The Price of Advice: Chronicles of a Young Philanthropist, Part III

Readers of this blog might recall my earlier posts about Michael, a young man who is expecting to donate about $70 million over the coming decade.

In the last six months, Michael has committed himself to understanding both the responsibilities and challenges of philanthropy. There was some interest in his progress among Freakonomics readers, so I thought it might be good to follow him around for a while.

Consider this a “blog alert,” if you will.

Some background: I met Michael at Harvard over a decade ago, when I began a study on the young and wealthy in their twenties. Michael was a junior at Harvard College and so he didn’t fit into my protocol.

Last year, Michael called me because I had advised a few of his wealthy peers who were forming family foundations. I’m no expert in wealth management and I initially turned down the offer to give advice. But on one point I thought I could be useful.

I knew that philanthropy is most effective when the donor has a clear understanding of his/her own role and can answer the question, “What is motivating me to give?” After completing my research on a sample of elite twenty-somethings, I noticed that few people had a clear sense of their self interest — most people explained that they want to change the world. While there is nothing wrong with this motive, it’s predictable.

I told the three people who came to me for advice that, in my opinion, prospective donors had two traits working against them.

First, they confused charity with commerce: that is, they uncritically applied the language of outcome-oriented investment to efforts to change human behavior in social settings. Humans, alas, don’t operate neatly according to market logic, though incentives can shift behavior.

Second, donors seem reluctant to talk about their own self interest. Instead of admitting their personal desires, they speak of selfless charity. Of course, donors can do whatever they want with their money, but this attitude doesn’t help them grow.

The three donors asked for my help in crafting a strategy for alleviating urban poverty. I agreed to work with them for one year, but with conditions. Most important, they had to arrive at a “loss figure” — a sum of money that they would give away (to actual causes), but which would be entirely devoted to their own learning.

They had to forgo any serious outcome-based evaluations of the families/service providers who received their support. (They turned over the management of the grant to a donor-advised fund.) Instead, they had to privilege and pay attention to their own development.

At the end of a year, we would reflect on the impact of their philanthropy: we would talk about their experiences, their sense of how their money impacted the families, etc.

The catch: whether they liked the results or not, they had to provide a second grant disbursement to the organizations (contingent on the fiscal responsibility of the recipient grantees). I felt this freed them up from the expectation of evaluating anything other than their own personal transformation. The three donors agreed on a “loss figure” of $500,000, meaning they would each give $1,000,000.

I did not receive any compensation. I was interested in accessing a world shut off to scholars. So as in the past, I only asked that they speak to me at least over a ten-year period, so I could track their stewardship of their respective family foundations.

The year-long process taught me a lot about the civic sensibility of the modern American elite. Perhaps most illuminating: the donors had very rigid ideas concerning the capacity of poor people to change their behavior. When they met poor families (in Chicago and New York), they expected that their money would have magical powers. I exaggerate only slightly.

They believed that poverty was largely a result of resource deficiencies and organizational inefficiencies: if the poor had more money and their service providers could simply manage their giving more efficiently, change would happen. None placed much emphasis on feelings of self worth, the long-term nature of behavioral change or, most important, that staying above water is itself an accomplishment for a poor household. Everyone modeled their expectations after their family business or other corporate workplaces where they saw the “bottom line” motivate people to meet certain standards of achievement.

Over the year, about two dozen poor families welcomed the donors into their lives. They opened up their household budgets; they were candid about their illegal activity; a few shared their private journals. The conversations were moments of honest self reflection.

Over dinner, the donors told poor families (sometimes angrily) that they expected change to occur more quickly; the parents around the table educated them about what kinds of change can reasonably be expected. For their part, the poor received an intensive dose of market logic, and many now use incentives in the home to motivate family members. Privately, the donors admitted uncertainty about the capacity of philanthropy to change people’s behavior. Along the way, each wondered whether they should give up and focus on other pursuits.

I don’t think any of the three donors became enlightened after the year was over. I doubt I have much of a future in professional consultation.

