SAN FRANCISCO — Last year, Jeff Bezos, founder of Amazon and richest person on the planet, took to Twitter to ask for suggestions for philanthropic giving.
The billionaire is just one example of an influx of ultra high net worth individuals in the field of philanthropy. Globally, there are 15 million millionaires and close to 2,000 billionaires, according to estimates by “The Global Philanthropy Report,” released Wednesday. And they are increasingly launching formal philanthropic structures to put their money to work for social outcomes — structures which don’t always look like they used to.
While not all billionaires are using social media to explore ways to make an impact with their money, their paths to giving often look different than traditional efforts, such as starting a foundation. And given the value these gifts could have in an era of uncertainty regarding official development assistance, and a funding gap to achieve the Sustainable Development Goals, high net worth individuals are groups the international development community should pay close attention to.
Ahead of an upcoming webinar on engaging ultra high net worth individuals, Devex is outlining best practices to attract these donors. Their engagement can be transformational, particularly in an era of uncertainty regarding official development assistance.
Many NGOs are in the midst of developing or improving strategies to engage ultra high net worth individuals, and in addition to highlighting best practices, Devex also spoke with a range of experts about what this growing number of billionaires could mean for fundraising in the sector.
The giving journey
Anu and Naveen Jain, entrepreneurs and philanthropists based in Seattle, Washington, donated $1 million in prize money to the XPRIZE Foundation to support a women’s safety XPRIZE. When Devex spoke with Anu Jain about the gift, she talked about the influence of her childhood visits to India, and seeing harassment on the streets. She said this inspired her support of a competition for wearable technology that will enable communities to respond to threats to the safety of girls and women in India. These childhood experiences continue to inform her giving, as well as her involvement on advisory boards focused on issues affecting women and girls.
“My daughter faces some of the same things my grandmother had to deal with in terms of safety. It’s something that has to be changed,” she said. “So let's use technology to find an immediate solution that can helping that journey in that goal of reaching gender equality.”
Jain, whose husband is currently working on a project to mine the moon, is interested in leveraging the power of emerging technology to address social problems. She said she sees incentivized competitions like those XPRIZE organizes as one way to do that. And Jain emphasized that she and her husband also give locally, working with an organization dedicated to serving underprivileged children and families in Bellevue, Washington, in the same area where Bezos and Bill Gates, currently the second richest person in the world, also live.
The question of why donors give is a critical one, and it is the focus of “The Giving Journey,” a report published earlier this year by the strategic advisory firm Open Impact with funding from the Philanthropic Partnerships Team at the Bill & Melinda Gates Foundation. The report is the result of six months of research “into the key motivations and barriers to giving” among ultra high net worth individuals, which Open Impact defines as donors whose giving ranges from $100,000 to more than $10 million per year. The report follows the path from what the co-authors describe as reactive check writing to actualized philanthropy.
“Journey is a great way to describe it,” Brian Boland, vice president of publisher solutions at Facebook, told Devex of his path to philanthropy.
He said Fidelity, the investment services group that holds his donor advised fund, or DAF, has been a valuable source for advice on how to be more effective at philanthropy. One of the organizations he has gotten behind is Village Enterprise, a nonprofit organization with a San Francisco-based chief executive officer, Dianne Calvi, and a stated mission of ending extreme poverty in rural Africa through entrepreneurship and innovation. His DAF, the Delta Fund, is also the lead investor of the Development Impact Bond for poverty alleviation in Uganda and Kenya, and he and his wife have had the chance to see some of that work up close, further solidifying their commitment, he said.
Experts who spoke with Devex said the more someone is able to give, the more responsibility they can feel to give it wisely. And some ultra high net worth individuals, particularly those who bring a Silicon Valley mindset to their thinking, find the effective altruism approach to philanthropy resonates with them. Effective altruism essentially asks philanthropists to consider how they can do the most good with every dollar they give, taking their own interest out of the equation, and doing what the data says.
“I think effective altruism is a great mechanism for people to reframe how they’ve thought about giving,” Boland said, explaining that he has read “The Life You Can Save,” a book by Peter Singer that is an influential guide for many philanthropists who ask how they can do the most good with every dollar they give. “It is not framed as do it for the tax break or because you feel guilty, but do it because it works.”
