Episode 79: Is it Really Hard to Give Money Away?

Welcome to another edition of "Around with Randall" your weekly podcast making your nonprofit more effective for your community, and here is your host, the CEO and founder of Hallett Philanthropy, Randall Hallett.

It's great to have you back here with me, Randall, on "Around with Randall." Today... today's conversation is kind of the confluence of two things or two moments that happened here recently. The first was reading an article in the Business Insider where Elon Musk is quoted as saying that it's really hard to give away money effectively. Interesting comment. The other, we'll get more into that here in a few minutes, the other moment that happened that kind of pieces together is a conversation I had. We were waiting to start a association meeting and there were a couple of us on the zoom call, the board meeting, a little early discussing what I think most fundraisers, most non-profit leaders at some point, including me, have dreamt about. If I had all of their money you can pick you're, they're whoever they are, all of their money I'd spend the rest of my life giving it away. It's almost like because we have to, we've had to work so hard to get people to engage and then ultimately to invest in our organizations wins that we know are doing the right things for good causes to make our community a better place. We dream of, gosh what would it mean to to help people that I believe in, in the missions and organizations I believe in at a much higher level than I currently could do. And when you put these two things together there almost seems like opposite sides of the equation.

Elon Musk's quote that I read in Business Insider really made me think and then it caused me to start looking around a little bit. Are there other comments from other people, those that are at the highest end of wealth in our country and around our world where they say it's really hard to give money away? And not only are there a few that say that there are a lot of stories and anecdotal evidence and even some answers as to why maybe that's actually true. Today I'd like to talk about why it's so hard to give money away while most of you listening are trying to figure out how to get all of that money.

So let me put a little bit of proviso on this. A kind of a, hey we're not going to talk about this i'm really talking about people who have more money they could ever spend, at least for this podcast. Those that have million and a half, two million, three million dollars they've saved their whole life. They're retired. Certainly they're better off than 98, 97 percent of the people, certainly in the country and maybe 99 percent in the world. But they're not going to spend their dollars in a way that would make them go into bankruptcy or into debt, or they they're keeping enough as a nest egg to live as they go through retirement. Who I'm really talking about are those uber, ultra wealthy. And this is where it gets to be an interesting conversation about perspective.

So one of the things that I think hurts the ability to give money away is how we view it. So let's take for an example, Jeff Bezos. Jeff Bezos gave $100 million dollars to Feeding America back in 2020, and I love the quote from Steve Dubb, who is a commentator and a leader on following the nonprofit world. In Nonprofit Quarterly he put it into context that the $100M, which to me is like more money than you could ever dream of, in comparison to his net worth at the time was about $849 billion, so if you put the money in comparison to what he was doing and how it would just dispose to what would be the average American's net worth which is about $98,000 at the time, his quote was sardis or sarcastically, "well we'll wait to read the press release for their set for the $75 donor." What he was saying was is that the $100 million gift is actually equivalent to someone's 75,000 or $75 gift based on the average American's net wealth. And that perspective of big is important. We think of a $100M, I think my gosh that's earth changing, but if you put it into context of what they have it's not as much as we think.

And so the perspective of what we really are looking for is that first person who says here's literally $10 billion. And we're beginning to see that a little bit out of Mackenzie Scott. Ironically it was not planned to do this, but Jeff Bezos' ex-wife, and in the next episode of "Around with Randall" we're going to talk about her in terms of the great philanthropist and why she's doing what she's doing, and by the way it's only going to be a guess but we'll show you that here next time. The other thing is that people who make large sums of money understand a basic financial principle, and Warren Buffett talked about this many years ago. Warren talked about it from the standpoint of giving money away and that he's trying to do it now, and he's one of the authors or the originators of the giving pledge, as many people know. But he quoted, was quoted as saying that early on as his fortune was beginning to grow his first wife, who passed away, Susan Buffett, was pushing him, "we should do more for the world, we should do more for our community, we should do more for people in need," and what he said was I didn't do it at that point because to be candid I like the idea of compounding and what compounding is is basically the idea of of the time value of money, that if you keep your money and you add to it a little bit kind of like a retirement fund, the time value of money will let it grow and that it will double every seven years depending on the interest rate. If you use a basic interest rate or rate of return and Warren Buffett was quoted as saying "I really was in love with this idea of compounding," well that's really important because what's happening now is using Jeff Bezos as an example, he makes the gift of a $100M he makes another $100M maybe in a few weeks because the compounding principle against his net worth of $146 billion means he's making more than he can give away. And we start to see other examples of this where people are trying to give their wealth away and I'll go back to Warren Buffett.

