Robin Hood also has a brand, prestige and a social network. “They are a recipient of so many big bets -- there are so many finance people sending them checks of $10 million plus -- because of their approach but also in part because their peers are doing it,” he said.
Home Run
The decision to back an organization is also a bet on a leader, Addy said. Stan Druckenmiller found that in Geoffrey Canada, who started Harlem Children’s Zone to alleviate poverty, according to the report. Druckenmiller has stuck with him and Harlem Children’s Zone for many years to see boarded-up vacant co-ops become homes for families who send their children to college for the first time. Druckenmiller has called the progress a “massive home-run.”
What’s holding donors back from such activism? The paper notes that traditional modes of philanthropy have sophisticated machines behind them that put easy-to-grasp price tags on gifts that generate results: a physical building in the donor’s name, for instance.
Donors to hospitals and universities have years of personal experiences with these institutions, building trust -- which helps when writing a check for tens of millions of dollars, according to the report.
Waiting Years
Projects involving social change usually lack all of the above. There’s often no track record, and donors may have to wait years to see if the investment pans out, the report’s authors wrote.
The paper, published in the Stanford Social Innovation Review, defined social change donations as gifts to human services, the environment, and international development. The analysis of how money was spent excluded the gifts Warren Buffett and Bill and Melinda Gates made to the Bill and Melinda Gates Foundation because of its large size and “its slant to both big bets and social-change causes” that would have distorted the trends in the dataset.
Closing the “aspiration gap” between what donors want to achieve and how they spend will lead to billions of more dollars flowing to the world’s most challenging problems, the authors said.
“There are tons of forces pulling your money,” Addy said. “You have to be that force and rebalance your portfolio if you want to make sure it’s oriented toward your aspirations.”