Donating to Gates – against its will

With all the people and organizations out there who would like more money, there’s something remarkable about the fact that the Gates Foundation is specifically asking people NOT to give to it (PDF) – and still couldn’t keep away over $10 million in donations in 2008. Why the Gates Foundation doesn’t want your money First off, I have a lot of trouble understanding the Foundation’s stated reasoning (PDF): From time to time, people generously offer to contribute money to the foundation. We prefer that people give directly to our grantee organizations rather than to the foundation if they want to help advance the causes we’re passionate about. We have the stable funds we need to help us fulfill our mission, but our grantees often do not. It seems to me that there are a couple of problems here. • Is it desirable that the Gates Foundation’s grantees should have more “stable funds” than they do now? If so, why doesn’t the Gates Foundation give them these “stable funds” in the form of unrestricted grants? Couldn’t it, at the very least, use its “extra money” (the money that comes in as individual donations) in this way? How does it make sense for the Foundation to ask people to fund something that that they choose not to fund themselves? More broadly, how does it make sense for an organization to that exists for the sole purpose of giving away money as well as possible to be discouraging people from giving to it? • The Foundation directs people to its list of grantees – in the form of a database of (currently) over 5,000 grants. How is an individual donor to cut through this information and figure out the best fit? Speaking as someone who personally tried to do exactly this about 3 years ago, I can tell you that the information the Gates Foundation is providing is nowhere near sufficient to figure out which nonprofits would most benefit from my donation. I’m honestly surprised that the Gates Foundation is pointing people to pages like this one (and the other pages it links to) for information. The Gates Foundation has a large and well-credentialed staff devoted to researching where to give out money, yet they’re asking individuals to make the decisions themselves based on profiles that read like fundraising brochures? The bottom line is that I don’t think the Gates Foundation makes a compelling argument that you shouldn’t give to it (so perhaps it’s not surprising that so many people have chosen to). To me, the strongest part of its case is the implication that it actually considers pages like this one to provide all the information and analysis a donor needs. If that were the case (and I doubt that it is), I’d definitely prefer to use my own judgment. What does$10 million mean?

Sean hypothesizes that “this is direct evidence of individual donors’ increasing interest in impact.” I’m inclined to agree.

We often hear that donors don’t really care about having the most impact possible; they care about attending benefits, or dispelling the guilt/cognitive dissonance raised by an appeal, or identifying with a cause. We respond that at least some donors are motivated primarily by wanting to make the world a better place; the question is how many of these are out there (because we know that the total pie is quite large). And we honestly don’t know the answer to that question – better research is needed.

But now we know that 2008 saw at least $10 million come from people who could not have been motivated by social events (the Gates Foundation holds none and doesn’t allow fundraisers on its behalf), in-the-moment emotions (the Gates Foundation conducts no appeals and doesn’t have a particularly cute namesake), or identification with a pet cause (the Gates Foundation’s work includes U.S. education, international aid and more, and it doesn’t allow people to earmark for a specific cause). The only reasoning I can think of for giving to the Gates Foundation is, “They’ll do a better job with this [in terms of making the world a better place] than I can, and that’s what I want even if it doesn’t come with the donor perks of a traditional charity.” If you disagree and can think of a less altruism-based reason, please share in the comments. Of course, that$10 million could all have come from 1-2 people for all we know (especially since only $1.6 million came in the year before). More on this below. Will the Gates Foundation help us learn more about these donors? Correction (added 6/11/09): Sean Stannard-Stockton has pointed out that the Gates Foundation will be releasing the names and amounts for all donors who gave more than$5000, as required by law. Assuming this is correct, the remainder of this post (from here until the end) should be disregarded.

There is growing interest improving donors’ access to quality information. In order to do this well, it would help greatly to know whom to target – in particular, whether the lion’s share of “impact-focused” charity is coming from tiny, medium, large, or mega donors. At this point we know so little about this question that having the breakdown of donation sizes from the Gates Foundation would, I believe, add a lot to our understanding.

I believe the Gates Foundation could be a good citizen and helpful to the cause of improving philanthropy by releasing information on how many donations it received of different sizes. Aggregating them by “buckets” (<$100,$100-500, etc.) and keeping all names confidential would allow this information sharing without compromising anyone's privacy. Will they do it?

• Sean Stannard-Stockton on June 9, 2009 at 6:46 pm said:

Super excellent post! You said it all better than I did. One small point, private foundations are required to publish the names and addresses of all donors over $5,000. You can find this list for the Gates Foundation in their 990 (for 2007). However, the 990 for 2008 (when they received the$10.4 mil) is not yet available.

