Horizons and Hope:

The Future of Philanthropy

an article by David Brin, Ph.D.

Copyright David Brin.
All rights reserved. No duplication or resale without permission.

At the beginning of a new century, we appear to face a crossroads regarding the paramount question of how best to improve the world.

Is the world improvable by means of human intervention? The question can be debated endlessly on a philosophical level. But there is little argument over this basic premise within the community of those engaged in philanthropic activity. We share a common belief that vigorous investment and intervention in humanity can help humanity as a whole -- and countless individual human beings -- to achieve goals starting with basic necessities but extending to the limits of ambition.

I don't claim to be an expert in this field. My perspective is that of someone who views present-day affairs in the context of history... including the speculative "history" of possible tomorrows that can come from thoughtful reflection on modern trends. My aim is to offer a few insights regarding the context that philanthropy may operate in during the next few decades -- an era that will unquestionably feature profound change.

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Mario Morino, Chairman of the Morino Institute, recently encapsulated the problem -- and the opportunity -- in a June 2001 address to the Washington Regional Association of Grantmakers.

"The approaching change in philanthropy is a product of extraordinary times... globalization and the Internet make a more connected world (and) a stunning paradox. As our world grows closer, our economic and social divides widen."

Yet these economic and social divides occur in a context of unprecedented opportunity and hope. The units and contexts of measurement are themselves under rapid flux, as definitions of "poverty" shift with rising expectations. For example, education levels that were once reserved for an elite are now considered minimal for the society's disadvantaged to better themselves.

There may be as many cynics today as there were in other generations, but few can get away with simply shrugging at the sight of poverty, claiming that "the poor will always be with us, more numerous than blades of grass." The rapid rise of an affluent middle class, first in North America, then Western Europe, and later in parts of Eastern Europe and East Asia, has profoundly changed the way we view society's basic structure.

Throughout history, most civilizations had pyramidal social structures, with a few on top lording it over uneducated masses below. And it was in the best interest of those on top to make sure that those masses stayed there. Our ancestors assumed this pyramidal structure to be permanent and inherent, with political affairs aimed only at deciding which small group held sway at the apex. For all that time, charitable efforts (if any) were aimed at reducing the pain endured by those at the bottom, not at lifting and emptying the bottom rungs of society altogether. Those who gave to the poor did not envision empowering them with the skills and privileges of equal citizenship.

In sharp contrast, our contemporary social pattern is diamond-shaped. For the first time, in large portions of the world, the well-off actually outnumber the poor! The educated outnumber the uneducated. And those who see themselves as empowered make up a majority. The social repercussions of this demographic shift cannot be overstated. In places like the United States, most people merely envy the rich and do not hate them, because each of us can daydream and imagine taking our own turn in the pointy upper half. And if not us, then perhaps our children. We relish the fact that, in the United States, most millionaires earned their own wealth instead of inheriting it.

Above all, we feel that society's elites are reasonably accountable -- at least they are limited in the degree that they can use their elevated position to wreak capricious harm, unlike the way aristocracies acted with impunity, in pyramidal cultures of the past.

True, there are many flaws in this happy picture! Stifling pyramidal social structures continue across half the globe, hardly altered from the traditional oppressive patterns that our ancestors endured. And even within "diamond-shaped" societies like ours, the pain of those at the bottom can wrack the conscience and frustrate us with a sense of wasted human potential. If one of six children in the world's 29 wealthiest nations lives in poverty (according to United Nations estimates), we must see this in two ways simultaneously -- both as a measure of how far we have come (in dramatically narrowing the bottom tier) and how far we have yet to go.¹

Is a diamond-shaped society stable, or a mere temporary effect brought about by surging technology and resource exploitation? That argument is too complex for us to get into here.² We are chiefly interested in the implications for philanthropy in the Twenty-First Century. And this geometric metaphor may offer some unique insights, helping us innovate to reach our goals.

Philosophers have long spoken of a "hierarchy of needs" -- that we care first about feeding our children and only afterwards move on to worry about matters like education, development, infrastructure, investment, environmental protection, and finally fun. Yet, despite this supposed hierarchy of importance, modern philanthropic efforts are distributed across the entire spectrum. Our efforts to improve human conditions should and shall continue to proceed across a wide front.

1. There is still great need for old-fashioned triage and amelioration aid, to ease immediate agony in the world. The conscience demands action where there is hunger, malnourishment, homelessness and pain, whether or not this action can be considered effective as investment or "pump-priming."

2. Around the globe, conditions must be fostered to help transform oppressive pyramidal societies into "diamond-shaped" ones, where prosperous middle classes are capable of acting creatively to produce new wealth while improving the lives of their children and holding their elites accountable. In the west, this transformation came only with improvements in education, health, infrastructure, justice and fostering honest institutions of civil society.

