Philanthropy is not interchangeable with government spending. It typically takes quite different approaches to solving problems.
John Updike once wrote an essay about how government administrators view change—noting that their every incentive is for continuation of the status quo. Change disrupts bureaucracies and creates work for those who man them. People working in government thus tend to shun departures from prevailing procedure, and to seek more of the same, not innovation. Updike writes poetically that “the state, like a young child, wishes that each day be just like the last.” Whereas an inventive private actor “like a youth, hopes that each day will bring something new.”
This pierces to the heart of why government problem-solving is generally so sluggish and uninspired. Of course, philanthropy can also become bureaucratic and timid—as can any human activity under certain conditions. But there are fundamental structures and incentives to private giving that, in the main, make it much more imaginative, flexible, and interested in transformation, as well as more individualized, more pluralistic, more efficient. One at a time, let’s look at some of the distinctive qualities of private giving that set it apart from public spending.
Philanthropy is inventive
Both in its approach to problems and in the forms through which it operates, American philanthropy has shown itself to be highly experimental and creative.
For instance, the institution of the charitable foundation itself—which allowed donors to codify their giving and extend it to future generations—is an invention of American philanthropy. The first foundations emerged in the U.S. around the turn of the twentieth century. By 1915 there were 27 in operation; in 1930 the total was over 200. The British began to copy the foundation structure in 1936; it was 1969 before the French and Japanese got some of their first examples. Today the foundation (and U.S.-style philanthropy in general) is just beginning to be understood and copied in places like China, the Middle East, Russia, and India.
Heaps of examples illustrate the inventiveness of private philanthropy in substance as well as form. Take just the past decade of grantmaking in a single field—education. Five donors recently set up a fascinating effort to trim the soaring costs of college by producing top-quality, low-cost textbooks for the country’s 25 most-attended college courses. They will use the open-source method commonly applied to producing great software, along with an expert-review process. And the resulting books will be free to students. Given that college students spent an average of $1,200 on texts in the 2013 school year, this effort is expected to save collegians $750 million in its first years. The donors are now expanding it to the high-school level.
The genius of the philanthropic mechanism is that it takes people just as they are and helps them do wondrous things, even when they’re not saints.
In the same year that this clever venture was launched, other donors paid to bring a new testing yardstick to schools so they can measure their performance against peers in other countries. Yet others provided the means to set up MOOCs—massive open online courses from top colleges that can be taken for free by anyone—thanks to philanthropic sponsorship. Simultaneously, philanthropists concerned about the low quality of many of the colleges that train schoolteachers created a new guide, in collaboration with rating expert U.S. News and World Report, that scores every one of the nation’s 1,668 teacher colleges for effectiveness.
There were creative educational thrusts by other givers at about the same time. One donor paid for a major experiment in Chicago that is testing whether at-risk preschoolers get a bigger academic boost from long-term training for parents, or from special financial incentives for teachers who produce results in a year, or from small weekly payments that reward specific achievements by parents, teachers, or children. Other givers paid for Khan Academy to offer “a free, world-class education for anyone, anywhere” via thousands of free online seminars. A contemporaneous donor-driven innovation was a practical new system that allows school districts to measure how far students progress from their starting point during a school year, and then to reward the teacher accordingly.
Meanwhile, several radically different and effective new ways of drawing fresh talent into teaching were created with charitable funds. Philanthropy invented a superb math and science initiative that spread rapidly to 560 schools in its first seven years. (It causes the number of students earning passing scores on math and science Advanced Placement exams to jump 85 percent in the first year, on average, and to nearly triple within three years.) And it was thanks to generous givers that less than a decade after Hurricane Katrina wiped out every one of its miserable public schools, New Orleans had an entirely new 100-percent-charters school system in place that allowed the city’s students to mostly catch up with the performance of students in the rest of the state, for the first time in state history.
