Category: Circle of Giving

Why do the rich give after they exit their ventures?

Sarat PratapchandranLeave a comment

Entrepreneurs acquire enormous wealth after exiting their businesses through sales, IPOs or liquidation. But what happens after they exit their ventures?

In a study, “After the harvest: A stewardship perspective of entrepreneurship and philanthropy,” in the Journal of Business Venturing (2017), authors Blake D. Mathias, Shelby Solomon and Kristin Madison found 4 key reasons why the rich redistribute their wealth after exiting successful ventures.

  1. Intrinsic motivations: They want to do meaningful work after making large amounts of money.
  2. Identification: The rich want to have a sense of identity and advance a cause they believe in.
  3. Personal power and long-term orientation: They crave for an opportunity to influence future generations.
  4. Stewardship norms: Most feel they have a sense of obligation to give back.

This award winning study analyzed “The Giving Pledge” letters of 99 entrepreneurs and separately conducted in-depth interviews with 19 of them. In 2017, when the study was conducted, there were 142 individuals, 70% of whom were entrepreneurs who had signed on to the “The Giving Pledge.”

Today, there are over 200 individuals from 23 countries who are part of the “The Giving Pledge,” and have committed a majority of their wealth to philanthropy or charitable causes.

The study found that the rich display an innate responsibility to “act as stewards of their communities.”

And, this is very evident in the way latest entrants to “The Giving Pledge” like MacKenzie Bezos have committed to pledging over half of the $36 billion she inherited in Amazon stocks. “I have no doubt that tremendous value comes when people act quickly on the impulse to give. No drive has more positive ripple effects than the desire to be of service,” she says in her Giving Pledge letter.

“In addition to whatever assets life has nurtured in me, I have a disproportionate amount to share,” Bezos adds.

This reminds me of a well cited Princeton study “High income improves evaluation of life but not emotional well being,” that showed the world that anything beyond a $75,000 annual income will not buy you emotional well-being. Authors Daniel Kahneman and Angus Keaton found that emotional well-being rises with income but anything beyond $75,000 is not going to buy you happiness.

However, for those who have made so many more multiples than $75,000, their entrepreneurial exits, often called harvests, trigger their ability to give.

And, social expectation will prompt them to give, be good stewards of society and perhaps buy a little happiness on the way. But one thing is very clear: it is insanely difficult for the mega rich not to give!

A Fresh Look at Fundraising

Sarat PratapchandranLeave a comment

generosity networkSo…how much did you ask? How did the visit go? This is a common question that fundraisers are asked after they meet prospects.

In a new book, “The generosity network: New transformational tools for successful fundraising,” authors Jennifer McCrea and Jeffrey Walker take a fresh look at fundraising. The authors show that “creating a sense of meaning and personal fulfillment is at the heart of great fundraising.”

They oppose fundraising as a transaction-based relationship where the fundraiser meets the donor solely to secure a financial gift. The book argues that “fundraising is a vehicle for transformation- personal, organizational, social, even global.”

Narrating her early experience as a fundraiser in New York, Jennifer says every ask that she made focusing solely on securing a financial gift yielded a negative response.  She soon realized that fundraising was not just about the numbers. Instead, it is a “shared commitment as two people sit down and have a deep conversation about their lives.” Giving is emotional, personal, makes people happy and is social.

The authors oppose fact-based appeals used commonly in fundraising. They argue that  fundraisers should focus on why people want “meaning in their lives” and  not dwell on data-driven case statements. “Another slide show won’t work and the most important aspect of fundraising is to create human connections.”

They are also against canned elevator pitches, a tactic  commonly used by non-profits. Instead, they encourage non-profits to focus on authentic storytelling. “Do not inundate your audiences with data, instead tell them stories.”

The book urges non-profits to stop selling ideas to people and encourages them to  give donors “opportunities to connect with causes.” It offers several nuggets, including one where the authors ask fundraisers to consider donors as their peers, irrespective of their social or financial standing. Treat them as peers and move from the “salesmanship model to enabling people to contribute to a dream.”

Authentic storytelling gets reinforced throughout the book and it has abundant tips on how to make the ask. At the heart of every ask is a “powerful story of the self, the power of us and now.” A good read.