But he said he views his giving as a portfolio, and cares about local as well as global involvement. He and his wife Katie are interested in organizations that can improve outcomes for the poor, no matter where. Early on, they had more time and expertise than money, and as they developed wealth, they got to a place where they could give more.
“As we became more successful, it became the kind of thing where we had been given a lot. So I started to ask, ‘how can I take the job I do every day and the money I get paid and turn that around to make a big impact on the world?’” he said.
Boland sought to bring his own insights around the way advancements in measurement were changing advertising to the field of philanthropy, with tools such as randomized controlled trials, which Village Enterprise just completed.
“Don’t see people as dollar signs. That’s where your motives are going to be transparent. You need to genuinely approach donors as partners.”— Kathleen Kelly Janus, author of “Social Startup Success”
“We are comfortable with human centered design and testing to our product design, but what we need to do is apply the same approach to fundraising,” said Kathleen Kelly Janus, the founder of the millennial philanthropy network Spark, and author of “Social Startup Success.” “There is no one-size-fits-all funding model that will work for every organization. You have to try out different sources of funding. Then do rapid prototyping to get the answer.”
But certain rules do apply across the sector, she said.
“Don’t see people as dollar signs. That’s where your motives are going to be transparent. You need to genuinely approach donors as partners,” Janus said.
What sets Silicon Valley apart
The median annual gift last year for America’s 50 most generous donors was $97 million, according to the Chronicle of Philanthropy.
The largest gift was from billionaire couple Bill and Melinda Gates into their own foundation. The second largest was from Facebook CEO Mark Zuckerberg and his wife Priscilla Chan to their charitable foundation, the Chan Zuckerberg Initiative, which is a limited liability corporation or LLC, and DAF. And the third largest gift was from Michael and Susan Dell, whose fortune comes from Dell Technologies, to their own foundation.
More and more, wealthy individuals are routing their giving through different vehicles, including DAFs and LLCs, and fundraisers who have typically pitched foundations may want to recalibrate those questions for individuals, experts told Devex in a separate story zooming in on fundraising strategies.
Anna-Marie Harling, head of the Global Ultra High Net Worth Philanthropy Centre at UBS, said the financial services firm defines ultra high net worth individuals as those with more than 50 million dollars in bankable assets. UBS funded the Global Philanthropy Report released on Wednesday, and in a call with Devex, Harling emphasized that despite the trends in the report, it is important to keep in mind that no two mega donors are alike. For example, someone who becomes wealthy for the first time, say because they sold a tech company, is likely to look for something very different in their giving than someone who has had wealth in their family for generations.
In its analysis of 2017 charitable contributions from mega donors in the United States, the Chronicle of Philanthropy noted an acceleration of the shift of big philanthropy from Wall Street to the West Coast. Eleven figures from the tech industry made the list of the top 50 American donors, collectively giving nearly 60 percent of the total contributed by the Philanthropy 50. And the influence of Silicon Valley on social issues is even greater, since many of their pursuits are through LLCs or for profit ventures rather than traditional philanthropy.
A few different factors drive Silicon Valley donors to have a different approach, Jacob Harold, president and CEO of GuideStar, told Devex The first is age, given that it is easier to make a fortune faster in Silicon Valley than elsewhere. These digital natives have a different set of assumptions about the information they need to make decisions, Harold said. And because so much Silicon Valley wealth has come from information technology, there also tends to be an interest in things like data-driven decision-making, technology-powered solutions, and pathways to scale as well as an appetite for failure.
“If people are used to making decisions about buying a house or a car or a digital camera or a ham sandwich with a whole lot more information available to them than people in other generations, then of course they're going to bring a different set of expectations to their giving,” he said. “But it turns out the nonprofit sector and philanthropy is incredibly diverse, and applying an analytical, data-driven mindset is harder than it sounds. And it is possible within real estate to build a Trulia or a Zillow with a very well-defined unit of analysis — the individual house — or to build an Uber or Lyft with defined unit of analysis — the individual ride by one passenger in one car and one driver — but the units of analysis are all over the place in social change.”
Doing the most good?
Prior to The Giving Journey, Open Impact released a report in 2016 called “The Giving Code,” which explores how individuals who make their money in tech bring those same approaches to their philanthropy.
For example, they seek to not just fund solutions, but rather to disrupt traditional social problems, with a focus on impact and scale, an emphasis on metrics and measurement, and a preference for a businesslike approach to social change.