And so on. We could walk through similar bursts of philanthropic invention in medicine, economic development, overseas aid, and other areas. You’ll find examples of all of these in the Major Philanthropic Achievement lists at the heart of this book.
Philanthropy is nimble
Private giving is light years quicker than government action, and it tends to adapt effectively to changing conditions on the ground. A simple example is donor John Montgomery’s provision of lifesaving radio gear in central Africa. Residents of that region had been terrorized for years by warlord Joseph Kony and his mercenary army that routinely popped out of the jungle to kill, steal, and kidnap children from remote villages. Montgomery suggested that if a radio network were created so information on Kony’s movements could be quickly shared, imperiled villagers could be warned in time to flee. In very short order he had tribal chiefs equipped with the necessary transmitters and receivers, and many families were spared.
Another illustration of the responsiveness of philanthropy came during the 2014 Ebola scare. As the disease swept into new nations, neither the international nor American health bureaucracies showed much capacity to adjust or speed up their distribution of resources. Enter philanthropist Paul Allen with an almost instant $100 million pledge, rapidly matched by $50 million from the Gates Foundation, $25 million from Mark Zuckerberg, and other gifts. By, for instance, immediately establishing protocols for aid workers who get infected, providing financial support for their evacuations and insurance-coverage gaps, and paying for the dispatch of 500 emergency respondents and their equipment to west Africa, Allen’s quick gift was credited by experts with stanching the bleeding (literally). The comparative speed of charities is often visible in disaster relief—where organizations like Samaritan’s Purse and Team Rubicon are routinely able to put supplies and help-teams on the ground days faster than public authorities.
Interestingly, the nimbleness and speed of philanthropy coexist with a proven ability to be patient and take an extraordinarily long-term approach when appropriate. “Unlike business and the state, foundations can ‘go long,’ ” writes Stanford professor Rob Reich. He cites the multi-generation creation of public libraries, the decades-long Green Revolution, the painstaking creation of our national 911 emergency call system by philanthropists, and other examples.
Philanthropy is individualized
Howard Husock once wrote in Forbes that “the more individualized attention a problem calls for, the less well-suited government is to dealing with it—and the more likely that independent, charitably supported groups can help.” This is indubitably true.
Many of the most successful mechanisms in the charitable world—like microlending circles, Alcoholics Anonymous, the successful mentoring programs for prisoners, college-dropout preventers like the Posse Foundation, and good job-training programs for welfare moms and the homeless—rely heavily on one-to-one human linkages and accountability. They take advantage of all the useful information that becomes available when you actually know someone, instead of dealing with a stranger. And they use the power of relationships to help people change behavior.
I once did a study of the informal lending circles that many immigrants use to build economic success after they come to the U.S. Typically, a group of six to ten individuals who are related or know each other will band together, and each month every participant will put a few hundred dollars into the circle. When your turn comes up you get to collect that month’s kitty—which recipients typically use for things like starting a business, or making a downpayment on a car or house, or buying some equipment or education that can be used to make a living. These circles almost never have contracts or receipts or any legally binding structure. So what prevents someone from walking off with the pot then refusing to kick in their share of contributions in the future? Relationships!
Enlightened, practical, democratic leaders won’t just tolerate the independent actions of donors and volunteers, they will embrace and encourage them.
There is the pressure of not letting down your relatives or friends or neighbors whom you will see in the future. There is also the confidence that comes from entering the circle with valuable knowledge of the character of the other people in it, making it less likely you will be taken advantage of yourself. These are not anonymous strangers in a transfer program, they are people whose strengths and weaknesses are known to each other. These are personal, not impersonal, transactions.
“I never think about crowds. I think about individuals,” Mother Teresa used to say. The administrator of a government helping program, on the other hand, has to focus wholly on the crowd. Government programs can’t have different approaches and different rules for different kinds of people; they are all about equal opportunity, about being strictly the same for all participants in all places at all times. Cramped minds sometimes romanticize this “consistency” of government programs, and contrast it favorably to the “patchwork” variations of charitable aid. But consistency is not really how humans work.
