THE SUPER RICH PHILANTHROPIST - ARE THEY DIFFERENT THAN PREVIOUS GENERATIONS OF WEALTHY GIVERS?

Andrea McManus, ViTreo Group Inc
January 15th 2019

There’s a new kid on the fundraising block - the Super Rich Philanthropist. And no pun intended, some of these heavy givers are young. They can be mainly found in the tech industry, with some in other sectors - real estate, finance, energy and retail. A few of them achieved billionaire status at an age when many would have still been finishing an undergraduate degree or entering the workforce for the first time - Facebook’s Mark Zuckerberg was 23, Amazon Founder Jeff Bezos even younger at 22; others were slower off the mark taking until their 30s or later (source:  Business Insider When richest people in the world became millionaires/billionaires).

So, what’s different about them, if anything? David Callahan, author of The Givers: Wealth, Power and Philanthropy in a New Gilded Age (a fascinating read by the way), and editor of Inside Philanthropy, says that’s a good question and not easily answered (The Givers. Inside Philanthropy).

HOW CALLAHAN SAYS THEY ARE SIMILAR

“That’s because today’s new donors are quite heterogeneous in their backgrounds, thinking and approaches. Yes, some of the top new donors are young billionaire types from the tech industry, but plenty of others hail from sectors like real estate, energy and retail. Over two dozen members of The Giving Pledge [The Giving Pledge is a commitment by the world's wealthiest individuals and families to dedicate the majority of their wealth to giving back] are from finance. Most of the pledgers are older, which is true of leading philanthropists — and the super-wealthy — overall. The average age of billionaires on the Forbes 400 list is 65, and for all the talk of early giving, large-scale philanthropy still tends to happen late in life, as business leaders turn from making fortunes to disposing of them.

While many of these older donors give in traditional ways, younger donors, like Mark Zuckerberg and Priscilla Chan or Laura and John Arnold have drawn attention by tackling ambitious challenges — such as curing all diseases or reforming the criminal justice system. And to be sure, an ethos of ‘change, not charity’ is embraced by many of the new donors, especially from Silicon Valley. In particular, the ideas of effective altruism have increasing sway in some precincts of philanthropy, a trend exemplified by the giving of Facebook co-founder Dustin Moskovitz and Cari Tuna. Nevertheless, much large-scale giving — if not most — still aims to strengthen long-established institutions, from Harvard to Lincoln Center to the LACMA [Los Angeles County Museum of Art].” (source: The Givers: Wealth, Power and Philanthropy in a New Gilded Age)

In any case, today’s new crop of donors hardly invented the ethos of ‘change, not charity.’ Two of the founders of modern philanthropy, John D. Rockefeller and Andrew Carnegie, had huge ambitions to remake key systems in U.S. society. Rockefeller sought to bring about sweeping changes in public health and medicine, as well as education in the South. Carnegie aimed to modernize the teaching profession and, even more grandiosely, dreamed of ending the scourge of war. He also brought public libraries to scale as a key institution in local communities. Julius Rosenwald’s vast effort to build schools for blacks stands on par with today’s charter school movement. Olivia Sage, Edward Filene and Robert Brookings aimed to harness social science research to public policy in new ways. The list could go on.

Strikingly, some of today’s biggest donors have embraced largely the same goals as early giants of philanthropy. Bill and Melinda Gates have followed in Rockefeller’s footsteps with their focus on health and education. Jim and Marilyn Simons are building a foundation to support science that is looking increasingly similar to the Howard Hughes Medical Institute. Alice Walton’s outsized arts philanthropy has a trajectory very similar to Paul Getty’s. Nicolas Berggruen’s $1 billion think tank brings to mind the Institute for Advanced Study, founded by philanthropists in 1930. The comparisons could go on, conjuring the adage that the ‘more things change, the more they stay the same.” (source: Inside Philanthropy -- What's different about the new philanthropists if anything?)

HOW CALLAHAN SAYS THEY ARE DISRUPTING PHILANTHROPY

He goes on to say,

 “American philanthropy really is undergoing seismic changes right now, and much is, indeed, ‘new.’

The biggest shift in the past 20 years is that the prime movers in philanthropy are no longer legacy foundations, as was true during the second half of the 20th century. When I first started paying close attention to philanthropy in the mid-1990s, it was a world dominated by endowed institutions created by industrialists who had long ago passed from the scene.

Today, the most important players in philanthropy are living donors. That’s not to say that legacy foundations don’t remain hugely influential and, in plenty of cases, quite creative and dynamic (despite what you might hear from dismissive tech types like Sean Parker). But their importance in relative terms has steadily diminished, as new mega-givers have arrived on the scene. In a growing array of fields — such as K-12 education, scientific research, criminal justice reform and environmental conservation — money from living donors plays a dominant role. This shift is likely to accelerate in coming years.

