons held fewer than 200,000 people; now that number exceeds 1.5 million, and when you add in local jails, it's 2.3 million—1 in 100 American adults.

Good news for the double bottom line social venture prison business and their investors, as investment banker Catherine Austin Fitts explains:

The “pop” is a word I learned on Wall Street to describe the multiple of income at which a stock is valued by the stock market. So if a stock like Cornell Corrections trades at 15 times its income, that means for every $1 million of net income it makes, it's stock goes up $15 million. The company may make $1 million, but its “pop” is $15 million. Folks make money in the stock market from the stock going up. On Wall Street, it's all about “pop.”

Prison stocks also are valued on a “per bed” basis — which is based on the number of beds provided and the profit per bed. “Per bed” is really a euphemism for people who are sentenced to be housed in their prison.

For example, in 1996, when Cornell went public, based on the financial information provided in the offering document provided to investors, its stock was valued at $24,241 per bed. This means that for every contract Cornell got to house one prisoner, at that time, their stock went up in value by an average of $24,261.

Jed,  how do we calculate the blended value proposition of for-profit prisons? Is the blended value  going up or down?

Lord Conrad Black's Penitential Progress

Lord Conrad Black, former Board Member at Hudson Institute, appears to be doing well in his new surroundings:

Inside the prison, Lord Black has apparently created a "small fiefdom," regularly lecturing prisoners and guards on American history and politics, and orders around his cellmate as his "gofer and cleaner."

No bio at Hudson, no goodbye from his former gofers and cleaners, just the one spare line: On leave.  That base ingratitude must hurt more than the body cavity search.

Altruism in Monkeys

Chronicle of Philanthropy:

Capuchin monkeys show concern for others’ welfare and enjoy giving to their peers — much in the way that humans do — according to a study by the Yerkes Research Center at Emory University in Atlanta, reports Reuters news service. Researchers tested eight female brown capuchin monkeys in pairs and gave them the option of choosing food for just themselves or food for themselves and their partner. They found that when the monkey’s partner was “familiar, visible, and receiving rewards of equal value,” the monkeys were more likely to give food to their partner.  “The fact the capuchins predominantly selected the prosocial option must mean seeing another monkey receive food is satisfying or rewarding for them,” said Frans de Waal, who directed the research.

Should I now feel less or more ashamed of my altruistic impulses? Yes, they are natural, bestial, maybe? Maybe I can rise above these base impulses and become a social venture philanthropist one day. I can't help noticing that all eight monkeys were females. I would hope the males were made of sterner stuff.

Clark Rockefeller

Great article on how to con people by passing yourself off as trustworthy. (Recommended reading for those who wish to be Trusted Advisors.)

Planned Gifts? Mostly Bequests, It Turns Out

Jonathan H. Gudema, Esq (a Managing Director, Planned Giving Services at Changing Our World):

What about the top 100 planned giving programs based on total dollars reported, including bequests and deferred gifts?  The average number of bequests was 73, for an average bequest size of $239,494.  The average number of deferred gifts was 39 for an average deferred gift size of $90,720.   Planned giving as a percentage of overall fundraising: 14.63%.  Bequests as a percentage of total planned giving:  83.06%.

Does this make planned giving a simple matter of reminding donors to remember your organization in their will? Or, does it mean that nonprofits should be working more closely with advisors on the donor's overall legacy plan, to give it some impact beyond self and family?

Putting a Price on Water

Philanthropy Action News:

Meanwhile it has become increasingly apparent that the huge underwater aquifers that have sustained this system of “pump all you want” have run dangerously low. Without intervention, this scarcity may only exacerbate the problem, as farmers and other landowners preemptively pump even more in an effort to get as much as they can for themselves before it is gone. That’s the thinking of T. Boone Pickens, a former oil-and-gas magnate, who is moving into water. Pickens owned a mid-size ranch above a section of the Ogallala aquifer, which supplies water to much of the Plains states of the US. He realized that in Texas his neighbors could pump out the water from under his land and sell it. Not content to let anyone else profit from “his” water, he began buying up water rights and land from his neighbors. Now, he is proposing that the city of Dallas, three-hundred miles away, buy the water he now owns, and has maneuvered the passage of legislation to allow him to build a pipeline from his ranch to the city to make it happen. So far, Dallas has demurred, but Pickens is patient: he reckons all it will take is a year or so of drought for big cities in Texas to realize they need more secure access to water.

Those with money water their lawns. Those without die of dehydration? Now, if we can just find a way to put a price on air.