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The United States is in the midst of the largest intergenerational transfer of wealth in its history.
Economists estimate that $84 trillion will be passed down to lucky heirs over the next roughly 20 years. Very high-net-worth individuals (people who own liquid assets valued between $5 and $30 million) and ultra-high net worth individuals (those with more than $30 million) control nearly half of this wealth, though they make up just 1.5% of U.S. households, according to the firm Cerulli Associates.
The evidence suggests that most of these vast riches will remain in the family – reinforcing or exacerbating inequality at a time when global inequality is already nearing levels not seen since the Gilded Age.
The U.S. Congress has been unable to pass tax reform measures that might ensure more of these funds land in government coffers to improve our schools, strengthen our health system, or serve other public needs. This despite lobbying efforts from outspoken billionaires like Warren Buffet and Bill Gates and organizations like the nonprofit Patriotic Millionaires, whose members, alarmed by growing inequality, have called for higher taxes for the wealthy.
If the government can’t or won’t respond to this crisis, others must.
It’s Time to Shake Up Traditional Means of Giving
Driving change and equity has to start with overhauling traditional retail philanthropy that encourages donors to make modest piecemeal donations. A report on ultra-high-net-worth philanthropy found that individuals worth at least $30 million gave away an average of $590,000 in 2020. That is less than 2% of their wealth, at a time when their net worth was increasing by the same amount annually. They simply aren’t giving their money away fast enough to make a dent in their wallets or in our world’s problems.
Foundations are performing no better. A report a few years back by the Bridgespan Group, found the median grant from America’s larger foundations was just $50,000. Such small-scale and snail’s pace philanthropy isn’t going to change the trajectory of our world.
We need to build a philanthropic sector that is as revolutionary as the transformation it seeks to achieve. There are a growing number of tools available to help philanthropists give quickly, strategically, and at scale and it’s worth shining a light on them.
Innovative Methods Drive Impact
Over the last few years, we have witnessed a growing movement towards donor collaboratives that serve as a vehicle to support ultra-high net worth individuals giving at scale. Organizations like the Audacious Project, Blue Meridian, Borealis Philanthropy, Co-Impact, Echoing Green, and Tipping Point, are helping ultra-high-net-worth individuals and foundations pool their funds to achieve greater impact more quickly.
My own organization, Lever for Change, has helped drive more than $1.5 billion in donor funding since it was founded in 2019. An example of how pooled funds can magnify impact is the $12 million Larsen Lam ICONIQ Impact Award — funded by Chris Larsen, Lyna Lam, the Sea Grape Foundation, and ICONIQ Impact — which attracted another $81 million in additional funds to transform the lives of refugees and displaced people worldwide.
Another powerful tool to accelerate philanthropy at scale are curated lists of shovel-ready philanthropic opportunities that have already been vetted and represent a low-risk, high-reward opportunity for eager philanthropists. Organizations like Focusing Philanthropy, GiveWell, Giving Compass, GlobalGiving, and JustFund help connect donors and problem solvers to drive funding to outstanding opportunities.
My organization’s Bold Solutions Network, a public and inclusive network of rigorously vetted, peer-reviewed projects, each of which has been through our due-diligence process, is another example. The network includes more than 100 inspiring proposals from organizations with big ideas that are poised to achieve transformative change in more than 80 countries — from a proposal to support another five million girls in sub-Saharan Africa graduating from high school to a proposal to improve access to life-saving oxygen supplies in hospitals across low- and middle-income countries benefiting millions of patients.
There are a growing number of annual philanthropic prizes too, such as the Earthshot Prize, the Google.org Impact Challenge for Women and Girls, and the XPRIZE for Carbon Removal that serve double duty, highlighting often overlooked issues, as well as the organizations who are effectively addressing those issues, by sending lottery-sized checks to effective organizations. Rockefeller Philanthropy Advisors and my organization have collaborated on a guide on prize philanthropy to help donors who are considering launching an award to learn from best practices in our sector.
Philanthropists can also use a variety of tools and guides available to support systems change work, including resources from The Bridgespan Group, the National Center for Family Philanthropy, and FSG.
Driving a New Donor Mindset
Philanthropists, many of whom accumulated great wealth making risky bets on long shots in finance and industry, often play it safe when it comes to their philanthropy. Pushed to give away more and give it away quickly, too many philanthropists default to their known network and further inflate Harvard and Stanford’s endowments, while HBCUs and other transformative opportunities are overlooked.
We must also embed a more inclusive and equitable approach to philanthropy into efforts to achieve speed and scale without sacrificing equity. If we fail to do so, we will reinforce or exacerbate philanthropy’s little secret: that white-led nonprofits receive more funding than nonprofits led by people of color.
We can mitigate risks to help philanthropy get more funding off the sidelines more quickly, to fund more impactful, and more ambitious initiatives capable of meaningfully changing our world and tackling the big problems we’re facing. But we need more donors to join us. We can’t do this alone.
The transfer of wealth over the next two decades provides an unprecedented opportunity. While we have made some progress, we can remake philanthropy and remake our world to benefit all mankind, not just a few.