The economics of altruism

I like trying to understand what it is that motivates people to give.  On a personal level, I find it deeply satisfying to hear stories from philanthropists like David Hardie, who shared his journey to becoming a philanthropist on this blog over last two weeks. With so much pessimism about, stories like David’s provide a little dose of inspiration. But can we ever truly understand what it is that motivates some to give and others to accumulate wealth?  Is it as simple as some people having an altruistic spirit and others being, well… greedy? We could look to philosophy, psychology (as Claire Rimmer did in her blog last week),  sociology even anthropology for the answers, but it’s actually economists who appear to have done the most work in this space.

Economists believe humans act rationally with our actions influenced by incentives. This point is important and at a surface level feeds the assumption that most people are, at their core, simply out for themselves. But what a crappy thought!  After reading David Hardie’s blogs I find this really hard to believe.

Economists have developed a series of ‘games’ to experiment with what exactly drives a person to act altruistically.  Using the Dictator Game initially, economists found results that seemed to indicate that people were hardwired for altruistic behaviour. If you’re not familiar with the Dictator Game, here’s the breakdown of the experiment to assess people’s altruistic behaviours:

  • volunteer 1, let’s call her Jane, is given $10 and is told that she can divide the money with volunteer number 2, let’s call her Barb, in any way she likes.
  • Jane is also told that Barb has no idea that she has been given the money or the option of dividing it. The anonymity bit is important because it means that Jane is neither rewarded or punished for her actions (it also means that the ’emotional’ pulls, evident when we give money to disaster relief or charities we are connected with, are removed)

Regardless of where the experiment was conducted, in the USA or Mongolia, the ‘dictator’ Jane tended to hand over about 20% of her money to the unknowing Barb. Wow! Giving away 20% of your money without any potential of reward seems to indicate that people act without any consideration of personal incentives. But, of course, the optimism around this amazing altruistic spirit didn’t last long. Enter John List.

John List, a Professor of Economics at the University of Chicago, is the person who really stepped up altruism experimentation. List devised a form of the Dictator Game that once again provided Jane with some cash, this time $20, and gave her three options whereby she could either:

  • keep all of the $20
  • give away any percentage to Barb or
  • take $1 from money that had been provided to Barb.

If you have 10 mins to spare it’s definitely worth checking out this RSA animation based on the List experiment by ‘Freakonomics’ and ‘Superfreakonomics’ co-authors, Economist Steven Livett and the Wall Street Journal’s Stephen Dubner. Alterntively, if you’d like to read the excerpt of the chapter from Superfreakonomics on which it is based you can check it out via The New York Times.

What List found was that in his version of the game only 35% of the people in the Jane role gave any money to Barb, 45% didn’t share at all and remaining 20% took the $1! As List played with the experiment and increased the amount Jane could take from Barb he saw a drop in the number of people who gave any money at all.  In fact when given the option of taking all of Barb’s $20, 60% of Janes took every cent.

List did run another important experiment whereby volunteer Janes and Barbs needed to earn their cash, usually through filling out a long survey.  Once again Jane was given the option of taking Barb’s hard earned cash but this time only 28% (a big drop from 60% in the original experiment) took the money and ran. Apparently it does matter how the person came into having the money (windfall v earned altruism experiments are fascinating and for another blog).

These experiments have since taken on a life of their own.  The percentage of money Jane gives to Barb changes drastically if Jane is told that Barb is aware of the choice she has.  Equally and definitely the topic for another blog, is that if Jane is actually a John the giving percentages change again (gender is a factor in how and why we give).

There are so many external factors in how we give and the amount we give that List and other economists came to a bit of startling conclusion.  We are not hardwired for altruism.  In fact, many economists concluded that when we give we are simply responding to incentives.  Perhaps its to feel good, or less bad.  Perhaps it’s because of social expectation (which might explain the recent media around high net worth individuals not giving enough), even to fit in or gain access to a social group (The Giving Pledge perhaps…) or in some instances to impress someone. For many, it’s simply the tax breaks they get.

Now the idea that you give because you get something out of it might not appeal to most.  But think about it carefully, list the reasons in your own mind as to why you give, if you give at all. Ultimately, incentives might form a reason as to why or whether we give at all, and frankly, that’s fine with me. Whether it’s for the tax breaks or that warm fuzzy feeling you get in your stomach, I just want to see more people give.


