Has the Philanthropic Boom Gone Bust, or Should We Be Bullish?

By H. PETER KAROFF

In the last couple of months, I’ve lost count of how many people have asked, “So, is it all over? Has a new golden age of philanthropy dissipated along with the fabulous wealth of the Nasdaq high rollers?”

We know, of course, that the Dow Jones industrial average and the Nasdaq are far below their historic peaks. But we also know that the amount of wealth in our society is still hugely greater than it was a decade ago, and far greater than has ever been seen at any time in any society. We also know that despite the rhetoric about all the “new money,” most of the wealth in our society is not new, but has been accumulated over many years through what in most cases is a lifetime of earning, saving, and investing.

Still, there has been tremendous hype, almost a kind of salivating, within the field of philanthropy about all the potential to increase charitable giving. The buzz and excitement about “new money,” and about the phenomenal projected rise in giving, have been the philanthropic analogue to the hype and overvaluation in the stock market.

Despite the anticipation, however, an explosion in giving has not yet happened. While the numbers have begun to increase, the imagined potential has not yet been realized.

In other words, we got carried away, and perhaps in the process ignored some of the basic lessons that influence generosity.

The first lesson is that philanthropy is fundamentally an articulation of values. The second is that people give to people and organizations they trust. The third is that generosity is most stimulated by passion about an issue, a movement, or an idea. The fourth is that people are more generous when they are truly engaged, and when they understand the results of their gifts.

These factors are much more important than the state of the economy, the amount of wealth in the society, or the relative value of one’s portfolio.

The billionaire who doesn’t care is of less interest than the people with a fraction of that wealth who are committed to things about which they care deeply. On the other hand, if a nonprofit organization does not measure up to high levels of quality and substance, all the money in the world that is on paper will stay on paper.

Will the economic downturn and the drop in the market influence giving? Yes, but only marginally, and only if we allow it to. The caveat, of course, is how serious and long the drop is.

For the very-high net-worth donor, a major drop in the market does not affect giving decisions. The vast majority of those donors are still working up to their philanthropic potential, and have not even come close to achieving it. Some foundations may give less because the market value of their portfolios is less. More and more foundations, however, are distributing more than the federally required 5 percent of assets each year and can easily maintain their current giving levels.

For most donors, large and small, giving will be influenced far less by a drop in their portfolios than by compelling and well-executed ideas and programs and by organizations that are effectively tackling critical issues facing society. Donors also will be influenced by mentors, or what we call donor-leaders, who, through their example and enthusiasm, show the way.

If the mood in American society a decade ago was one of a yearning for something more out of life, something that connected people with their neighbors and their communities, and spurred them to embrace constructive values, that is still true in 2001.

In fact, I believe that such sentiments are even more commonly held today than a decade ago. This is the place where the individual, society, and philanthropy writ large come together. It has a “market value” of its own — one that remains bullish.

H. Peter Karoff is chairman of the Philanthropic Initiative, a Boston nonprofit group that counsels individual, family, and corporate donors.