3. What happens after a nation shifts from pyramidal to a diamond-shaped structure? History suggests that such societies can foster the rise of vigorous homegrown activism, especially as a spreading middle class gains education, confidence, satiation and compassion. For example, these conditions appear to be prerequisite for the development of strong environmental or social action movements. These movements, in turn, make demands on the philanthropic pie.

4. In regions where the "diamond-transition" has already occurred, we must never accept that a certain reduced level of poverty is "natural." Instead of reacting with smugness or satisfaction to a steady demographic narrowing of the underclass, we tend to view with increased dissatisfaction and horror the poverty that remains. We also tend to re-define poverty in terms that might have surprised our ancestors. (Many of today's poor live in conditions that medieval lords might have envied.) This healthy response inspires continuing efforts to ensure that:

   • children of the poor do not inherit their parents' status,
   • living at the diamond's bottom is viewed as a temporary misfortune to be solved,
   • interventions continue to make the demographic bottom ever-narrower,
   • we continue redefining poverty so the whole diamond rises, with no one left too far behind.



5. As wealthy societies continue to develop, philanthropy will take on new roles, some far removed from reducing basic human suffering. Environmentalism is the first of these new areas, involving itself in the preservation and protection of a world that future generations will inherit, rather than improving immediate conditions for those already alive. Grants for scientific research can have this character (although much research is aimed at short-term results). As this trend proceeds, we must expect to see endeavors that call themselves "philanthropic" while including in their agendas desiderata such as fame, profit and even fun.

This broad-front approach to solving world problems will seem dissipated and inefficient to some, who might prefer to concentrate on one particular area, e.g. eliminating hunger. Others respond that grinding poverty will only vanish in conjunction with the rise of a vast, prosperous middle class capable of financing future government and private efforts through their taxes and donations.

Finally, it can be argued that full involvement by the top tiers of society -- the owners of capital -- will only be complete when a wide range of inducements are offered beyond those having directly to do with conscience... by appealing to those motivations I mentioned earlier -- fame, profit and fun.

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From the perspective of philanthropic institutions -- especially grant-makers -- all of this geometric philosophizing about diamonds and pyramids may seem theoretical and obscure. Grantmakers face a range of practical problems, including the nitty-gritty of managing the endeavors that they fund. As Dr. Lucy Bernholz pointed out³ recently, the field is faced with a wide range of new challenges -- including privacy protection, technological change and devolution of decision-making from the federal to state and local levels -- as well as a bewildering array of new opportunities, tools and services.

In addition, a growing public awareness of philanthropy, fostered by increasingly media-savvy donors and foundations makes life much more complicated for managers of granting agencies.

Above all, grant-making is still about dividing a donated "pie" and dispensing slices where they will do the most good. Despite a myriad new complications, there are two chief factors to increasing the effectiveness of grant-making:

1. Improving the allocation process and subsequent supervision.

2. Finding ways to increase the size of the donated pie.

Again, I am no expert, but I hope to offer a suggestion or two. Let's begin with (2)... increasing the philanthropic pie. Consider the following:

1. We are about to experience the greatest inter-generational transfer of wealth in human history, passing from the World War Two generation to the clade of Baby Boomers. By some estimates, the amount will surpass 15 TRILLION DOLLARS. This huge inheritance has implications for capital flow, investment and tax planning. Moreover, if just one additional percent of this sum somehow diverted to philanthropic ends, it would add up to roughly $150 billions -- enough to take on projects of great magnitude, once thought reserved to just a few continental governments.

2. Even after the 'e-bubble' collapse, we are left with a rather large clade of self-made entrepreneur-millionaires, some of them falling in the super-wealthy category. Many are deeply concerned about the world where their money must be spent and where they will continue living for decades to come. Some are both sophisticated and imbued with the notion of "positive sum games"... the idea that it's possible to do well by doing good. They may be receptive to projects that, while helping others, also have speculative potential for outstanding long term profitability.

These two reservoirs pose special quandaries to those hoping to unleash the giving imperative. When it comes to pump-priming, we must ask -- what targeted efforts may provoke increased philanthropic giving among both major groups? What factors induce those at society's apex to invest in enhancing the lives of the less advantaged?

Even elites who reside atop the social order now tend to concede that they reap maximum benefits from their capital when the middle of the diamond is prosperous, happy, creative and free-spending.⁴ The debate is largely over how to achieve improved conditions for all citizens, while attempting to preserve as much of the Earth's sustainable ecosystem as possible along the way. I believe that many people who are in a position to give may refrain out of a belief that private individuals have only a minor role to play in such investment, compared to governments and corporations.

This belief may change if we explore and illuminate the way the investment horizons of governments and corporations differ from the horizons of the satiated rich.