Giving is sexy!

Following all the chat among 3egg and co recently about the lack of giving in Australia and the offering of thoughts on what might be done to encourage it, I have something to throw into the mix!

What would you say if I said giving is sexy? Would it appeal to you? Would it make you grimace? It made me snigger – philanthro-geek that I am – but it did get me thinking. It’s definitely not the sort of language that is normally used around philanthropy but a UK report written for the Philanthropy Review in April 2011 suggests that this small but significant change in how we frame giving could be the key which unlocks all those “hidden” AU philanthropic $$ that we keep talking about.

The study, The Aha: Why donors give, why non-donors don’t and what to do about it, written by Carol Fiennes (CEO of UK Climate Change Charity, Global Cool Foundation) suggests that the reason some people don’t give is because they simply aren’t motivated to: that the way that giving is generally talked about only appeals to a certain group within the population.

The study draws on the outcomes of research carried out by the UK company, Cultural Dynamics, Strategy & Marketing, to determine what drives people to do what they do. CDSM surveyed more than 8,000 people with over 1,000 questions and, with the data gathered, was able to identify a series of fundamental psychological needs that we as people are trying to satisfy – the needs which drive our behaviours and the vision of the person we want to become – and segment them. They called this the ‘Values Modes’ segmentation.

The segmentation identifies that there are three types of people:

  • Sustenance Driven (SD)
  • Outer Directed (OD) and
  • Inner Directed (ID)

In a nutshell:

  • SDs are socially conservative – they’re wary of change, keep to the rules and want to be directed by authority. Their key need is to feel safe and secure;
  • ODs are driven by needing the esteem of others and want to be seen to succeed. They are a higher energy, fun-seeking group and are instinctive rather than analytical; and
  • IDs are always questioning and looking for ethical and intellectual stimulation. They don’t find change worrying and see global issues as their issues. They’re more analytical than instinctive.

The ‘Values Modes’ segmentation’s been used successfully for over 30 years in over 30 countries – for purposes which range from selling soft drinks to determining voting behaviours – and has predicted Value Modes with over 97% accuracy. For more info on CDSM’s work, click this link to their website. CDSM

If you hadn’t guessed already, us Philanthro-niks (Fiennes’ word for us philanthropeeps and my favourite to date!) are defined as Inner Directed people. I did the survey and despite giving answers that I was sure would lead to me bucking the trend and being an OD, surprise surprise, I was categorised as an ID.  If you’d like to do the short survey and find out which of the segmentations you are, click here: Value Modes Survey

Apparently much of the thinking in The Aha draws on Fiennes’ work at Global Cool, which is a charity that aims to get more people to adopt a lower-carbon lifestyle. Global Cool was looking into how to “sell” green lifestyles to people and realised that the way that they’d been doing it had resulting in them preaching to the converted: with campaigns developed by IDs which only appealed to IDs. They realised that their challenge was to make low-carbon living attractive to the OD and SDs of the world who they knew, generally speaking, were less interested in the issue. So they developed a series of campaigns to get people to make green lifestyle choices based on the things that motivate them. For example, one campaign works to entice people to turn down the heat in their homes by “turning up the style” instead – wearing beautiful, fashionable woolly jumpers to combat the cold with the added benefit of keeping their skin from drying out! Through the campaigns they seem to be capturing the broader imagination.  Brilliant!

I have to be honest when I first read the report, I found myself curling my lip and rolling my eyes at the suggestions it makes to encourage broader giving (maybe that‘s because I‘m an ID….and a bit of a curmudgeon?!). It all sounded kind of patronising….“make giving fun & social“, “make giving easy“, “avoid people feeling that giving is a loss“, instead of promoting giving at music festivals or in a serious newspaper, do it at a yacht club or a glitzy event with business leaders. Essentially, diamond encrust the carrot that’s dangled and make the promise of a feature story in Grazia magazine (for the ODs at least). But with a track record as strong as the segmentation’s in terms of determining motivations and behaviours, I did a 360 and started to think it’d be well worth trying it. If this is all it might take to increase and broaden giving, why not?!

