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The Giving Conundrum: What Is the Most Effective Way to Deploy Your Philanthropic Dollars?

With an endless list of nonprofits, we unpack the best places to put your hard-earned coin.

Money Philanthropy Shutterstock

Two years ago, with a newborn and a two-year-old at home, Sandra Abrevaya and her husband, Brian Wallach, received devastating news: Wallach had the neurodegenerative disease amyotrophic lateral sclerosis (commonly known as ALS, or Lou Gehrig’s disease), and his doctor’s prognosis gave him six months to live. He was 37. “When we were diagnosed, obviously we wanted to take action, but our default was not to start a new organization,” recalls Abrevaya from the family’s home in Chicago.

They decided Abrevaya would stay local to keep her job as president of a youth-oriented nonprofit and be with their daughters, while Wallach, a lawyer, would travel around the country to meet with every ALS group, researcher and funder to figure out what was keeping scientists from discovering a cure. “We found that the existing organizations weren’t collaborating in a way that would aggregate knowledge,” says Abrevaya, who, as a former press secretary for US Senator Dick Durbin and an associate communications director in the Obama White House, knows a thing or two about sharing information. “As a patient, you don’t come from a place of competition. You don’t care who wins the race. You just want to win.”

Unlike many patients, Wallach and Abrevaya had inside knowledge of how the federal government funds projects—and scores of political contacts (Wallach, who is still very much alive, is also an alum of the Obama administration). Earlier this year they launched I Am ALS as a high-profile PR and lobbying group, which began with Wallach testifying before Congress. His testimony quickly resulted in the Senate Appropriations Committee voting to double one ALS research budget from $10 million to $20 million.

A co-worker then introduced Wallach to Mark Zuckerberg and Priscilla Chan’s Chan Zuckerberg Initiative, whose Rare As One Project to eradicate rare diseases gave I Am ALS $453,000 in September. Abrevaya says that by banding with other philanthropists and the political machinery, her organization is creating a multiplier effect—not only for her husband’s illness but for related neurodegenerative diseases, which include Parkinson’s, multiple sclerosis and Alzheimer’s. “Within three years, I Am ALS will turn every $1 million invested in its operations into $16 million in funding for research,” she promises.

Priscilla Chan and Mark Zuckerberg

Priscilla Chan and Mark Zuckerberg  Shutterstock

But modern philanthropy is hard. I Am ALS and niche causes like it often require relatively little money compared to the Big Ones—climate change, criminal-justice reform, poverty—but supporting one can be incredibly rewarding, in part because they can bring about change fast. Then again, they’re, well, niche, and the world of nonprofits is, by contrast, vast. Philanthropists today have a seemingly endless menu of choices. There are sectors, including the arts and higher education, that use philanthropic dollars as oxygen, often enticing big donors with the chance to create legacies by slapping their names on buildings—or entire schools or institutions (see Chicago’s newly renamed Kenneth C. Griffin Museum of Science and Industry, which cost the financier 125 million tax-deductible dollars).

Then there are emergencies such as Hurricane Maria or the Amazon fires, not to mention personal causes, political causes, pet causes (in both senses of the term)… The list goes on. If you have hundreds of thousands or millions to give away each year, it can be mystifying to discern whether your money is best spent at a local homeless shelter or by pledging to prevent homelessness in the first place.

The dawn of the new millennium marked the dawn of a new Gilded Age, it has been said, a time of great wealth and even greater displays of generosity. According to the 2017 Wealth-X report, around 80,000 American households have assets of more than $30 million, 5,000 have more than $100 million and 565 tally more than $1 billion. Thanks to a national tradition of giving and favorable tax laws, some 30,000 new private philanthropic organizations were created in the past two decades, according to InsidePhilanthropy.com; the assets of all 90,000 private foundations in the US total around $700 billion. Americans gave almost $428 billion to charity in 2018.

Not all donors are cut from the same cloth. For some, philanthropy resembles a competitive sport. There are those who give to stave off criticism—see the Sackler name, now tainted by the opioid crisis, on many art institutions, or the late libertarian industrialist David Koch, who funded both the Metropolitan Museum of Art and the Tea Party. There are those who have promised to give away most of their wealth by declaring so quite publicly through Warren Buffett and Bill and Melinda Gates’s Giving Pledge (204 pledgers and counting), and those who seek acceptance in the most incongruent corners of philanthropy, such as the climate-change denier and ultra-conservative Rebekah Mercer, who, ironically, holds a seat on the board of the American Museum of Natural History.