The three individuals continue to operate family foundations, but they all reacted differently to the intense exposure to daily poverty. The one consistent outcome is that each remains true to the philosophy of entrepreneurially-oriented investing: i.e., the use of incentives, emphasis on individual responsibility, pursuit of investment-oriented gains on charitable giving, etc.

I might point to one other result of this process: the donors came away with a much better sense of their own assumptions/stereotypes. They had to think as poor people do, even as they tried to change poor people’s thinking.

For example, they learned that poor families who have access to small amounts of cash — as little as $20 — can stave off problems that might otherwise spiral out of control. (Previously they dismissed the utility of using such small sums for change.) Of course, credit unions have long understood this — and one of the donors is now helping to fund organizations that replicate this strategy in New York.

They also learned that, in some cases, process is as important as outcome. For example, service providers who keep families together — despite dramatic improvements — are playing a valuable function in communities where things always fall apart. And even if a child’s grades don’t improve, sometimes staying in school is a huge mark of success for the family.

All of this brings me back to Michael. When he asked me for advice, I said no. I was only interested in tracking his progress objectively. I told him to consult a few experts.

Then he asked about my experiences with the three donors and he actually spoke with each of them. One evening he phoned me excitedly and asked that I run him through the same paces. When I asked why, he laughed:

Each person I called told me they had more anxiety giving their money away than running a business. I’ve been losing sleep for a year trying to give this damn money away. They all said that the year (with you) was mostly about figuring out what they wanted out of the deal. I think I need that.

I told him I would consider it, but I suggested that he begin by taking the advice of professional experts — firms with accomplished track records in money management and charitable consultation. This led to an agreement: before we decided to work together, he would invite the counsel of professional experts. (Recall that he has already asked for suggestions from readers of this blog as well as “The Thugz” — the guys with whom I watched season five of The Wire.) And if we did work together I would receive no compensation — only the freedom to document his experiences.

He has retained three professional advising firms. The cost is not cheap. He is paying three consulting firms a total of $19,000 for three independent assessments. (Each assessment comes with a conceptual plan that can guide Michael over the next ten years, as well as a practical description of the firm’s services during that time period.)

Each firm was asked to respond to Michael’s stated desire to “be involved and learn from charity.” Michael made it clear that he was interested in the process of giving; he wanted more than a simple update every six months about the status of his money. He asked each firm to provide him with a strategy for learning along the way.

In two weeks we should have the results.

Finally, because I couldn’t resist, I asked Michael to throw a little business to my friend Dorothy, who offered to provide him with a similar game plan. Dorothy has helped me with field research in Chicago’s ghettos for years, and her voice has filled these pages on several occasions. With no prompting from me, Dorothy said her fee would be $275 ($225 plus bus fare to visit a few poor communities in the suburbs). I wonder if I should tell her what the firms are getting paid!

The three experts that Michael consulted asked that I not identify them, but they were all gracious enough to allow me to quote anonymously from their work.

Stay tuned.

Lili Fulton

I also wish Michael luck in his attempt to improve the world. Actually I think we all need to work on that cause together. Michael has access to the useful tool called money and he has to use it wisely. We all have access to varying amounts of different tools to improve the world and we all need to use them as best we can.
With this challenge in mind I would like to promote an independent charity I am working on: a school/orphanage for AIDS orphans in Kenya. It is an extremely worthy cause, it is totally under funded, but it is well functioning and it needs all the help it can get. To find out more please check out the website:
thanks for any help any of you can offer


I'm intrigued by this young man's desire to do good. Trying to put myself in his shoes (however futile it may be) I can't help but imagine how conflicted this guy must be, how many trials he must go through on a daily basis, how incredibly daunting it must be trying to achieve the goal of "helping people in the best way possible". Putting yourself into the public domain; opening yourself to criticism (bitter or otherwise) from strangers on all sides; having huge public expectations to live up to; are things us anonymous commoners are lucky not to experience.