If you have one child who needs a very structured environment, and another who blooms when left to navigate on her own, and a third who doesn’t do any kind of book learning well but has vibrant creative skills, you don’t want “consistent” schools; you don’t want one size fits all. You want individualized services that recognize and work with intimate differences of personality. You’ll have a hard time finding that in government-run programs, but it’s a hallmark of philanthropic efforts.
Great philanthropists know all of this. That’s why many donors prefer to work in their own backyards, where they know the characters of many recipients. When allying themselves with social entrepreneurs, donors tend to seek out neighborhood operators who have intimate acquaintance with the problem at hand, and the persons suffering through it. Donors sift through competing petitions for help and choose those where they have some direct knowledge, and confidence the transactions will be personal enough to keep people accountable and tuned in to real needs.
Successful benevolence uses the power of intimate knowledge. That greatly improves the chances of social success. An individually tailored approach is often the central difference between philanthropy done right and ineffective government check writing.
The great giver Julius Rosenwald once described the aim of philanthropy as “healing the sore spots of civilization.” This is easier to achieve by working in personal rather than impersonal ways. Consider the story of a young woman named Liz Murray who grew up as the neglected daughter of two drug addicts.
In her teenage years Murray began reaching out to potential allies for help in saving herself. On one particular day she had two back-to-back human interactions that were climactic in her life. The first was in a New York City welfare office where she attempted to qualify for aid for the first time so she could have an apartment instead of living on the street as she had been for two years. The transaction was all about forms and rules. It was impersonal. And it ended in yelling, her being mocked by the government caseworker, and a refusal of aid—which was disastrous given her precarious circumstance at that moment.
Murray’s next interview that day was at the New York Times headquarters, where she sat down with the committee in charge of awarding the charitable college scholarships handed out every year by the New York Times Company Foundation. This transaction was highly personal. She told them how her mother sold their donated Thanksgiving turkey for drugs; how she had slept in stairwells since her mother died of AIDS; about not eating and living off a food pantry; and about what kept her spirits intact throughout these trials. She was soon awarded one of the foundation’s six scholarships (with which she eventually graduated from Harvard). And when a very personal story about her life was published by the Times, donations poured in which not only allowed Murray to occupy an apartment and start eating regularly, but also provided the means for the foundation to award 15 more college scholarships than expected.
Murray herself makes clear how important personal factors are in any helping interaction. “During my more vulnerable moments, I was always seeing myself through the eyes of others.” If they looked at her as a failure, “then I was one.” And if they looked at her as “someone capable, then I was capable. When teachers like Ms. Nedgrin saw me as a victim—despite her good intentions—that’s what I believed about myself too. Now I had teachers who held me to a higher standard, and that helped me rise to the occasion. The deeply personal relationships in this intimate school setting made me believe.” With the help of just a few well-placed helping hands—philanthropists as it happens, though that is too cool and Greek a word to capture the intimacy of what they did for her—Murray eventually wrenched herself out of a death-spiral. It could not have been done without human closeness.
Philanthropy frequently seeks to transform, not just treat
Philanthropists are often driven by a deeper, wider, more comprehensive ambition than just giving aid. Instead of merely compensating for ills, philanthropy often tries to correct them. It works preemptively to stop the flow of hot lava, rather than simply putting out the fires it creates.
An early advocate for this aspect of American philanthropy was Ben Franklin. His own extensive giving aimed not so much to relieve men in their misfortune as to reform them into a healthier state. “The best way of doing good to the poor is not making them easy in poverty, but leading or driving them out of it,” he wrote. Improving the world that strugglers live in was Franklin’s notion of the best way to do good for fellow men. Libraries, schools, occupational training, and all forms of education, self-improvement, and character-building were his favorite causes.
