Andrew Carnegie once said, “It is more difficult to give money away intelligently than to earn it in the first place.” This statement still holds true today—it can seem like a daunting task.
For many of us, it’s simply a matter of giving to charities from which we feel the most “tug.” But ad hoc philanthropic actions, however well intended, are often not enough to make a real difference. Worse, they can have negative unintended consequences on the social issues they aim to fix. In Africa, for example, funders distributed mosquito nets for free to reduce the incidence of malaria but found that they were in competition with local shop owners whose livelihood depended on income from selling the nets.
To avoid situations like these when giving back, you need to have more than a cursory understanding of the social issues you want to support; you must also clarify your own objectives. I call this approach “entrepreneurial philanthropy,” as it is similar to starting your own new business—you are creating a viable plan for tangible impact on a chosen social issue or on target beneficiaries.
The premise of this approach is to distinguish between your intended impact, which is personal, vis-à-vis social issues that can be objectively studied and addressed. There are six steps to take:
1. Study the social issues.
It is tempting to simply write a check to a charity referred by a friend or to support cost-effective charities based on online resources without investing the time to better understand the social issues you care about and the best way to tackle them. But it’s also important to study how factors feeding into an issue interplay with each other and to identify their underlying causes before acting.
2. Decide how to get involved.
The next step is to decide how to get involved. There are four considerations:
- Underlying causes versus symptoms: If you tackle the underlying causes of an issue, it can result in a more lasting impact. But it can also be more difficult to quantify success and may also take a longer time. If you tackle a symptom of a bigger social issue, such as directly providing food to a homeless person who needs it, impact is more tangible and immediate. But this approach may not have any system-wide impact other than serving as a “good example” for others to emulate.
- Popular versus niche: Some philanthropists gravitate towards popular issues such as education and disaster relief, where the needs are more apparent and widespread. Others consciously seek out niche charities, choosing to focus on underserved social needs that affect a smaller percentage of the population—juvenile diabetes, for example.
- Global versus local: Some issues are global in nature—removing plastics from the ocean, for example, requires international collaboration. Others, such as preserving heritage arts of a marginalized indigenous tribe, are community-specific.
- Direct social welfare versus system-wide initiatives: Social welfare support tends to be institutionalized through charities with government subvention and is easier to identify for support. System-wide initiatives, such as reducing food waste by donating excess food to the hungry, entail comparatively more complex work and joint efforts by private, public, and charity sectors.
3. Assess your time horizon of impact.
We often disregard the time horizon for our intended impact when deciding how to help. For example, building an elderly care center may take a year to make an impact while finding lasting solutions to a specific global health issue may take years, if not decades. At the other extreme, providing shelter to a homeless man will enable him to get by through the night. Clarifying the time horizon of your intended impact hones in the range of viable options available to you.
4. Ask: Is there a tipping point?
Sometimes there are shifts in the social ecosystem that are conducive to one-off philanthropic actions that trigger massive impact. Some of these developments are sudden—a crisis that galvanizes public support for an issue that was previously ignored. Others are predictable, slow-moving trends such as an aging population. Tipping points can also result from new social, technological, and financial innovations that can enable the scaling of impact by the millions in a way that wasn’t previously possible. Anticipating these tipping points, and making timely and targeted philanthropic interventions, can have an outsized impact beyond traditional giving methods.
5. Decide what resources to deploy.
After you have a better understanding of the social issues you want to take on, decide on your approach and what resources to deploy. Is straightforward charitable giving the way to go? Or should you try blended approaches of “doing good while doing well”—such as impact investing or responsible investing?
6. Track your progress.
Once you have decided on your intended impact, your time horizon, and what resources to deploy (whether that’s time, money, or expertise), you must measure and evaluate your progress against your goals to ensure that your effort is grounded in evidence.
Entrepreneurial philanthropy is not just about supporting the most effective and trustworthy charity that works on a social issue you care about. It is a mindset that constantly seeks opportunities to build intended impact out of informed understanding.