After Michael Bloomberg closed out three terms as mayor of New York City, he began ramping up his philanthropy. Since leaving City Hall in early 2014, he’s given away over $2 billion. Last year alone, he gave away $700 million and, earlier this month, he pledged $1.8 billion to Johns Hopkins University.
Still, for all his giving, Bloomberg is now far wealthier than he was when he stepped down as mayor, with a net worth that’s ballooned to $48 billion, according to Forbes—up more than 50 percent since 2014.
Bloomberg intends to give away this fortune and was among the first members of the Giving Pledge. Yet no matter how much money he parts with, he just keeps getting richer.
The same is true of the other billionaires who’ve pledged most of their wealth to philanthropy, including the Pledge’s founders, Bill Gates and Warren Buffett. Gates was worth $54 billion in 2010, the year the Pledge debuted; he’s worth $97 billion today. Buffett’s wealth has also nearly doubled, to $90 billion, despite annual transfers of Berkshire Hathaway stock to the Gates Foundation and the four foundations controlled by his three children.
Even two of the hardest charging big philanthropists around, Laura and John Arnold, haven’t made much dent in their fortune. Since 2011, the couple’s foundation has made $1.1 billion in grants, including many big bets on a range of causes. Yet Forbes estimates that John Arnold is 20 percent wealthier today than he was five years ago.
For all the talk of a golden age of philanthropy led by mega-donors like the Arnolds, Gateses, and Bloomberg, the richest Americans are piling up wealth faster than they’re giving it away. A new study by the Bridgespan Group finds that that “ultra-wealthy American families donated just 1.2 percent of their assets to charity in 2017, which falls considerably short of average, long-term investment returns on assets.”
Bridgespan notes that given typical gains from the stock market, an ultra-high net worth family would need to donate more than 11 percent of its assets per year to spend down half their wealth in two decades. That would be a nearly ten-fold increase over current levels of giving by the super rich.
Why Don’t They Give More?
That the richest Americans aren’t giving away as much money as they could or should is hardly news, especially to readers of Inside Philanthropy. We’ve commented often on the gulf between the actual giving of billionaire donors and their publicly declared aspirations to make the world better place.
This gulf is both puzzling and maddening. Even America’s leading role models of big philanthropy, it turns out, are hoarding vast wealth f0r reasons that are unclear.
While Warren Buffett aims to donate his entire fortune, and has already parted with billions, he’s still gotten richer and richer as he’s gotten older and older. Buffett’s timetable for giving away his Berkshire Hathaway shares isn’t nearly aggressive enough to offset his gains in the stock market. Meanwhile, there’s an urgent worldwide need for more resources to address Buffett’s long-time top cause—family planning and women’s reproductive rights. Around 100 million pregnancies a year are unintended, with one result being 25 million unsafe abortions globally that claim the lives of many thousands of women. So why is Buffett sitting on $90 billion at the age of 88?
Or consider Bill and Melinda Gates, who have led the charge to get more wealthy Americans to give, including to the global health and development causes the couple champions. They argue that more giving can reduce deaths worldwide, including among young children—over 5 million of whom died last year in developing countries from preventable causes. Why are the Gateses pleading for stepped up giving to save lives even as Bill Gates holds nearly $100 billion in private investments—sidelining twice as much wealth as sits in the Gates Foundation? (See my past speculation on this question here.)
Most perplexing is why Giving Pledge members who care about climate change don’t step up the pace of their giving. Julian Robertson has called climate change the “defining threat of our lifetime” and called for more philanthropy to meet this time-urgent challenge. Robertson himself has given more than nearly any billionaire to combat climate change. But at the age of 86, he’s sitting on a fortune estimated at $4.4 billion, a sum 40 percent greater than his net worth five years ago. With the clock ticking, both for the planet and his own time on it, why isn’t Robertson giving away more money faster? What’s the hold up? You could ask the same question about a half dozen other billionaires who’ve sounded the alarm about climate change, but give away only a small fraction of their wealth annually.
A Push to Spur Greater Giving
While armchair critics like myself gripe about how slowly even top donors are moving—never mind the super rich who barely give at all—the Bridgespan Group is trying to do something about this problem. And as a blue chip consulting firm with the ear of many wealthy clients, it’s well positioned to shape the arc of big philanthropy. In theory, anyway.
