Axios AM Deep Dive

Two adjacent full coffee mugs, one red and one blue.

December 05, 2020

Good afternoon and welcome to our Deep Dive into philanthropy, led by Axios' Felix Salmon.

  • In the spirit of the season, Felix this year (as every year) is giving to the Committee to Protect Journalists. Axios writers have it easy; our colleagues are under extreme threat in many countries around the world, and the CPJ is astonishingly effective at fighting on their behalf when they are targeted by governments.

Smart Brevity™ count: 1,474 words, or 5½ minutes.

1 big thing: The end of micromanagement

Illustration of a hand with scissors cutting a ribbon in the shape of a dollar sign

Illustration: Sarah Grillo/Axios

The balance of power in the philanthropic world is moving — slowly but surely — away from the people with the money and toward the people they're trying to help, Felix writes.

What they're saying: "People who have experience with inequities are the ones best equipped to design solutions," wrote MacKenzie Scott, the ex-wife of Jeff Bezos, when she announced $1.7 billion in charitable grants this summer.

Flashback: Hedge fund billionaire George Soros once famously declared, during a debate about focus areas at the Open Society Institute, that "at the end of the day, it's my money, and we're going to do it my way."

  • Similarly, Bill and Melinda Gates employ people with deep subject-matter expertise at the Gates Foundation, and exercise full control over how every one of the foundation's dollars is spent.

How it works: The golden rule ("he who has the gold, makes the rules") is beginning to be supplanted by the other Golden Rule, where the rich give unto others as those others would like to be given to.

  • The increased visibility of the racial equality movement this year has refocused attention on how privilege can act as a set of blinders.
  • One young philanthropist, Margi Dashevsky, told the N.Y. Times that “the happenstance of me being born into this wealth doesn’t mean I’m somehow omniscient about how it should be used. It actually gives me a lot of blind spots.”

The bottom line: Paternalism is giving way to humility, and the idea that n0-strings checks can be much more useful than micromanaged projects and a cycle of endless grant applications and donor reports. That's one reason for the rise in popularity of simple cash transfers.

2. The DAF generosity spike

Illustration of Benjamin Franklin and hearts wrapping paper with large bow

Illustration: Eniola Odetunde/Axios

Donor-advised funds are a bit like foundations without the management hassles or the overhead. They're available to anyone, and they've had a remarkable year, Axios' Jennifer A. Kingson reports.

How it works: DAFs let people take an immediate tax deduction by putting money into an account earmarked for future charitable donations. DAFs often take heat because people can park money there indefinitely, reaping the initial tax benefit without donating to good causes: More than $1 trillion sits in private foundations and $120 billion in donor-advised funds rather than being distributed to charities.

  • That doesn't seem to have happened in 2020, when contributions to DAFs — and, more importantly, distributions from them — both rose substantially.

What's happening: The pandemic and the movement for racial equality inspired people who had set up DAFs to add money to them and to pay out grants to related charities.

  • Contributions to National Philanthropic Trust DAFs in 2020 are up about 4% from 2019, while the amount of grants funded is up about 50%, according to Eileen Heisman, president and CEO.
  • At Vanguard Charitable, another major sponsor of DAFs, the trends are similar, with $1.3 billion in grants made by DAF holders in 2020 — about 25% higher than last year, according to Rebecca Moffett, chief strategic planning officer.

What they're saying: When the pandemic started, DAF holders started making grants "directly related to COVID and charities that they loved that they were afraid were going to go out of business," said Heisman. "And then when Black Lives Matter came out, there was a lot of focus on social justice organizations."

  • Lately, she said, she's seeing donations to groups that are struggling for survival — like arts and environmental organizations — as well as to health care-related causes.

Go deeper.

3. How COVID changed giving

Data: Classy; Chart: Naema Ahmed/Axios
Data: Classy; Chart: Naema Ahmed/Axios

4. When philanthropy is intertwined with tax evasion

Illustration of gift wrapping paper with a hundred dollar bill pattern being torn away to reveal wrapping paper with a penny pattern.

Illustration: Aïda Amer/Axios

Private equity billionaire Robert Smith — the richest Black person in America — spent 15 years evading taxes on more than $200 million of income, by parking it in secret offshore accounts, Felix reports.

  • When he was caught, he agreed to pay a fine of $140 million, thereby avoiding criminal prosecution. By that point, he'd donated all of the money to charity.

Why it matters: After Smith found out that the IRS was investigating his offshore accounts, he embarked on a high-profile series of philanthropic gestures.

How it works: According to the statement of facts in the case, signed by Smith, the billionaire found out that he was being investigated in April 2014. In December of that year, he donated all of the holdings of the offshore account to his Fund II Foundation, while "knowingly and falsely" saying that the transfer was required as part of an agreement with his first investor, Robert Brockman.

  • Smith's philanthropy picked up after that date. In 2019, for instance, he announced he would pay off the student loans of all graduating seniors in the class of 2019 at Morehouse College.

The bottom line: Thanks to his philanthropy, Smith is now considered a thought leader to be lauded during plum spots at conferences, rather than a private-equity speculator caught up in tax and politics scandals.

