Outsourcing Your Philanthropy

I’m hopeful that Mr. Buffett’s generous gift to the Gates Foundation will inspire other wealthy families to be more philanthropic.  There’s an important aspect of his gift that could use greater emphasis:

Mr. Buffett’s strategy of outsourcing his philanthropy recalls his approach to investment, which involves identifying good companies run by talented people and backing them. Would-be imitators have turned books such as “The Warren Buffett Way” and “Buffettology” into best sellers; perhaps Mr. Buffett will persuade other wealthy individuals to give away their fortunes through existing foundations instead of establishing their own. Ultimately, we could see a market in philanthropic capital in which donor groups compete for resources the way their recipients do now. This would be healthy, as the best foundations presumably would attract the most assets.*

The idea is simple: Instead of incurring the considerable expense of establishing your own foundation, why not simply give a part of your fortune to an established philanthropy, one whose values resonate with your own?  Many foundations will have professionals on staff with expertise in areas like youth development, health, education, and the arts, among others.  They often know the best charities in a given region and have accumulated considerable knowledge about what works and what doesn’t.

Your philanthropic advisor can help you decide if this is the best option for you, and even help you broker the relationship with an existing foundation.

Wasn’t it Thoreau who said that “A man is rich in proportion to the number of things he can afford to let alone”?

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* Open the FloodGates by John J. Miller, in the WSJ OpinionJournal.

Comments

[phil]

Interesting thought. How might community foundations and others market themselves, I wonder, to leverage the PR that Buffet has gotten on this?

[Phil Anthropoid]

After you work out values, vision, legacy, etc. -- the "touchy-feely" things you mention in your post, Phil, does a giving vehicle start coming into view? Is this a discussion you have with donors, or do other advisors intervene at this stage? I always tried to listen for cues from donors about the degree to which they wanted to be involved in the mechanics of their giving. You get a sense from speaking with them about the kinds of things that would energize them and sustain their philanthropy. Unfortunately, running a family foundation can burn out many donors, so the Buffett option makes a lot of sense.

As for marketing, is there enough glam in Warren Buffett's gesture to encourage other would-be Buffetts to copy it? How can a community foundation invoke Buffett's gift without mentioning it by name? Processing ...

[Susan Herr]

I appreciated your ideas about how, with his gift to the Bill and Melinda Gates Foundation, Warren Buffet is outsourcing his philanthropy in a way that could be high impact, more broadly, for the sector.
As I am sure you know, there is already a vibrant marketplace in which “donor groups compete for resources the way their recipients do now” and that is the world of public charities. Community foundations have been in this space the longest, providing wealthy donors with the opportunity to create funds that will, in perpetuity, be given to organizations deemed most effective. Although a wide-range of identity funds (women, gay/lesbian, global) are aggressively building on this model, it appears unlikely that Buffet’s gift will counter the trend toward increasing (rather than decreasing) donor control.
But Buffet’s gift and your blurb point to an approach Community Foundations of America has been pursuing that leverages both the intellectual capital possessed by private foundations and the imperative public charities face to grow their efforts by more deeply engaging donors. We are in the early stages of doing this by developing partnerships that enable private foundations to “package” their knowledge and offerings in ways that public charities could use to more deeply engage donors in specific issue areas.
Annie E. Casey Foundation could, for instance, package contextual knowledge and giving opportunities that community foundations and other public charities would use to market to donors who have expressed interest in issues affecting children, youth and families. The same could be done with other issue-area leaders such as Robert Wood Johnson Foundation in the areas of healthcare or Edna McConnell Clark Foundation in area of youth development. Funds wouldn’t necessarily go to the private foundation, as in the case of Buffet/Gates, but would go through the intermediary or directly to high-performing nonprofits.
Private foundations don’t necessarily need to grow their endowments but such an approach would advance their work by growing revenue streams available to their grantees, an opportunity that the most entrepreneurial are becoming willing to consider.
While this is only one cog in the wheel of a vibrant social capital marketplace, like the Buffet/Gates partnership, we hope it will get us moving in new and powerful directions.

[Albert Ruesga]

Thanks for your thoughtful comment, Susan. Please help us understand the set-up. Community foundations are typically focused on a specific piece of geography. So it doesn't seem likely that the Baltimore Community Foundation, say, would partner with the Annie E. Casey Foundation (based in Baltimore) to provide BCF's donors with "giving opportunities" in the Baltimore region, does it? BCF staff members would want to provide this information to BCF donors themselves. But the Seattle Foundation, for example, might have donor advisors who hail from Baltimore and who would welcome the Annie E. Casey Foundation's giving advice.

Or is this all about donor advisors and their desire for greater "depth" in a given subject area, subject areas that might not be the focus of their community foundation's giving program?

As a representative of the Community Foundations of America, wouldn't you always favor community foundations over private foundations as sources of giving expertise?