Reminds me of a story I had commissioned when I was at Worth.com in early 2000. Called "Melodious Intent," it told about how a regular (and major) giver to Yale decided one year NOT to give to the school’s capital campaign. Instead, he found out that despite Yale’s riches, the music school was starving for funds and couldn’t afford to replace its leased Yamaha pianos. So this person made a gift that was earmarked just so the school could lease new pianos. That triggered someone else to give for the same purpose too. Sweet music to the school’s ears.
There’s an interesting disconnect between how investors invest and donors donate. In the investing world, investors spend a tremendous amount of time examining which companies to invest in. But once they invest, they give the money as an “unrestricted” investment. They don’t tell the for-profit, “you can only use this money to build your new office building,” or “you can only use this money in your cell phone division, not your landline division.” In philanthropy, most donors spend very little time comparing the various options for donations, but they often restrict the gifts they do give to certain specific uses. Why is this?
Bruce’s story above could be read as the story of a tactical philanthropist who directed his money to the area where it could have the most impact. I don’t read it that way. To me this is the story of a donor who effectively said, “You dummies at Yale don’t know the best way to run your organization. I know better than you that the music department needs funds more than you need to build a new building.”
Why don’t donors trust nonprofits to know the best way to allocate their capital? If they don’t trust them to make capital allocation decisions, why are they giving to these nonprofits at all?
In a world where nonprofit research was widely available, would donors cease making restricted grants? If so, does it then follow that nonprofits should be encouraging the creation of nonprofit research platforms so that they can begin to attract more unrestricted grants? And if donors are so untrusting of nonprofits that they choose to restrict grants, then might this distrust also be limiting the amount they give?