This connects to the previous point about philanthropy being individualized and intimate. If improving private behavior and building self- governance is what you are trying to do, a personal approach is essential. And in our country, the goal of charity has always been individual competence and independence, not just social quiet.
Philanthropy has a long history of taking up crucial burdens in the face of government failure.
As a Polish journalist who traveled across the U.S. in 1876 observed to newspaper readers back in Europe, the charitable impulses of Americans are very specific. “A man who is old and infirm, a woman, or a child receive more assistance in the United States than anywhere else,” he noted. But “a healthy young man will almost invariably hear one piece of advice: ‘Help yourself!’ And if he does not know how to follow this advice, he may even die of starvation.”
Strong citizens and strong communities make most palliative aid unnecessary. In law enforcement it is a truism that heading off bad behavior is much preferable to cleaning up after a crime. American philanthropists often take a similar approach to social reform—better to help people build sturdy habits than to rescue them after they fall.
In a free society, one doesn’t really want government, with its coercive powers, to get into the business of personal transformation. There’s too much risk of Big Brother authoritarianism in that. But donors can do this work well on a voluntary basis. They offer carrots that encourage individual reform, while at the same time assisting recovery from prior mistakes. This has great value to society.
In 2015 The Philanthropy Roundtable published a book called Clearing Obstacles to Work that catalogues the secrets of hundreds of successful charities that help homeless people, released prisoners, welfare moms, and other at-risk populations succeed economically and stand on their own two feet. These effective charities don’t just give out jobs and apartments and checks. Without exception, they require their clients to rise to the occasion—they expect them to learn and cooperate and expend effort. In short they treat them as equal partners and ask them to contribute, rather than patronizing them with undemanding alms.
Philanthropy is pluralistic
Polyarchy. That’s a great $50 word for any American to know. It refers to a society in which there are many independent sources of power. Contrast it to monarchy. The United States has a notably polyarchic culture, and independent grassroots philanthropic giving is one big aspect of this.
The polyarchy fed by philanthropy increases variety in our lives and protects non-mainstream points of view. There is only one federal government, and it necessarily applies a uniform approach to all who approach the throne. At the state level we have 50 power centers but only one applies to our own life. If you count every single school board and village administration and water district in the U.S. there are about 100,000 government entities all told, but again only one holds sway where we live, and we usually have no alternative to what it presents us.
Meanwhile, there are about two million independent organizations in our civil society, and hundreds of millions of separate adult donors. These overlap and compete; none have an exclusive franchise; we can pick and choose, mix and match. And as alternate sources of resources and organizing power these voluntary elements are antidotes to any uniform authority that could become oppressive, or just ineffective. (“The legislator is obliged to give a character of uniformity…which does not always suit the diversity of customs and district,” observed Tocqueville.)
Yale law professor Stephen Carter points out that “the individual who gives to charity might measure the needs of the community by different calipers than centralized policy makers, and will therefore contribute to a different set of causes. These millions of individual decisions lead to a diversity in spending that would be impossible if we adopted the theory that the only money spent for the public good is the money spent by the state.” Philanthropy “also helps resolve an information problem: Government officials, no matter how well-intentioned, cannot know all the places where donations are needed, or the form that will be most useful.” Philanthropy is thus “democracy in action.”
Give away houses built by bleeding-heart church volunteers! Ask small business owners to have coffee with a prisoner every month, and college kids to spend a day with his children! Adapt Mormon welfare programs to other hungry and homeless people! Recruit school teachers from the Ivy League! It is much easier for private givers to invent and experiment in these sorts of ways. They can try liberationist models, authority-based models, religious approaches, mentoring influences, and other strategies that would be off- limits to public agencies.