Bridgespan’s concern isn’t just with speeding up the pace of giving by America’s far upper class, it’s also with prodding these folks to give more for social change efforts, which it defines broadly to include causes “like human/social services, the environment, and international development.”
Bridgespan’s work to speed things up began a few years ago, when it published an illuminating 2015 study on why philanthropists aren’t making more “big bets” to achieve social change even as they routinely write eight- and nine-figure checks to universities, cultural institutions, and medical centers. Bridgespan’s answer, in a nutshell, was that investing lots of money in social change efforts isn’t easy. The issues are complex, many nonprofits working on them lack the capacity to absorb big gifts, and wealthy donors lack trusting relationships with people who can steer them to big investments that can achieve impact.
I had some issues with that study when it came out, since it struck me as too ready to make excuses for donors who keep their checkbooks closed. Anyone who’s hung around the world of social change organizations knows that there are plenty of groups able to absorb at least eight-figure gifts, especially if a funder is willing to pay for strategic planning to ensure that the money is spent wisely. Venture capitalists long ago figured out how to throw tons of cash at small startups and help them scale quickly. It doesn’t seem like it should be so hard for philanthropic investors to do something similar.
But I get Bridgespan’s larger point, which is that there’s not a strong marketplace that connects a growing army of ultra-wealthy donors with a social change sector that tends to think small and is filled with people who often have few links to rich people.
After its initial 2015 study, Bridgespan’s next move was to offer up a detailed set of six “billion-dollar” bets that wealthy donors could grab off the shelf. The idea here, basically, was to say to these philanthropists: “hey, you guys want shovel-ready plans to make America a fairer place? Well here they are.”
Of course, though, things aren’t that simple; just having a blueprint to create something isn’t the same as having the mindset, relationships, supports, and—maybe most of all, the courage—to actually take the plunge into the risky and unfamiliar philanthropic waters. After all, let’s face it: even the biggest social change funders find it hard to move the needle on society’s toughest challenges. You can understand the reflex among the moneyed class to just stick with Harvard and MoMA instead.
So now, after more thinking and research, Bridgespan is back with another cut at the challenge of shaking loose more cash from rich people for social change efforts—a fascinating and important report entitled “Four Pathways to Greater Giving.”
Vast Giving Potential
You can see why Bridgespan has been so dogged in its effort here. The stakes are truly enormous. According to the study’s authors—Susan Wolf Ditkoff, Alison Powell, and Kyle Gardner with Tom Tierney—just 2,000 U.S. households control a staggering $4.2 trillion in wealth, a sum that is twice as great as just eight years ago. These Americans, who are mostly older, are giving away a lot of money in absolute terms, about $45 billion in 2017, but their level of giving—just over 1 percent of their net worth on average—is paltry relative to their net worth and how quickly their wealth keeps growing.
Bridgespan estimates that if the richest Americans doubled their giving, to 2.4 percent of their assets, it would mean another $45 billion in total annual charitable giving—or an 11 percent increase. The authors write: “That is enough for 4,500 nonprofits to reap a transformative, $10 million contribution, or for 4.5 million low-income Americans to benefit from a potentially life changing, $10,000 cash transfer or educational scholarship—every single year.”
This sounds great, except that much of the increased giving that we’ve seen in recent years hasn’t gone to help struggling Americans or Africans; it’s gone to elite institutions, as confirmed by Bridgespan’s earlier “big bets” research. Excluding gifts from the Gates Foundation, that “research surfaced fewer than 600 such commitments to social-change nonprofits over a 12-year period, less than 50 commitments annually.”
Bridgespan’s ideas for how to get the wealthy to engage in more social change giving are informed by conversations with scores of philanthropists and their advisers and staff. These interviews have deepened the firm’s understanding of what’s holding wealthy donors back from giving more for social change and what those donors need to start making such gifts.
Unlocking the Cash
This study offers up four pathways to unlock bigger bucks to help change America and the world. The most promising of these, in my view, is to scale up the use of aggregated funds that allow rich donors to pool lots of money together in a collaborative way and attack big problems.
