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The best philanthropy takes the biggest risks

Making a big bet on one moon-shot idea can have more impact than funding many organizations.

The best philanthropy takes the biggest risks
[Images: Deagreez/iStock, Irina Lobenko/iStock]
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“With great power comes great responsibility.” Who would have thought that Spiderman might provide one of the most enduring summations of what it means to hold power?

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Power—whether political, financial or “super”—is a dangerous weapon in the wrong hands; that much we know. But when we talk about great responsibility, this is not only about people using their resources for good, but also efficiently.

For the high net-worth community specifically, money in itself is not a superpower. It is a tool that must be used carefully, with the sharing of wealth far more powerful when done strategically.

This year marks the tenth anniversary of the Giving Pledge. Initiated by Bill Gates, Melinda Gates, and Warren Buffet, it is a commitment by a group of the world’s wealthiest people to give away at least half their wealth either during their lifetimes or in their wills. In the past 10 years, great leaps have been made in many social issues, and billions of dollars have been given away—yet the wealth of the current 210 signatories has doubled since then.

The ultra-high net worth have a higher responsibility when it comes to addressing social issues due to their unique position when it comes to wealth. A dollar from a risk-taking catalytic social investor has much more potential and therefore value, than a dollar from a low risk-taking institutional funder. The conditions attached to funding from an enlightened philanthropic source is likely less constraining to the entrepreneurial doer, as the expectations are not founded in immediate returns or accountability considerations.

Philanthropists must be willing to address failure in the first instance. Without failure, and without taking the risk associated with failure, we would never be able to shift the dialogue on some of the biggest social issues in the world.

It is here that philanthropic capital becomes so important. Enlightened private philanthropists have the power to take the risks that institutions such as governments and businesses, beholden to taxpayers and shareholders respectively, cannot. They also have the personal capital to fund the high-risk moon-shot ideas. Financing these ideas, catalytic social investors patiently build their domain expertise by learning what works and more importantly, the lessons from failing. This type of venture eventually ensures ideas and proven solutions can further down the line become mainstream winning stories. Catalytic philanthropists need to strive to privatize failure and socialize success.

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One of the recent signatories of the giving pledge is Mackenzie Scott, ex-wife of Jeff Bezos and now the world’s wealthiest woman. Since signing the pledge, she immediately made good on her intentions with investments and donations totaling $1.7 billion to 116 organizations Scott recognized as “driving change.”

Her approach has garnered a lot of attention, donating directly to the recipients from her own personal wealth, rather than through a foundation in her own name. It means that while 100% of the money she gives away will go to the target organizations, the impact of this largesse is questionable—$1.7 billion makes a big splash like rocks thrown in a pond, but the ripples rapidly dissipate with little discernible change. What she is practicing is charity and patronage, not philanthropy.

This is a low-risk, low-reward approach—spreading her wealth in organizations tackling broad issues, as opposed to experimenting on untested unconventional ideas toward solving a focused issue that she is passionate about and—with her enormous wealth—she could become a domain expert in and create great impact.

Her list of investments include: $586.7 million to numerous racial equality organizations, $125 million to those fighting climate change and $72 million to pro-democracy campaign groups. For each of those recipients, Scott is making a tangible difference to how they can operate (for better or worse) and perhaps foster some change in their respective fields. But in her own role as a donor, I do not believe her approach is the most effective way of making significant societal change.

Mackenzie Scott is by no means the only philanthropist to take this approach, the same could equally be said for Jack Ma, Larry Ellison, and even Jeff Bezos. There are sadly too few philanthropists who take a “catalytic philanthropy” approach as I call it. And there is no harm at all in her donations, which are generous and may well change some lives.

She says she wants to keep giving “until the safe is empty,” but also that she will continue to add to the list of organizations she donates to as her “giving continues in the months and years to come.” But by giving in this way, neither she nor these other donors who write cheques to countless organizations will ever make the systemic change this world needs.

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Philanthropy to create real world change can never be as simple as charitable giving, nor is giving away your wealth as simple as writing cheques until the safe is empty. It is investing in a strategy that can lead to major societal shifts and giving away your expertise and your time as well as your money. That is how to use the power of wealth responsibly.


James Chen is a venture philanthropist.

Correction: We’ve updated this piece to reflect the correct number of Giving Pledge signatories, to note that Melinda Gates is also a founding member, and that Giving Pledge signatories can also commit to giving their money away in their will, not just during their lifetime.