Visiotrs walk past a taped over sign at the Louvre Museum in Paris, France, . France's Louvre museum has taped over the Sackler name as donors to a wing of the building after protests against the family blamed for the opioid crisis in the United StatesLouvre Sackler, Paris, France - 17 Jul 2019

The taped over Sackler name at the Louvre Museum  Kamil Zihnioglu/AP/Shutterstock

Some give strategically for self-gain. Billionaire hedge funder David E. Shaw and his wife donated $1 million or more per year for seven years to at least four universities that neither of them attended, reportedly in an effort to snowplow the way for their offspring, the first two of whom did indeed end up attending one of the beneficiaries, Yale. Many, of course, give quietly, under the name “anonymous.” The savviest philanthropists, many experts say, use the same acumen as they would in a business venture, doing their due diligence and expecting a high return on their investments.

Amy Holmes, director of strategic planning for Rockefeller Philanthropy Advisors, one of the world’s largest donor advisories, works with newly minted deca-millionaires every day, helping them find a framework for their giving that is meaningful and effective. “A lot of donors come to us when they are at an inflection point, like a major wealth event, or they have been giving for a while but ‘donor fatigue’—when donors start to feel disengaged from their giving—has set in,” Holmes says. RPA takes clients through a curriculum called the Philanthropy Roadmap (it’s free on its website) and facilitates a conversation intended to lead to targeted donations. “For a donor who is giving out of a personal sense of responsibility to the community that helped them succeed, for example, being able to go to a neighborhood and see positive things happening might be meaningful. But sometimes donors are analytical and might think, ‘I can give money to a refugee crisis, and I know intellectually that this contribution will have a big impact.’ ”

RPA and other philanthropic advisers aim to be agnostic, helping clients deploy funds in a way that’s important to them. “Any donor who goes through this process will have to say no to some organizations that they said yes to in the past,” Holmes says. “That can be difficult, so we can play that role, but in the long term, it makes for satisfying philanthropy rather than a lot of scattered giving.” RPA vets nonprofits for clients, but donors with less than $1 million to give annually can research on their own, looking to watchdogs Charity Navigator and Charity Watch, or reading up on sites such as the University of Pennsylvania’s High Impact Giving Guide.

Philanthropy in the US found its footing during the last Gilded Age, when Scottish immigrant and steel magnate Andrew Carnegie published the 1889 essay known as “The Gospel of Wealth,” in which he professed, “The man who dies thus rich dies disgraced.” His philosophy was taken up by many of the country’s wealthiest, and his words still resonate today. Entrepreneur Chuck Feeney has followed Carnegie’s “giving while living” ethos. In 2016, his Atlantic Philanthropies made the final commitment of its total $8 billion budget across 35 years and over 6,500 grants; his funding addressed systemic change in places such as Vietnam, where it installed water systems and modernized health care; Northern Ireland, where it supported the peace process; and the US, where it promoted racial equity and helped identify best practices for dementia care. Atlantic’s strict due diligence still serves as a proxy for other philanthropists: By contributing to organizations Feeney has given to, a donor can be reasonably assured the money will be used wisely. (One other metric is to research if more than 35 percent of the budget is going toward costs—the sign of a poorly run charity. Some highly efficient organizations can bring that number down to 15 or even 10 percent, though often they get much of their “funds” from in-kind donations, which can be difficult to value).

From Generosity to Justice by Darren Walker

Courtesy of Ford Foundation

Darren Walker, president of the Ford Foundation, whose mission for the past eight decades has been “to reduce poverty and injustice, strengthen democratic values, promote international cooperation and advance human achievement,” has been thinking a lot about Carnegie’s pamphlet. He asserts that this current Gilded Age and its resultant rise in inequality requires a fresh take on charity—a time, he has written, “to openly acknowledge and confront the tension inherent in a system that perpetuates vast differences in privilege and then tasks the privileged with improving the system.”

While he’s a big fan of sponsoring friends when they walk a 10K to end breast cancer, and also of rushing funds to natural disasters, he believes deeply that fixing broken systems is the only way to make lasting change. “This is not an attempt to diminish the impulse to be generous,” he says of his just released book, From Generosity to Justice: A New Gospel of Wealth. “I believe we must continue to do that, but we also need to ask the fundamental questions. If we are walking in a marathon to end homelessness, we need to also engage in the question ‘Why is there so much homelessness?’ We need to get at the root of the problem, which can generate discomfort.”

This kind of inquiry, he admits, implicates all of us and requires more engagement than writing a check. Working at the local level is important, Walker notes, but working systemically at the local level is paramount. He offers an example: “If you are interested in improving the parks in your city, don’t just give to the one park that you use. Think about what the parks in the rest of the city look like and give to an effort to improve all parks.”

