False Gods: Summertime, and the Givin’ Is Easy
By Randy Kaufman
with research assistance from Dustin Lowman
Monica, 68, knew that artistic success doesn’t come easy. In addition to raw talent and grit, it takes the right resources at the right time: inspiring professors, dedicated practice space, and state-of-the-art (pardon the pun) facilities.
Having honed her vision and navigated the sundry obstacles between an artist and her market, Monica had made her mark (and a handsome living) as a painter. Now, she wanted to give back. Fortunately for me — her wealth advisor — her desire to give sprung from a deep, unshakeable purpose: compassion for young artists (women in particular), and a wish to make their paths a bit less treacherous.
Specifically, she wanted to donate $1.5 million to her alma mater, Princeton University, earmarked for the construction of a new dormitory to house artists. She didn’t want the dorm named after her; she was in it for impact, not recognition. I assumed Princeton would prefer an unrestricted gift — cash they could use however they wanted, not just for a building. So, thinking I was doing a great deed, I convinced Monica to give $1.5 million in unrestricted funds.
Thankfully, before initiating any transactions, I called the school to discuss the gift. Why? Because a donor’s intentions don’t always align with the donee’s needs, and if you give without correcting this misalignment, you miss out on potential impact — the heart of philanthropic giving. So, assuming I had done a wonderful deed, with a big smile on my face, ever so proud, I told Princeton’s senior development officer that I had convinced my client to not restrict her gift just to the building of a dormitory.
“Really,” they said, before politely informing me that I was completely wrong. It was important for a large matching grant — that would effectively double the gift — that my client’s donation be restricted.
Additionally, the university told me that, contrary to the giver’s predisposition, they wanted her name displayed in large letters on the building. They hoped that seeing the name of an esteemed woman artist displayed, and understanding what a life in the arts gave her, would go a long way in inspiring other young women artists to follow in her footsteps. And really, wasn’t that the impact that this giver was hoping to achieve all along?
Bringing this perspective to my client, the answer turned out to be yes. At the outset, we’d intended to give unrestricted funds and to stipulate no public recognition. Ultimately, we gave restricted funds and accepted public recognition, because that’s what would help Princeton the most.
I tell you this story to illustrate a fundamental point about philanthropic giving: Contrary to what people often think, it’s neither simple nor easy. Andrew Carnegie in his 1889 essay, “The Gospel of Wealth,” famously wrote: “It is more difficult to give money away intelligently than to earn it in the first place.” We — myself included — often take “shortcuts” (the “heuristics” of behavioral psychology which often result in flawed financial decisions). These assumptions tend to take us far from the truth.
Sadly, a reliance on these shortcuts can thwart our true purpose, which is to maximize the impact of our gifts.
I’ve spent decades making and advising on philanthropic gifts. What follows are three of the most common — and dangerous — shortcuts I’ve observed, and how I often advise my clients to avoid them.
3 Dangerous Philanthropic Shortcuts — And How To Avoid Them
Shortcut #1: Impulse Giving
Having survived a scary cardiac event, one client came to me eager to give $5 million to the hospital where he’d received treatment. This same client perseverated over trivial details in annual investment reports. But when it came to philanthropy, he acted impulsively, without any research and data to support his large gift.
People often hear (or experience) a good story, feel momentarily filled with gratitude, and use that as a basis to give without much analysis. Not that this is always wrong; I believe we should all have a “bucket” of money for impulse gifts. Maybe it’s a desire to help a friend who is biking to help cancer patients, or a desire to get a quick jolt of endorphins by sending a small amount for something you see on a Facebook appeal. But money is money. I beg my clients to do their research before making a large donation, and to focus on the impact they make with the money they have. Why focus on metrics like pure overhead, out of context?
Doing the hard work is, of course, hard. But not doing it is the philanthropic equivalent of buying a sports car and hoping it will bring you long-term happiness. Happiness research unambiguously shows that big, one-time purchases lead to a jolt of short-term happiness, but not to the kind of long-term satisfaction that we’re all after.