And while it’s true that the hard-charging living donors of today are often similar to mega-givers from earlier times, they do tend to operate differently from legacy foundations — taking more risks, placing bigger bets, and moving with more urgency. (Although, again, it’s important not over-generalize on this score.) And even if the majority of newer donors do give mainly to established causes, the ranks of those philanthropists who are instead focused on systemic change has lately exploded. Disruptive philanthropy may be over a century old, but it’s now practiced on a scale never seen before in U.S. society.

This trend, too, is likely to accelerate — especially as more philanthropy emerges from a tech sector filled with restless innovators. Of the $2.5 trillion in assets held by the Forbes 400, as much as a quarter of that wealth is the hands of tech billionaires. Some, like Jeff Bezos and the Google co-founders, have yet to put philanthropy at the top of their to-do list. When this happens, the face of large-scale giving in America will likely be further transformed.”
(source: Inside Philanthropy -- What's different about the new philanthropists if anything?)

CALLAHAN SUMS UP THE DIFFERENCES BY SAYING,

“…a cliché that springs to mind about philanthropy today is that it’s ‘the same, but different.’ The most ambitious and creative of the new donors aren’t any more ambitious or creative than Rockefeller, Carnegie and Rosenewald. But there are many more such mega-givers operating in a more sophisticated environment that’s been enriched by a century of learning. And their arrival on the scene in recent years marks a big break from the golden age of institutional philanthropy in the 20th century.

One thing is certain: There’s never been a more exciting time in American philanthropy than right now.” (source: Inside Philanthropy -- What's different about the new philanthropists if anything?)

In our work at ViTreo, we have seen the nonprofit sector in the U.S. and Canada become progressively more top-heavy, resulting in a great deal of philanthropic leverage held by a small group of wealthy individuals and foundations. While this trend provides opportunities, it comes with its challenges which I will explore in this series on the Super Rich Philanthropist - stay tuned.

DO YOU SEE THIS PHENOMENON AS FAVOURABLE? OR ARE YOU CONCERNED ABOUT IT — OR BOTH?

In the U.S., the report, Gilded Giving 2018: Top-Heavy Philanthropy and Its Risks to the Independent Sector (36 pages, PDF), found that “the charitable sector is changing from a sector with broad-based support contributed by a wide range of donors to one dominated by a relative handful of individuals at the top of the income and wealth ladder. In 2017, for example, households with income of at least $200,000 accounted for 52 percent of all charitable deductions, compared with 30 percent in the early 2000s. Similarly, the percentage of charitable deductions from households with more than $1 million in income grew from 12 percent in 1995 to 30 percent in 2015. According to the report, the share of all households giving to charity fell from 66 percent in 2000 to 55 percent in 2014, while over the same period the number of low-dollar and mid-level donors — who traditionally have made up the vast majority of charities' supporters — fell by about 2 percent annually.

The study also found a significant increase in the number of mega-gifts awarded in recent years, with the threshold for such gifts jumping from $50 million in 2012 to $300 million in 2017. In 2012, gifts of at least $50 million totalled $1.2 billion and accounted for 0.5 percent of all individual giving in the U.S., while in 2017 gifts of at least $300 million totalled $4.1 billion and accounted for about 1.5 percent of individual giving. In addition, between 2005 and 2015, total assets held in private grantmaking foundations grew more than 60 percent, while contributions to donor-advised funds jumped 66 percent.” (source: Report Warns of Risks of Top-Heavy Philanthropy ) 

In Canada, Philanthropic Foundations Canada released its report, A Portrait of Canadian Foundation Philanthropy. Here are some of its findings:

“We can identify some key trends in the development of organized philanthropy over the last three to five years:

• A steady growth of the private foundation sector in Canada, with more families and donors interested in committing to institutional philanthropy.

• Within the sector, a larger number of very big private foundations with assets over the billion dollar mark are appearing, a trend that is a new phenomenon for Canada.”
  
  (Source: Hilborn News: Canadian Foundation Philanthropy)

I also wrote about this influential group of philanthropists in an earlier blog, The Emerging School of Philanthropists, if you’re interested in learning more about how they give and for recommendations on how to approach them.

Have you also noticed a decrease in giving by low to mid-level donors? And an increase at the level of high net worth individuals? Some of that may be attributable to the downturn in the economy. The American economy is stronger, the Canadian economy stable, however, there is still a widening gap between those who have and those who don’t.

Although it’s wonderful to see the enormous gifts being donated, there are risks attached. Our role as fundraising professionals is to guide others to do philanthropy well; to ensure donations of all sizes have an impact.

Check out ViTreo's Braintrust as we bring you additional insights into what is and what will be important in philanthropy through our Weekly News Recap and our Podcast.

ABOUT THE AUTHOR

Andrea McManus, Chair, Board of Directors, Partner
ViTreo Group Inc

Andrea McManus is a Partner with ViTreo with over 30 years’ experience in fund development, marketing, sponsorship and nonprofit management. A highly strategic thinker and change maker, Andrea has worked with organizations that span the nonprofit sector with particular focus on building long-term and sustainable capacity.