On Philanthropy: It’s time for some “moonshot” philanthropy

The challenges facing contemporary society are enormous. Think about helping to solve hunger, homelessness, climate change, disease (including pandemics), gun violence, income inequality, discrimination, threats to democracy, education, environmental degradation and so much more. Traditional philanthropic investments have been working for decades to make a dent in solving these problems. In some cases, much progress has been made. Sadly, in many others, it seems like we’re stuck right where we started … or worse.

If you are fortunate enough to have money that is dedicated to philanthropy — whether it sits in a foundation, a donor-advised fund (DAF), a trust, or a checkbook — it’s already literally or figuratively off your balance sheet. In fact, if it’s been donated to a foundation or DAF, it’s gone, and nothing’s going to bring it back. It can’t be spent on a vacation, second home, education, new car or anything but philanthropy.

That’s one of the main reasons why philanthropic capital should be viewed as the ultimate “risk capital.” Government investments in societal progress are, ultimately, accountable to the electorate. Business investments are, likewise, accountable to the shareholders who are first interested in a financial return and then possibly, a social return. For better and worse, the success of philanthropic investments, however, is accountable to no one but the donor.

“Philanthropy should be taking much bigger risks than business,” philanthropist Bill Gates said. “If these are easy problems, business and government can come in and solve them.”

That’s where “moonshot” philanthropy comes in. Merriam-Webster says: “While ‘moonshot’ originally meant ‘long shot,’ it’s increasingly being used to describe a monumental effort and a lofty goal — in other words, a ‘giant leap.’ ”

Moonshot philanthropist James Chen put it this way:

“The risk of any moonshot endeavor? Failure. Without the tangible possibility of failure, and without embracing the risk of testing unconventional out of the box ideas, we would never be able to shift the paradigm on the complex issues we each seek out to resolve.

This is the superpower of philanthropists — the ability to take on the reputational and financial risks that institutions such as governments and corporates cannot. Why? Because institutions are agents of the ultimate capital providers, respectively taxpayers and shareholders, often proscribing their ability or willingness to make high risk bets. Whereas philanthropist capital owners have the freedom and ability to accept the consequences of setbacks and failure, learn from mistakes, improve on their theory of change, improve domain expertise and try again.”

Risk and return analyses are important considerations when making any investment decision. Usually, the greater the risk, the greater the potential for outsized returns. This concept applies to philanthropy as well.

Should all your philanthropy be dedicated to moonshots?  I think not. Traditional, tried-and-true philanthropy is important and can make a huge difference. Rather, decide on your risk tolerance – your willingness to take big risks for the potential of outsized results — as well as your willingness to accept failure as an opportunity to learn and evolve. Then, allocate a percentage of your philanthropy to taking those risks. I recommend starting with a relatively small percentage — 10 or 20% — and moving forward from there.