One thing that stood out when I read the report, which worried me a bit given all the negative press here just now around giving, is that rather than talking about the lack of giving we should instead celebrate giving: to normalise the notion of doing this rather than exacerbate the trend to not give. It makes sense, I think. Talking about a wealth of giving creates the feeling that there is a scale of investment which makes problems tackle-able, rather than making them feel too big and too hard to deal with, creating a desire to sweep them under the carpet.

So…the question is….what do you think?  Should giving be “sexy”?!

So…I guess I’m one of those philanthropist wankers. (Part 4)

In part four of this special four part series, David Hardie looks ahead and thinks about what needs doing to take his philanthropy to the next stage.  You can and should check out parts one, two and three of David’s wonderfully honest story about his philanthropic journey.

A set of values is a good start but as I’ve been reading through the Annual Reports and websites of various Foundations I have noted that the vision and mission thing features prominently. Now I suspect it’s a result of sitting through a few too many strategic planning sessions in the government sector, but I’ve traditionally been a bit of a cynic when it comes to visions. So I initially decided that what would work for me was capturing how the Foundation would work – the things that would help define our approach to grantmaking. This may have been a ‘vision avoidance strategy’ but it kind of worked! I again just started writing down some words and phrases that are important to me, some of which are certainly borrowed from others and some that come from my own observations. Now I first wrote these down a few weeks back but reading them through again as I write this has made me realise that I’m still pretty happy with them. So here they are:

  • Open, honest communication in all its relationships
  • Listening with an open heart
  • Fun and laughter
  • Supporting good people with good ideas
  • Trust and mutual respect
  • Collaborating with and learning from others
  • Acknowledging and alleviating the power imbalance in the grantmaking relationship
  • Enabling grantees and communities to steer the work.

Now like a set of values, this is just a bunch of words and until they get tested by the complex realities of the grantmaking relationship, a bunch of words (albeit nice words!) is all they will be.

So that was where I got to over a few days and I was pretty happy with it. But when I revisited it after a break and after a bit more reading of some of my philanthropy journals, I did realise that there was something missing and that the ‘v and m thing’ did need to make an appearance.  So I sat back down and I eventually came up with this Slingsby Foundation vision and mission:

Our Vision:  A just and caring society that embraces difference.

Our Mission: To fund initiatives of the not for profit sector that strengthen the lives of those who are marginalised or experiencing disadvantage. We support organisations and projects that build on people’s strengths and help equip them with the capabilities to overcome disadvantage and lead happy, fulfilling lives.

And you know – I finally got to see what these things can do – they help set out what I’m aiming for and how I might go about helping to achieve this. I think they also will help the organisations and people that the Foundation will eventually support to get some insights into the type of Foundation that we want to be and why we might want to support them.

So that’s where I’m up to in June 2011. A little over ten years since my grandad passed away and approaching the year that will represent the 100th anniversary of his birth. And much to his surprise (and I suspect wry amusement), I’m finally interested in the share market. The Foundation has recently made its initial investments and I’m actually really enjoying the process of tracking them and learning about the vagaries of such things. Week one was looking great, week two not so great!

Of course it’s all about purpose and for me, the purpose of sound financial investment and wealth generation is related back to that vision and mission of the Foundation. And yes, a wider purpose of celebrating the life of someone (my grandad LindenLittle) whose hard work and commitment to excellence enables others to share the benefits of a life well led.

David Hardie recently worked as a Program Manager and Intern at the Myer Foundation and Sidney Myer Fund. He is the Founder of the Slingsby Foundation and strongly believes that those Australians who are financially well-off should grow Australian philanthropy and help build the social fabric of the nation that has provided their wealth. 

So…I guess I’m one of those philanthropist wankers. (Part 3)

In part three of this special four part series, David Hardie looks at challenges faced when you want to take your philanthropy to that ‘next level’. You can learn more about David’s journey into philanthropy in parts one and two of his story.  The final instalment will be posted tomorrow, so make sure you pop back to check it out!

Stepping into the world of philanthropy, gradually feeling comfortable with my place in it and then establishing a private ancillary fund has led to the next big question. What do I do with it?