But it is also driving an important conversation about what the authors call a prosperity paradox, noting that while Silicon Valley wealth has led to negative consequences for Bay Area residents — such as a lack of affordable housing — a relatively small portion of that philanthropy goes to challenges in the local area.
Many people who identify as effective altruists give their money to global health initiatives such as those recommended by the charity evaluator GiveWell. Top charities like Evidence Action’s Deworm the World Initiative have a clear return on investment in terms of impact. But as most philanthropists view their giving as a portfolio, many advisers and experts are calling for them to consider the impact they can have in their own backyard, as well as globally.
“If you approach this from a purely economic, rational, numeric mindset, if you’re using an ROI framework, of course you're going to say the most bang for your buck is going to be serving the poorest of the poor,” said Heather McLeod Grant, managing director of Open Impact and co-author of both The Giving Pledge and The Giving Code. “That's not the same as a moral and ethical framework, which doesn't lend itself to quantitative numerics.”
Still, effective altruism is an approach worth understanding, with Cari Tuna and Dustin Moskovitz being the highest profile examples of billionaires who identify as EAs, and have supported the movement through contributions to GiveWell and the creation of their own Open Philanthropy Project.
And their influence on philanthropy has yet to be fully realized. Many Silicon Valley individuals who think of giving in this way have a lot of paper wealth tied up in the companies they founded, explained Chris Addy, a partner at Bridgespan, which provides management consulting to nonprofits and philanthropists. But when this money becomes liquid and these dollars become gifts, the effective altruism approach is likely to spread, although in most cases as part of a portfolio where giving to the local community remains a priority along with global health and international development.
In the meantime, family foundations and larger more traditional foundations are looking for more proof of impact and data driven decision-making, in part due to the impact of effective altruism on the field of philanthropy.
“I have clients that are doing great work, still tinkering around with their theory of change and program model and exactly what outcomes they will be tracking, and they’re not quite ready for prime time for a lot of funders,” said Vanessa Pierce, president at Black Fox Philanthropy. “The effective altruism movement has empowered a lot more funders who are saying, ‘We need hard impact measurement. We need to see a sophisticated data collection system. We need to see real time M&E results.’”
“Philanthropy funding is ideal for taking risks, so why fund all these certain interventions?”— Robert Boogaard, founder of the Jazi Foundation
Based in the Netherlands, the Jazi Foundation is presenting ultra high net worth individuals with some of the same principles as effective altruism but in a way that is more accessible to them and the large gifts they plan to make.
“Philanthropy funding is ideal for taking risks, so why fund all these certain interventions?” Robert Boogaard, founder of the Jazi Foundation, asked Devex.
He said he sees the Giving Pledge, a campaign to encourage billionaires to contribute a majority of their wealth to philanthropy, as an effort focused on why to give. GiveWell, and the Life You Can Save, named after the book by Singer, focus on what organizations to give to. But whereas certain groups do focus on how to give more effectively, they are not geared toward people who could make gifts of a million dollars or more, he added.
“Philanthropy advisers often start by asking: What is your passion?” Boogaard said. “That pushes these ultra high net worth individuals down a tunnel that is very hard to get out of.”
He developed an effective giving framework to guide donors through ways to make the greatest impact possible. For example, an axis outlines how selections in cause area, like those issues that are important or neglected or tractable, have the greatest gains in impact, whereas the solution itself has a medium gain in impact, and the organization or team has only a small gain in impact. The framework also defines principles of giving, including prioritization, leveraging unique resources, and additionality, or selecting opportunities that would not happen without the support of these individuals.
There are of course other groups in the space of making giving more effective. One example is The Philanthropy Workshop, which has offices in San Francisco, New York, and London, and a network of more than 425 philanthropists interested in strategic philanthropy, or giving their time, talent, treasure, and networks for meaningful change. Among wealth advisers, there are also leaders such as UBS, which has a Global Philanthropy Forum and an invitation-only network supported by UBS that connects ultra high net worth philanthropists with similar interests. It remains to be seen to what extent newer examples, including The Founders Pledge, which asks donors to commit a percentage of their personal exit proceeds from selling a company to a charity, will push their networks of philanthropists around effectiveness.
Join Devex’s webinar, Engaging Ultra High Net Worth Individuals, this Friday for additional insights on how to get these billion dollar donors to the table and keep them there.