In December 2016, Open Impact, a social change advisory firm, reported some strange behavior by Silicon Valley’s wealthiest givers. While overall giving has reached record highs in the region–it’s estimated to be at least $5 billion annually, per data from 2013–very little was flowing to local organizations, many of whom aid those struggling with things like affordable housing, which is directly related to the tech boom.
The group’s latest report, dubbed “The Giving Journey,” was funded by the Gates Foundation and provides some clues to how such oversight can happen. Essentially, it boils down to the fact that helping super-rich donors figure out where to funnel their money could merit its own charity effort. While many entrepreneurial-minded people end up with huge windfalls because of their enormous salaries or shares in some startup, they also don’t know what to do with that wealth. Open Impact’s new report is designed to offer some suggestions.
“The field of philanthropy has primarily been built around the more tactical aspects of giving–the how–while taking the why for granted,” notes the report, which was written by Heather McLeod Grant and Kate Wilkinson. Their findings are based on a six-month study of 50 high-net-worth donors in the Bay Area, each with assets between $10 million and $1 billion, who are now giving between $100,000 and $10 million per year. Most of these folks qualify as “new wealth”–their riches are self-made, and have they started making large gifts within the last decade.
Specifically, the report tracks many of these donors’ paths toward “actualized philanthropy”–or intentional, strategic and psychologically rewarding charitable actions–in order to find universal lessons for groups that might want to work with the next crop of new money. The report also points out obvious institutional gaps, and suggests future ways for other charities or consultancies to engage.
That pathway is generally counter to the effective altruism style of giving, which has been backed by a corps of logic-first thinkers in the Valley, including Facebook co-founder Dustin Moskovitz, who has ties to GiveWell, a charity-effectiveness evaluator that recommends contributions to groups based on their life-saving (or at least radically life-changing) impact per dollar spent. “As our research reflects, the supply of philanthropic capital among ultra-wealthy donors is driven by their personal values and interests–not by ‘rational’ economic behavior,” the report adds. At this level, charity is often seen as a “relational” activity, encouraged by social recommendations or other’s close ties to causes as much as demonstrated impact.
What’s left is an underserved market: Billionaires seeking guidance for how to dispense their largesse can join Bill Gate’s Giving Pledge, but there’s isn’t a step-down group for those who are fantastically if not so abstractly rich. Another vehicle for giving that appears underused among this set is giving circles, which some respondents have joined. The Silicon Valley Social Venture Fund, for instance, is one. Its price for entry, which starts in the thousands, as opposed to the $1 million commitment needed to join a highly influential group like the women-led Maverick Collective, is more in line with beginner expectations. First-time contributions among high-net individuals generally range between $5,000 and $10,000, per the report.
In Silicon Valley parlance, the sector appears ripe for disruption.
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