One of the joys of writing a blog is that every day you write what you hope is a coherent passage about your point of view and then submit it to the whole world for their review and feedback. Given the nature of blogging, these passages are first draft material, but that doesn’t stop anyone from calling you a communist.
Albert Ruesga recently wrote up a critique of my argument that we are witnessing “the emergence of small, widely disbursed donors who co-create the social sector.” He makes the very valid point that innovation is important, but sheer scale can’t be ignored. He’s absolutely right. As someone trained in the workings of financial markets, I tend to think in terms of what is happening on the margins. I don’t think that big foundations will be supplanted in terms of assets controlled by a collective of small pools of assets. I do think that the current wave of philanthropy will be characterized by an explosion of activity among smaller donors. When we look back at the First Great Wave, we tell the story of Rockefeller and Carnegie. When we look back on the Second Great Wave, Gates and Buffett will be chapters, but the real story will be about the smaller donor.
In the chapter I wrote in the book Mapping the New World of American Philanthropy, I point to statistics showing that private foundations with less than $1 million in assets make up 64% of all foundations, but control only 2% of total foundation assets. Yet much of the recent growth in private foundations has occurred at this smaller asset size. The changes in the private foundation administration market place will only further drive this trend. Donor advised funds add fuel to the fire.
Will small donors collectively control more philanthropic wealth than big foundations? No. Will the Second Great Wave of Philanthropy be characterized by the explosive involvement in philanthropy by small donors, newly empowered by technological innovations and a massive cultural shift? Yes.