On Friday, Renata Rafferty wrote a guest post that resonated with a number of readers. In the post she suggests that the focus on “foundations and social venture/social entrepreneurship leaders” is misplaced and worried that “Those of “us” on the “cutting edge” of philanthropy” may be too busy navel gazing to realize that the majority of philanthropy is being practiced by “dinosaur philanthropists”; Renata’s affection term for the vast majority of donors who attend charity galas and engage in community giving without tracking the day to day issues discussed by the “cutting edge".
Renata’s post rocked. She nails one of the core elements that form my view of philanthropy. Namely, that we are in the midst of a Second Great Wave of Philanthropy in which the lead role is played by the individual donors whose giving currently makes up 82% of all charitable donations (with foundations making up 13% and corporate philanthropy making up 5%).
At this point, the vast majority of individual donations are made without regard to any sense of impact, without knowledge of how effective the recipient is, without any strategic goals in mind. The point of my post Why Philanthropy Wins in a Web 2.0 Culture, was that having influence (or controlling “social capital”) is becoming more important than controlling financial capital in the field of philanthropy. That’s because, unlike in the for-profit space where only returns on your financial capital benefit you, in philanthropy the returns on all invested philanthropic capital accrues to the public at large. That means that if you can utilize your social capital to influence how money flows in the sector, you can have a larger impact than you ever could investing your own philanthropic capital.
The large foundations are natural “thought leaders” and should be able to take the lead in influence. But only if they recognize the power of sharing information (as a way to achieve impact). The rise of social media tools means that you do not need a large amount of financial capital to leverage your social capital. The costs of sharing information (which is a highly effective way to influence decisions) has dropped dramatically due to social media tools.
What Renata’s post misses, in my mind, is that focusing on social media/large foundations/cutting edge philanthropy is not to ignore the vast legions of individual donors. There is no such thing as “old” and “new” philanthropy. It is all real dollars being put to the purpose of good. The real clout, the real money is with the individual donors. But the leaders of this field, the ones who help influence the way philanthropy is practiced, will be those who understand that sharing information has entirely different ramifications in philanthropy than it does in the for-profit field. Understanding those ramifications is the key to understanding the Second Great Wave of Philanthropy.