I’ve recently sat down and started to think about what this opportunity provides, what I’d like to achieve, who I want involved and what success and failure might look like. It’s been an interesting exercise and one that I’ve struggled with. Part of me wants to leap straight to developing really specific grantmaking priorities and program areas and just get on with it. I know that I want to support refugees and asylum seekers and to help tackle homophobia and that these are some of the issues that resonate with me. But I’ve also realised that while I might be ready to get on with it, there are others who I want to bring with me and that perhaps the most important thing in the initial few years is actually providing the space for their learning to take place. There’s also the reality of having very limited grantmaking capacity in the first few years!

I want this to be fun and for me, fun involves having my family and friends alongside me. So I’ve decided that a defining theme of the initial years of the Foundation will be its commitment to learning – for family and friends to gain experience in grantmaking practice and to learn about related issues. I want these learnings to shape the development of our longer term grantmaking strategies and processes. I want to make sure that I bring others with me and that it’s not just about my issues and my priority areas.

Nonetheless, I also really want to get some things down on paper now. I’ve always been a bit more of an implementer than a strategist but over the last year I’ve had the opportunity to listen, capture some learnings and really see the importance of having a strategy to guide your grantmaking. A key part of my learning and my own personal development in recent years has been taking the time to write stuff down – it’s amazing the power that the written word has when you really take the time to capture what’s going on. Over the last year there have been a few things that people have said that have resonated with me and that I didn’t want to lose. Stuff like this:

You need to find the people and the organisations you want to work with – not just the project or the issue

You should be risk welcoming

Never forget about the power dynamic between philanthropy and those that need the funding

Your decision making will often be subjective- accept this but keep analysing why you make the decisions you do

Most philanthropists try and do too many things

Don’t be scared to be eccentric and to support what others won’t – collaboration is fine but sometimes you just need to go it alone

Remember to keep asking the ‘so what?’ question

Guidelines and strategies are really important – and it’s also great to ignore them occasionally

It’s about heart and head – and heart is allowed to win.     

When I sat down with a blank piece of paper in front of me entitled Grantmaking Strategy these were some of the things that I started to think about.

I also started to think about the words that I wanted to be associated with the Slingsby Foundation and those words came to me very quickly – words like inclusion and diversity and justice and strength and compassion. I also knew that it would be a Foundation about people and that I wanted it to be values driven. So I started with this set of values:

Inclusion – Diversity – Strength – Compassion

I see these as the core or the heart of the Foundation and I’ve explicitly stated that they are to guide all Foundation activities. How will that play out in practice? No idea. But I certainly have learnt that when something doesn’t fit with a set of values you soon recognise that.

David Hardie recently worked as a Program Manager and Intern at the Myer Foundation and Sidney Myer Fund. He is the Founder of the Slingsby Foundation and strongly believes that those Australians who are financially well-off should grow Australian philanthropy and help build the social fabric of the nation that has provided their wealth. 

Too much or not enough?

A couple of weeks ago I blogged about the funder-grantee relationship.  Working in philanthropy, the issues of power imbalance, the burden of responsibility and questions around ‘how much support is too much’ come up daily.  And when I talk about support I’m not talking about financial support, but about helping organisations to apply for grants.  About encouraging and supporting them to ensure they’ve got the best shot at getting the dollars.

Obviously the question of how I allocate my time is a daily proposition, and so I read with keen interest (and rising frustration) a recent blog from Deep Social Impact.  In the blog entitled Three strikes and then what? Joanne Duhl talks about the dilemma of how we know when we’re asking too much of our potential grant recipients.  In Joanne’s blog, she tells the story of an organisation that underwent significant changes, including the appointment of a new director.  The funder decided it was essential to meet the new director before renewing the organisation’s grant.  Fair enough, I reckon.  In my view it’s essential to meet the director to ensure commitment to the project, organisational stability and so on – it’s just good due diligence.  After a few failed attempts at arranging a meeting, and no  demonstration of commitment from the grantee organisation, the funder decided to pull the pin.

In reading the story and the list of excuses of the grantee organisation, I sensed Joanne’s frustration.  And I recalled a number of similar experiences I’ve had, again, with frustration.  But reflecting on the lessons learned from CEP’s findings on relationships between Foundation staff and grantees, maybe I need to be a little more lenient.  I get to choose how to allocate my time in my day, so I have to accept that grant seekers get to make that exact same choice.  Returning a call from a funder might not be at the top of their list of priorities.

