At Inside Philanthropy, we often point out that many of the nation’s wealthiest individuals and institutions give away just a tiny fraction of their vast wealth. We’ve looked at some of the structural factors that make it easier to hold onto fortunes; for example, the growing predominance of donor-advised funds, which, though they offer ease-of-use benefits for donors compared with private foundations, also severely limit transparency and oversight. We’ve also been tracking efforts by organizations like the Crisis Charitable Commitment, the Excessive Wealth Disorder Institute and Donor Revolt that are putting pressure on philanthropies and philanthropists to part with more of their dollars, and backing government efforts to enact tax reform measures to increase philanthropic payout.
All of this prompts the question: When they have so much, why don’t those with means give more? The reasons are obviously complex and multifactorial. As a society, we tend to both valorize and villainize the very wealthy, alternatively marveling at their ornate lifestyles and condemning their excesses. In the same way, when it comes to philanthropy, there is a tendency to portray wealthy people as caricatures.
On one end of the spectrum, there’s MacKenzie Scott, who is giving her money away as quickly as possible — no strings attached — to an array of social justice causes. And then there is Elon Musk, who’s sitting atop almost $250 billion (the richest person on the planet, according to Forbes). Despite his mind-bending wealth, Musk is better known for his extravagant space ambitions, labor union disputes and online squabbles than for his philanthropy.
But very wealthy people are complicated, like the rest of us, and so are their reasons for giving — or not. Alex Johnston, the founder and president of Building Impact Partners, has been a philanthropy advisor for over a decade, and he’s observed the discrepancy between how much ultra-wealthy people have and how much they give away.
In a recent book, “Money with Meaning: How to Create Joy and Impact through Philanthropy,” Johnston explored why, despite the many challenges facing the world today, “Many well-intentioned, thoughtful people with lots of resources and a genuine intention to give back are not gearing up their giving in line with their own goals and the world’s needs. It’s no exaggeration to say there are hundreds of billions of dollars sitting on the sidelines in a world that is literally on fire.”
Why aren’t they gearing up their giving, despite the urgency? We talked to Johnston to get his take.
Billions on the sidelines
Many of Johnston’s colleagues are asking the same questions. “A lot of us in the philanthropy advising field are sensing that there’s something not coming together in terms of the giving of ultra-high-net-worth individuals who have an aspiration to be philanthropic,” he said. “We’re not seeing as much follow-through on that aspiration as it seems like there should be.”
Johnston unspooled some numbers to illustrate this, citing data from Wealth-X demonstrating that the concentration of wealth has become even more pronounced since the pandemic. In 2020, according to Wealth-X figures, about 101,000 people in the U.S. qualified as ultra-high net worth, meaning they have $30 million or more in assets; their combined wealth totaled $11 trillion. In terms of their philanthropy, Wealth-X found that only 0.75% of that $11 trillion was given away that year.
According to more recent data, there are now 130,000 people who have $30 million or more, meaning nearly 30,000 more people now qualify as ultra-high net worth. “Their total wealth rose to $15 trillion,” Johnston said. “But the giving actually went down a half–billion dollars, so now, it’s only half of 1%. Even when you take into account resources that aren’t liquid, many ultra-wealthy people could double or triple how much they’re giving away and not even really cut into their capital.”
Why they don’t give
Johnston laid out a number of factors that can create barriers to giving, even for those with extraordinary resources. One is the philanthrosphere’s intense focus on impact. “The celebration of impact above everything else leads people to believe that’s the only legitimate thing to focus on in their giving,” Johnston said. “On one level, of course, the whole point of philanthropy is that we’re supposed to be making the world a better place. But if donors don’t also pay attention to a broader set of human interests and relationships in the way they give, then giving can become a chore. On the flip side, we’re seeing that many of the donors who are really leaning in to gear up their giving are not only focused on channeling their resources to achieve significant impact — they are also finding ways to do so that align with their own sense of personal fulfillment and even joy.”
Giving can feel like a very public act, Johnston said, and — if a project blows up — a high-profile failure. There are a number of examples of large philanthropic commitments that wound up with disappointing results — and some very bad press. Three big examples from the world of education philanthropy, for example, include Mark Zuckerberg’s $100 million investment in Newark charter schools, which had decidedly mixed results, as did the Gates Foundation’s investment in the Intensive Partnerships for Effective Teaching initiative. More recently, Dalio Philanthropies initiated a public/private partnership to boost equity in Connecticut schools that fizzled when partners couldn’t agree on terms.
