At the end of each year, nearly every news and opinion outlet publishes its own year-in-review. Compounding this trend with the Buzzfeedification of online media, they nearly all mimic the same form: “The Top 10 Most Popular Searches on Google [in 2014],” “Top 100 Films in 2014,” “Top 10 Sports plays that made us stop and stare in 2014,” and – compiling all the top trends in humble fashion – Time’s “Top 10 Everything of 2014.” Giving into temptation, the philanthropic world has its own lists, but – considering the combination of disparate fiscal calendars and tax scheduling – they are usually published when we least expect them. One such list that has garnered a lot of press attention lately – especially from the “tech world” – is The Chronicle of Philanthropy’s “The Philanthropy 50.” Although compiled using admittedly imperfect means (think: disclosure issues), the list has received a fair amount of media attention, providing insightful commentary suggesting new trends in big philanthropic giving.
Before listing the top fifty individual donors of the year, Philanthropy 50 provides brief remarks on its findings:
America’s biggest donors gave $9.8-billion to nonprofits in 2014, with foundations and higher education receiving the most money. A number of donors are focused on scientific research, and some tech entrepreneurs are giving while they’re still building their businesses.
Topping the list are Bill and Melinda Gates giving away $1.5 billion. Following, there are a number of familiar faces: Michael Bloomberg, Paul Allen, Steve and Connie Ballmer, and David Rockefeller to name a few. Looking at the whole list, many of these philanthropists are familiar names to those steeped in the nonprofit world; however, many of the names and faces are not your typical “household name” philanthropists. Yet, one category of philanthropists stood out and did include household names – or, at least, Silicon Valley names.
Jan Koum of WhatsApp, Nick and Jill Woodman of GoPro, Sergey Brin and Larry Page of Google, Marc and Lynne Benioff of salesforce.com, and Sean Parker of Facebook, Spotify, Napster, etc. all appeared on the list. (If you go on The Philanthropy 50 and just click on the profiles of the youngest-looking philanthropists, there is a fairly good chance that he or she is a tech giant.)
Amazed at the number of young technology leaders on the list, much ink has been spilled (nay, keys have been typed?) about this recent phenomenon. Summarizing the shift, Wired explained:
There was a time, not so long ago, when the country’s leading philanthropists were the oil barons and industrialists who helped build the nation’s infrastructure. Today, they’re the people building mobile messaging apps and the tiny waterproof cameras that you strap on your head before going skydiving.
Commenting on their own project, Alex Daniels and Maria DiMento explained: “If the tech industry’s role in philanthropy keeps growing at the present pace, the trend could be permanently upending the dominance of the finance industry among the nation’s largest philanthropists.”
So what sparked this shift in big philanthropy?
First, many of these “tech giants” achieved significant financial status nearly overnight, which contrasts greatly with the previous generation’s typical business model. Although Jan Koum worked on WhatsApp since 2009, his financial status (and not to mention his placement on the Forbes 400) changed literally overnight: after he sold his company to Facebook for $19 billion in early 2014. Because the tech giants are becoming wealthier earlier, big philanthropy is getting younger when compared with the previous generation, who had to “build up wealth over years” as Maria Di Mento argued. This combination of younger giving and “wider wallets” has driven this trend (at least in part).
Second, The New Yorker aptly pointed to the “peer-pressure model of charity” that has pervaded the tech crowd. These tech leaders are quite opinionated about the importance of giving: “[Benioff] talks openly about his own giving, showers praise on friends of his who contribute, and disapproves of those who do not.”
Third, The New Yorker piece also acknowledges how donor-advised funds alter the math behind the Philanthropy 50. Charitable giving in the form of a donor-advised fund resembles a typical contribution when it comes to tax purposes but it looks drastically dissimilar when it comes to charitable output: donors can keep their money in these funds without committing where the money is directed (all while enjoying the tax benefits). According to The New Yorker:
Contributions last year by Koum and Woodman, for instance, took the form of donations to the Silicon Valley Community Foundation, which created donor-advised funds on their behalf. And part of Parker’s contribution was to a donor-advised fund run in his name by the Fidelity Charitable Gift Fund.
From the perspective of this argument, the numbers provided by the Chronicle may be inflating “philanthropic giving.”
Lastly, there is a clear selection bias in determining who appears in the Philanthropy 50 (and the study’s authors openly admit this point): a) issues of disclosure bias the results to those who report giving; and b) the methodology did not include foundation giving (so as to not double count donations). Regarding the latter issue, if an individual’s family foundation contributed a great sum of money to a cause in 2014, it was not counted unless the individual’s original donation to the foundation also took place in 2014. In terms of The Chronicle’s list, this methodological choice clearly biases the outcome towards favoring younger wealth, considering that most “established wealth” is already affiliated with a foundation (here, the list-leading Gates are an exception to the rule).
Regardless of these potential issues, it is encouraging to see the philanthropic behavior of the “tech giants” mirror that of their immediate predecessors. Without getting into the details, their giving is something that I “like” and “favorite.”