Peter Buffett (Photo credit: Wikipedia)
Peter Buffett's op-ed essay in today's New York Times takes aim at what he calls the "charitable-industrial complex," and offers a fairly tough-minded critique of a system that makes big donors feel good but leaves a vast infrastructure of inequality in place.
Buffett's post has generated a fair amount of discussion in philanthropic circles and it highlights the frustration that many in the "next generation" of major donors - Buffett is the son of investment king Warren Buffett and directs a billion-dollar foundation with his wife - tend to feel about organized philanthropy and the nonprofit sector.
Writes Buffett:
As more lives and communities are destroyed by the system that creates vast amounts of wealth for the few, the more heroic it sounds to “give back.” It’s what I would call “conscience laundering” — feeling better about accumulating more than any one person could possibly need to live on by sprinkling a little around as an act of charity.
But this just keeps the existing structure of inequality in place. The rich sleep better at night, while others get just enough to keep the pot from boiling over. Nearly every time someone feels better by doing good, on the other side of the world (or street), someone else is further locked into a system that will not allow the true flourishing of his or her nature or the opportunity to live a joyful and fulfilled life.
That idea of continued, endemic, growing and stubborn inequality is at the center of Buffett's essay and I honor him for it. It is absolutely crucial to recognize this fact in the cold light of day. There are two other aspects of Buffett's call to arms that I found striking, one quite good and one less so.
First, the area I disagree with. Buffett posits that the philanthropic sector has grown rapidly and almost wildly - he points to the rise in the number of nonprofits over the last decade, "with approximately $316 billion given away in 2012 in the United States alone and more than 9.4 million employed." And he writes: "Philanthropy has become the 'it' vehicle to level the playing field and has generated a growing number of gatherings, workshops and affinity groups."
I don't think this argument works for two reasons: for one thing, the numbers are off. While it's true that the numbers of nonprofits have grown rapidly (as have foundations), philanthropy today represents roughly two percent of GDP - and has been stagnant at that level since roughly 1970. While the hype factor may indeed be on the rise, philanthropy itself is not growing. Secondly, I think this argument presents too much of an emphasis on money wasted - or invested unwisely. Unquestionably, some charitable funds are poorly (or unethically) spent. But as a professional who works with nonprofits to raise funds and plan strategically for more impact, I can tell you with absolute certainty that too much capital is not the problem in the charitable world - even for those organizations doing really good work. It's hard to raise a buck, especially with more competition from all those new nonprofits on the scene.
But that leads me to a key aspect of Buffett's argument that I agree with - and one that perhaps stems from Buffett's creative side, as a musician and composer of some note, used to taking artistic chances to find new expressions: his call for philanthropic dollars to better represent "risk capital."
The current system allows "The rich sleep [to] better at night, while others get just enough to keep the pot from boiling over," he writes, adding that "we have a crisis in imagination." I agree - in part. There are thousands of worthy charities that don't need re-invention, don't need a new model, don't need an entirely new mindset. What they need is more capital, to serve more people, with the successful models they have. But philanthropy itself as a sector does indeed need the kind of re-thinking Peter Buffett is talking about - and it's a rethinking that can happen if the U.S. sector can break through the two percent GDP ceiling.
"With more business-minded folks getting into the act, business principles are trumpeted as an important element to add to the philanthropic sector," writes Buffett. "I now hear people ask, 'what’s the R.O.I.?' when it comes to alleviating human suffering, as if return on investment were the only measure of success."
This is exactly right, and continuing along this line will prove disastrous for the millions who depend on - for example - nonprofit social services for education, food and shelter, healthcare and more. But Buffett's crisis of imagination should mesh with his thoughtful call for more humanism. Risk capital is needed - but only in addition to the capital that saves and improves lives on a daily basis.