Examples like these serve as a deterrent to potential donors in many cases. “People don’t want to stick their heads up, and as a result, they just defer it because they don’t have the time, energy and emotional bandwidth to lean into that,” Johnston said. “That’s one reason I think that money sits on the sidelines.”
Another factor may be simple unfamiliarity. A lot of ultra-wealthy people have worked their whole lives to build their businesses, and don’t move in circles that put them in contact with social causes. In fact, three-quarters of ultra-high-net-worth individuals made their fortunes in their own lifetimes, according to Wealth-X data. “Many of them are entrepreneurs, they’ve been hugely focused on building something, and so when they begin turning their attention to giving more, they don’t automatically have proximity or connection to social entrepreneurs,” Johnston said. “And when that personal connection piece is not there, they can be wary of just going out and having a lot of exploratory conversations because they don’t want to incur social obligations or feel like they have to give to stuff they don’t really care about. And so many just keep their heads down despite their own intentions to start giving more.”
In addition, even wealthy people may feel overshadowed by the giving of mega billionaires, who actually make up only a small fraction of the 1%. Of the 130,000 ultra-wealthy people in the U.S., 99% aren’t billionaires, Johnston pointed out, even though it is that small group that tends to make headlines — for both their excesses and their giving — and who people tend to think of when they conjure images of the wealthy.
“I think, ironically, all the attention that billionaires get for their giving may create the impression on the part of people with tens and hundreds of millions that they can’t even play,” Johnston said. “And I do think that the industry is set up to channel people’s attention to these big signature initiatives, but it’s such a tiny fraction of ultra-high-net-worth people who can give a billion dollars to something.”
In fact, in many cases, funders with smaller assets help jump-start worthy projects and enable them to grow to the point that they draw the attention of larger funders. In just one recent example, smaller commitments to the San Francisco Literacy Coalition from the Hellman and Stocker foundations brought the initiative to the attention of Michael Moritz and Harriet Heyman’s Crankstart Foundation, which is now backing the effort with a $3 million investment.
Finally, Johnston said that for many wealthy people, purely practical issues are also a deterrent to giving: They don’t have the staff or infrastructure. “Historically, our industry for philanthropy advising has been really geared around the billionaires,” he said. “But 99% of ultra-wealthy people are not billionaires and collectively, they control over three-quarters of that $15 trillion in wealth. There’s an extraordinary opportunity to help that group of people. This is where the growing number of boutique firms and solopreneurs in the advising field can really make a big difference.”
Shame and taxes
Johnston has little faith in current efforts to persuade the very wealthy to give more. He argues the two primary ways we’ve addressed wealth inequality as a society — shaming people and working to revise taxes and regulations — have been ineffective to date. “Folks have been running the shaming strategy for years now, and the statistics I shared with you earlier indicate it’s not working,” he said.
As for changing taxes and regulations to make sure the wealthy contribute more, Johnston is skeptical that we’ll see real reform anytime soon, given the makeup of the current Congress. “We have bills tied up in Congress around minimum distribution requirements from DAFs, for example,” he said. “And when it comes to changing the tax code to address these issues, despite many politicians talking about it, I don’t see real movement on that in the next five to 10 years.”
In the meantime, Johnston thinks there is a lot more that can be done to loosen up some of the money sitting on the sidelines. “As a field, we need to open up more creative space around the ‘how’ in giving, not just the ‘what,’” he said. “We need to better understand what it is that makes giving a fulfilling and rewarding and positive thing in peoples’ lives instead of a duty or chore. Otherwise, it ends up being something they put off, like a kitchen renovation project they plan to get to someday. They’re like, ‘yeah, I should do this. But I got a lot of other stuff going on.’”
Johnston is encouraged by some recent efforts to increase the flow of funds to address urgent issues. As an example, he pointed to Climate Lead (formerly the Climate Leadership Initiative). Climate Lead is funded by philanthropies including Ballmer Group, Hewlett Foundation, MacArthur Foundation, David & Lucile Packard Foundation, Sea Change Foundation and others; it provides free advising services to potential climate donors. “I continue to believe that one of the savviest investments existing donors can make is to help build infrastructure to engage new donors around gearing up their giving,” Johnston said.