Again, Warren Buffett has made billions and billions and billions of dollars. I mean he's, if you do it by pure dollars, he's probably the most generous person in the history of the world. He keeps giving it away. A majority, big majority to the Gates Foundation, and yet he's still the fourth or fifth richest man in the world because this idea of compounding, and the value of Berkshire Hathaway continuing to grow in the way he's built that company. He can't get rid of it fast enough, and so in some ways this becomes a conundrum for someone who's looking to make bigger gifts because they can never get to the point where they can make the biggest gift possible to make up for what they're earning just day- to-day.

Another issue, and this is what Elon Musk was talking about. So I mentioned the headline in the Business Insider, "it's tough to give money away." What I didn't give you was the other half of the quote was, "if you care more about the outcomes than the optics," and this is really important. What Elon Musk was commenting on is that if you're really interested, particularly if someone has spent their life building wealth, then the return on investment whether it's building a company like Berkshire Hathaway or the Gates' in Microsoft or Elon Musk and Space-X or Tesla, return on investment's talked about every day. If I put in a dollar how much am I going to get out of it? Eventually, and what he's saying is, and he's quoted as saying is, it's really hard to get organizations, nonprofits to articulate outcome at the level I'm looking for, and that is, I think, an incredibly important discussion.

Our organizations aren't ready for the kind of philanthropy that's being discussed in this podcast or by these kind of philanthropists. If you walk into your boss's office, let's say you're in health care, CEO of a hospital and it's a good size community-based hospital, and say if I put a $100M down on the table, not using it for salaries of nurses, we already have, I'm not saying our finances are perfect here at this hospital and certainly with the pandemic article after article is now showing us they're not, what is it that you would do with that $100M to make the community healthier? Or if you're in education, if I put a $100M down on the table they're going to be able to answer this question much more efficiently and effectively because they're used to maybe a little more aggressive strategic thought process, how you make education better?If it's a social service, food bank, shelter, if I put $100M what is it going to do to solve the housing crisis? There was a recent article highlighting the negotiation, and finally, settlement for the homeless problem in Los Angeles here recently, and it came out that the city, not the county but the city, is going to put several billion dollars into homeless issues and they're readily admitting it's not enough.

Think about that. Hundreds of millions of dollars into the billions of dollars, and it's not enough to solve the whole the homeless crisis because it has ancillary issues. It's just not about housing, it's about health care, it's about food insecurity, it's about mental health, it's about jobs, and the ability for professional growth and self self-sustaining financial models for people and families.

The issue that I think is becoming more and more apparent to me is that our leaders aren't thinking big enough about that what Elon Musk talked about, that ROI, that ability to have outcomes that justify that kind of level of investment. And if we want those kind of dollars we got to figure out bigger plans, in particular in healthcare, that's challenge. it's one of the biggest things I deal with as a consultant is working with CEOs to say it's not big enough, it's just not big enough.

The last thing that I think impedes philanthropists from doing big things is what I call notoriety. Let me give you a couple of examples. Mark Zuckerberg has made two amongst many huge gifts, $100M a piece one for the San Francisco General Hospital and one for the schools, I believe, in Newark, New Jersey. The public education, and he has been criticized for both, he's been criticized in the schools for not engaging the parents and some others about what's really needed. And in San Francisco he has received some criticism for making the gift because really I don't know, I don't understand. If you are wanting to make that kind of impact and you give two $100M gifts to help those in need with health care issues in San Francisco or with education for students and children, and then you're criticized for it, how likely are you to be more aggressive in the future? I'll give you another example. The Red Cross, which generally it's just a fantastic organization, a public report came out that they had some issues with money not being utilized very effectively in Haiti and they're land-based. If you were a large donor would you give to that organization if that were the story every night in every newspaper? I'm not saying what happened was good or proper but what about the other 50,000 things the Red Cross does? I'll give you another example. Warren Buffett made the decision that he didn't want to do his own foundation and other than gifts to his kids foundations. As mentioned, the Gates Foundation is their number one, his number one charity or philanthropic effort. Now he's got an issue where Mr. Gates has personal issues, he's resigned from the board. Now what's he going to do? So he's affiliated with this issue that they had nothing to do with.

Let's say that you want to do it yourself. You're going to build out your own opportunity to make the decisions for you, for philanthropy. You're not going to do what Mr Buffett did and give it to the Gates Foundation. You're not gonna, don't want the public notoriety like directly with Mark Zuckerberg. Well, it's really hard to set up a foundation. I mean go ask the Ford Foundation or the Rockefeller Foundation how difficult it is to manage something like that. Well then let's add into the issues of donor-advised funds and the pressure that's being applied currently amongst people who have these large funds and that they're being pushed and eventually, I think probably something in congress is going to come out where they're going to force large donor-advised funds and community foundations and those at Fidelity and Schwab and other places, going to force people to start making some decisions. That's not exactly enticing either.