My question, and Joanne’s question is, how far do you go?  At what point does coaxing a potential grantee become harassment?  We might think that those who don’t have capacity to return our calls (because they’re putting out fires and are just too stretched to take on the extra work of a grant proposal) need our money the most.  But really, if we’re not running the organisation, who are we to decide?

I guess this makes the point again that relationships are so important in the funder/grantee relationship. If we know the organisations and sectors we support well enough, we have a better chance of understanding what sorts of pressures they are under.  And then I guess it’s just a case by case basis.  And maybe sometimes persistence is worthwhile, and other times it’s better to dedicate your time to another worthy organisation.

So…I guess I’m one of those philanthropist wankers. (Part 2)

In part two of this special four part series, David Hardie takes us on his initial journey into philanthropy and explains how important personal connections are when starting to give. If you haven’t already, you should check out part one of David’s story, which gives you the low down on how he came to be a philanthropist.

The personal connection I formed with the Founder of the Sydney Community Foundation led me to make the decision to establish a sub-fund as part of the Foundation. This model appealed to me – it enabled me to have input into the areas the sub-fund might support but meant that I did not need to concern myself with the grantmaking and investment logistics – but knew that these were being well managed. That felt right and so in 2005 my sub-fund (named after my nephew Jack) was established and I started to allocate my annual proceeds from the family investment company into the sub-fund. The initial project that was supported through the sub-fund was one that had a deep personal connection for me. It was a project to support grandparents raising their grandchildren- being administered by the NSW Council on the Ageing. The connection was that this reflected my personal story as I had been raised by my grandparents from the age of seven. When I heard about the project it was a no-brainer that this would be my first sub-fund project!

The community foundation model has worked well for me – governance and investment decisions are sound and I’ve been able to have a level of input that has been appropriate for me at the time. I’ve also been able to diversify the areas I support. An area of growing interest for me over many years has been the challenges facing refugees and asylum seekers. I volunteered for a few years providing hands-on settlement support to newly arrived refugee families and also worked as a program coordinator for a project supporting refugee kids in schools (part of a massive career change but that’s another story!). Increasingly I have also despaired at the quality of political and public discourse on this issue. The most recent organisation supported by my SCF sub-fund has been the NSW Asylum Seekers Centre – a small organisation doing excellent work with very limited resources.

So my engagement in formal philanthropy has progressed in a slow but considered and increasingly structured manner over the last ten years. Alongside this I’ve also supported a couple of other initiatives – again they have a personal connection – and that does seem to be the consistent theme that drives my personal giving. The first was setting up an annual scholarship to fund a place for an individual from the not for profit sector to undertake the Sydney Leadership Program. That was a pivotal experience for me and one that I wanted others to share.  Secondly, I’ve provided three years of support to fund an annual student bursary (in the name of my niece Tara) in the recently established School for Social Entrepreneurs Australia. This came about because I was working alongside two amazing women who were involved in the initial establishment of SSE Australia back in 2008. I wanted to support their work and also wanted to help support the initial set-up of a program with huge potential.

That brings me to the here and now and the recent set up of a private ancillary fund. How did I get to this stage? Well, again it took a personal experience to show me the way. In 2010 I took up a role working at The Myer Foundation. When applying for this role it had become abundantly clear that I really wanted this experience (you know that rare moment when you can just feel that something is the right thing for you to be doing). Fortunately I got the job and apart from learning a lot about good grantmaking I also learnt about other formal forms of philanthropy such as private ancillary funds. Quite quickly I decided that this was the next step for me to take and so the Slingsby Foundation was founded in 2010. The name comes from the name of my grandad’s company – after all it only exists because of him. It’s a very small PAF at the moment but it will continue to grow during the remainder of my lifetime.

When I was signing the Trust Deed for the Foundation I did feel like it was the culmination of a journey that began with my grandad sitting me down with the financial section of the newspaper very patiently trying to share his knowledge with his disinterested grandson. It took almost 40 years from that time, but this Foundation will be a legacy of not just his work but also the very different work that I have undertaken during my life.  His and my skills are very different but this Foundation brings the best of both of us together. Now, it’s up to me to develop its strategy and I’ll share some of my early work in this area with you in parts three and four.

Before that, I should provide some final reflections on the key things that have helped me to finally embrace my inner philanthropist!