Solution: First, identify your cause(s). As Lewis Carroll wrote, “‘Begin at the beginning,’ the King said, very gravely, ‘and go on till you come to the end.’” I’m no king, but when I work with philanthropic clients, I begin at the beginning, helping them identify the cause (or causes) they want to support. Often, pivotal moments or people in their own lives inspire their causes. One young client is a writer; for him, childhood literacy is a central cause, because he knows the long-term value of good literacy instruction. Since he has a strong purpose for giving, he’s likely to give carefully and impactfully.
You’re under no obligation to support any cause other than the ones that feel important to you. You’re also under no obligation to already know which causes are important to you. It takes careful thinking and reflection (and, in my case, good listening) to identify the causes that mean the most to you.
Shortcut #2: Trying To Pick The “Right” Charities Too Soon
People sometimes start by trying to choose the “right” charity. This is well-intentioned, but going straight to the charity-picking stage is like trying to find that proverbial needle in a haystack, which I believe has been found by no one ever.
Solution: Go from macro to micro. I treat philanthropic giving the same way I treat investment portfolio allocation: Start macro, get micro. Macro step #1 is the one we just talked about — identifying the causes that you care about by examining your values. Here’s how this process looked for a recent client:
Cause she cares about: Social justice. She came into the room knowing this, as well as the next step …
Region/population to narrow in on: Women in Africa. You may share this concern, or you may not. The point is, she had a good fundamental reason for caring about women in Africa, and so we narrowed in on it.
African country she wanted to target: Rwanda. “Women in Africa” is still a very, very broad category. So after considering the specific activist issues that were most important to her, we zeroed in on Rwanda.
By this point, we had traveled from the incredibly general category of “Social activism” to the much more specific “Women in Rwanda.” Now, we could start investigating specific charities and deciding which most closely aligned with her reason for giving.
Shortcut #3: Assuming You (The Donor) Know Best
Some of the work I’m most proud of is my work with Acumen, a global force of entrepreneurs, investors, philanthropists, and social innovators working together to break the cycle of poverty. In addition to volunteering as an advisor, I give them a substantial gift each year.
Last year, I got a call from one of their development representatives who asked if I’d be willing to make it a recurring gift — one they could count on for the next several years. Absolutely, I told her; I was going to give the same gift or more every year. Of course, I wanted to maximize the gift’s impact. The only reason I hadn’t made it a recurring gift was simple: I just didn’t realize it was important to them.
Solution: Before you give, consult the target organization. Just like in Monica’s case, a single phone call which clarified Acumen’s needs was enough to increase the impact of my gift. During this call, I also told Acumen that they were in my will, and specified the amount I planned to give them. This is called “legacy giving”; when the donee knows about it, it both strengthens your relationship with them and helps them plan for the future a little more clearly.
More Impact, More Joy
The world of philanthropic giving is complex. I’m not a philanthropic expert (though I often play one on TV). Therefore, it often makes sense to engage third-party help. Having worked in this field for a long time, I try to know what I know, as well as when to suggest a client engage a full-time experienced philanthropy advisor. My “rolodex” is replete with some excellent, experienced philanthropic advisors.
Depending on the complexity of the gift, the size of your giving, and/or your desire to conduct deep research or site visits, their expertise might be invaluable and maximize your impact.
Giving is — and should be — a two-way street. But easy it’s not. The receiver strengthens their organization, and the giver experiences joy. Contrary to what some people believe, I don’t think that a giver experiencing joy remotely diminishes the altruistic nature of giving. The only real meaning in life comes from relationships, and strong relationships correlate strongly with long-term happiness.
Relationships take two, and a healthy relationship brings both parties joy.
Speaking of relationships, the one between author and reader can be tenuous. If you like this, hate it, have learned something, want more thoughts, or want to share your own, please reach out.
And, if you want to read more about other False Gods circulating in the world of philanthropy, you can read about them here.
ABOUT THE AUTHORS
Randy Kaufman, formerly a corporate tax attorney and investment banker, is now a wealth advisor who prides herself on focusing on what matters most: clients’ peace of mind, family dynamics, and getting enough, not more. Randy is a passionate student of impact investing, strategic philanthropy, and behavioral psychology (while not a psychologist, she occasionally plays one in the boardroom). She is dedicated to helping the underprivileged and is a proud member of global venture fund Acumen's advisory board. A thinker, learner, and pursuer of overarching truths, she is always eager to discuss big ideas about money, and its off-and-on associate, happiness.