The sprawling, multi-dimensioned society that America has grown into is often too complex for government-provided single-solution answers. In areas like family life, schooling options, health, and so forth, many citizens would prefer to choose from independent and voluntary social solutions rather than have a government-provided version forced on them. Do we really want public authorities deciding what’s in our art galleries, who trains our children in moral virtues, and the size of soda we should drink? It will often be more realistic and desirable to address these sorts of issues through multi farious private voluntary efforts. Let a thousand flowers bloom.
Philanthropic solutions, right-leaning professor Les Lenkowsky has pointed out, are “especially important for people with ideas that may be unpopular, innovative, or directed at a minority of the population…. Philanthropy, in short, is an expression of pluralism.” Left-leaning professor Rob Reich makes the very same point. Because they “decentralize production of public goods and curtail government orthodoxy,” he writes, philanthropists provide “pluralism of public goods.”
In addition to reinforcing freedom and innovation, this aspect of private giving has many practical advantages. What works to reverse homelessness or alcoholism or loneliness in old age may be quite different in Nebraska than in Newark (or Namibia). Yet in public programs it’s hard to allow different rules and pursue varying strategies. In philanthropy that’s easy. Indeed that’s one of the field’s inherent strengths.
One of the distinctive (and for many of us encouraging) aspects of contemporary life is the rapid “nicheification” of choices. Not long ago we had three national news networks, and three national car makers, and three national entertainment channels. Many neighborhoods had one hospital choice, one public school, one department store, and one dominant employer. Today we have many more options, allowing us to select from quite different priorities, and values, and tastes. Philanthropy has always enjoyed this rich variety.
Another subtle way that philanthropy protects diversity and options is by giving the social visions of different time periods their chance to chip away at problems, allowing points of view that are out of fashion, or just forgotten, to retain a foothold. “The great thing about the legal protection of charitable trusts over time is that we don’t all have a bunch of institutions in 2013 that are wholly determined by what trustees happen to think in 2013. That would lead to an appalling homogenization of our cultural, social, and educational landscape. Instead, people set up different projects in 1880, or 1938, or 1972, and those visions, sometimes gloriously out of step with how we currently think…continue to thrive.”
So wrote a trustee of a college in the rural West whose founder stipulated a hundred years ago that it had to be one of the most academically selective in the country, yet require its students to put half of their time into ranch work, that it had to be all male, and never bigger than a few dozen students per class. We wouldn’t want every American college to have that signature, but how wonderful that there is one that does. Thanks to its donor’s rules, Deep Springs College offers a rare and perfect education for a special type of student, while producing results and insights that the rest of the educational establishment can learn from.
Philanthropy is flexible
If you talk to problem-solvers who rely on both private donors and government grants to support their operations, they will tell you that one of the most invaluable things about philanthropy is its flexibility, its trust in social entrepreneurs, its comparative lack of red tape, its willingness to adapt.
This can be seen with crystalline clarity in science philanthropy. It was donors like John Rockefeller, John Hartford, and Lucille Markey who created modern biomedical research and set the template for the way government funders like the National Science Foundation and the National Institutes of Health operate today. Even after the federal science agencies began gushing billions of dollars in all directions, philanthropy remains crucial to the field because it is more flexible.
MIT professor Fiona Murray recently studied the 50 universities that top the list for science-research spending in the U.S. She found that private donors now provide about 30 percent of the total research funding at these places. So the sheer volume of dollars is consequential. But what’s even more important about science philanthropy is the way it is structured. Private funders often take up work that is neglected by federal funders because it is too experimental, too obscure, pursued by scientists too young to have a record, and so forth. “Government research is powerfully conservative. I’ve been an NIH researcher for decades, and to get an NIH grant today you essentially have to already have solved the problem in question,” says Charles Marmar, a top medical scientist at New York University. Private funding is not only more willing to take risks, it is also much faster and less bureaucratic, according to Marmar. “On the philanthropic side donors tend to have business acumen and know how to get things done,” he notes.