  • I’ve realised that there are lots of different ways you can take part and that all of them (personal donations, sub-funds, PAF’s etc) have an important role to play
  • Personal connections and relationships have been critical
  • My values have driven my actions
  • My level of interest, engagement and involvement has progressively increased as I’ve learnt about myself, my skills and developed my own confidence to participate in this field
  • I see this as my opportunity to lead good work in the world.

David Hardie recently worked as a Program Manager and Intern at the Myer Foundation and Sidney Myer Fund. He is the Founder of the Slingsby Foundation and strongly believes that those Australians who are financially well-off should grow Australian philanthropy and help build the social fabric of the nation that has provided their wealth. 

So…I guess I’m one of those philanthropist wankers. (Part 1)

In part one of a special four part series, David Hardie explains how it is he came to be a philanthropist. You can follow part two of his journey tomorrow.

I’ve been an interested observer of the world of philanthropy for a few years now and in particular, the increasing efforts to encourage a greater sense of giving amongst wealthy Australians. I’ve nodded quietly to myself when reading the assessment that Australians just don’t like to go public about such things (the tall poppy syndrome and all that) and I’ve heartily laughed when noting a recent observation that many ordinary Australians equate the word philanthropist with wanker.

Although I suspect I’ll never fully embrace the philanthropist job title I also firmly believe in the importance of de-mystifying and challenging labels, especially through the power of personal stories.

So I thought why not use the Three Eggs musings to share some of my insights drawn from what has been a ten year, (umm, yep I’m going to use the dreaded ‘j’ word)…journey, to get me to my recent milestone of establishing a private ancillary fund. I’ll do it in four parts. The first two will provide some history on what has got me to this stage and in parts three and four I’ll share some thoughts on the strategy I’m putting in place for this PAF.

To deal with the obvious question first…where did the $ come from? The money is an inheritance from my beloved grandfather – an unassuming man who through sheer hard work and a great mind for smart investments managed to establish and build a small family investment company during his lifetime. We’re not talking massive wealth here – but it is more than I or my other family members need to lead the type of lives we want – again, pretty unassuming ones. I realised from a young age that one day there was a good chance that, as an ‘only grandchild’, I’d end up with responsibility for the company. To say that this didn’t particularly excite me was an understatement. Despite my grandad’s best efforts to get me engaged, I just could never get interested in this world. Money and finances have never been my thing, I’ve always liked words not numbers and I’ve never once (until very recently – but more on that in part four!) got a thrill from reading a balance sheet or shares portfolio, no matter how positive they might be. I also really liked my life and didn’t want the acquisition of wealth to change it. So the idea that one day I might be responsible for this seemed quite a burden. My grandad passed away in 2001 at the age of 88 and he was still overseeing his investment portfolio right till the end…proudly reflecting on what he had built ‘for his family’.

For quite awhile the family just let things continue on as they were (with the assistance of sound investment advisors). I just put all this to one side and continued on with my life as it was. I didn’t really consider that the wealth was mine and didn’t even want to think about it too much. So things stayed like that for a few years. With one exception. I established a memorial scholarship in my grandad’s name to provide an opportunity for a student from a disadvantaged background to undertake an undergraduate engineering degree. Having pursued a HR career and been responsible for a large public sector trainee and graduate recruitment program this was an area I knew something about. So I guess that this scholarship (which continues to this day) was my first act of traditional philanthropy.

Then, in 2004, I met someone who was in the process of setting up the Sydney Community Foundation and shared an intense and challenging time with her and 30 others on the eight month Sydney Leadership Program – a social leadership program that tends to turn your world upside down (in a good way!). I had undertaken this program because of a growing realisation that I was interested in social issues and that while money wasn’t my thing as such, that people certainly were – especially people who were marginalised in some way. I’d been volunteering as a telephone counsellor for a few years and slowly developing more self-awareness about what mattered to me, what my values were and had started to consider those simple questions like ‘what’s your purpose in life?’ And creating the space for those questions led to some clarity about what I should do next.

David Hardie recently worked as a Program Manager and Intern at the Myer Foundation and Sidney Myer Fund. He is the Founder of the Slingsby Foundation and strongly believes that those Australians who are financially well-off should grow Australian philanthropy and help build the social fabric of the nation that has provided their wealth.