The environment to give money publicly is tough and I think this is also why Mackenzie Scott's doing what she's doing. She gives the money to the Boys and Girls Club or to Habitat for Humanity and just gives the money and says I don't want anything, I'm not even a comment on it, and how they use it is up to them. Because I don't think she wants the notoriety. We'll talk about that next time on the podcast with great philanthropists. All of these challenges make it hard, whether it's the compounding principle, whether it's we're not thinking big enough, whether big is a relative term meaning big for us but maybe not big for them, or the fact that when somebody makes a large gift there's challenges publicly with it, makes it really hard to give away money.

Elon Musk is right. Is this a new concept? No. Andrew Carnegie, the steel magnate, was maybe amongst the great philanthropists initially in our country. Direct quote, "it's more difficult to give money away intelligently than to earn it in the first place." It's not a new issue, we just are dealing with it within our own time and our own challenges.

So the last piece here is what's the tactical? How do you help your organization be ready for maybe larger gift opportunities? Maybe it's not $100M. Maybe it's five to ten million and that changes your organization. Number one is, is that encouraging people with resources to give their money away earlier makes it easier to do, to deplete it. This goes back to that compounding interest or compounding return that Warren Buffett talked about, and that why Susan Buffett was probably right. It had been much better for them to give money away earlier on in their lives because it wouldn't have compounded so much that they had struggled to get rid of it now. Another thing that was recommended and that I recommend to you is discussing what the impact will be today. Let me give you three examples.

Education. If you educate kids correctly the exponential effect over their lifetime is undeniable, whether it's staying out of trouble, whether it's earning more money, whether it's being a better citizen. There's all these studies and stats. It's easier to fix an issue before it becomes an issue. An education has a chance to engage with people earlier on, in terms of the product, the kids needing philanthropy to make a difference. And this is, this merger where public education needs private support. Another one is health care, particularly in pediatrics we know that if you have great prenatal care it has effects not only on the birth of the child at birth time but it can also affect the ability for them to be more prepared for elementary school. Another one that the idea of helping to solve homelessness and basic services helps people be more productive in society. Sometimes we have to show that the money used today will have more impact than if we got even more down the road in 15 or 20 years, and that our organizations can make a difference today, but more importantly will have a long lasting effect much down the road.

The last thing is, is that we have a responsibility here in the fundraising side of the equation of philanthropy to challenge our leaders to think bigger. What does it mean not just for our organization but for the community as a whole? Certainly our organization may have a part in that. It may be a large part but it can't be about us. If you want to maximize someone's highest level of engagement they're going to want to know what it means for the community economically, socially, culturally, health-wise, financially. It can't be just about you give the money to us. We do better. It has to be if you give the money to us we do something in the community that makes a difference, that very few people can do. That's an exponential effect. What is it you want to accomplish that goes beyond your door step, your windows, your little piece of the of property in your community? How do you partner with other nonprofits to make a bigger difference? Giving away money - not as easy as one would think, but as a fundraiser I've always thought it would be fun to try. I've just never had the money to do it, and maybe many of you have had the same thing. It gives us something to think about, how we can make what we do a little bit more effective.

Don't forget to check out the blogs on the website, two or three per week, 90 second reads, posting some interesting things, might be of value to you. To consider also if you'd like to get a hold of me don't forget that's podcast@hallettphilanthropy.com. Would love to hear your thoughts. We have a suggestion on a podcast and if you're listening to this on Apple, Spotify, Google, whatever iheartradio or YouTube. Leave a comment, rate it, hopefully highly, share it with a friend. Maybe it could be helpful to them, too. Don't forget that what we do is important and our job is to take all of these opportunities which we talked about today and make it easier for those who can make a difference to make a difference for those people in our community and the things that are important in our community that need assistance. That's the value of what we do. Philanthropy doesn't mean money, it means love of mankind, means helping others, making our community a better place, which brings me to my favorite saying. Don't forget, some people make things happen, some people watch things happen, there those who are wondering what happened. Fundraising, nonprofit work is the conduit to philanthropist, philanthropy. Two people, two entities, two groups. a person in a group trying to make a difference for people who are wondering what happened, and that's a worthy cause. And I hope you can feel good about what you do every day. I hope today might give you a little chance to think a little bit bigger about how you can be impactful and your organization can be impactful in your community. Appreciate your time, as always. Love having you here. Look forward to seeing you next time. And don't forget, make it a great day.