Forbes Insights and Credit Suisse conducted a study of some of the world’s wealthiest to gain deeper insight into their motivations, strategies and financial philosophies. The research shed light on the total lifecycle of philanthropy — from the moment an individual first decides to use his or her fortune to do good to the legacy he or she plans to leave behind — and the spirit of giving they hope will live on in their descendants.
Those who participated in the study bring the same tenacious, pragmatic approach to giving away their wealth as they brought to amassing it in the first place. This makes sense; when you get right down to it, business and giving are not really all that different. Both require a results-driven approach, a strong strategic vision, the ability to surround oneself with the right team for the job and the understanding that the biggest risks most often result in the biggest rewards. Fifty-three percent found applying their business experience to their philanthropy an effective and successful approach to giving – a sentiment that only increases with wealth.
More of the wealthy respondents partner with businesses (40%) for their philanthropic endeavors than with government agencies (22%) or other non-profits (28%). Eight in 10 of the wealthiest preferred to give to early- or growth-stage endeavors, rather than the more established organizations. Why allow yourself to get snagged in the stickiness of so much red tape when you can use other channels to move more quickly?
But what surprised us most in our Forbes Insights study was not just the scope and scale of the wealth they plan to disburse, but how quickly they plan to do so.
And more than half – 54% — of respondents to the study planned to leave more than a quarter of their assets to charity. Close to half of those with more than $20 million in investable assets plan to leave half or more of their wealth to charity; nearly 1 in 5 of those with over $50 million in investable assets plan to give it all away. A massive level of giving, to be sure – but those with the greatest amounts to give planned to give it away the fastest.
It’s not often – well ever, really – that 150 of the world’s 400 wealthiest billionaires gather in one place at one time, particularly to talk about how they plan to give all those billions away. But that’s just what philanthropists Bill and Melinda Gates, Warren Buffett, Jacqueline Novogratz, Leon Black and Steve Case – and their peers – gathered together to do this past June.
Forbes Insights, together with Credit Suisse, used this unprecedented gathering to better understand how the world’s wealthiest approach giving back. What we found surprised us: yes, legacy is important, but not as important as making an impact as quickly as possible. And billions of dollars can make a tremendous impact — it can truly change the world.
More than half of Summit attendees who participated in the poll said that they expected to see a meaningful return on their philanthropic investment within 10 years, while four in 10 were prepared for an impact that stretched beyond their lifetime.
And they were risk takers, applying the same aggressive approaches in their charitable endeavors that they used in their business activities. Two-thirds invested in either early- or growth-stage philanthropic endeavors, rather than the old tried-and-true established charities with long track records.
In short: they were looking to make their mark, take risks, and solve the world’s most intractable problems – the huge knots that no one had yet been able to untangle.
With the U.S. election nearing, some of America’s wealthiest argue that they would give more to charity if they paid lower taxes, as they surely would under proposals put forth by Mitt Romney and in the House-approved budget drafted by his running mate Paul Ryan.
Such an assertion is directly contradicted by scholarly studies. Studies indicate that when taxes go down, people give less generously. Lower taxes mean that what scholars call “the price of giving” goes up; the value of the tax deduction per donated dollar is less.
The notion that the wealthy will pay out in voluntary contributions what they don’t pay in mandatory taxes may seem an attractive proposition to some charities, but it just isn’t so.
While there may be more discretionary money in the pockets of millionaires, it tends to stay there. As a matter of fact, the wealthy give a smaller percentage of their income to charity than do moderate- and low-income people.
The social psychologist Paul Piff, who studies the effects of income on personal behavior, told The Chronicle of Philanthropy last month that “the more wealth you have, the more focused on your own self and your own needs you become and the less attuned to the needs of other people.” He has shown that wealth can make people “more selfish, more insular, and less compassionate than other people.”
Much of this has been known since 1990 when Terry Odendahl published Charity Begins at Home; wealthy Americans tend to support the nonprofit institutions that they themselves use. That includes elite universities, museums, operas, and performing-arts groups as well as other cultural institutions and some hospitals and medical facilities. Few would consider these institutions to be on the frontline of charities dealing with today’s most pressing problems.