"Unprecedented Philanthropy" - Missing or Meeting the Moment?

Inequality is extreme. The needs are immense. No wonder we're cheering the coming waves of philanthropy.

The "Great Wealth Transfer" refers to the unprecedented intergenerational movement of an estimated $84+ trillion in assets that baby boomers and the Silent Generation are passing down to their Gen X and Millennial heirs over the next two decades.

Women are set to control nearly half of all global wealth by 2030, driven by this historic transfer and higher female workforce participation. 

AI wealth is unlocking a "Third Wave" of philanthropy, with tech experts estimating that AI companies and founders could soon distribute $37-$100 billion ANNUALLY. Before it has even happened we are hearing that this monumental capital infusion will focus heavily on mitigating AI’s societal disruptions while reshaping how charities operate! The projections for social change that are practically already accomplished is astonishing.

Many who have taken the Giving Pledge and say they will give away half their wealth in their lifetimes are aging.

We are confident that all or most of these groups will take advantage of their tax breaks through foundations and DAFs but then…what? We are just not as optimistic about this flood of philanthropic capital to change the circumstances of communities and individuals.

Take for example, Michael and Susan Dell. If you were asked about their philanthropy, you might say that not too long ago they gave away a massive or “sacrificial” amount of their wealth. But did they? They certainly made a big splash and will be remembered as great philanthropists. But was it consequential in a way that a fortune like theirs could or should be?  They pledged $6.25 billion to seed Trump Accounts — a $250 deposit for kids 10 and under in zip codes with median income under $150K. Sounds targeted. But the accounts themselves let families and employers contribute up to $5,000/year on top, with no income cap. Brookings cites projections that a wealthy family's child ends up with roughly $150,000 by age 30, while a low-income child ends up with about $2,500. The Dells didn't fund baby bonds. They funded a vehicle that, by design, widens the gap — and got a tax deduction plus a hefty Trump favor for it. And while $6.25 billion dollars (if they fulfill the pledge) would be an insane amount of money to mere mortals, it is only about 2.5% of their wealth. Their fortune fluctuates by more than this amount on a weekly basis and was certainly made back by them in a matter of days, particularly in light of the support of Trump and his administration. To put this gift into context, the median US wealth is $192,900, which means a 2.5 % gift would be equivalent to $4,800.

Or consider the Southern Poverty Law Center situation where Fidelity, Schwab, and Vanguard froze DAF grants to SPLC after a DOJ indictment that legal scholars across the spectrum have called politically motivated and legally thin. Many other DAF providers kept granting. The big three made a choice. So much of the outcry that we are hearing is "But, it’s OUR money! They can’t do this!" But as Sharon Schneider correctly points out, this money is NOT actually the donor’s any more. And the DAF providers are being consistent in the policies they have established for their DAFs. But regardless, these gate keepers can and do keep money from moving sometimes.

Or take the Giving Pledge as a case study. Most haven't even started to spend down their wealth let alone reach half.

Philanthropy relies on DAFs and foundations to not just take the tax break but to actually move the money. 

As The Chronicle of Philanthropy pointed out, “why has charitable giving held steady at 2.5% of GDP for five decades, even as wealth has exploded? More capital isn't the answer if we're still asking the wrong question.” If 2.5% sounds familiar, that's because that's what the Dells gave (essentially the average).

And what of the growing number of tech individuals who don’t even see philanthropy as necessary because their day jobs are already improving the world? When we tried to organize a group to volunteer or grant collectively when we lived in Silicon Valley. We experienced this type of thinking firsthand and it’s only gotten worse in the intervening decade.

As taxpayers footing the bill for the deduction, we're owed an ROI. So we hope.

We hope they pick the right problems.

Then we hope they pick the sustainable and strategic solutions.

Then we hope they coordinate, so the work isn't duplicated and the gaps aren't fatal.

Then we hope they actually move the money, instead of dribbling it out over decades while the problems compound.

That's four layers of hope before a single dollar lands where it's needed. The tax deduction happens at step zero.

I've heard people say how broken big philanthropy is but that "it's the best we've got, so…shrug". But we’re just not satisfied with that. In our current economy wealthy people walk away with all the money leaving the rest of society in dire straits and we just sit here and hope that they will feel generous and motivated in between building their bunkers and playing on their yachts? 

There ARE things we can do however. And we’re hoping some people come to their senses and work on this before the pitchforks come out. We simply need a higher ROI on DAFs and foundations. And we need more transparency about what is and what isn’t being done. 

We need to regulate them. 

We need to stop allowing the image washing without true results. 

We need to stop writing article after article about the coming wave of money that again gets people’s hopes up but may do nothing to actually help to facilitate the coordinated deployment of this capital. 

Impact investing is slowly evolving from ‘avoid harm’ to an engine to shift ownership and power (more on that soon). Philanthropy needs to evolve too. 

Maybe it’s time to have a fair tax system rather than relying on just hopes and dreams.