Entrepreneurial philanthropy for all

Why are Americans so much better at giving money away than Brits? Britons don’t give as much as they could, while approaches to giving are too hands-off. In challenging inequality, we need to get better at proper, plugged-in, engaged philanthropy – entrepreneurial philanthropy.

Aristotle once said: “To give away money is an easy matter and in any man’s power. But to decide to whom to give it, and how much, and when, and for what purpose and how, is neither in every man’s power nor an easy matter.” I would only add: “Don’t let that stop you, though”.

At the end of 2019, the Sutton Trust did some research into public perceptions of philanthropy in Britain, and perhaps the most striking outcome was that four out of 10 British people don’t know the meaning of the word. Literally. Press them on what philanthropy means, and a disappointingly large portion of Brits would probably hazard a guess that it’s got something to do with stamp collecting. Perhaps that’s why Britain doesn’t do as much philanthropic giving as it could and, in my opinion, should do. The country is certainly a long way behind America in this regard.

Of course, there’s a simpler word: charity. Probably everybody knows what charity is. But, for all their similarities, charity and philanthropy are not the same thing. In fact, they represent radically different approaches to giving away money.

Among the wealthy, charity might be, for instance, something that happens at black-tie fund-raising evenings. I’ve been to a few of those, in particular while I was living in New York. You will normally be invited along to some giant chandelier-hung hotel ballroom, or possibly a cavernous conference centre somewhere on the West Side. There will probably be an envelope on the table for you to stuff with money. You will be served three courses, at least one of which will feature chicken. And there will generally be a charity auction where you’ll be treated to the sight of Wall Street types bidding against each other for gold-leaf spa treatments in Bali, or the use of someone’s private jet. And there will be lots of glossy people there who want to be seen and who especially want to be seen being charitable.

But anyway, my point is that there’s an important distinction between charity and philanthropy – and, by extension, a big difference between thinking charitably and thinking philanthropically. We could express it like this: charity writes a cheque and walks away – job done. Philanthropy writes a cheque and then applies itself to managing the way the cheque gets spent – job just beginning. And it’s philanthropy that I think we should be doing much more of in Britain.

Why are Americans so much better at giving money away – both charitably and philanthropically – than Brits? Why do high net worth individuals there donate so much more, and so much more readily, than their British counterparts? No doubt there are all sorts of cultural reasons, and national characteristics at play, including a certain kind of British squeamishness around the subject of personal wealth. In some ways, ‘don’t flaunt it’ is an unhelpful strain in the British character. What’s the best way to get rid of a Brit? Ask him for some money. He’ll be so embarrassed it will likely be the last conversation you ever have with him.

Americans are less troubled about asking for money, and about being asked for it. I learned this truth very graphically when my kids were small and at a tiny school in Florida. One term we got a letter about the school’s annual fund-raising drive. Contributions were being solicited. It was a wealthy community, so the school would have been mad not to ask. I wrote a cheque for $1,000, which I felt was on the generous side, but without being embarrassingly showy, and I sent it over. Duty met.

Two days later, my phone rang. It was the school’s Development Director. The first thing to note is that the school had such a thing as a Development Director. I’m fairly sure I’ve never come across a kindergarten in the UK that had its own Development Director. Anyway, I assumed the Development Director was calling to thank me for gifting the school so generously, and I waited for him to start singing his hymn of gratitude.

On the contrary.

“Look, you live in a nice house on the water”, said the Development Director, who was an alumnus. “A thousand dollars isn’t really so much for you”.

My instinctive reaction to this was outrage. The cheek of it. I’d sent him $1,000, for god’s sake. And now he was coming after me for more?

At the same time, though, I had to concede, the guy had a point. I listened to his pitch a little longer. Eventually I was talked into funding a scholarship and ended up giving well over $100,000.

It clearly works.

“We need to get better at asking for donations. And we need to get better at being asked.”

It doesn’t really surprise me, then, that the level of giving as a percentage of gross domestic product is three times as much in the US as it is in the UK. The staggering fact is, if Brits gave at American levels, we would generate an additional £45 billion each year to spend on good causes. Brits have a lot to learn. We need to get better at asking for donations. And we need to get better at being asked.

Beyond that, we need to get better at philanthropy, in the sense of proper, plugged-in, engaged philanthropy – entrepreneurial philanthropy. By which I mean the kind of organised endeavour which doesn’t simply attempt to alleviate the symptoms of a problem by charitably lobbing some money that way, but which does something more long-term and closely-managed to tackle the causes of that problem. This is something that successful entrepreneurs are well-placed to do. You could even say it’s something they should feel obliged to do.

It seems to have been understood, in the late nineteenth and early twentieth century in America, in the time of Andrew Carnegie and John D Rockefeller, that if you were a pioneer in business then you would automatically be a pioneer in philanthropy. Carnegie (who was Scottish by birth) wrote about philanthropy as a duty: the wealthy entrepreneur, in his opinion, was merely a ‘trustee’ of the fortune he had accumulated, and the rich were honour-bound to perform the task of “returning surplus wealth to the mass of their fellows”.  The man who single-mindedly built the vastest steel empire the world had ever known spent the last 20 years of his life employing the same driven talents in the construction of a massive network of philanthropic enterprises.

Similarly, Rockefeller, who was 97 when he died, used the 40 years for which he was technically in retirement to turn the shrewd mind of an oil magnate to the business of carefully targeted philanthropy. In the hands of the likes of Rockefeller and Carnegie, philanthropy wasn’t a soft side-line to their business: philanthropy was their business.

