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.

Comments

[Trista Harris, Headwaters Foundation for Justice]

Phil,
I agree that donors should give through organizations that they trust and that share their values since those fees go to maintain that organization's infrastructure but some donors are more confortable with their for-profit advisor than they are with a community foundation that they many not have a relationship with. If a for-profit advisor has the access to encourage a donor to give to non-profits, I think that is only a bonus for the sector.

[Phil]

Yes, I agree. All is well that ends well. My post was more polemical than not. The challenge comes in when the advisor put the money in accounts the advisor manages, and when the grants from those funds are not encouraged, since that depletes the funds under management. A community foundation may have the same conflict of interest in managing its donor advised funds, but the community foundation at least has a loyalty, I presume, to the grantseekers in a way that an advisor may not.

[Phil]

Trista, on a constructive note, if you offer or plan to offer donor advised funds you might consider setting them up so the donor's advisor can manage the money. Often advisors will only steer funds to a community foundation that gets them paid that way. Can't blame them. Some community foundations meet advisors half way in that respect, others do not. Those that do tend to have more advisor referrals, I imagine.