Likewise, art patron Agnes Gund’s two-year-old Art for Justice initiative provides a good framework: Concerned with mass incarceration, the philanthropist pledged $100 million from the sale of a Lichtenstein canvas to criminal-justice reform. Instead of starting her own non-profit, she worked with Walker to target some 68 existing organizations that have already proven they can make a dent in changing the criminal-justice system.

Billionaire Laurie M. Tisch had more varied pet causes, so she set up an umbrella fund to dole out her money. Eleven years ago, the hotel scion was sitting on a bunch of high-profile boards (the Whitney Museum of American Art, Lincoln Center), when she kept hearing about family foundations. “I wanted to do something different, and I didn’t want to raise money again,” she says. Family foundations happen to be excellent vehicles for avoiding taxes and offsetting capital gains, but Tisch says that wasn’t her motivation. With the guidance of RPA, she launched the Laurie M. Tisch Illumination Fund to hit all her passion points: public art, Jewish life, community building, access to healthy food.

Why Philanthropy is Failing

Because it’s a privately held foundation, Tisch can deploy resources where and when she wants, as long as she adheres to the tax law of giving away a minimum of 5 percent of the fund’s assets annually to charitable endeavors. (This rule is easily abused; see the now defunct Trump Foundation or the Meyer Charitable Foundation, which came under fire after one of its family members used its tax-deductible funds to allegedly pay a $200,000 bribe to the Key Worldwide Foundation, the faux charity tied to the college-admissions scandal.) Tisch says she has given tens of millions to existing organizations and built new structures inside of them—such as her recent initiative to create an arts program for patients and burned-out staff in the public NYC Health & Hospitals system—but unlike Abrevaya and her I Am ALS, she doesn’t start new organizations. “One of my pet peeves is, among people who have made a tremendous amount of money, there seems to be a trend to want to start your own thing—which is fine if you’ve done the research and see that other people aren’t doing it. Just don’t assume no one else is doing what you want to do,” Tisch advises. She looks at numbers, of course, but also makes frequent trips to see firsthand how her projects are doing. “There are some things you can’t measure with numbers, and not-for-profits shouldn’t be run like businesses.”

Stanford political science professor Rob Reich couldn’t agree more. He has been thinking hard about philanthropy in America.
In his book Just Giving: Why Philanthropy Is Failing Democracy and How It Can Do Better, he takes issue with the hallowed tax deduction philanthropists trade for charitable donations, seeing it as a government subsidy for the affluent. He questions the accepted idea that large donations are motivated by a desire to do good and that it’s perfectly fine for a donor to steer money according to personal preferences. Rather, he sees those massive dollar amounts as a means to exercise power and influence over society, with the government (via generous tax subsidies) endorsing the venture.

Though he often agrees with the solutions offered up by major donors like Bill and Melinda Gates, he worries they have outsize authority to advance their agendas, whatever they may be. “Gates basically shows up… like a head of state,” Reich recently pointed out in an interview with data scientist Russ B. Altman at Stanford. The difference, he notes, is that “if you don’t like what the Gates Foundation is doing, you can’t un-elect him.” He can see a future where something as basic as the public funding of science research is replaced with private money—a concern if climate-change denier/philanthropist Rebekah Mercer were to be involved.

But Reich’s views aren’t all doom and gloom. He also has faith that philanthropic organizations are at their best when they can focus on long-term, niche ventures (such as curing ALS) or risky missions that are too toxic for politicians (family planning, for example). In any case, he believes the way this country views charitable donations will undoubtedly change. “In an era of extraordinary inequality, there’s going to be greater scrutiny of what big philanthropists do,” he told Altman. He points to data that shows wealthy donors typically target only 1 percent of their total donations to social-service organizations; by contrast, donors making less than $100,000 tend to give 10 percent of their contributions to such groups. The government treats all donations equally, whether to feed hungry children or to build a fountain at the donor’s alma mater, but Reich says it could tweak the tax code.

During this season of giving, the Ford Foundation’s Walker suggests that thoughtful philanthropists sprinkle the love around, certainly, but to truly make a difference, take the long view and give to organizations that seek to change systems that no longer work for ordinary people. “Everyone starts with the impulse to make this a better world,” Walker says. “But philanthropy can no longer grapple simply with what is happening in the world. It also has to address the how and why.”

Moreover, systemic change, whether in education, health care or housing, will almost certainly provide a longer-lasting legacy than erecting a building. If in doubt, see Lincoln Center’s Avery Fisher Hall. Or, rather, don’t see it. Forty-two years after Fisher gave the New York Philharmonic $10.5 million and lent his name to the orchestra’s home, a certain music mogul forked over $100 million for its renovation. The name over the door now reads David Geffen Hall.

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