Philanthropic money often functions as venture capital, supporting high-risk, high-payoff science that is at an early stage or taking an unconventional approach. “What I’ve always loved about philanthropy is it’s money that has a potential to be flexible. It’s money that can catalyze new ideas. It’s money that lets you push the frontiers, follow the leading edge,” states Leroy Hood, one of today’s leading biologists. “At the National Institutes of Health, if you haven’t completed two thirds of your research, you’re probably not going to get a grant, because everything is so competitive and so conservative. So a philanthropist who is willing to say ‘Yes, I’ll step in and help you find something new’ is a jewel.”
Hood has relied on donors over and over in his illustrious career. When he was creating a machine to automate the labor-intensive process of sequencing DNA, he applied for NIH grants and “got some of the worst scores the NIH had ever given. People said it was impossible, or they said, ‘Why do this? Grad students can do it more easily.’” So Hood turned to Sol Price, the entrepreneurial whiz who originated the warehouse superstore concept that produced Costco and Sam’s Club, and then later Bill Gates. With support from these two donors, Hood produced the technology that made much of today’s genomic revolution possible.
There are many simple things that make science philanthropy so valuable. For example, the federal bureaucracies are hugely biased toward scientists who have already made their mark—the average age at which researchers receive their first federal grant is 43, and only 1 percent of NIH grants go to researchers 35 or younger. Yet most science breakthroughs originate from precisely those young inquirers who haven’t yet fallen into conventional ways of approaching topics. Private funders are vastly more likely to support young investigators.
Private donors are also vastly more willing to buy machines, and erect buildings, and hire technology aides—creating the infrastructure within which discoveries can take place. Government grants are notoriously unwilling to pay for this sort of foundation-laying. Federal grants must be tailored for one discrete experiment and its immediate costs only. That makes it hard for directors to keep their labs operating and continuously improving.
Philanthropy has special importance in bringing resources to new fields, new places, new approaches. Ignoring conventional advice that they give only to established health centers, donors have built top-flight new medical facilities from scratch in places like Kansas City, San Diego, and Houston. Eminent neuroscientist Steven Hyman, who is investigating the genetic bases of mental illness, wanted to do work in Africa because of its unusually diverse genetic pool, “but it would take a huge administrative or bureaucratic effort to run federal grants there. We couldn’t think of doing that without private money.”
As easily as it fills geographical gaps, philanthropy fill gaps in popularity, conventional wisdom, and intellectual fashion. The list of “orphan” maladies that neither government nor corporate funders were much interested in before donors became involved is long. Trachoma, schistosomiasis, Guinea worm, onchocerciasis, and many other tropical diseases. Geriatric medicine. Retinitis pigmentosa blindness. Huntington’s disease. Malaria. “Diseases like schizophrenia, bipolar disorder, and autism have moved out of this black box,” reports Hyman. “Without private philanthropy, we wouldn’t be able to take risks or get our research up to scale.”
The medical establishment was dismissive of his idea when George Papanicolau used a “highly speculative” grant from the Commonwealth Foundation to invent the Pap smear. The AIDS epidemic was still a blurry terror when the Aaron Diamond Foundation ripped into it with a nimbleness, speed, and tolerance for risk that allowed it to pioneer many of the key research and treatment findings needed to battle the disease.
Lab directors prize the fact that private giving usually comes without onerous strings attached. “Unrestricted funds are gold; they’re magic,” says Eric Lander, director of the Broad Institute and another of the nation’s top scientists. “We’re able to say when we have a good idea, ‘Let’s start investing in it now rather than write a grant and start working on it two years from now after it wends its way through the NIH system.’ ”
In combination, these practical advantages can have remarkable effects. The trust set up by Lucille Markey to support biomedical careers is an excellent illustration. It operated only from the mid-1980s to 1997, when it shut its doors for good after distributing more than $500 million in 200 grants.
Philanthropy is crucial to keeping America operating as that exceedingly rare society where most individuals can steer their own lives.
