Rich to the rescue
Among the more than 8 million millionaires in the US, making a global difference is becoming 'the cool place to be.'
These are exciting times in the traditionally quiet world of philanthropy, as a growing cadre of the newly wealthy promises to change the world – as well as the face of charitable giving. Among the recent developments: •The pool of potential wealthy donors has mushroomed in the past two decades, and includes more than 8 million US millionaires. The number of family foundations has risen 60 percent in six years.
•Bill Gates and the Google and eBay teams have made a splash with blockbuster donations and innovative approaches to giving.
•An intergenerational transfer of wealth of more than $15 trillion dollars is projected in the US over the next 15 years.
•The number of nonprofits here has doubled in the past five years to more than 1 million, heightening the competition for resources.
Despite some high-profile gifts recently, however, a spike in overall giving has yet to occur. Americans' generous donations rose by 6 percent last year to $260 billion, keeping pace at a relatively stable 2 percent of GDP over time. Yet many see signs of significant change ahead, as super-rich philanthropists show the way for others joining the ranks of the wealthy.
"Because of their collective prominence, they tend to make people aspire to be like them ... and to see philanthropy as 'a cool place to be,' " says Tom Watson, strategy officer for Changing Our World, a philanthropic consulting firm.
The young corporate leaders sharing their wealth at midlife (rather than in their wills) also herald a new style of giving. Keen to "make a difference" in the world, they are zeroing in on serious global problems and taking an active role that aims at specific results. Mr. Gates's leaving Microsoft to concentrate on foundation work is the most prominent example.
"There's a lot of younger, impatient money, if you will," says Marcia Stepanek, editor of Contribute magazine in New York. "Donors used to be content to write checks.... Now there are lots of strings attached – not only specific targets, but MBA-type metrics.... It's almost seen as an investment with expectation of a quick return."
A few are blurring the boundaries between business and charity. Google founders Larry Page and Sergey Brin intend to spend $1 billion on for-profit as well as nonprofit ventures through their Google.org charitable arm. Any financial returns on for-profit funds, they say, will be plowed back into the charity.
Entrepreneurs Jeffrey Skoll and Pierre and Pam Omidyar of eBay are experimenting with nonprofit and for-profit "social purpose" enterprises.
With globalization, corporate leaders involved in cross-cultural alliances are more aware of social and environmental problems perceived as intractable. "The American business sector has found it a little tougher going in places around the world," Ms. Stepanek says. For some, it's a matter of enlightened self-interest. They see that conditions must improve if they are to create new markets.
United Nations studies have shown that key health and poverty problems could be solved if sufficient resources were brought to bear. With governments falling behind on commitments, new philanthropists are stepping in.
Ted Turner broke the mold when he announced his $1 billion donation to the UN in 1997.
The Bill & Melinda Gates Foundation, with another boost from Mr. Buffet's planned $31 billion gift, is donating heavily to the Global Fund to Fight AIDS, Tuberculosis, and Malaria. The Gates Foundation spurred a huge jump in the number of vaccine manufacturers by committing $1.5 billion to buy medicines.
Google.org is searching out projects to address global poverty and energy and environment problems.
The Clinton Global Initiative – President Clinton's town-meeting-style gathering of corporate, political, and charity leaders – this fall garnered pledges worth $7.3 billion from 215 people for endeavors in the areas of global health, poverty alleviation, ethnic and religious strife, and energy and climate change.
One innovative thrust involves a $5 million commitment by AOL's Steve Case to get clean water to sub-Saharan Africa. Mr. Case's grant to PlayPumps International will support the building of water pumps linked to children's merry-go-rounds. As kids play, the water is pumped into storage tanks, and billboards on the tanks earn money to pay for maintenance. At the Clinton meeting, first lady Laura Bush announced a $10 million US government contribution to the project.
Along with these positive developments comes a great uncertainty within the US charitable community. The astounding growth in nonprofits means more competition for funds. It's likely that a number of nonprofits will fail.
While rising corporate profits and tax cuts have widened the pool of private wealth, many in that pool are not yet involved in philanthropy. A recent survey by the Luxury Institute found that 31 percent of rich Americans say they donate to nonprofits; 25 percent say they will do so in their wills. Fifteen percent say they intend to give. But 11 percent say they will not, and another 15 percent aren't sure.
According to Charles Maclean of Philanthropy Now, who did the survey, the rich don't donate for two main reasons: the fear of not having enough money for themselves and their family, and distrust of nonprofits. Only 35 percent said they felt charities would use the money wisely, pointing to a need for objective data on nonprofits.
Many are gearing up to provide such objective information on charitable organizations. In financial services now, wealth management often includes some consideration of philanthropy. Contribute magazine, launched last spring, provides case studies and, in each issue, ranks 25 charities based on a range of metrics. Charity consultants Changing Our World is launching a philanthropic advisory service for family foundations.
The unsettled environment places new demands on nonprofits and traditional foundations, demanding greater accountability and spurring fresh conversations throughout the field about how change can be realized.
"Philanthropy has tended to be a quiet, hidebound sector," says Mr. Watson. "The leaders now coming in are shaking things up – and that's a good thing."