Delusional Altruism

1You Save Money on All the Wrong Things

Philanthropists like to save money, but they save it on the wrong things. Let me explain what I mean.

Foundation leaders, donors, professional athletes, corporate executives—all philanthropists—want to be good caretakers of their charitable wealth. They want their assets and profits to grow, so there's more wealth to give. They also want to reduce their charitable costs and save money, so there's more left over to give to the causes they care about.

All of this is well and good.

The trouble is, in their altruistic effort to be frugal, they hold back on investment in important things like talent, strategy development, research, evaluation, technology, relationship building, and even their own personal learning. They hold back investment in their grantees, too.

They do this by setting arbitrary limits on how much money can be spent on nonprofit “overhead,” or on when they expect to see grantees' results, but at the same time they refuse to fund evaluation costs. When they do this, they hamstring themselves and the nonprofits they support. They genuinely want their philanthropy to change the world, but they're under a misguided belief that saving leads to impact. They're delusional about the damage caused by their thrift.

Frugality rarely leads to social change.

This type of destructive frugality happens to all types of philanthropists. Let me give you a few examples:

The CEO of a foundation with more than $200 million in assets refused to ...