• Carl Shulman on June 9, 2009 at 8:00 pm said:

I find it difficult to reconcile this statement with the Foundation’s acceptance of Warren Buffett’s eleven figure contribution. If Warren Buffett thought that Gates would manage his charitable activities better than he could, why should the typical impact-focused donor do otherwise?

I think the real reason for the ludicrous cited language may be that there are legal issues and obligations associated with a private foundation actively soliciting donations, and officially discouraging donations provides a shield against trouble. A threat to the tax-exempt status of the Foundation would be a disaster.

• Carl Shulman on June 9, 2009 at 8:06 pm said:

E.g.:
http://www.irs.gov/charities/foundations/article/0,,id=141454,00.html

• Ian Turner on June 9, 2009 at 8:27 pm said:

The reason the Gates Foundation doesn’t want people to give to it is simple: They are required to give away 5% of assets every year in order to preserve foundation status, and are running flat out just to meet this requirement. The more money people give to them, the harder it will be to grant away 5% every year.

The second implication of these facts is that giving money to the Gates Foundation indirectly dilutes the quality of their grants; if in a given year the Foundation only sees $100m of quality grant opportunities but is required by law to grant$150m, the extra $50m will not be spent as efficiently. That said, I didn’t know it was possible at all to give to the Foundation. I’ll give that a second look. • Jonathan Mark on June 10, 2009 at 7:35 pm said: I understand the Gates Foundation statement to mean: “We have a massive amount of money and we only give away 5% per year while investing 95%, so it doesn’t really make sense to give us any more.” This seems like sound reasoning to me. I would love to see more publications with well-supported recommendations for international giving. It would be great to see this from the Gates Foundation or anyone else! • Holden on June 11, 2009 at 3:17 pm said: Thanks for all the comments. Sean, I’ve edited the post to incorporate your note. Ian and Jonathan: the Gates Foundation may be struggling to give away the money well, but it still would seem to me that they’re better equipped to do so than donors who are explicitly looking to outsource the decision to them. (These donors apparently don’t perceive themselves to have any more capacity to find worthy recipients than Gates does.) It’s particularly strange that the Foundation encourages individual donors to contribute to its grantees’ “stable capital,” when the Foundation could presumably do the same. Carl, it’s true that being perceived as soliciting funds would come with additional reporting/filing requirements. Your explanation seems likely to me. • Ian Turner on November 6, 2009 at 3:22 pm said: Holden, It’s the difference between Warren Buffett investing$160 billion versus Warren Buffett investing \$160 thousand. When you’re a smaller investor (or a smaller donor), it opens up opportunities to pursue options that are too small to warrant attention from a large donor. Again returning to the financial element, TSTC is up 428% in the last year, but their market cap is so small that no institutional investor (including Mr. Buffett) would ever have been able to buy a year ago.

Cheers,

–Ian

Full Disclosure: I own shares of TSTC and Berkshire Hathaway.

• Holden on November 6, 2009 at 5:44 pm said:

Ian, I don’t follow. The Gates Foundation encourages people to make unrestricted gifts to specific charities (the same ones it grants). For it to make these gifts itself, instead, would presumably require no additional costs other than literally accounting.

I find Carl’s explanation to be most likely.

• Jason Fehr on May 27, 2010 at 11:14 am said:

For the reasons Holden had mentioned, I also found it surprising that the Gates foundation doesn’t allow donations.

I had planned to give to them a year ago, using the same reasoning as Warren Buffet (that the foundation can find a better use for it than I can). But, besides the fact that they have stated that they don’t want more money, there had been some bad press (http://articles.latimes.com/2007/jan/07/nation/na-gatesx07) and lots of the standard criticisms (diverting skilled workers from hospitals to Gates AIDS clinics because they were paying workers too much, etc.)

Economist William Easterly also argued at the World Economic Forum in 2007 that the Gates Foundation hadn’t had an impact since its efforts hadn’t had an effect on GNP. Gates disagreed. http://video.google.com/videoplay?docid=3635653767205809762#

Somehow, the idea of giving money to an organization that could be having no impact (or even causing harm depending on who you ask) didn’t sit well with me. This led me to discover GiveWell…

• Holden on May 28, 2010 at 10:18 am said:

Jason, unfortunately I think that the risk of having no impact – or even doing harm – is unavoidable when you give to an organization working on difficult issues like these. Recent discussions of our two top-rated charities, VillageReach and Stop TB, are open that we aren’t 100% confident.

What’s important to us is first and foremost that an organization shares the information necessary to get a sense for how its work is going. That enables us to at least make the best bet possible. The reason I don’t donate to Gates (aside from its request that people not donate) is that it shares so little information. But I think expecting there to be no concerns about its work, or expecting it to have had short-term effects on GNP, would be holding it to an unrealistic standard.

One more note – I think the criticism leveled by the article you linked to is overblown (see our 2007 post on ‘responsible investing’).