If I were a rich man, I’d have a rich man’s worries. I’d worry about the stock market. I’d worry about my tax bracket. And I’d worry about how to make a difference in the world—how to use my hard-earned bucks to improve the lives of schoolchildren in Philly, or AIDS sufferers in Africa, or homeless families in Haiti.
Most people don’t fret very much about that. We text $10 to SAVE JAPAN after an earthquake; we help out at the food bank now and then. But if you were a rich man—if you had a spare $10,000, or $10 million—how could you figure out the best way to give it away?
You could ask Kat Rosqueta.
Rosqueta—Kat’s short for Katherina—is the executive director of the University of Pennsylvania’s Center for High Impact Philanthropy, or CHIP to its familiars. CHIP was founded five years ago by a group of Wharton alums to help philanthropists get what’s known as “bang for the buck.”
The million-dollar question in charitable work these days, Rosqueta explains, is, “How much does change cost?” Different do-gooders have different philosophical impulses; some take the short-term perspective and fund a soup kitchen, while others look long-term, funding job training for those standing in the soup kitchen’s line. What CHIP tries to do is estimate the “cost per impact” of various ways and means of doing good—to apply the science of sabermetrics, made famous in baseball, to the art of giving money away. Think of it as Moneyball Philanthropy. “Donors aren’t just satisfying an emotional desire to feel good about themselves,” says local philanthropist Peter Gould. “They’re trying to accomplish something.” Charitable giving, as he sees it, is an investment, and like any investment, it has a goal: not capitalism’s ROI—“return on investment”—but SROI, or “social return on investment,” in the form of improved lives.
To that end, in the late 1990s, venture capitalists began to extend business-world principles to the hidebound philanthropic world, looking for evidence that their do-gooding did good. The push to quantify SROI stepped up as charitable giving constricted during the recent recession; fewer resources meant more careful shepherding of what remained. Another driver was the collapse of Bernie Madoff’s empire, which gutted a number of charitable foundations that had put too many eggs in his basket. That today’s kazillionaires tend to be entrepreneurs who earned their money, not stewards of old family wealth, has also had an impact on how they view giving it away.
Ann Nolan Reese, president of the board of overseers of Penn’s School of Social Policy and Practice, is one of what CHIP terms “high-net-worth philanthropists”—donors whose giving averages $1.5 million annually. She made her fortune in finance, and she points out that if you want to invest money in the business world, you have tons of resources to turn to: general macroeconomic information, spot analyses of specific companies, mutual funds where you can measure performance. But when it comes to charitable giving, quantifiable information is hard to find. “Philanthropists would never invest in stocks as lackadaisically as they do in charities,” Reese says. She notes two high-profile examples of do-gooding gone bad: Oprah’s scandal-plagued boarding school in South Africa, and Madonna’s school in Malawi, which ate up $3.8 million in donations without ever breaking ground. “If Oprah and Madonna can’t get it right,” asks Reese, “who can?”