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April 4, 2017

A Philanthropic Tidal Wave Is Building

In the First Post in Our "Giving Well" Series, Matt James Analyzes Potential for Massive Growth in Philanthropic Investment Over Next 5 Years

Much has been written about how our society is splitting ever more rapidly into the haves and the have-nots and the implications that has for politics, society and addressing social issues. And while it is true that the rich are getting richer, there is a lining to this that may be more gold than silver: a rapidly growing commitment to philanthropy by the uber-rich and a massive influx of resources dedicated to addressing society’s woes.

Now there are some fair questions to ask about the role of philanthropy – like whether philanthropic giving can effectively replace torn and tattered government safety nets (it can’t) and whether philanthropic investments are well-balanced between immediate needs and creative, new solutions (probably not) – and those questions, along with fast-developing trends in philanthropic investment, creative models that combine public sector, private sector and government investment, and whether mission-driven investments really make sense, will be explored in future blogs in this space. But one thing is certain: we can expect a huge increase in philanthropic spending over the coming years, and non-profits need to be prepared to meet this opportunity and make sure funding is absorbed successfully.

Just how much money are we talking about? While the exact dollar amount is uncertain, it is safe to say billions more.

In a fascinating section on wealth on February 19th, the New York Times reported on a Wealth-X study that mapped how many billionaires we have (2,473, give or take today’s market action), how much wealth they have ($7.7 trillion), and what their major interests are (philanthropy tops the list). Just to put this amount of wealth into context, if you lumped together the resources of those 2400 plus billionaires together and compared it to the GDP’s of major countries, our billionaires would rank third behind the US ($17.9 trillion), China ($11 trillion) – Japan comes in fourth at a modest $4.4 trillion.

Billionaires_vs_Nations

Let’s bring it a little closer to home.

A recently released report on philanthropic giving in Silicon Valley (defined as San Mateo and Santa Clara counties) has caused quite a stir – both because the net increase in philanthropic giving in this region (from 2008 to 2013 individual philanthropic giving rose from $1.9 million to $4.8 billion) but also because of two other factors the report revealed:

  • Despite this tremendous amount of philanthropic funding is two counties, one third of Silicon Valley residents are on some form of public or private a sistance, and one-third of kids are hungry;
  • There is a “Giving Code” that has surfaced – basically, a divide between nonprofits and high net worth individuals – resulting in well-meaning donors not matching up with needy nonprofits.
  • What’s behind this?

    The Giving Code Report notes that many new philanthropists are looking for nonprofits to solve seemingly intractable problems, organizationally scale, and do so with deep metrics and low overhead. There is also often a feeling that social service nonprofits are inefficient and “do not operate like businesses.” Many of today’s emerging Silicon Valley donors are looking for high impact, innovative solutions and not as interested in band-aid solutions.

    On the non-profit, social service side of the ledger, 80 percent of nonprofits in Silicon Valley report an increase in demand for services over the past five years, three-quarters do not have access to high-net-worth donor networks and half say they will not be able to meet the demand for services in the coming year. And many feel that many new philanthropists are out of touch with community needs.

    To be fair, having worked with a number of these new donors, they are passionate about their causes and care deeply about the issues they are investing in. Many of them are still very involved in their careers and find it difficult to connect with, and easily evaluate, where to spend their philanthropic dollars.

    Closing the Chasm

    Closing the chasm between this extraordinary increase in philanthropic resources and non-profit need is vitally important – especially at a time when government at all levels are either holding steady or cutting back on funding.

    One of the most successful philanthropists of this generation is Michael Bloomberg, who has figured out how to make both transformative grants and support basic needs – as he once said, “Every dollar makes a difference. And that’s true whether it’s Warren Buffet’s remarkable $31 billion pledge to the Gates Foundation or my late father’s $25 check to the NAACP.”

    Today’s donors have a great opportunity to share their resources to both support basic needs and look for new solutions to old problems. What remains to be seen is whether that happens in a meaningful way.

    giving-well

    Giving Well is a regular series in which Matt James and the Vrge Strategies team explore emerging trends in philanthropy and corporate social responsibility.

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