Tech Entrepreneurs Influence the Rapidly Changing World of Philanthropy
Philanthropy – What Does It Look Like Today?
Philanthropy, the large donation of money, time, and talent to good causes, has changed significantly over recent years. The pandemic, the growing technology industry, globalisation, and the widening income gap have all recently impacted how philanthropy is implemented.
Until very recently, philanthropy has often conjured up images of large donations given by extremely wealthy individuals. However, the concept of philanthropy encompasses different types and sizes of giving and does not necessarily only relate to extremely large donations in the millions of USD. Nor is philanthropy a new concept, it has in fact, a long history dating back as far as 2000BC in China with historical references in most cultures and civilisations.
Philanthropic giving is naturally at the heart of the now growing philanthropy sector. Today the philanthropy sector is worth an estimated 2.3 trillion USD, just under 3% of the world’s total GDP (Citibank, 2021). The sector growth to this level is also comparatively new, with 72% of foundations established in the last 25 years (UBS, 2022) and it is still growing. India’s philanthropic sector increased 23% between 2019 and 2020 (Bains & Co, 2021). The USA saw an increase in philanthropic financial giving of 5.1% over the same period (Barrons, 2020). Financial philanthropy has also increased in China over time in tandem with the growing number of wealthy individuals (IMD, 2019).
Furthermore, most of the sector’s financial giving does still come from individuals rather than foundations or corporations, accounting for 67% of the sector (Citibank, 2021). The financial giving base that makes up most of philanthropies’ sector’s finance is therefore incredibly small. It is restricted usually to advanced economies and to individuals who are generally very affluent (Citibank, 2021).
Tech Entrepreneurs – The Philanthropic Investors
8 of the top 10 richest individuals come from the tech industry (Inside Philanthropy). Given the proportion of wealthy individuals contributing financially to the philanthropy sector, it is perhaps unsurprising that the tech industry’s ethos is becoming a greater influence.
Tech entrepreneurs bring with them a risk-tolerant, evidence-based mindset. Their aim, similar to their business approach, is to uncover how to make every dollar work for them. This value of ‘active investment’ is what sets them apart from the traditional ‘gifting’ approach, which doesn’t tend to emphasise making donations as profitable as possible. Profit here is of course not the financial return tech entrepreneurs aim to receive in their respective business ventures. Instead, it is defined as the most social impact possible per investment.
How the Tech Mindset is Influencing Philanthropy
The tech industry places a heavy emphasis on making decisions based on solid data. It is partly this focus on data-driven decision-making that has enabled tech entrepreneurs to make their assets as effective as possible. These values carry through to their philanthropic ventures. As such tech philanthropists are usually keen to see quantifiable and measured results from the charities they support in order to become ‘effective altruists’.
Organisations that can provide this kind of data often do well from tech philanthropy. The Malaria Consortium, which aims to prevent malaria in Africa and Asia has received consistent financial support over the last few years. This has enabled the organisation to have the stability needed to ensure it can consistently deliver drugs and mosquito nets as well as develop policy change initiatives.
Tech philanthropists are less likely to focus on maintaining their wealth and more interested in activating the assets they have. As such, risk-taking is embraced, rather than avoided, as long as this is based on evidence. This means that tech philanthropists are happier to invest in new organisations or initiatives that are yet to be well-established if they believe these organisations can deliver a high impact for their investment.
It is worth noting that the data-driven approach has been recently criticised for ignoring an organisations experience-based knowledge built from years of working ‘on the ground’. In response, another approach has been developed called ‘Trust-based philanthropy’ which aims to give full control of funds to the recipient organisations, recognising and trusting the decisions built from experience.
Trust-Based Philanthropy and What Does This Mean for Philanthropy
Trust-based philanthropy aims to address the potential power imbalances that may occur between large philanthropic donations and the donor organisation. With a focus on humility and mutuality, trust-based philanthropy seeks to create partnerships between the donor and recipient organisation collaborative and effective. Here each actor brings with them their unique skillset and insight. But the decision-making is ultimately led by the felt needs of an organisations projects, rather staying within the realm of pure data
The landscape within Philanthropy is developing and changing fast. No doubt tech entrepreneurs are positively influencing this with their data-driven, wealth-activating approach. What must remain present throughout these changes is the recognition that partnership between different knowledge and decision-making styles has to be equitable to be effective. Trust-based philanthropy aims to construct this into the culture within the Philanthropy sector.
Beasley,S an Cheney, C,. (24th January 2022) Tech entrepreneurs bring new approaches, challenges to philanthropy https://www.devex.com/news/tech-entrepreneurs-bring-new-approaches-challenges-to-philanthropy-102174
Philanthropy Roundtable,. (2022) How giving in America is changing under the growing influence of tech donors, https://www.philanthropyroundtable.org/magazine/the-calculating-philanthropy-of-silicon-valley/
OECD (2022) Private Philanthropy for Development – Second Edition : Data for Action https://www.oecd-ilibrary.org/sites/cdf37f1e-en/index.html?itemId=/content/publication/cdf37f1e-en
Bains & Co, (15th March 2021) India Philanthropy Report 2021 https://www.bain.com/insights/india-philanthropy-report-2021/
UBS,. (2022) Shaping Philanthropy https://www.ubs.com/global/en/ubs-society/philanthropy/experiences/philanthropy-reports/shaping-philanthropy.html
CitiBank,. (November 2021) Philanthropy and the global economy https://www.privatebank.citibank.com/newcpb-media/media/documents/insights/Philanthropy-and-global-economy.pdf
Block, F and Schultz, A,. (2021) Charitable Giving in the U.S. Rose 5.1% to a Record US$471.44 Billion in 2020 https://www.barrons.com/articles/charitable-giving-in-the-u-s-rises-5-1-to-a-record-us-471-44-billion-in-2020-01623797511