New Wealth Vs. Old Money Donations: Culture Clash Or Learning Opportunity?There has been much attention devoted to what has been termed "new
wealth." Projections of this new wealth and forecasted intergenerational transfer has been estimated in the trillions of dollars, possibly as high as $25 trillion, over the next 50 years. Those of us in the nonprofit sector find ourselves searching for approaches to these new potential funders.
These new philanthropists are a different breed than their predecessors.
They new funders may be as different from one another as are the nonprofits in the U.S.; however, there are common characteristics that can give us some clues. But before this analysis, it would be helpful to contrast "old" and "new."
Old wealth: The most familiar traditional charitable contributors were
the likes of Rockefeller, Carnegie and Sage. Donations were given without expectations of return, except that good works and services be given to those in need. Most grant seekers are familiar with this type of wealth and donor. These are the families that made money several generations ago, and whose members are active in a variety of civic endeavors. These families are generally comfortable with philanthropy and the culture of giving.
Millionaire Next Door: These are potential funders who do not get much
press. They are professionals or small business owners making $80,000 or more who invest wisely and live frugally. They donate small amounts, but the majority of wealth from them will be obtained through bequests and planned giving. They have been highlighted in the best seller "The Millionaire Next Door" and are difficult to recognize because they are "ordinary" people living in modest homes, stashing away their savings, and not joining organizations.
New Wealth: These are the extremely wealthy entrepreneurs. Many are in
the technology field, but others earned their millions in real estate, corporate mergers, athletics and entertainment. Bill Gates is perhaps the obvious example of this type. Most people who are newly wealthy are new to philanthropic involvement. Unlike old wealth families raised in a culture of social responsibility and understanding that giving is an obligation, newly wealthy families may not automatically volunteer or contribute to charity at all. These entrepreneurs understand the world of business and investments and approach their involvement with the same understanding.
Can we identify common characteristics that link them? Maybe. There
are growing examples of such people coming together to discuss their role in philanthropy, like the newly established Silicon Valley Social Venture Fund (SV2), the Entrepreneurs' Foundation, New Profit and the Social Venture Partners. They are discussing giving and the redefinition of philanthropy in new terms.
Frequently, these people will be interested in an organization if it can
represent its potential as a business venture, and they are looking to extend their business expertise in a nonprofit or public setting. They may want to get on your board of directors or help your organization establish business ventures. They are not interested in strictly making a donation to your organization. They seek to invest in its future in the form of social venture capital. This leadership among the newly wealthy is encouraging, but does raise the possibility of a clash of cultures. What can we do to maximize their interest and involvement in the nonprofit sector? How do we balance our enthusiasm for their contributions with their enthusiasm for involvement and reach the stage where we bring the best of each to the table?
Much can be learned from the business world, just as much can be learned
from the lessons emanating from the nonprofit experience. In sum, nonprofits can provide the place where these newly wealthy individuals can find connections to the world around them, be a part of bettering the world and building those relationships that make the real difference in how we live our lives, while enhancing the quality of life for all.
I offer some simple closing thoughts for those who would like to foster
deeper relationships with the new philanthropists and nonprofits to assure we create learning opportunities and not get distracted with clash of cultures.
For the nonprofits:
1. Be clear about your mission and purpose.
2. Be able to speak about the outcomes of your program, which
should tie to your overall mission.
3. Appreciate the philanthropists' perspective on business
practices and return on investments. Learn how to speak about your
program goals/outcomes in these terms through the eyes of the nonprofit
(i.e., bringing a smile to the face of a child when you offer a word of
encouragement is and should be considered a valuable return).
4. Be willing to make some changes if what you have tried does not
appear to be working, as long as the changes tie to your overall
5. Respect one another's point of view, perspectives and life
experience while finding common ground.
For the new philanthropist:
1. Appreciate the lessons and understanding of the nonprofit
staff/board. They have a long history in the field of service that
should not be dismissed out of hand.
2. Share the best business practices, but do not overemphasize the
process of operating a good business as the ultimate reason of the
nonprofits' existence. Good business practices should free up the
agency to fulfill its mission, not the other way around.
3. Realize that the investments in social capital touch the heart, not
so much the bottom line. Those outcomes that are not easily subject to
measurement are not necessarily unworthy.
4. Respect one another's point of view, perspectives, and life