The Good Samaritan Gets Savvy

Modern benefactors are starting younger and taking a broader view of philanthropy

Back Article Dec 29, 2014 By Nick Tedesco

We are at a critical point in history. Longstanding social issues like hunger, poverty and lack of access to quality education continue to plague the world. All the while, wealth continues to grow at a staggering rate. This global dichotomy has given rise to new philanthropists who approach their discipline in a radically different way.

U.S. wealth hit an all-time high of $241 trillion in 2013, and a recent report by the Boston College Center on Wealth and Philanthropy predicts an estimated $59 trillion will be transferred from 94 million American estates by 2061 — the greatest wealth transfer in U.S. history. With that we are witnessing, perhaps for the first time since the early 20th century, a renaissance of giving.

As Matthew Bishop highlights in his book Philanthrocapitalism: How Giving Can Save the World, “The new philanthropists believe they are improving philanthropy, equipping it to tackle the new set of problems facing today’s changing world. … They think they can do a better job than their predecessors.”

And many will argue that these philanthropists are well-positioned to take on the challenge given their success in the venture capital and technology sectors, where they have proven to be resourceful visionaries. Now, they are eager to apply their skills to solving problems both at home and abroad. Here’s how they’re doing it.

They view philanthropy as a larger discipline.

The next generations of philanthropists are poised to become the most influential donors in history. And with campaigns like the Giving Pledge (which encourages the world’s wealthiest people to give most of their wealth to charity), philanthropy has recaptured the attention of the world in a way not seen since Andrew Carnegie penned the The Gospel of Wealth in 1889.

They’re starting earlier.

Wealth is being cultivated at a much earlier age and on a larger scale. Industry pioneers give back much earlier in their careers and at a pace at which they can witness the effects. Tech executives — many of whom made their wealth in their 20s and 30s — are turning to philanthropy as a second career. Philanthropy, once born out of retirement, is now a sophisticated discipline, a career unto itself.

They’re entrepreneurial. 

Tech pioneers in Silicon Valley and beyond apply their business acumen to their giving strategies, changing the landscape entirely. We see new and innovative approaches to longstanding challenges like education and global health. Many employ nontraditional models of giving, such as impact investing, which pairs traditional grants with investments.

They’re catalytic.

Today’s philanthropists develop and support methods designed to create systemic change. They address large-scale social problems with a more hands-on and results-oriented approach. Donors no longer simply support an existing (and often longstanding) program, but create new solutions. There is a sense of ownership and urgency, and often high-level involvement by the donors themselves.

They’re collaborative.

The new breed of philanthropists understands the limitations of attacking a problem alone, so they turn to their peers to maximize impact. They understand the learning opportunities that come from partnerships, so they welcome the free flow of ideas in the name of the greater good. To this end, we are seeing the emergence of funding collaboratives and learning circles. These partnerships extend beyond organizational and even geographic limitations, crossing sectors to adopt a common agenda, as demonstrated by the collective impact movement.

They focus on results.

As a byproduct of their desire to maximize impact, today’s philanthropists incorporate robust measurement and evaluation guidelines into their giving strategies. They want to understand the return on their investments and learn from their mistakes.

Much like the evolution of the modern-day philanthropist, nonprofits are in a process of adaptation. The National Center for Charitable Statistics estimates there are approximately 1.5 million nonprofit organizations in the United States — and more than 160,000 in California alone. To attract funding and remain viable, these organizations understand they must appeal to the new guild of donors.

Funders, particularly in Northern California, support organizations that embrace this notion of high-engagement philanthropy — an approach characterized by direct and personal engagement that often extends beyond financial support. Donors are drawn to opportunities in which they can provide strategic support in partnership with financial investment. Leading organizations now look to philanthropists to help with capacity building, leadership development, technical support and programmatic development. The donors themselves actively seek opportunities to identify the gaps that government and business are unable to fill, and they help shape the outcomes.

These venture philanthropists focus on the tangible return on their investments and want nonprofit organizations to define outcomes and maximize results. More than ever before, funders are assessing the link between cost and impact, and are asking their prospective partners to do the same.

To meet those ends, funders infuse their professional expertise and passions — e.g. supply chain and technology — into their philanthropy. Areas such as education have begun incorporating digital components to enhance student engagement; global health organizations infuse groundbreaking technologies into their delivery strategy. This gives the funder a reason to stay invested and engaged.

The last decade has seen the rise and fall of many things — political systems, industries, social classes — but perhaps the most transformative event, the one that might ensure that the coming decades are met with innovation and success, is philanthropy. The new humanitarian is setting the pace and making great strides.