How do you give away billions? On the surface it’s a simple question. However, what if you want to make a lasting quantifiable impact? What if you want to do a deep dive and determine which organizations are most needy? Or, once an entity receives a donation, were the funds used wisely and efficiently?
This semester, students at Texas Lutheran University will steal a page from MacKenzie Scott’s playbook as they pro-actively evaluate and implement intelligent philanthropy.
Over the last three years, Scott, the private billionaire co-founder of Amazon, has turned philanthropy on its head. Most foundation boards are comprised of well respected, but gray-haired retirees who passively wait for a grant request to come in. Some requests are good, while others are quite mediocre. This is a less-than-optimal plan for high impact.
Instead of having a passive board of elder statesman, Scott has a team that quietly, thoughtfully and analytically evaluates charitable opportunities. Once they identify worthy causes, they privately contact them and deliver a check with the mandate of expanding good works.
This puts the burden of evaluation and diligence on Scott and her team. Scott is “all-in” when it comes to finding new opportunities to improve the world. Since going down this road, Scott has donated $12 billion to more than 1,250 worthy causes. This is impressive.
At the same time, there are many young kids and emerging professionals with lots of energy and desire to improve the world. Unfortunately, they lack experience, contacts or financial resources necessary to gain the attention of foundations or charitable boards.
These are the “kumbaya” kids. They are long on energy and passion to help, but short on business acumen and real-world practice.
Seeing what MacKenzie Scott has accomplished, students at Texas Lutheran were motivated to borrow, and expand upon, the concept. In doing so, they created the Big Dog Endowment.
The goal of Big Dog Endowment is to teach a data-driven curriculum that identifies, evaluates and measures philanthropic success. They evaluate characteristics and factors of an “impactful and efficient” charity versus “less-than-optimal” ones bloated with overhead or political agendas. Much like an analyst evaluating financial statements for investment ideas, the Big Dog scholars must be conversant in how money flows in and out of a non-profit. They must evaluate efficiency and measure how they impact those in need. At a minimum, they know that if there is no money, there will be no mission.
This is not a theoretical exercise. The Big Dog students were funded with a $2 million endowment. Each semester, the student philanthropists must evaluate their portfolio and identify a sustainable distribution rate. This requires balancing current distributions while growing the portfolio to overcome inflation and maintain purchasing power.
In their first year, the TLU students must determine how best to give away $60,000. Competing student teams research the most pressing needs in society and present and defend the data and conclusions to classmates and sponsors. The winning presentation gets to fund their charity. However, they must also evaluate the opportunity cost relative to their annual giving budget. As such, the student scholars must determine how much of their budget should be allocated to each project while not overspending.
In a world with many challenges, it is exciting to see the kumbaya kids tackle challenging and perplexing issues. It will be even more interesting to observe as they learn the business of philanthropy. Already, they are learning, “No Money, No Mission.” If you can’t fund your project, it is just good intentions.
Additionally, the students must differentiate hype and spin versus hard data and facts. The most difficult societal problems rarely have simple solutions, and a soundbite does not qualify as meaningful analysis. Successful analysis has less to do with attacking “millionaires and billionaires” and instead asks thought-provoking questions like, “How does this impact the single mom raising three kids?”
Hopefully, Big Dog Endowment students will gain legitimate business skills that can be utilized throughout society. Furthermore, maybe charities, foundations and non-profits will see the value and vision that well-educated young people bring to non-profit board of directors. And in the process, a challenged planet will become a better place.
Dave Sather is a Certified Financial Planner and the CEO of the Sather Financial Group, a fee-only strategic planning and investment management firm.