Updated: Jul 20
Recently mega-philanthropist MacKenzie Scott picked up the phone and called Melanie Johnson, the head of Houston’s Collaborative For Children. “I want to help,” she said and donated $3 million to the nonprofit. Could the lives of Scott and former spouse Jeff Bezos be more different? Here’s a headline from last month:
Scott has given away $14 billion since her divorce. In fairness, Bezos has pledged to give away most of his $124 billion net worth during his lifetime. The purpose of this blog is not to pick sides. Although seriously, Mackenzie, we all love you!
This is all about discretionary spending. They both have the money to pay the light bill and cover the rent. This is what they have left over. Jeff bought a $5 million diamond ring. You may wish he had gone for a $4 million ring instead and sent the leftover million to your nonprofit instead. You may wish Mackenzie would send a little of her philanthropy your way. But the fact is you have opinions. They have the money. And they can spend it anyway they want. That’s what discretionary spending means…They have the freedom to spend it any way they want.
We tend to forget that in the charity world. Have you ever:
Had a board member say, “call so-and-so. I saw her bid $25,000 at a charity auction last year?”
Focused your attention on how much you hope to raise at your gala and downplayed the need to make it worthwhile for your donors?
Used a donor meeting to talk about how much your nonprofit needs her gift without determining what need that gift might fill for the donor?
How people use discretionary cash is part psychology, part economics and part voodoo. The economist Thorstein Veblen coined the term “conspicuous consumption” 125 years ago to describe the way people buy things to convey status, power and even “genetic superiority.” He also called giving to charity “conspicuous compassion,” done to enhance the reputation of the donor.
Why we choose to spend our money on one thing instead of another is a calculation buried deep within our subconscious. When we say, “For the price of a Frappuccino, you can give the gift of reading to a child,” it is a deeper choice than “cold drink vs. book.” When the choice is diamond ring vs. build a library, the number of zeros changes, but psychology is still a factor.
Most of the time, our calculations don’t make logical sense. For example, when test subjects were told the price of the bottles at wine tastings, they routinely give higher scores to the more expensive wines. What we want and what we know we need are usually separate things. As a French philosopher wrote 400 years ago, "The heart is forever making the head its fool."
How can nonprofits tip the scales in their favor? First, we have learned that “philanthro-shaming,” trying to make people feel guilty for not giving, doesn’t work any better than “eat your broccoli! There are starving children in the world.” However, nonprofits still have a few tools in the donation toolbox:
Values Donors are products of their own beliefs and experiences. When those beliefs and experiences align with a nonprofit’s mission, people give. Understanding those values allows a fundraiser to emphasize the alignment with the nonprofit.
Familiarity To paraphrase Maya Angelou, when you know better, you do better. That’s why your ability to tell your story is so important. It helps familiarize donors with your cause on a personal level and to understand where their money goes.
The Happiness Loop Think of the old adage, “it’s better to give than receive.” Neuroscience confirms what we knew intuitively; we feel good when we give. Research has shown that our brains get a little shot of feel-good dopamine when we help someone else. One really interesting study found that the memory of helping can make us happier, which leads us to give more, and on and on and on:
Participants assigned to recall a purchase made for someone else reported feeling significantly happier immediately after this recollection; most importantly, the happier participants felt, the more likely they were to choose to spend a windfall on someone else in the near future.
Isn’t that what stewardship is all about…showing donors the impact of their gifts to remind them of the positive feeling of giving, causing them to want to give again?
Conspicuous Compassion We use this in the nonprofit world all the time. We put people’s names on buildings. We encourage bidding wars at auctions and applaud the winner. Many years ago, I remember two millionaires, one who owned a newspaper and the other who owned a TV station, getting into a bidding war every year over the prize steer at the state fair. The bidding would go into the thousands and the money would go for college scholarships.
That natural human urge to be recognized for our generosity (and its pitfalls) were the central joke of an episode of Larry David's Curb Your Enthusiasm.
The most important take away from all this is that fundraisers need to pay attention to what donors want, not just what the nonprofit needs. Easier said than done, but the fundamental truth is that discretionary spending is based on motivation. What motivates MacKenzie Scott to call a stranger and give money is very different from the thing that motivates Jeff Bezos to be photographed frolicking with his fiancé on the Mediterranean. Knowing what motivates people (and accepting when we aren’t going to win that calculation) is the starting point for any fundraising.
Here's a place to start. Instead of hitting donors with some version of “We need your money to make our dream come true,” say, “Here’s how you can use your money to make your dream come true.”