“We still see far too many examples of ‘ineffective philanthropy’ – hands-off, under-managed philanthropy, the kind of philanthropy where the donor’s involvement begins and ends with the gifting of a sum of money.”

Somewhere in the intervening years that fundamental connection between business and philanthropy got lost – to the point, indeed, where Professor Michael E. Porter of the Harvard Business School was very recently in a position to point out: “Billions are wasted on ineffective philanthropy. Philanthropy is decades behind business in applying rigorous thinking to the use of money”.

There are shining exceptions, of course. Bill Gates, with the Bill & Melinda Gates Foundation, is a role model not just for the range and extent of his philanthropic giving (approaching $40 billion), but for the depth to which he involves himself personally, at an organisational level, in what that money acquires and does. The same is true of Michael Bloomberg, with his entrepreneurial role in Bloomberg Philanthropies – someone I am proud to count as a friend and a partner of the Sutton Trust.

Yet we still see far too many examples of ‘ineffective philanthropy’ – hands-off, under-managed philanthropy, the kind of philanthropy where the donor’s involvement begins and ends with the gifting of a sum of money. That mindset needs to change, and I think we’ve been changing it in our work at the Sutton Trust.

So many charitable concerns nowadays don’t properly quantify what they do. They’re spending money in a charitable cause and that seems to be regarded as enough in itself. Because it’s philanthropy, and philanthropy is inherently a good thing, the rules that would inform the spending of money in other areas of business aren’t felt to apply in quite the same way. But, like any other company, a philanthropic organisation needs to be accountable.

We’ve always been very hot on this and it has informed the way we have done philanthropy from the beginning. With the Sutton Trust, the education and social mobility charity that I founded, I didn’t just pump in money from a distance. I made it my business to understand what was going on, to stay on top of it, to manage the spending strategy in association with a set of formidable and equally engaged board members, trustees and donors who share the Trust’s vision, and to make sure that our money was working as hard as it possibly could. You only have a finite amount of money, after all. You want to make the most of it. And to do that, I stayed engaged as Executive Chairman and re-applied the strategies I had learned as a business entrepreneur.

“We need more entrepreneurs to come to philanthropy and to bring their business heads with them.”

Very often charity suffers from a kind of benign inertia. It’s easy, in the non-profit sector, for the foot to come off the gas, and for people to relax a bit because after all, we’re being good, aren’t we? We’re doing ‘good things,’ so why be brassy or sharp-elbowed about it? Constant pushiness could almost be thought to be inappropriate in this sphere. Yet that loss of internal pressure can be catastrophic for philanthropic organisations.

Inertia, benign or otherwise, is the enemy of good business. Suddenly you’ve got slack in the system and money and time are getting wasted. These are things you wouldn’t tolerate if you were running a company; you would move in to tighten that slack at source. So why be any different in a philanthropic organisation, where arguably every pound is more precious?

In the UK, we need more entrepreneurs to come to philanthropy and to bring their business heads with them. I think there are four simple ways in which they could be encouraged to do so.

First, the government could simplify the tax treatment of donations, abandoning the labyrinthine complexities of Gift Aid and gravitating towards the American way, where philanthropic giving is treated as a straight deduction from income. It’s a clear system and the donor gets all the tax benefit. It actively incentivises donations, which is the point.

Secondly, the government should promote far more matched funding schemes. The Education Endowment Foundation, which I chair, is a good example of this: an organisation seeded by £125m of government money, some of which is then matched through fund-raising. Such schemes represent good value for the tax-payer and are attractive to co-funders who are looking for maximum leverage on their donations. Matched funding is also a good way for the government to point philanthropic giving in the direction of the most important issues; functioning not as a replacement for government funding, rather as a complement to it.

Thirdly, we should instil a greater recognition and celebration of philanthropy. It’s peer pressure, clearly, that causes high net worth Americans to give more philanthropically than their British counterparts – and to start their giving at a younger age. By contrast very little prominence is given to the importance of philanthropy in the UK and generosity frequently goes unremarked and uncelebrated here. You will know the British line: “He does a lot for charity, but he doesn’t like to talk about it.” Well, maybe it would be a good idea if we did like to talk about it. Which is a reason why I welcome the leadership shown by Andrew Law and his foundation in stimulating this debate.

And fourthly, and most importantly, we should work to broaden the definition of philanthropy – not just so that people can no longer confuse it with stamp collecting. We need to be clear about the ways that philanthropy is distinct from charity – that philanthropy is entrepreneurial by default. We need to understand, too, how philanthropy can be the giving of anything: not just money, but experience, skills, time – things that any of us may have accrued in the course of our lives, and not simply wealth.

In that sense, entrepreneurial philanthropy ceases to be the preserve of the rich. On the contrary, entrepreneurial philanthropy can become the business of practically every one of us. What are you rich in? What do you have a lot of that can you afford to give away, or give back? And, most importantly, what’s the best use that you can make of what you have to give? Such activities as working at food banks or for the Good Samaritans come to mind. How can you maximally leverage that particular skill of yours, that experience that you have gained in your work or your life, that time that you have free on a weekend or in the evening? When you think about it that way, you’re engaged in entrepreneurial philanthropy.

And there’s no cause too small, either. Every time I help some kids, I can guarantee that somebody somewhere will say to me: “Why aren’t you helping all the kids?” Well, great idea. Tough one to pull off, though. Yet, just because you can’t change everything, it doesn’t mean you shouldn’t try and change something – the one small thing, maybe, that it lies in your power to change. Life is unfair, and life is always going to be unfair. All we can do – indeed, the best we can do – is try and make it less so.