Michael has put a huge stake on his reputation to have come even this far. He faces responsibility for every decision he takes now, and whether he achieves or fails will be out there for all to see. Not only that, he's trying to find his own way to spend the money, to beat his own path and *create* something, as opposed to throwing his money at an established charity. So to the detractors and bitter nobodies : what have you offered? What are YOU putting on stake? A piddly 2 minute remark is easy and worthless because a. you don't have to consider formulating and executing that plan, b. you don't have to bear the consequences.

My point is I think the story here is Michael's journey. Having the courage to stay on course, to stay centered in a situation like this is a colossal task most of us will never face. I wish him all the best.

And don't blow all the money.



You should let Michael know about Resource Generation (,) an organization that works with young people with wealth who want to align their resources with their values to impact social change.

Also, there is a retreat coming up in October that he should attend (

Brian D

I recognize that I am fascinated by this series of posts (I read every one and a lot of the comments) and that I am unable to read them without disdain. There is something inherently and annoyingly indulgent about this $70 million problem.

I don't know exactly how to explain why I have no sympathy for the philanthropist who is dabbling in different issues, trying different consultants on for size, getting frustrated with his inability to fix things in a business-like manner... maybe an explanation is in the word "problem" itself in the above post. How can that word be used to describe this rich person's charitable challenge (opportunity may be a better word, or privilege) AND someone's need for $20 to stave off a real crisis?


Donors, however small, have this innate need to 'see' their donation working. My cousin told me of this incident where a group of ladies (all homemakers with very successful husbands) collected Rs.7000 (approx $170) once to donate to charity. They approached my cousin, who's a doctor, to buy some equipment for the Government Hospital where she works. She told them that you wouldn't get any equipment for this money, and asked them to hand over the money to her so that she could give it to patients who couldn't pay for their medicines. They seemed very reluctant, and ended up buying bedsheets for a hospital that already had too many bedsheets.

I'm guessing this works on a much larger scale. Often, the best policy is to give money to some organisation that does good work, and let them use it the way they want to. Trying to do it yourself might end up being counterproductive.

H Tran

Maybe instead of 'giving', he could choose to 'invest'. Create local jobs (& local demand) so that those people don't have to commute (often public transport) say 90min to earn $8/hr.


Not Blert?


I think he should subsidize inferior goods. Give a nickel rebate on every pack of ramen. This would help the poor, and not be attractive to most people who would rather eat something better.

I've been in the situation of looking for help, and everything available is free. Since it's free, it gets rationed by waiting and having to give your personal and financial information over and over. And having to ask for everything, all the time, sucks. I think it would be better if inferior goods were subsidized for everybody. It would give the poor more choice and more privacy.

Rufus T. Harlemberry

"Blog alert" eh? The internet rule is that all new blog related ideas must coin a new blog word, or blord. So henceforth "blog alert" shall be bloglert. You're welcome, internet.


How about getting started by just handing out cash on a daily basis to whomever you wish? The sign wielding homeless person; the extra nice cashier; a mother in line at the grocery store. You'd actually affect a lot of lives and the direct feedback should make any personal satisfaction the overhead model could provide pale in comparison. Plus, it would be loads of fun! When the cranky manager confirms what the mother of four cashier tells you about not being allowed to accept money, you could persist, perhaps all the way to asking the cashier how much he/she would need to quit the job. The daily exposure you'd get to this random process couldn't help but lead to some amazing insights and outcomes. A few of those might even lead to some good ideas on how to go about getting the results you want on a larger scale.


Have worked in a charitable organization and I was amazed at the selfish attitude of donors. Before I started there, I thought people gave out of pure generosity and kindness to others. Not so. They wanted to know that they would get for their money; recognition was very important and photo ops with blown-up checks were always required. Names over doors were also popular. I was disheartened at the amount of "administrative" money was given over to stroking these selfish egos.

I'll be reading this as it progresses with interest as it is a refreshing change to the "charitable world" I know.