Blue Meridian Partners is a leading example of this approach right now. In that effort, catalyzed by the Edna McConnell Clark Foundation, a small group of foundations and billionaire donors are committing at least $1 billion to scale up the most effective nonprofits that help children living in poverty. Other examples include the END Fund, which is taking on neglected tropical diseases, the Charter Growth School Fund, and the recently created Co-Impact, which launched last year with $50o million in commitments and describes itself as a “global philanthropic collaborative for systems change.” Venture philanthropy groups are also examples of aggregating capital for social change, as is the Robin Hood Foundation, which last year raised $141 million to fight poverty in New York City, much of it from Wall Streeters.
The use of aggregated funds has expanded rapidly in recent years, in part because lots of wealthy people aren’t building their own foundations and see these funds as a way to give with confidence that their money will be used wisely. Bridgespan is hopeful that such funds can expand much more rapidly in coming years, unlocking substantial new giving by the ultra-wealthy—as much as $5 billion a year in additional cash for social change.
I would like to believe the same thing. Aggregated funds are big philanthropy made easy, Why wouldn’t they be a magnet for billionaires who’ve been making money faster than they can give it away?
Unfortunately, though, the story of aggregated funds to date isn’t all that encouraging. Bridgespan’s research looked at some 40 funds and found that only eight of them are moving more than $50 million a year. My own recent deep dive into venture philanthropy found that few such groups are mobilizing really big resources. New Profit is a good example. After twenty years of raising money from rich people for social change nonprofits, the organization’s annual revenues are still below $50 million a year. Outfits like Robin Hood and Blue Meridian are the outliers, not the norm.
Herding Fat Cats
One challenge, as the study points out, is that aggregated funds tend to need big patrons from the get-go to succeed. If you have a few billionaires on your team starting out, like Blue Meridian or Robin Hood did, you can bring other billionaires on board. But if you don’t, well, best of luck raising the big bucks.
For example, IP recently wrote about a new venture philanthropy fund called the American Journalism Project, which aims to raise $1 billion annually to reverse the decline of local media—addressing a problem that nearly everyone agrees is a threat to U.S. democracy. Yet while AJP is an obvious idea backstopped by strong leadership, its prospects aren’t very bright, since it launched without large initial commitments from a bevy of billionaires. It may well just limp along like so many other funds that never really catch fire.
All that said, Bridgespan is on the right track with its focus on aggregated funds as a way to get serious money off the sidelines. There’s a lot of excitement around such funds and good reasons to think the cake may rise here.
Likewise, the study offers hopeful and detailed ideas for ensuring that wealthy donors get better access to services that support their giving and can more easily identify “those qualified grantees that are able to put their big bets to effective use.” There’s much to chew on in these sections of the study, and I’d strongly encourage people to check out the full paper, as well as its data-rich appendixes.
Let me close by mentioning one other idea that Bridgespan floats in this paper—which is to create a “community foundation for America” that would enable donors to “give seamlessly to advance economic mobility.” The authors note that some 60 percent of Giving Pledgers reference the American Dream in their funding priorities, but “to date, philanthropists have lacked a national platform that provides them with a simple, compelling way to invest in efforts to increase upward economic mobility.” Bridgespan is hopeful that creating such a platform could unlock as much as $5 billion annually for mobility efforts.
It’s a cool idea, which the study elaborates on in some detail. Again, though, the success of such a venture would depend heavily on the benefactors associated with it and what kind of buzz it generated out of the gate.
What Kind of Social Change?
The larger hitch with this idea has to do with how wealthy donors approach social change philanthropy, tending to shy away from engaging key drivers of inequity and injustice.
Billionaire philanthropists give for things like workforce development, but rarely address how the U.S. economy is no longer working for a good swath of the population even as the rich keep getting richer. They give for education, but almost never to challenge deeply entrenched patterns of school segregation or the way funding inequities are baked into K-12 systems. They say they want to empower low-income Americans, but rarely invest in movement building efforts or worker organizing or voter mobilization. Few of these donors give to promote tax fairness or to prevent cuts to social programs. Almost none fund work to oppose extractive corporate behavior, despite all the ways that predatory practices strip wealth from poor communities. Some actually abet such behavior in their day jobs.
We should all be pushing the wealthiest Americans to give more money for social change and Bridgespan deserves kudos for working so hard on this goal. What’s less clear is how much impact such increased giving would have, at least on issues of equity, if well-heeded donors aren’t ready to support real changes to today’s economic and political power arrangements.