Why Don’t The Rich Give More?
- June 7, 2017
- 1:22 pm
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Why Don't the Rich Give More? Here's Why...
By John Hawthorne
It’s ironic, really. You’d think that millionaires and billionaires would be some of the most generous people on the planet. After all, they could literally withdraw all their money from the bank and use it to insulate the walls of their palatial mansions. They could heat their houses by lighting bales of bills on fire.
But the crazy thing is that compared to the rest of the population, the super wealthy give away a smaller proportion of their income. In Britain, the uber rich can secure a spot in the top 100 givers spot by donating a miniscule 1.08% of their income.
Transporting these numbers into the U.S., it would mean that the average American could have those bragging rights by giving about $400 to charity. That’s hilarious in a heartbreaking sort of way.
The Atlantic puts it this way:
One of the most surprising facts of charity in America is that the people who can least afford to give are the ones who donate the most. In 2011, the wealthiest Americans—those with earnings in the top 20 percent—contributed on average 1.3 percent of their income to charity. By comparison, Americans at the base of the income pyramid—those in the bottom 20 percent—donated 3.2 percent of their income. The relative generosity of lower-income Americans is accentuated by the fact that many cannot take advantage of the charitable tax deduction because they do not itemize deductions on their income-tax returns.
Of course, this raises one, somewhat huge question: What is really going on?
There is a level of absurdity to the whole thing. If anyone can afford to part with some cash, it’s the men and women who don’t think twice about dropping multiple millions on a yacht of Noahic proportions. So what’s the issue here? Why is it so difficult to separate the wealthy from their money? In this post, we’re going to lay out 7 reasons why the rich don’t give more. By the end, you’ll probably go one of two directions:
- Outrage
- Insight into how to approach the wealthy for donations
#1 – The Wealthy Don’t Give More Because They Plan To Give Later
Let’s start with the best reason the rich aren’t giving more now: they have plans to give a lot later. A number of the wealthiest individuals in the world – Bill Gates, Warren Buffet, Mark Zuckerberg – have pledged to give a huge amount of wealth over the course of their lifetimes.
5 Hour Energy creator (and multi-gazillionaire) Manoj Bhargava has said that he’s going to give away at least 90% of his fortune to charity. Sara Blakely, creator of Spanx, has hopped aboard The Giving Pledge, in which the rich promise to give away 99% of their wealth.
So before you begin gnashing your teeth and foaming at the mouth, at least give credit to those individuals who have a plan to donate.
#2 – The Wealthy Don’t Like Being Bothered
Now onto some of the less pleasant reasons why the wealthy tend to be more tightfisted when it comes to their cash. The simple truth is they often don’t want to be bothered. They’ve got things to do, people to see, small corporations to crush. They are empire runners, making deals, running for president, selling huge amounts of stock.
Giving away massive amounts of money can be time consuming. There are tax options to consider and causes to research. Wealthy magnates don’t want to funnel cash into an elaborate Ponzi/pyramid scheme. Although their donations could potentially save millions of lives…it simply takes too much time.
To be fair, there are serious challenges in donating large volumes of cash. It’s an understandable challenge. Not all rich people fall prey to this trap, as you’ll see below.
#3 – The Wealthy Feel Overwhelmed By Choices
There are an enormous amount of options when it comes to charitable donations, and just like anyone else, they can be overwhelmed by the options. And let’s be honest: many of them aren’t exactly subtle when asking for donations. The hyper-wealthy are often bombarded by organizations asking them to “make a one-time donation”.
Additionally, it can be challenging to find an organization that aligns with their values. As Google’s Craig Silverstein said:
"The advice I got as I embarked on giving was: Focus on something you’re passionate about. There are so many worthy causes, but none jumped out at me; how could I choose? I was paralyzed by too many options."
Unfortunately, not everyone is as altruistic as Silverstein, who donated 70% of his fortune to women’s education. Many of the rich are more interested in acquiring more houses, Lamborghinis, and hot tubs than in saving the world.
#4 – The Wealthy Don’t Want To Be Hassled
It’s amazing how many long-lost relatives come out of the woodwork when you become rich. That second uncle’s brother Larry and the fifth cousin were three times removed. When you make money, you become a target for people seeking opportunities to better their own life. . And, as even we mortals know, it’s tough to say no to family and friends.
Psychologist Moira Summers compares sudden riches to announcing that you like steak…and having someone deliver 200 cattle to your door. She says:
"That was very sweet, but what do you do with 200 steers? You need to know how to deal with them, and that’s very different than eating a steak. Deciding what to do with the money can require work within itself."
Unfortunately, one of the side effects of this is that it can desensitize the rich to legitimate needs. Some people, such as some of the billionaires mentioned above, are willing to endure the hassle in order to find worthwhile causes, while others simply don’t want to deal with it.
#5 – The Wealthy Are Nervous About Financial Stability
Consider the situation some of the rich find themselves in. They may have once been relatively poor, just trying to make ends meet. Thanks to their hard work and smart moves, they’ve acquired a huge amount of wealth. But in the back of their minds, they always remember what it’s like to not have money. On top of this, there are countless stories of rich people suddenly losing it all when the market crashes or a business deal goes South.
And so they’re uncomfortable with the idea of giving up their hard earned money. They’re worried about something going wrong. About everything going to pieces. About all their hard work suddenly vanishing, like that guy who sells you a lemon used car then never returns your calls. It’s a legitimate, understandable response.
Of course, there are others who don’t have that excuse, either because they’ve inherited huge sums of money or have built up so much wealth there’s no possibility of it going up in smoke.
#6 – The Wealthy Aren’t Exposed To Much Need
When you’re traveling in private luxury jets and staying at elite resorts, you’re not going to see much poverty or need. You won’t rub shoulders with a struggling family on the 18th hole of the golf course, and you won’t encounter developing world poverty as you sit down to a massive steak dinner.
One of the reasons the rich don’t give as much to the needy is that they don’t see the needy as much. Ken Stern wrote in The Atlantic:
Wealthy people who lived in homogeneously affluent areas—areas where more than 40 percent of households earned at least $200,000 a year—were less generous than comparably wealthy people who lived in more socioeconomically diverse surroundings. It seems that insulation from people in need may dampen the charitable impulse.
Implications For Nonprofits and Charities
The above reasons present some interesting lessons for nonprofits and charities. First, they need to be sensitive to the circumstances a wealthy person is in. Are they newly wealthy or well-established? If they’re newly wealthy, they’re probably being bombarded with requests for money and may not be open to helping.
Second, nonprofits and charities need to be aware of plans already in place. As noted, numerous rich individuals already have solid plans for donating a huge amount of their wealth. Their commitment to these plans will, at times, preclude them from donating to other causes.
Finally, the wealthy need to be sold on a cause they truly care about. When you combine their insulation from need and the overwhelming number of options available to them, it’s easy for them to tune you out. For most people, an incentive is needed to give.
Conclusion
It needs to be stated that even though the rich may not give as much percentage wise, many still do contribute huge sums to crucial causes. At Business Connect, we recognize that although a controversial topic, shedding light on any new perspective is a core of journalistic democracy.