I am coming into this thread a little late - probably should have responded to the 'What would you do with 70 million' posting, but ... an idea that always fascinated me was a private expansion of new jersey stars ( From their webpage:

"NJ STARS is a new scholarship program exclusively for New Jersey residents that covers the cost of tuition and approved fees at New Jersey's 19 community colleges.
Students who graduate in the top 20 percent of their high school class are eligible. (Ask your high school guidance counselor for details.) NJ STARS covers up to five semesters of tuition and approved fees at the student's local community college."

The numbers can be tweaked and we throw out the whole new jersey aspect of it.

One of the neat things about it is that you only pay for "success" and it is easy to measure.


Maybe there are people who cannot be taught to fish. And they will simply need our help forever.

There are times when, to be fully civilized and refined, we simply give to help someone in need, to meet the need of the moment, and not to gain some return on our investment or with the expectation that they will turn their lives around.

We simply do it because, unlike the wild animals, we can demonstrate compassion on those who simply cannot help themselves, even if given certain opportunities to do so.

Jesus said, "The poor you always have with you." Maybe they are here as a way of civilizing us, motivating us, refining us...and giving us the opportunity to warm the heart of God.

Jennifer Wojcikowski from Campagna Academy

As someone who sees lives changed and cycles of poverty, abuse, and addiction broken everyday where I work, I was really disheartened by the three donors who found that their money was not making the changes they had anticipated. Of course it's naive to think that if you just hand money to someone who has lived in generations of poverty that they will automatically change their behaviors and jump on the track toward long-term success. But that doesn't mean that money, when channeled through the right organization, can't make a life-changing difference. I would encourage Michael and the other donors to find organizations that DO track their results and have evidence that their programs work. Our organization does, and we break the cycle of generational poverty by providing the at-risk kids whom we serve with educational, social, financial, and psychological programs aimed at first restoring their hopes so that they can go on to build their dreams. Our investors truly get to see how they are changing their community one child at a time.


Doug Nelson

This reminds me of the documentary "The 1%", where the heir to the Johnson & Johnson fortune turned a camera on his family and friends of family and asked "why don't you do more to help the poor", never once asking himself the same question.

But it's interesting how he feels that, unlike all those other charities and philanthropists, HIS money will actually do some good.


It might help Michael to get some experience with the communities he wishes to help BEFORE deciding where his money should go. If he spent a year "getting dirty" in the field - perhaps rotating through some common urban community service endeavors, like soup kitchens, organizations serving those with HIV/AIDS, after-school programs, public libraries, community centers, etc. - he might find that he has his own ideas about where the community's needs are and what could be done to address them. Then a consulting firm (or academic!) could come in to place his ideas in perspective and help him figure out the financial details.


Also, Michael, I apologize for misspelling your name. If there were an editing function, I'd use it!


I think getting involved with a cause or organization BEFORE giving money away will only help the donor feel more confident in his or her ability to affect change. What is important to Michael? If it's simply giving away money for tax reasons, they perhaps just hand the money off to a larger fund/foundation/organization with expertise and a proven track record. But if the idea is to make change by providing means, financially and perhaps in somewhat intangible support, then he's first got to identify what is important to him, and then figure out who is has similarly aligned values.



I wrote this in the last post, and I'll write it again here: our blog, Grant Writing Confidential, has a plenitude or perhaps even plethora of stories about how giving away money goes wrong and the mixed incentives of those who do give. If you want further advice or thoughts on the issue, call or write to one of the e-mail addresses there.


I was a chaplain in the Navy in the late 60s, early 70s. My counseling load went down by, like 80% in a period of one year. The congress ended the practice of E-1 and 2 (maybe 3, I am not sure, of being paid almost nothing. It struck me at the time that what the poor needed above all was a little more money. No longer was a car with bare tires causing a person to be late to work, getting a captain's mast (mini trial) etc etc etc. There still were those who f***ed up all the time, but most used their money to improve their lives, and consequently their service to the Navy.