The second wave of giving will roll on

Original Source

By Sean Stannard-Stockton

Between the dismal economy, crashing financial markets and the Madoff scandal it would be natural to assume that philanthropy was out for the count. But while these difficulties might take the wind out of the sector’s sails for a while, we are in the midst of a second great wave of philanthropy.

Even though baby boomers have seen their retirement accounts take a dive, they have spent the past 30 years accumulating wealth and are now entering the part of their lives where they spend and give away their assets. At the same time, Generation Y, who spent their high school years volunteering to beef up their college applications, now find they love being engaged in social action and have continued to volunteer in record numbers.

Add to this potent mixture of financial and human capital web-based technology, which empowers everything from micro-loans to entrepreneurial women in India, record-shattering fundraising campaigns together with a thriving online conversation about philanthropy and social innovation.

While the current economic situation is unique in many ways, it is still useful to see what happened to philanthropy when the dotcom bubble burst in 2000. Even in the face of the Nasdaq falling 78 per cent from 2000 to 2002, charitable giving rose 11 per cent from $211bn to $234bn. But while philanthropy was resilient in dollar terms, its public prominence and cultural importance took a beating.

In July 2000, Time magazine, which has a reputation for putting hot trends on its cover just as the trend peaks, ran the cover story “The New Philanthropists: They’re Hands On. They Want Results”. But in 2001 and 2002, the reputation of “new philanthropists”, especially the “venture philanthropists” who were getting so much press in the late 1990s, was diminished as public interest in philanthropy faded.

However, that fading interest proved to be a cyclical phenomenon, not a dying trend. Today, Social Venture Partners, the leading association of venture philanthropists, counts more than 2,000 members in 25 chapters – up from fewer than 700 members in 11 chapters in 2000. I am certain that we will see a similar dip and rebound in the years ahead.

The fact is that the philanthropy trend is real. It is driven by the dual impact of retiring baby boomers and a socially engaged Generation Y. It is the result of the amazing wealth creation of the past 25 years and the emergence of innovation as the engine of the American economy. Just as technology is resulting in a globalised world economy, it is also allowing the community about which donors care to expand dramatically.

While charitable giving may well dip as we slog through the worst recession in decades, it will rebound when the economy recovers. The amount of money given to charity online jumped 23 per cent in December. Online social impact groups such as GlobalGiving.org, Facebook Causes, DonorsChoose.org and Change.org are growing quickly by tapping into a hunger in Americans to make a difference and create change.

In 2006, Bill Gates announced he would be leaving Microsoft to work at his foundation full-time. A few months later, Warren Buffett announced that he was abandoning his long-held plans to give away his money at his death and instead give 85 per cent of it to the Bill & Melinda Gates Foundation, as well as joining the Gateses as a trustee of the foundation.

While much of the media coverage of these announcements focused on the enormous sums of money involved, something far more important had happened. A 50-year-old corporate superstar, the richest person in the world, decided that spending his time on philanthropy was more important than running the corporation he founded.

At the same time, the world’s second richest person rejected the historical tradition of making his largest charitable contribution at his death and instead embraced the emerging trend of “giving while living”. These decisions model a new set of behaviour that defines success in America.

We are in a tough economy. The net worth of Americans has taken a tremendous hit from falling financial markets and home prices. But like all things, this too will pass. Philanthropy will survive this downturn and re-emerge stronger, more robust and more innovative in the years ahead.

The second great wave of philanthropy is alive and well.

The writer is a principal and director of tactical philanthropy at Ensemble Capital Management and author of the blog TacticalPhilanthropy.com.

Copyright The Financial Times Limited 2009