Stop Hoarding, Start Healing: Why Philanthropy Needs an Urgent Spending Revolution

Over the past few weeks, I've read posts from foundation leaders saying, "now is the time to step up," as many consider marginally increasing their grant budgets for the next year or two. At first glance, this seems encouraging, but it also highlights a persistent and flawed assumption underlying philanthropic strategy—the belief that maintaining or slowly growing foundation assets ensures a sustainable future impact. I strongly disagree with this conventional wisdom. Here’s why:

Impact Has Compound Interest Too

We love to celebrate the power of financial compounding, marveling at how money grows exponentially over time. Yet, we overlook something equally profound: the compounding effect of human impact.

According to research from the World Bank, investments in early childhood education return as much as $7 for every dollar spent due to improved health outcomes, higher lifetime earnings, and reduced reliance on social support (World Bank). Every dollar invested in affordable housing and community empowerment similarly creates a ripple effect, significantly enhancing economic stability and reducing long-term public expenditures.

Studies show that providing stable housing can decrease healthcare costs by up to 60% and reduce emergency shelter usage by up to 88%. For instance, a Housing First program for chronically homeless individuals resulted in cost savings of up to $29,000 per person per year, while another study found an average cost savings on emergency services of $31,545 per person housed over two years.

Additionally, organizations like Village Enterprise and BRAC further illustrate this effect. Village Enterprise's poverty graduation program shows that participating households experience sustained income increases averaging over 71%, lasting years after the initial intervention (Village Enterprise). Similarly, BRAC's ultra-poor graduation program has shown substantial long-term improvements in income and quality of life (BRAC). Investing quickly and decisively generates "impact interest," multiplying benefits for generations far beyond the initial intervention. Once a village has sturdiness, it can support the generations or neighboring villages that didn't participate in the program, but can benefit too.

Today Feels Urgent, But Is it Special?

The chaos unleashed by the first weeks of the Trump presidency has profoundly disrupted international aid, with severe cuts to USAID and foreign assistance programs. These actions have dismantled critical support systems around the globe, exacerbating existing humanitarian crises, destabilizing vulnerable regions, and significantly undermining decades of progress in poverty alleviation and global health. Philanthropists often argue that these exceptional times warrant exceptional responses.

But while today's challenges are indeed severe, are they more critical than past or future crises? History consistently reminds us of perpetual urgency. Waiting for an even "more urgent" moment to spend assets means indefinitely delaying solutions that are desperately needed now. Do we really believe that before Trump's actions, we were in some sort of optimal state of government aid and philanthropy? Even then, we were far from achieving meaningful global goals, such as the UN Sustainable Development Goals, highlighting a persistent complacency in our collective efforts (United Nations).

Learning from the Nordics: Policy Over Philanthropy

In countries like the U.S., philanthropy often acts as a bandage, filling gaps left by inadequate social policy. Nordic countries take a different approach, using robust social safety nets to meet basic human needs comprehensively. Due to their strong policy frameworks, research consistently ranks Nordic nations among the highest globally for quality of life, social mobility, and economic equality (OECD Better Life Index). Isn’t it more logical—and impactful—to invest our energy into advocating for domestic systemic change and building a foundation of social security that makes philanthropy an accelerator rather than a crutch? Imagine how boldly we could address global poverty, inequality, and climate challenges if domestic philanthropy weren’t perpetually patching policy holes. This isn't a call to focus on "America First" today but rather a call to fix our policies while we deploy capital around the world today.

Asset Preservation as Accidental Wealth Hoarding

Foundations commonly target financial returns that surpass their required distributions, which means their assets often grow faster than they spend them. Data from the St. Louis Fed shows that foundation endowments have grown significantly over the past decade, despite ongoing global challenges. Instead of perpetually preserving these assets, foundations unintentionally become wealth accumulators—ironically withholding funds intended to solve problems. This practice perpetuates suffering and delays progress. What good is preserving capital indefinitely when immediate and solvable human needs persist?

Investment Strategies Often Contradict Missions

The most troubling paradox is that foundations' investments frequently undermine their stated missions. To achieve market-rate returns, foundations often invest in companies and practices that directly extract from communities or degrade the environment, a phenomenon I discussed extensively in the blog post "The Violence of Market Rate Returns." Unless foundations deliberately align their investment strategies with their missions, they're actively funding the problems they claim to oppose.

An Aggressive Call to Action

We must shift our mindset from asset preservation toward aggressive capital deployment. Foundations and DAFs should adopt spend-down strategies, prioritizing immediate, significant investments in people, communities, and systemic change. Radical transparency, deliberate mission-alignment in investments, and a willingness to boldly fund transformative solutions today are urgently required.

It's time for a radical shift: stop building endowments that grow indefinitely and instead aggressively deploy capital to compound immediate impact. Our focus must move away from increasing financial reserves toward reducing global suffering and dependency on philanthropy. By investing boldly now, we create lasting change and empower communities to build resilience, ultimately reducing future philanthropic needs. This is the essence of compounding impact—let’s urgently choose it over perpetual endowment growth.