“It came down to helping the poor, or giving the world’s richest university $400 million it doesn’t need. Wise choice John!”
These words, dripping with sarcasm, were tweeted by journalist and social scientist Malcolm Gladwell at John Paulson back in June. Billionaire hedge fund manager Paulson had just given a $400 million endowment to support Harvard University’s School of Engineering and Applied Sciences — the largest gift in the university’s history.
Ineffective philanthropy is a particular bugbear of Gladwell’s. He dedicates three full episodes of his excellent podcast, Revisionist History, to an examination of educational philanthropy in the US. And his conclusions are less than flattering.
Gladwell has two main gripes. The first is that most of the biggest donations go to schools that already have endowments larger than some countries’ gross domestic products – Harvard, Stanford, Columbia, MIT and the like.
The second is that many of these schools (which, we should remember, are not taxed on their earnings because they are non-profit institutions) are spending these endowments in ways that appear to undermine their supposedly non-profit mission.
To illustrate his point, Gladwell picks on Bowdoin College in the US, which he accuses of lavishing its funds on eggplant parmigiana pancakes in the dining hall rather than fulfilling its social responsibility to subsidise students from less wealthy backgrounds.
This, Gladwell argues, has serious consequences. Every time a school like Bowdoin spends its money on sautéed mushrooms instead of social mobility, it makes it much harder for other, more progressive schools to attract the affluent students they need to help subsidise the gifted but poor students who would otherwise be unable to pay the tuition.
The shift to a focus on more effective giving
Is the story of ineffective educational philanthropy in the US a rare cautionary tale? Or is it indicative of a wider problem in the philanthropic sector?
Unfortunately, it would appear to be the latter.
“Most programmes don’t really achieve anything,” says Professor William MacAskill, author of Doing Good Better and Co-Founder of the Centre for Effective Altruism. “The best estimate we have is that about 75 per cent of social programmes, when tested, were found to have no impact at all.”
This is a startling statistic. But the picture is much more nuanced. Even amongst the remaining 25% of social programmes whose net effect is positive, there is a huge difference in effectiveness between the very best and the merely average. The former are more effective than the latter by a factor of over a hundred. This means that a $1 donation to one of the world’s most effective charities is more effective than a $100 donation to an average – not even a bad – charity.
It has taken a long time, but donors and the general public are starting to wise up to this. In a post Kids Company world, they are beginning to apply more pressure on philanthropists, and the programmes which they fund, to demonstrate that they are actually worth their money. They are starting to treat a donation less as an emotional reaction to a given cause, and more as an investment on which a social dividend is due.
Effective communication means communicating effectiveness
We are at the early stages of a crucial shift in attitudes towards charitable giving that will play out in the coming years. This shift will have profound consequences for how philanthropists, and the organisations which they fund, communicate with their target audiences.
The traditional “heartstrings” approach – leveraging the emotional power of individual stories to capture the essence of the problem being addressed – will still have its place. An individual story will always resonate more than even the most compelling statistic.
But to remain credible and to satisfy an increasingly informed public, philanthropists and non-profits will need to get better at communicating their effectiveness.
Fortunately this is becoming easier to do, as such data becomes more widely available. Historically this has not been the case. Traditional evaluators like Charity Navigator have confined their scrutiny of charities to assessing their financial data. This meant that a charity needed to do little more than point to low overheads as evidence of its effectiveness. But in recent years, organisations like GiveWell have started measuring the underlying impact of charities themselves, conducting in-depth research to determine how much good a given programme accomplishes.
GiveWell’s research shines a spotlight on the very best charities – the ones at the top of the tree. One of these, the Against Malaria Foundation, provides funding for long-lasting insecticide-treated bed nets. For roughly every $3,000 they spend on bed nets, they save a life.
This is what an effective charity looks like. And it is this data that organisations will increasingly need to communicate to satisfy donors, the public and the media.
The end result? A shift to more transparency around effectiveness
The increased transparency around effectiveness that will result from this can only be a good thing.
The spotlight of international media will create a positive competitive effect, with the best organisations striving to outperform each other in a bid to be perceived as good global citizens. Likewise, the threat of negative media coverage will incentivise laggards to clean up their behaviour. Sunshine is a powerful disinfectant.
The Extractive Industries Transparency Initiative (EITI) provides a clear illustration of this point. Set up by the UK-based NGO Global Witness, the EITI sets an (entirely voluntary) global standard which countries could sign up to. By doing so, they committed to publishing details of the funds they receive from oil, gas and mining contracts.
Despite its voluntary status, the EITI has been a big success story. Some 47 countries have published their revenues, accounting for over US$1.8 trillion worth of government revenues.
Why are resource-rich developing countries bending over backwards to comply with a voluntary standard created by a small Western NGO? Oxford economist Paul Collier suggests that it’s because international standards like this “give people something very concrete to demand: either the government adopts it or it must explain why it hasn’t.”
The EITI relies on two naturally occurring phenomena to raise standards in its sector – the scrutiny of the international media, and the desire of those regulated to be seen in a positive light.
These two factors will play an important role in philanthropy in the years to come. With data on effectiveness now widely available, organisations will find it increasingly difficult to justify running ineffective programmes, and philanthropists will increasingly be held accountable for funding them.
The biggest winners will be those who get ahead of the game, and move now to make effectiveness an essential component of their communications strategy.
Measurement and evaluation