The key barriers to strategic philanthropy are practical

This was published by Stanford Social Innovation Review in a series about strategic philanthropy.

Encouraging more strategic philanthropy is a behavior change exercise. Paul Brest and I are fellow travellers and co-conspirators in that mission. But his article implies that he and I see different barriers to achieving that change. (We may of course both be right.) Brest lays out the objections to strategic philanthropy and refutes them—and does so excellently. By contrast, the barriers which I see and encounter are primarily practical. 

To change donor behavior, we can usefully learn from the patron saint of “nudging,” University of Chicago Professor Richard Thaler, who first deployed behavioral insights in economics. He has developed two ‘mantras’ while overseeing ‘nudge units’ in various governments globally:

  • “You can’t make evidence-based policy decisions without evidence.”
  • “If you want to encourage some activity, make it easy.”

Strategic philanthropy comes out badly on both mantras: we have barely any evidence about either how to do it or the location or extent of most of the problems it might tackle; and (not unrelatedly) strategic philanthropy is not easy to do.

One practical barrier to strategic philanthropy is that many donors do not know that strategic philanthropy exists. Despite years of philanthro-niks talking about it, many major donors and foundations still have heard nothing about the approach. I ran into a £100 million donor just this month who fits that description. And when talking to private wealth managers, I constantly find significant pots of philanthropic money managed by people completely unaware of the debates about strategic philanthropy.

Instead, many donors think that their job is to simply give money away. They’re off-loading capital after inheriting it or selling a business: they wouldn’t frame what they’re doing as solving a social problem. Hence the observation by F.B. Heron Foundation President Clara Miller, that ‘most philanthropy is not a process of discovery; it’s a process of bureaucracy.’ This is our failing, not theirs. It’s also an opportunity: if we want to engage people in strategic philanthropy, a first step is to tell them about it. 

A second barrier is time and brain-space. Many foundations are unstaffed, or barely staffed, so decisions are made by trustees who meet just a few times a year for just a few hours. They simply don’t have time to really understand a problem in detail and figure out the solution. Trustees and donors often engage in what Nobel laureate Daniel Kahneman calls thinking fast, which is instinctive and emotional. Strategic philanthropy requires donors to think slowly, which is logical and deliberative.

For many donors, giving (either their money or somebody else’s money) is a hobby. Yet thinking slowly is painful—it makes our eyes dilate, our pulse quicken, we sweat more, we try to avoid it. Nobody wants to think slowly in her spare time. Hence the apparently surprising behavior of clever financiers who often don’t want to do the analytics for their giving: their professional job is about thinking slow, but for their hobby they often want to escape all that pain. My personal view is that bad giving is exacerbated because trustees, by law, are unpaid, so even large foundations are reduced to being people’s hobbies. 

Nudging is about organizing public policy such that people are likely to make good choices even though they are thinking fast. It is the job of the philanthropy industry to organize giving such that donors can give strategically and well even though they are thinking fast. We need to make it easy to give well.

I also felt that the article didn’t look at whether the barriers can be overcome. The paper refutes the objections, but that’s different from seeing if they can be overcome. For example, somebody who is doing un-strategic philanthropy may agree with all of Brest’s points, and yet still not have the time to give well. Perhaps they need practical help. If a donor wanted to support education in less developed countries, a sensible strategic choice is to focus where learning levels are worst. Where is that? We don’t know. The Annual Status of Education Report has the data for India and some other countries, but for many countries, we don’t know. To Thaler’s first mantra, the evidence just isn’t there. What, then, is a time-poor would-be-strategic donor supposed to do?

Worse, most dollars donated in the United States, and most pounds donated in the United Kingdom, are donated by ‘retail’ donors. If they want to give well domestically in, say, the United Kingdom, France, Thailand, or Australia, what resources exist for them? None: every recommendation of Give Well is in international development, and Charity Navigator only looks at US-registered charities. It’s far from easy. For the majority of donors and donations, there is literally no guidance at all. Brest touches on this shortcoming, saying: “Perhaps the complexities of social change lead some people to just give up.” Indeed: it is our job to change this.

We—the philanthro-niks—want more philanthropy to be strategic. Our fundamental challenge is this: that social change is hard and calls for slow thinking, but most donors will only think fast. It therefore falls to us to do the work that Thaler describes: get the evidence, and make it easy.

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