One of the biggest fallacies of philanthropy is the expectation that money will solve everything and that more money equals greater results. Trillions of dollars are spent globally on social and environmental issues, and very few problems have been solved. Why is that?
We’ve been focused on the wrong things. Our assumptions, traditions, and self-interest have made us lose sight of what it means to do philanthropy in the true sense of the word. Philanthropy should be about serving humanity and giving people what they need — not what we think they need or what feels good to give, like putting our names on buildings or giving to institutions that are already rich.
To truly change the world, we need to make significant adjustments — to our mind-sets, our motivations, our attitudes, our ways of thinking, and even our business models. Like several other billionaires, I have pledged to give most of my wealth away. As I do it, I am trying to follow these principles:
Value and success should be based on results, not dollars.
Philanthropy today is judged almost entirely by money. Foundations boast about how much they give away, and nonprofits talk about how much they bring in. For both groups, it tends to be the first thing they mention in their list of accomplishments. That’s mainly due to the fact that the world assesses the value and effectiveness of philanthropic activity in terms of dollars spent, not results.
The Foundation Center has numerous lists ranking the top foundations in the United States based on total giving and assets. The assumption is that the more grant funding a foundation gives out, the greater its impact on the world. That’s simply not true.
The same goes for nonprofits. If an organization brings in huge sums of cash, we think it must be really good at helping a lot of people. Unfortunately, when money is the main measure of success, the focus tends to shift away from doing actual work; it becomes all about how much is in the bank. This line of thinking perpetuates a cycle of raising money in order to raise more money. For many of the largest nonprofits, fundraising is a primary expense.
If we were to turn our attention away from the bottom line and toward measurements that reflect how these various organizations have served humanity, we’d be likely to see a significant shift in our rankings of value and effectiveness. Imagine if nonprofits and foundations began competing for top recognition on the basis of results instead of grants deployed or money raised.
Be motivated by the needs of humanity, not compassion or legacy.
I recently addressed a group of philanthropists in Silicon Valley. These were mostly young tech entrepreneurs who got rich in a short amount of time and were looking to do something good with their money. I began to talk to them about philanthropy — what it means, what it is, and what it is not. I learned that many had never thought about philanthropy being anything more than giving their money away to a cause that interested them or that they were passionate about. This was how other wealthy people were modeling philanthropy, so they assumed that was how they’d do it, too.
Most philanthropists today have forgotten what it means to do philanthropy in the truest sense of the word, and as a result we’ve twisted philanthropy to be something it isn’t. It’s not about us being compassionate, because it’s not about us. The work is for those who need it. It’s deeper than how we feel. Philanthropy is also not about legacy. Personally, I do not understand the need for legacy, because it’s something that will happen after I die. How can I benefit from that if I’m dead?
The same goes for passion. Any philanthropic activity should be done using your brains, not your passion. Passion is irrelevant. What’s required is determination. When things get hard, passion fades away. Determination says, No matter how many times I fall on my face, I’m going to keep getting up.
There’s also a lot of money given under the label of philanthropy that isn’t necessarily philanthropic. My old school, which was a fancy college, came to me a while back and asked me for money. My response was, "I don’t give money to the rich."
Don’t get me wrong. I’m not against people giving back to their alma maters. That’s a fine way to express gratitude or to advance science, but it’s not philanthropy. Donating to museums is a nice hobby, and it’s great to have them. Sponsoring the arts is a good thing. But it’s also not philanthropy. And paying to have a building named after you is definitely not philanthropy.
In fact, if we’re not serving humanity and improving the lives of those in need of help, then it’s not really philanthropy.
Make philanthropy about serving, not helping. (There’s a difference.)
If philanthropy is service to humanity, then those we’re serving should be seen as our customers. Think of a business. Businesspeople serve customers and address their needs. Businesspeople give customers respect. The customer is always right.
Philanthropy that takes an attitude of helping is the opposite of philanthropy that takes a posture of service. Helping is condescending and implies that the donor is superior. Service, by definition, is not superior. Serving puts you beneath those you serve. We help based on what we want; we serve based on what our customers need. Helping is giving what we want to give; serving is giving based on what they want to receive.
