The Rise of a Philanthropic Culture

Tim Walter is the CEO of the Association of Small Foundations and a guest contributor at Philanthromedia. Today he wrote:

According to onPhilanthropy’s Tom Watson who blogged live from the fourth annual Skoll World Forum for social entrepreneurs at Oxford:

"(Jeff) Skoll said that this "is a changing time for philanthropy," and that much of the focus these days is on bringing business practices to philanthropy. But he suggested that buzzwords like "philanthropreneurs" may miss the point: it’s not just about change in the nature of philanthropy, "but a movement from institutions to individuals." Individuals, he suggested, can move faster and take more chances."

My experience as the head of the Association of Small Foundations suggests that Jeff is correct. More than ever before, donors are acting on their capacity to effect change. The media is full of stories about individuals who get fired up by an idea of how they can help, and then simply go do it.

In two of the first posts on this blog I wrote:

Today we are in the early stages of The Second Great Wave of Philanthropy. The First Great Wave was led by a small group of ultra-wealth individuals who created enormous bureaucratic entities that supported government efforts to build such infrastructure as libraries and hospitals. The leaders of The Second Great will be you. You and your neighbors, and the family down the block. Entrepreneurs, middle managers and millions of retiring Baby Boomers will lead the Second Great Wave. Rather than supporting status quo projects, the donors of the Second Great Wave will primarily be concerned with funding entities that promise to bring new approaches to solving social problems.


Web 1.0 dropped the operating costs of traditional philanthropy, distributed information about strategies, tactics and needy causes, and facilitated transactions. Essentially, it made the philanthropic “marketplace” more efficient. These are the same types of changes we saw in the financial markets during the 80’s & 90’s. With Web 2.0, we are seeing not just a more optimized version of Philanthropy 1.0, but instead the emergence of a radically new philanthropic marketplace.

Unlike the Rockefellers, Carnegies and other early foundation founders who created entities that mirrored existing institutions, the structured philanthropic vehicles of the 21st century will create a tradition similar to the emerging Web 2.0 companies. Rather than concentrated pools of money that imitate existing institutional structures, the new philanthropists will be smaller, widely distributed agents of change who co-create the social sector that they support.

If the Second Great Wave of Philanthropy follows a course similar to the democratization of the financial markets, we will see (or are seeing) some of the following occurrences:

  • An explosion of philanthropic advisors/tools/resources to serve the growing number of individuals participating in philanthropy.
  • A rise in the number of self-directed individuals who bypass traditional institutions.
  • A huge number of stupid decisions being made by some of these individuals (see the stock market bubble and the rise of day traders).
  • A backlash from nonprofits.
  • A maturation of this next stage, where far more people are participating in philanthropy, some self-directed, some using newly created service providers, some using traditional institutions.

Throughout this process, the role of large foundations and other institutions will remain incredibly important. Note that during the heyday of day trading, large institutions still played a very important leadership role, for better or for worse. I think that Tim is right. We are in the midst of a tidal shift from institutions towards individuals. But this shift is not about a zero sum game where individuals take power from institutions. Instead, it is about a growing pie, as the role of philanthropy gains importance in our culture and participation rates soar.


  1. I agree with everything you have said here but would be interested to hear more about the backlash that you anticipate from nonprofits, and how/who that mirrors from the democratization of the financial markets.

  2. During the stock market boom, individuals began to self direct their own investments. This came back to haunt them when the bust occurred and many of them realized they had made terrible decisions. In that case, the backlash was against stock brokers (ever see Schwab’s lipstick on a pig ad?).

    As the new self directed donors, hooked on the concept of “investing” in nonprofits, grows in numbers, I would expect nonprofits to finally say enough. Most donors do NOT know more than nonprofits do about how to run their business.

    During the stock market boom, the investment were made on the investors own behalf, so they were the ones from whom the backlash came. This time the “investments” are being made in nonprofits, and they are the ones who will finally call foul.

    That being said, this is just part of a normal boom/bust cycle. The concept of social investing is a good one. But every successful business person is not going to turn out to be the best philanthropist.