The Markey funding was everything that government granting isn’t. It was tremendously flexible. Preliminary investigations and risky science of the sort that give NIH or NSF funders lockjaw? No problem. Spend money recruiting great new scientists or graduate students whose exact roles will be determined in the future? Can do. Build or equip a lab before the exact experiments that will unfold there have been plotted? Sure. Shift money from one year to another, or one project to another, to fuel the most promising avenues as they open up? Yup. Dramatically change research directions in response to unexpected experimental results? You’d be stupid not to! Yet almost none of those things can be done with government funding.
The rules which allowed the Markey grants to fuel so much innovation by recipients were explicit: favor young investigators with promise and nurture them through the “valley of death” that extends from the end of their training until their reputations are established. Trust outstanding researchers with wide discretionary powers in using their funds. Support fields with the biggest upside. Fund areas that are important but not popular. Allow not just basic science but also “translational” research that turns new discoveries into useable treatments and technologies. Pay for the infrastructure necessary for great research, not just the research itself. Be patient.
The Markey Scholar Awards offered funding for five to seven years to each recipient, plus money to establish his or her own lab. The 113 Markey awardees turned out to be extraordinarily successful and productive. Eric Lander is an example—during his fellowship he refined new concepts of gene mapping in the lab Markey supported, and today he heads the largest genome center in the world.
A current example of how different philanthropy-funded science can be from state-funded science is the Howard Hughes Medical Institute. The eccentric billionaire who founded it created the institute primarily to conduct its own research instead of handing money to facilities with their own agendas. A 1985 sale of gifted stock made it the wealthiest medical philanthropy in the country.
About 350 Hughes Investigators operate at more than 70 universities, hospitals, or labs across the country in an unusual organizational structure. Their dispersal allows them to benefit from cross- fertilization of ideas, yet they are employed by the institute rather than their host, and benefit from its independence and patience. As a companion to these investigators working far afield, Hughes recently created a major research campus of its own outside Washington, D.C., where it has concentrated more than 400 biologists to do high-risk, long-term research in large interdisciplinary teams. Their more corporate style of investigation is quite different from the traditional individual-researcher model favored by government funders (and by Hughes in its other support), and brings special advantages to certain kinds of discovery work.
A 2009 study by the National Bureau of Economic Research found that these philanthropic models are unusually effective. “Investigators of the Howard Hughes Medical Institute, which tolerates early failure, rewards long-term success and gives its appointees great freedom to experiment…produce high-impact papers at a much higher rate than a control group of similarly accomplished NIH-funded scientists,” the study concluded. This meshes with many other observations. “Philanthropy fuels new opportunities in exciting ways,” concludes Leroy Hood. “At really excellent places like MIT or Caltech or Harvard, new innovation almost always comes from philanthropy.”
Philanthropy is efficient
A few years ago, academics collected 71 different studies comparing the efficiency of offerings when the same basic service was available from both public agencies and private organizations. They found that in 56 out of the 71 cases, the philanthropic provider was more cost-effective. In ten cases there was no clear difference, and in only five cases was the public provider more efficient.
The public senses and understands this reality, which is one root of its deep affection for charitable operations. Americans know most philanthropic efforts get a lot of bang for the buck. That’s why they voluntarily handed $410 billion to charities in 2017.
Asked in 2011 “Which do you think is more cost-effective in promoting social good—private charities or the government?,” 73 percent of adults nationwide said charities were the most cost-effective, while 17 percent selected government agencies. (Perhaps you’ve heard the old definition of social science: “Elaborate demonstrations of the obvious, by methods that are obscure.”) Asked in 2010 whether they most trust government, business, or nonprofits to solve “the most pressing issues of our time,” 71 percent of Americans picked nonprofits.
To gather more evidence on public attitudes toward philanthropy, The Philanthropy Roundtable commissioned its own national poll in 2015. The results revealed deep public confidence in both the effectiveness and the efficiency of private giving.
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