Rethinking charity

It’s a common response among charity donors. “I want 100% of my money to go fund the cause.” “How do I know the money I’m donating doesn’t go into your pocket instead of the cause?” “Please make sure that none of my donations goes to overhead, I want all my money to go to those in need.”

But do you know that charities have to pay for overhead? Someone has to organize the charity. Someone has to actually do the work of taking the money and giving it to the cause. Someone has to pay for all the credit card processing fees, transportation and logistic costs, equipment, admin and accounting, fundraising, website maintenance, etc.

The only charity I know of that manages to utilize 100% of all public donations on their cause is charity water. And the only way they can do this is by using a separate bank account funded by a separate group of private donors. These private donors will contribute a little extra to “match” your contribution just to cover all the overhead and operating expenses, including credit card processing fees. They do this just so you’re comfortable knowing that 100% of your donation goes to the cause.

Why do we apply this double standard to charities? Compare them to the standard for-profit company. If you’re the CEO of a video game company, or even a tobacco company, you can comfortably earn millions of dollars and contribute zero, or even negative, good to society. Whereas the CEO of a charity fights for a cause and contributes to the good of society but can’t earn half that amount without causing a public outcry.

If you really want to do good in the world, it’s actually better and more efficient to become the CEO of a video game company and spend half your salary to privately fund a charity, much like charity water’s group of private donors perhaps, instead of actually becoming the CEO of a charity. This way, you get to keep a bigger salary and still have complete control over the charity by being a board member. Think about it, there’s seriously something wrong with that picture.

Charities are forced to keep there overhead low and spend as much as possible on the actual cause. Failing to do that would cause a huge public backlash. That means charities can’t hire bright people, they can’t afford to spend big on daring projects with huge returns, and they can’t even pay their workers the average salary of a for-profit employee.

On the other hand, for-profit companies are free to spend as much overhead as the need, they can find and hire lots of talent, they can afford to take big projects with high risk but huge returns, and no one would even bat an eye if they reported a loss. If a charity reported a loss, just imagine how the public would respond!

If charities are forced to keep their overhead low, they’re operating on a scarcity mindset and won’t have the resources to achieve their goal. Imagine a bake sale with just 5% overhead raising a grand total of $100. Would you prefer that, or a professionally organized fundraising campaign with a 40% overhead but raising a grand total of $1,000,000? Well, guess what? A fundraiser with a 40% overhead would most likely cause a huge public outcry regardless of how much is actually raised.

Or consider this. All the volunteers at the bake sale, instead of spending 10 hours baking and selling cakes, what if they were to work their day jobs for 10 hours and donate their earnings? Wouldn’t that be exponentially more than the $100 raised by the bake sale? Well, guess what? Most people are more reluctant to donate their earnings and would much prefer to donate their time doing a bake sale instead, even though it’s less effective.

The way we think about charity is dead wrong and the TED talk below by Dan Pallotta masterfully illustrates why.

With this, I hope you would reconsider what charity is and rethink what it means to contribute to a charity.


HT Jemma Balmer

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Why are people so reluctant to donate?

You see people in the streets, walking past charities, ignoring them. They walk past the salvation army, ignoring the guy ringing his bell. They walk past the habitat for humanity booth, ignoring the lady asking for donations. Why is it so hard to get people to donate?

Is it because most people don’t trust charities? Or they think that most of their donations will be used by the charity as admin and logistic costs, leaving very little for the actual charity itself? Perhaps it’s a trust issue and they’re afraid of accidentally giving money away to some con man posing as a charity?

Or it could be that most people are actually short on money, they’re living paycheck to paycheck and can’t even make ends meet. That’s a possibility too. Maybe most people are fundamentally selfish, some philosophers sometime to believe that. Why would anyone want to give away their hard earned cash?

Have you ever tried convincing someone to donate? Do you know how difficult that task is? Trying to get their attention is hard enough, but to actually convince them to part with their money? Good luck.

They always try to ignore you, avoid you, and in the rare moment that you managed to talk to them, they will come up with all kinds of excuses not to donate brush you off their backs.

Ultimately, I believe the reason is that humans are too clever and too creative for their own good. They seem to be capable of coming up with millions of reasons why they don’t, or won’t donate to charity.

What’s the solution then? How do we get more people to donate and contribute to the greater good? As an individual, I don’t know. But I’m sure a lot of charities are looking into it, there are even organizations like 80,000 hours that teaches people how to choose a satisfying career AND help solve world problems.

So what can I do to help? How do I get more people to donate for a cause? It’s hard to change people’s mind, logic and reasons don’t work very well. How do I make them willingly want to change?

The only thing I can think of is to write about it and hope my readers would willingly change and donate more, especially those with the capacity to. Do you know how rich you are? Give what you can and take a pledge, most of you are wealthy enough to.

Do you help homeless people?

This is a dilemma everyone has gone through, you see a homeless person out on the street begging for money. Do you offer help?

It’s hard being homeless, you know that, and there’s probably a reason why they’re homeless in the first place. Alcohol, family issues, violence, money issues, house burnt down, declared bankruptcy due to loans and whatnot.

Any series of unfortunate events will do and it may or may not be their fault that they’re homeless. Knowing this, would you offer help?

Maybe you noticed a pack of cigarettes in their pocket. Maybe they reek of alcohol. Maybe if you give them some money, they’ll just waste it all again. Maybe it’s their fault that they became homeless. Maybe they haven’t learned their lesson and will just repeat the same mistake again.

Or maybe they have learned their lesson, maybe they just need that little boost. Maybe they’re already smart at managing themselves, they can’t have survived in the streets for so long if they didn’t know what they’re doing.

You should know how hard it is to get a foothold in society when you haven’t showered in days, when you have to struggle just to get food, when you don’t even have basic shelter? It stresses you, do you know how stressful it is to not even have your basic needs like food, shelter and clothing met?

So help them out once in a while. You can’t help them all, it’s a tough problem that’s not easy to solve. But you can at least help one person, offer them your spare change. Go talk to them, ask what they want or need help with.

Give them food if you’re not comfortable giving them money. Offer them some socks, shirts, warm clothing and maybe even some underwear. Do you think they have the luxury to do their laundry?

Whether they can get their life back is one thing. Offering help and temporary relief is another. We won’t solve their problem but at least we can help ease their lives a bit. Even if it’s just a bit, it’ll mean a lot to them.