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We are used to viewing business and government as society's two dominant capitalizing forces. This held throughout the 20th Century.

Despite obsolete rants from the ideological extremes, it has long been evident that both public institutions and corporations can invest capably, in ways that leverage society's future prosperity and well-being -- government by using tax revenues and business by applying profits or borrowed funds. We have learned that governments can be effective at creating shared infrastructure, universities for example... but terribly inefficient when meddling in a consumer economy. Commercial enterprises, on the other hand, exhibit great agility at responding to changes in technology and consumer demand, but timidity when it comes to problems at the margins... e.g. pure research, providing "orphan" drugs, or lending to risky entrepreneurs in blighted areas.⁵

While these two decision-making blocs -- representing the right and left hands of human initiative -- can at best complement each other, a severe problem results from leaving all capital investment solely in their hands. Both businesses and governments suffer from severely restricted investment horizons... the range of opportunities and needs that they willingly consider funding. Both sets of institutions share a trait of rather stodgy accountability -- to taxpayer-constituents or to stockholder-investors.

This accountability is doubtless a good thing! It is a large part of the general process that helped create our well-run, diamond-shaped civil society. And yet, this same obsession with accountability also leads to a culture of risk-aversion.

In saying this, let me hasten to add that things are not as bad as some exaggerated clichés we all hear. Take the following ridiculous calumny.

"No government will invest in any endeavor whose payoff extends beyond the next election."

Though oft-repeated, this nostrum is absurd. In fact, government funding for pure research -- with no immediate prospect for practical use -- enjoys strong political support from both public and industry for the very reason that individual businesses have shorter payback horizons, yet recognize the value of pump-priming research over the long run. Nevertheless, even in government labs, speculative research is kept below a politically-acceptable fraction of the total science budget. Moreover, even "pure" research endeavors must endure stringent peer review procedures... partly to cover granting officials from backlash in the event of failure.

The upshot? If you take a look at the investment horizon -- the range of possible undertakings that might deserve funding -- only a fraction of worthy projects are undertaken by legislators, bureaucrats and entrepreneurial managers.

Much of the remainder has remained the province of philanthropy.

Is it possible to imagine philanthropy taking a place next to the other two major capitalizing forces, managing undertakings as big, as complex and as expensive as the great endeavors financed by corporations and governments? Future cash flows seem to hint at this astonishing possibility! If this were to happen, those gaps on the investment horizon may yet be filled.

Only first, in order to cover a much wider range of human activities, philanthropy may need to redefine itself. Especially if -- as we discussed in section 1 -- the wealthy apex of a rising diamond feels unleashed from the constraints of the past. This may happen if and when the New Rich decide to combine fun and profit with doing good.

Next... setting up the Eye of the Needle Foundation!

¹ The good news is seen in the shrinking proportion who suffer poverty. The horrific news is in the raw numbers who languish in unacceptable conditions. These two phenomena can happen simultaneously because of burgeoning world populations. Something has to give. return to where you left off

² "That argument is too complex..." We should note that much of the political debate in the west today, especially the United States, is not over whether society should become more diamondlike, but over which means will prove more effective at achieving this end. Those on the left tend to assume that government intervention -- which proved effective at spreading universal free secondary education and promoting land-grant universities -- should lead the way in the next phase. Those on the right insist that the borderline poor can only advance in a new economy by participating vigorously in that economy. The philanthropic community, ironically, seems well positioned to serve as a bridge between these viewpoints. return to where you left off

³ Foundations for the Future: Emerging Trends in Foundation Philanthropy, Lucy Bernholz, Ph.D., at www.blueprinted.com. return to where you left off

⁴ "Even elites who reside at the pointy apex of society..." The question of satiability is crucial here. Among the elites in any society, there are those who measure their status and contentment by their relative wealth -- the degree by which they appear to be elevated over the majority. Others measure their sense of success in terms of personal goals -- items they want to own and things they want to do or achieve. To these latter individuals, it is immaterial whether millions of others get to own and do the same things. In fact, the more the merrier!

Distinguishing between these two motivations for seeking wealth can be profoundly significant, not only psychologically but also philanthropically. Many political and social disagreements among members of the monied elite arise from tension between these two views of wealth -- whether it is a means to achieve status or a means to achieve specific and tangible goals.

What seems to determine the balance is satiability, having to do with an individual's ability to draw genuine satisfaction and a sense of completion from the achievement of his or her previously stated goals. return to where you left off

⁵ Political science in the next generation should at last refine our knowledge of which kinds of activity are well handled by governments and which are best left to business. In addition to improving our allocation of resources, this may have the pleasant side-effect of at last quelling some of the heat and noise emitted by oversimplifying ideological purists. return to where you left off