30 Days of Reflection: Day 14 (Raising the Bar: Part 3 of 3)

Continuing from my previous discussions on fundraising challenges within venture capital and philanthropy, below I share an excerpt from a piece I wrote during my MBA program. The bottom line: I believe fundraising is broken in more ways than one.

Unpopular opinion: The rich tell us what social problems are most important to solve. But how would they know? Dan Bennett said, “real charity doesn’t care if it’s tax-deductible or not,” likely to opine on donors' moral motivations. However, considering modern tax laws and the comparative size of philanthropic donations to the fortunes of the rich, many may disagree or begin to believe actual charity no longer exists.

As a result of power-wielding investments, in many cases, those farthest removed from the issues that “charities” set out to tackle hold power around how the problems are approached and ultimately solved.?

On an episode of "Pitchfork Economics," and in his book Winners Take All, journalist and author Anand Giridharadas argues that the U.S.’ wealthiest class uses philanthropy to wash away the misdeeds that come with tax avoidance, underpaying staff, and other power abuses. Meanwhile, the ways they use funds to influence social causes are often more benign forms of the same abuse. In Datawrapper, Zara Khan notes, "charitable donations by the richest 20 Americans account for less than 1% of the total wealth of the donors." It appears that Giridharadas is correct — the sum of these philanthropic donations doesn’t amount to much more than a guise for goodwill.

To illustrate the unintentional power shift, we can examine the social challenge of justice reform, specifically post-incarceration reentry. This cause receives millions from foundations such as the MacArthur Foundation, the Ford Foundation, and, more recently, Charles and Lynn Schusterman Family Philanthropies (CLSFF). In July 2021, Ford Foundation announced teaming up with Blue Meridian Partners and CLSFF to establish the Justice & Mobility Fund with a $250 million initial investment. Initiatives like these tout a focus on systems change, aiming funds at advocacy and policy-centered initiatives. Despite the commendable efforts and massive impact of these institutions, there is largely a failure to understand how policy can take decades to shift dramatically and implement changes.???

In fact, investing in advocacy is not exactly the far-reaching, long-term solution many believe it to be. In addition to the length of time needed to change policy in meaningful ways, we are currently seeing policies overturned regularly by politicians across the aisle from those who initially passed the reforms. Additionally, when revised laws pass, they often are implemented inefficiently or not at all, resulting in reduced impact and wasted resources. As Swedish scholar Anders Gustafsson notes in Constitutional Political Economy, “a substantial body of literature suggests that politicians are blocked from implementing efficient reforms that solve substantial problems because of special interest groups or budget constraints, […] policies are often selective and considered to be fairly inefficient by ex-post evaluation, and they tend to be small in size and scope.” The result is more money over a longer term without guaranteed return. Not to mention, policy is arguably an investment into the same broken political-legal system that locked up millions of mothers, fathers, sons, and daughters in the first place.

Meanwhile, organizations working in direct service could have used that investment to impact thousands, perhaps with more intergenerational impact when one accounts for the compound impact of an earlier start. But unfortunately, power lies not with those closest to the cause but with the ultra-wealthy yet again. Merriam-Webster’s Dictionary defines power as “possession of control, authority, or influence over others.” That is precisely what is happening in the case of philanthropy — the rich are defining how we tackle society’s most pressing issues by controlling the capital needed to solve them.

So how can we work to redistribute power in the social sector? First, regardless of one's political stance on tax strategies, it is undeniable that redistributing taxes from the wealthiest individuals to reinvest in nonprofit organizations would be beneficial. Second, those who do participate in philanthropy should also be required to submit proof of power redistribution as part of the tax filing. For example, initiatives might include those closest to the cause serving on the board; or requiring foundations to gather input from affected parties when making decisions about where to invest their philanthropic funds in order to qualify for tax breaks. In the area of justice reform and reentry, perhaps this would result in a complete investment shift, namely from advocacy and policy to direct service.

Whether in philanthropy, venture capital, or any other sphere, it is evident that the existing dynamics of power and wealth distribution in our country are flawed. Rebalancing measures are imperative to rectify this imbalance and redistribute power within a society where financial influence holds significant sway. Such an endeavor is not solely for the benefit of the most disadvantaged but for the collective well-being of all members of our society.