Further, there are things of which the mind understands one part, but remains ignorant of the other; and when man is able to comprehend certain things, it does not follow that he must be able to comprehend everything.
—Maimonides1
More than at any time in nearly a century, America is awash in philanthropic dollars. Today’s high-profile gifts are often given in spectacular amounts by famous, occasionally controversial donors. Now, as with the big gifts of the early 20th century, when such philanthropic notoriety occurs, criticism soon follows. Some of history’s largest charitable gifts, or publicly expressed intentions to make such gifts, such as the announcement by Mark Zuckerberg and his wife, Dr. Priscilla Chan, mentioned in the next paragraph, have recently been announced as this book goes to press. As night always follows day, the many critics of American philanthropists, both cynical and sincere, have once again emerged in great profusion, as well as often in great confusion.
Ever since 2006, when Warren Buffett surprised the world with his extraordinary $31 billion gift to the Gates Foundation, philanthropy has regularly been in the headlines. In 2010, for example, Buffett and Bill Gates announced the creation of the Giving Pledge whereby all signers commit to giving away half of their wealth. From 2012 to 2016, David Rubenstein, cofounder of The Carlyle Group and one of the signers of the Giving Pledge, donated $7.5 million to help restore the Washington Monument after an earthquake, $5.37 million to restore the US Marine Corps Iwo Jima War Memorial, $10 million to restore President James Madison’s home at Montpelier, $18.5 million to restore the Lincoln Memorial, and $50 million to the Kennedy Center for the Performing Arts. In 2016, Philip Knight, founder of Nike, donated $400 million toward a $1 billion endowment to finance 100 three-year graduate and professional fellowships at Stanford University, to be named for himself and for former Stanford president John Hennessy. And, raising the bar to its highest point ever, in December 2015, Mark Zuckerberg, the 32-year-old founder and CEO of Facebook, and his wife, Dr. Priscilla Chan, announced that they would, over their lifetimes, put the $45 billion present worth of their Facebook stock to various kinds of philanthropic use.
All of these charitable acts drew exceptional media attention, both to the respective givers and to the idea of philanthropy writ large. With public and media attention thus heightened, this is an especially opportune moment to seek to clarify the significance of American philanthropy to American society, to American culture, and especially to America’s flourishing civic sector. While American foundations, by and large, remain “The Great American Secret”—the subtitle of my first book on philanthropy2—public awareness of the existence of the wider philanthropic sector is now greater than at any time since Andrew Carnegie and John D. Rockefeller Sr. captured the attention of the public with their launch of the first great institutions of American philanthropy more than a century ago.
American entrepreneurs, as well as those who have invested early in their ventures, have accumulated ever-greater wealth, and a steadily expanding number of them are donating increasingly larger portions of their riches to charitable causes at unprecedentedly youthful ages. Moreover, less-wealthy Americans routinely make charitable donations to the best of their ability. Together, the rich and the far more numerous less-rich continue to sustain a remarkable multipurpose civic sector that runs schools and universities, owns hospitals, provides social services to the impoverished, supports the visual and performing arts, fosters think tanks and scientific innovation, and much more. Many people, myself included, have long believed that this sector is among the key sources of America’s continuing robust dynamism.
The current philanthropic energy is reminiscent of—and more widespread than at any time since—the end of the 19th century and the early 20th, when the newly rich then began their huge giving and great foundations and universities began to be established. America’s civic sector is once again being widely recognized as one of the authentic marvels of the world, which it assuredly is. Yet since about 1990, that civic sector has been steadily changing, not only because of outsized gifts and pervasive digital communication devices but also because of the invention of new vehicles to facilitate philanthropic giving, such as donor-advised funds. These tax-advantaged structures, which allow donors to control when they get tax advantages and when they or their heirs can direct philanthropy to different causes, have become a very significant presence; at the end of 2014, they contained about $70 billion in assets destined to pass through them to nonprofit organizations over the coming several years. The average annual payout rate from these funds to recipient organizations is about 22 percent of fund assets. If that continues, their aggregate contribution will be equal to almost one quarter of the amount paid out in 2014 by all private foundations in the United States. That same year, the approximately $19 billion contributed to donor-advised funds represented 7.6 percent of all giving by individuals.
Moreover, foundations and individual philanthropists are now combining philanthropy and advocacy in ways that even a decade ago were untried and considered likely to be illegal or close to it. Crusading attorneys on both the left and the right have spent more than two decades advising foundations that the US Tax Code’s prohibition against lobbying—once thought to be a barrier against funding most direct appeals to voters and legislative bodies—actually permits a great many forms of aggressive political action. While some philanthropic structures (such as the LLCs of the Omidyar Network or the Chan Zuckerberg Initiative) will face no such constraints, traditional foundations have grown bolder in following that advice. Furthermore, foundations, corporations, individual philanthropists, and governmental agencies are working together to tackle thorny social and economic problems, and corporations are increasingly engaging in ambitious strategic nonprofit and even for-profit initiatives (such as B Corporations) to seek social transformation.
However, the single most important change that has taken place since 1990 has to do with the intentions of individuals who have great wealth and who want to deploy it philanthropically. One hundred years ago, the overwhelming majority of such people instinctively opted to create foundations that they expected would go on perhaps forever. At that time, not one of the largest foundations had a limited lifespan. Ever since 1990, however, prospective donors appear to be favoring either the creation of a time-limited foundation with a lifespan roughly concurrent with their own or the direct disposition of substantial gifts during their lifetimes without the involvement of a foundation at all. That is a seismic shift in philanthropic practice and one worth trying hard both to track and to understand.
In other words, over the past 25 years, it has become ever clearer that a fast-growing number of wealthy individuals have concluded that their preferred philanthropic option will be “giving while living,” a phrase coined by early 20th-century philanthropist Julius Rosenwald3 and popularized in the 21st century by Charles Feeney—successful businessman, entrepreneur, founder of Duty Free Shoppers, and donor/founder of The Atlantic Philanthropies.4 Like Feeney, such donors usually express a passion for deploying all or a large part of their wealth during their lifetimes to help solve or mitigate urgent social problems. This impulse is understandable. Around the globe, human beings face enormous suffering from hunger, disease, displacement, discrimination, and countless other woes. While I wholeheartedly praise the determination to act now, as will become clear in the pages that follow, I have serious concerns about whether it is wise to spend all of one’s philanthropic wealth in the short run.
My purpose in writing this book is to examine, assess, and explain the major changes in American philanthropy—beneficial, harmful, and still doubtful—over the past 25 years and to consider the significance of each of those changes for the future health and vibrancy of America’s civic sector. For this book, I have drawn on my interviews with some 50 attentive observers of the American philanthropic and nonprofit sectors, along with my own experiences as a researcher, teacher, and writer on philanthropy and the nonprofit sector for more than 40 years and as a foundation officer for 10 of those years.