What the Savvi­est Phi­lan­thropists Know

The best gifts em­brace emo­tion and the bot­tom line.


Turn on the news, and watch the dev­as­ta­tion caused by the lat­est hur­ri­cane or wild­fire to rip through the United States or tsunami to hit Asia. What’s your re­sponse? Do

“You need to have a lit­tle ra­tio­nal with your emo­tion or you’re giv­ing to ev­ery­one on the street.”

you change the chan­nel? Do you well up with emo­tion and do­nate what­ever you can to a re­lief or­ga­ni­za­tion? Do you start to en­vi­sion a way to build stur­dier houses or en­cour­age peo­ple to move to higher ground?

Your re­sponse says a lot about what kind of phi­lan­thropist you might be. If you’re in the first group, you’re likely not phi­lan­throp­i­cally in­clined. But the sec­ond two de­fine the eter­nal bat­tle of givers as their wealth and as­pi­ra­tion climb. The peo­ple who well up are mo­ti­vated by the emo­tion that em­pa­thetic peo­ple feel when they see oth­ers in need. Those watch­ing the dis­as­ter who think of fix­ing the in­fra­struc­ture or in­cen­tiviz­ing peo­ple to make dif­fer­ent choices—like not liv­ing in a flood- or fire-prone area— show a ra­tio­nal ap­proach to giv­ing. They want to mea­sure the im­pact of their char­i­ta­ble dol­lars and, if pos­si­ble, find a way to repli­cate what they’ve learned in one area in many com­mu­ni­ties.

Many of the wealth­i­est and most so­phis­ti­cated phi­lan­thropists are try­ing to find a way to com­bine the two: get some­thing con­crete done with their do­na­tions with­out ne­glect­ing the emo­tion that drove them to turn over money to solve a prob­lem in the first place. One such donor, Alexan­dre Mars, is lead­ing by ex­am­ple—and bring­ing along other young, techy en­trepreneurs who have the where­withal to be phi­lan­thropists.

Mars, who made his wealth found­ing and sell­ing three com­pa­nies, says he saw the tra­di­tional con­struct of giv­ing as out­dated. In his early 40s, he prefers to ask peo­ple what is enough for them. He wants them to keep their giv­ing be­low their pain thresh­old, some­thing that runs counter to the give-un­til-it-hurts ethos of some phi­lan­thropists.

“For us, it’s not the 50 per­cent from the Giv­ing Pledge,” he says of the work he is do­ing through his Epic Foun­da­tion, which he founded in 2014 to im­prove the lives of dis­ad­van­taged chil­dren. “That’s great, but it’s the top-down ap­proach. Ours is the Shar­ing Pledge. We ask, what’s your giv­ing thresh­old?” The Shar­ing Pledge is a push to get peo­ple to share their wealth but comes with the prom­ise that Epic will, in ex­change, share data on the im­pact their money is hav­ing, even in­clud­ing vir­tu­al­re­al­ity films to take them to where their giv­ing goes.

Mars cov­ers all the costs—to the tune of $2.5 mil­lion just this year—and that en­ables ev­ery dol­lar to go straight to a cause. His re­cruits, among other suc­cess­ful en­trepreneurs, in­clude An­dre Had­dad, founder of cheeky car-shar­ing app Turo, and Rakesh Ton­don, chief ex­ec­u­tive of the sub­scrip­tion fash­ion com­pany Le Tote; their ex­am­ple is meant to bring oth­ers along.

“Our thought was, why were all of those peo­ple not do­ing more?” Mars says. “It wasn’t be­cause they weren’t good peo­ple. It’s be­cause they didn’t know where the money was go­ing. The work you are do­ing should be vis­i­ble.”

Mars and Epic are putting a Sil­i­con Val­ley spin—trans­parency and cool ac­count­abil­ity—on the age-old prob­lem of emo­tional ver­sus ra­tio­nal giv­ing. An emo­tional giver, af­ter all, who pays no heed to where their money goes will have less im­pact than they could oth­er­wise, while a ra­tio­nal giver who fo­cuses too much on the out­comes might find that their well-crafted plan is not em­braced by the peo­ple they most thought it would ben­e­fit.

“You need to have a lit­tle ra­tio­nal with your emo­tion or you’re giv­ing to ev­ery­one on the street,” says Carol Kroch, na­tional di­rec­tor of phil­an­thropic plan­ning at Wilm­ing­ton Trust. “If you’re ra­tio­nal, with­out emo­tion, what can hap­pen is you build it—but will they come? You need to de­sign a pro­gram that is wel­come.”

Phil­an­thropic giv­ing can be high­minded stuff, but thought­ful donors should also think about some­thing more earthly: the tax im­pli­ca­tions of their do­na­tions. “Phi­lan­thropy should be two-pronged,” says Jac­que­line Valouch, head of phi­lan­thropy at Deutsche Bank Wealth Man­age­ment. “There’s the al­tru­is­tic warm-and-fuzzy piece, and there’s the tax de­duc­tion.”

The tax cuts passed this year, though, have made it hard for even five-fig­ure donors to get the tax de­duc­tion for do­na­tions. This is a re­sult of in­creas­ing the stan­dard de­duc­tion and elim­i­nat­ing or cap­ping other pop­u­lar de­duc­tions.

One work-around to make sure you get a tax credit for your phi­lan­thropy is to put sev­eral years’ worth of do­na­tions into a donor-ad­vised fund: You get the de­duc­tion today but can dis­trib­ute the money when­ever you like. It’s a good way to re­duce your tax bill and buy your­self time to de­cide how you can be both a ra­tio­nal and an emo­tional donor.

Paul Sul­li­van is the au­thor of The Thin Green Line: The Money Secrets of the Su­per Wealthy and the Wealth Mat­ters colum­nist for the New York Times.

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