Philanthropy needs an attitude shift. And we philanthropists should get to know our customers — visit with them personally — to fully understand their needs. Only then can we properly serve them.
Understand the problem before funneling money into a solution. And always anticipate unintended consequences.
Clearly money is the fuel that drives philanthropy. But if that money isn’t being used in a practical way to actually meet the needs of the people we’re serving, then we’re wasting our resources.
In my experience, many philanthropists today are not thinking through what people really need. We make assumptions based on what we believe or "know" to be true; we make promises and give away billions of dollars with the best of intentions. But intentions don’t win the game. No amount of money is going to make a difference if it’s not spent in ways that directly meet the needs of the people we’re serving.
Before doing anything, we need to understand something about what we’re doing. If we rush in and haven’t thought through the roots of the problems we want to solve, or the ripple effects of our actions, we inevitably will do the wrong things.
The United States and other wealthy nations, for instance, have aid programs that import food to developing countries at very low or no cost. The result in some places has been the complete collapse of agricultural economies and local markets, because no farmer can compete against free. These programs, which were meant to help the poor, have ended up driving even more people into poverty.
When it comes to curbing poverty, the solution is not to give more money to the poor. Lack of money is a symptom of poverty, but it is not what causes poverty. Above all else, poor people are poor because they lack the ability to make a living. And for many of them, that’s due to their basic needs not being met.
An estimated 1.3 billion people have no access to electricity. What if we were all just sitting in the dark as soon as the sun set each day? How productive would we be? Considering that a big share of wealth is based on the Industrial Revolution, which was based on electricity and power generation, it should come as no surprise that lack of power is a perpetuator of poverty.
It’s the same with clean water. If you’re sick because your water is contaminated, you can’t hold a steady job. Over 50 percent of the world’s hospital beds are occupied by people with waterborne diseases.
The largest area of philanthropic work for the future will involve financing products and services related to energy and water. They’re the real solutions for health and livelihood and have the biggest potential to improve humanity. However, we have to be smart about how we do it. Seeing poverty from the perspective of someone living it is a critical step in understanding it, and ultimately designing ways to end it.
Stop relying on traditions and assumptions.
Traditionally, philanthropy has meant giving large sums of money to charitable causes, and philanthropies have existed as entities with specific tax designations, boards of directors, and all kinds of regulations and red tape. Recently, there’s been an increase in more creative forms of philanthropy, which provide some flexibility for how money can be spent. This is a good thing.
Instead of funneling my giving to a foundation that distributes money only to nonprofits, I’ve used some of it to set up an invention and manufacturing shop. It is neither a nonprofit nor for-profit. It’s zero-profit. We run it like a for-profit, but it doesn’t make any money. It exists to find, develop, produce, and distribute products that can reduce the problems facing the world’s poor. We’re currently focused on solutions dealing with energy, water, and health and wellness.
Our Free Electric stationary bike is one example of a solution to the lack of energy access. Pedaling it for an hour generates 24 hours' worth of electricity, which is enough to provide lighting for a rural household, charge mobile devices, and perhaps get on the web and learn a skill. After all, electricity is the enabler of the Internet. In fact, all of our work is focused on affordable and common-sense inventions that will bring the unlucky half of the world to a level where they can make a living and have better quality of life.
My approach to philanthropy might be a bit unconventional compared with the status quo. But philanthropy, like any action, is pointless if we’re not thinking about what we want to achieve and then designing solutions that get us there. Unfortunately, in philanthropy, like in most activity, tradition and assumption are the greatest enemies of intelligent action.
We tend to let our needs and passions define our actions. What we have to do is look at the fundamental needs of our "customers" and work backward.
Manoj Bhargava is founder of Billions in Change and Stage 2 Innovations. He also founded Living Essentials, the company behind 5-Hour Energy. He has promised to provide 99 percent of his wealth to groups serving the common good.