5. Where nonprofits get their money

Data: OECD; Chart: Naema Ahmed/Axios
Data: OECD; Chart: Naema Ahmed/Axios

Nowhere in the world do nonprofit organizations get most of their money from donations.

  • The U.S. has more of a culture of donations than most countries — but they still account for only 13% of total revenues. Government provides 31%, and fee income (payment for services rendered, at places like hospitals and universities) is larger still.

6. Biden's giving is politically moderate, too

Illustration of a partially unwrapped gift with a donkey greeting card attached

Illustration: Sarah Grillo/Axios

President-elect Biden and incoming first lady Dr. Jill Biden walk a mostly moderate line with their philanthropy, while also giving to some progressive causes, Axios' Ursula Perano writes.

The big picture: The Bidens' most frequent charitable recipients are generally local, including Westminster Presbyterian Church in Wilmington, the Catholic Diocese of Wilmington, St. Joseph on the Brandywine, and Northern Virginia Community College.

  • The Bidens have given $160,000 to Kingswood Community Center, in Delaware; $180,000 to the United Jewish Federation of Chicago; and $220,000 to the Delaware Center for Justice.
  • They also started two foundations — the Joseph Biden Foundation, to which they donated $105,000, and the Beau Biden Foundation for the Protection of Children, to which they gave $200,000.

Some progressive causes have popped up in the Bidens' giving, including:

  • Sandy Hook Promise ($5,000, 2017).
  • Human Rights Campaign ($25,000, 2017).
  • Congressional Black Caucus Foundation ($250, 2015).

Of note: 2018 and 2019 tax returns for Vice President-elect Harris and incoming second gentleman Doug Emhoff show they donated to the California State University, Northridge Foundation; the Maple Counseling Center; the University of Southern California; the Parsons School of Design and Howard University.

Go deeper.

7. Dolly Parton's string of philanthropic hits

Photo illustration of Dolly Parton wrapping paper on a gift with a notecard attached

Photo illustration: Sarah Grillo/Axios. Photos: Bruce Glikas/FilmMagic, Jason Kempin/Getty Images

Any doubt that Dolly Parton is the greatest living American was erased last month when she turned up as the only individual on the list of funders who helped support the development of Moderna's successful COVID-19 vaccine.

Why it matters: This is not the first time Parton has worked "9 to 5" on philanthropic endeavors, writes Axios' Oriana Gonzalez.

  • Parton helped reduce dropout rates from 35% to 6% for 7th- and 8th-graders in her home county of Sevier County, Tennessee, by promising to give each student $500 if they finished high school.
  • Parton launched the Imagination Library in 1995 to mail free books to children from birth until they start school. In March 2018, Imagination Library mailed its 100 millionth book.
  • She was an early adopter of cash transfers: Her My People Fund gave $1,000 per month to families who lost their homes to the wildfires in the Great Smoky Mountains in 2016.

Former President Obama regrets overlooking this generosity and said not giving Parton the Presidential Medal of Freedom was "a screwup."

  • "That's a mistake. I'm shocked," Obama told Stephen Colbert on CBS’ "The Late Show" when asked why Parton hadn't received the award. "She deserves one. I'll call Biden." (Video)

Go deeper.

8. GiveWell's data-driven approach to giving

Illustration of trophy wrapping paper with large bow

Illustration: Eniola Odetunde/Axios

GiveWell sizes up nonprofits by gauging how effective each dollar spent is at saving or improving a life, Jennifer reports.

Why it matters: Donors who crave cost-effectiveness and bang-for-the-buck gravitate to GiveWell's annual recommendation list, which this year includes nine charities that support life-saving or income-generating measures in the developing world.

Details: GiveWell's top picks are the Malaria Consortium, which gives prophylactic medicine to children in sub-Saharan Africa, and the Against Malaria Foundation, which supplies insecticidal nets to at-risk populations.

  • A $5-$7 donation to the Malaria Consortium or Against Malaria Foundation will protect a child from the disease, GiveWell says, while $3,000-$5,000 will save a life.

Other charities on GiveWell's list include Helen Keller International, which spends about $1 to give a Vitamin A supplement to a child at risk of deficiency, and GiveDirectly, which "gives cash to very poor families, mostly in Africa, to spend as they like," as GiveWell puts it.

  • The one new charity on GiveWell's list this year is New Incentives, which pays cash to caregivers in Nigeria to coax them to bring children to medical clinics for routine vaccinations.

Background: GiveWell was founded in 2007 by a pair of hedge funders who were seeking to apply the same rigorous financial analysis and performance metrics to charities as they did to the fund they were managing.

The bottom line: "Our starting point is zooming all the way back and saying, 'If we care about all human lives equally, what are the most cost-effective ways to improve people's lives?" GiveWell managing director Neil Buddy Shah tells Axios.

Go deeper.

9. 1 delicious thing: Cake critiques of philanthropy

Pictures of philanthropy books, and the cakes they look like

Via @Philliteracy/Twitter

💸🍰 We're in a golden age of books that cast a critical eye on philanthropy and philanthropists. Here's a thread of what they would look like as cakes.