Walter Bagehot wrote more than a century ago in Lombard Street that “The good times of high prices always engender much fraud. All people are most credulous when they are most happy and when much money has been made, when some people are really making it, there is a happy opportunity for ingenious mendacity.” Good times and bull markets invariably leads to market bubbles involving any number of investment manias, from tulips to Florida real estate, to dot-com companies and cryptocurrencies. Now, this mania appears to have spread to the world of philanthropy.
Melinda French Gates, former wife of Bill Gates, recently wrote that as useful as evaluations of grants might be, “it is equally important to place trust in the people and organizations we partner with and let them define success on their own terms.” Mackenzie Scott, the former wife of Jeff Bezos, has touted the organizations she’s given to because they are led by people with “lived experience,” and the gifts are completely unrestricted.
“Why create a foundation in the first place?” Bill Gates asked in a blog post last month that reads like a criticism of the approach taken by his former wife and Scott. “Would it have been better to donate the money directly to existing groups?” For Gates, the answer is obvious. He said that “the most effective way to solve … more of the world’s problems … was to build a new organization with people from the public and private sectors who know how to get new tools invented and delivered.”
Whether or not one appreciates what Gates has done with his money, this data-driven, metric-using view of philanthropy appears to be going out of style.
What does it mean when recipients of grants “define success on their own terms?” Or rely on the voices of “lived experience”? According to this approach, the “victims” — the formerly homeless, poor, or incarcerated — know better than the donors and the foundation staff and are in a better position to evaluate the results of their charity.
The rise of “lived experience” philanthropy — as opposed to evidence-based philanthropy — is connected to the importance of viewing things from the victim’s point of view. Lived experience philanthropy is an implied attack on wealth itself because, by definition, the wealthy are not victims, they do not understand victims, and have no knowledge that would allow them to help victims. Giving in this way is an expression of values — support for victims — rather than an effort to solve problems.
The head of the Boston Foundation recently pointed to the words of a grantee who said, “The very fact of living (through) injustice, living through inequality, and coming out the other side of discrimination gives you an expertise that you will never learn in an ivory tower.” Although this may be true up to a point, it amounts to allowing a grantee to evaluate his own grant, or to act as a judge in his own case.
For this reason, many foundations have found it useful over the years to call upon experts in universities or among their own staffs to evaluate their programs and to determine what works and does not work in addressing problems such as poverty, crime, and homelessness. That is more or less what Gates recommends and what his ex-wife and Ms. Scott reject.
But lived experience is what some new or younger philanthropists wish to recognize in the place of expert judgment. Indeed, that standard has become so ubiquitous that the head of one charity recently complained in the Chronicle of Philanthropy that he was regularly required to describe being shot in order to win support for his youth-serving organization.
Nevertheless, experts on philanthropy are lining up to praise the new strategy recommended by Scott, French Gates, and others. Megan Ming Francis, a professor at the University of Washington, is impressed by their reliance on the “creativity” of grantees. She told the Chronicle of Philanthropy that foundations struggled to respond to calls for racial justice in 2020. She believes that the Gates Foundation is not doing enough “innovation” in its grantmaking.
Those philanthropists who shoved large sums out the door in response to the murder of George Floyd seem to have few regrets, despite the fact that leaders of the Black Lives Matter movement have been accused of squandering tens of millions on charter flights, private security, and vacation homes. It is not even clear that the group was qualified to receive the funds because it did not have a tax exemption, as one official claimed that the requirement is “racist.” The voices of lived experience turned out to be frauds and charlatans.
In that situation, a donor who offered smaller grants at first and then used metrics to judge whether more should be invested would have had a better chance of using its funds effectively. On the other hand, many of these donors were more interested in signaling their virtues about race than they were in the effective use of the funds.
This current trend is a move away from the early theories of philanthropy going back to the progressive era and the Rockefeller Foundation, which were evidence-based. Those donors tried to solve social or medical problems through experimentation, evaluation, and research, and allocated funds with precise goals in mind. But this is no longer a useful approach when the goals of philanthropists are so vague and lofty as to defy practical strategies. How, for example, are they supposed to fix inequality and end racism or “white privilege?”
Money may have become so plentiful to these donors that they are prepared to cast it to the winds with little thought as to what it may or may not accomplish. As Walter Bagehot observed long ago, easy come, easy go.
CLICK HERE TO READ MORE FROM RESTORING AMERICA
Naomi Schaefer Riley is a senior fellow at the American Enterprise Institute, where she focuses on child welfare and foster care issues. Jim Piereson is a senior fellow at the Manhattan Institute.
