The woodworm of scarcity or whether the fund comes before the foundation

“Myths of Philanthropy” is a series curated by the philanthropic community of practice Elemental , led by Chiara K. Cattaneo and Mandy Van Deven . These talks offer a cross-section of international philanthropy and analyze some of the most common “myths” that shape the way charitable organizations operate. These talks, asking “what if?”, offer approaches, interventions, and new visions of how we might work for a more just world. The series is also published by the Center for Effective Philanthropy and the Association of Charitable Foundations , as well as by VITA.

Resources are scarce—they must be protected and safeguarded, even at the cost of fulfilling the mission . To preserve scarce resources for hypothetical future needs, foundations in the United States adopt a five percent annual endowment distribution as a ceiling, not a baseline. When resources are scarce, they must be distributed with extreme prudence and discernment .

Does this logic sound at least somewhat familiar? One of the most pervasive—and damaging—narratives shaping progressive philanthropy today is the fundamentally false idea that resources are scarce. Many of the practices adopted by funders are often rooted in this scarcity mentality.

When we look for traces of these logics in the way most foundations are structured, it's easy to find the influence of the "scarcity mentality" everywhere, from the composition of the board of directors to investment methods, from the criteria for awarding grants to reporting methods. A clear example is the fact that in foundations, funding decisions are often framed as mutually exclusive choices: if we choose to fund this organization, we are also choosing not to fund that organization. If we increase funding for this cause, we must decrease funding for another cause. The result is that organizations find themselves competing for funders' attention, continually having to prove themselves worthy of their support, and never being able to afford to fail .

Not only does this create an unsustainable situation for nonprofits competing for scarce funding, it also makes it impossible for any foundation to ever achieve its mission, because the ecosystem of change—in any sector, location, or system—is not funded as a whole, a collaborative entity capable of collective impact. It also reinforces another common myth about how change happens: that a single funder has the ability to solve a complex problem independently.

These scarcity-based logics are employed so frequently in philanthropy that many people accept them without question. Naturally, as wealth inequality grows to levels not seen since the Gilded Age, and foundation endowments in the United States now exceed $1.6 trillion , the obvious contradictions become harder to ignore. The scarcity narrative raises many questions: Who benefits from the myth of scarcity in philanthropy? What is lost when making money, not giving money away, is the priority? Can we even call that philanthropy?

However you answer these questions, the scarcity narrative prevents the most progressive philanthropy from achieving the change we desire to see; one way funders can make a meaningful impact is by choosing, instead, to structure their operations with an abundance mindset.

At the Kataly Foundation , one of the ironic consequences of our abundance mindset is that we've decided to be a foundation of limited duration; as our closure date approaches, we're forced to turn down numerous requests. However, we view this as a welcome challenge rather than a limitation. The Kataly Foundation was founded in 2018 with the stated goal of redistributing our funding over the next 10 to 15 years. You may be wondering, then, what it means to operate with an abundance mindset in this context.

To actively counteract the scarcity mentality in our work, we have structured our approach to provide substantial funding, starting from the very beginning of our relationship with grant recipients. In philanthropy, one way scarcity manifests itself is through the initial disbursement of limited funding, like a trial balloon to assess an organization's performance, providing it with a small sum of money. If the impact generated is deemed significant for a small investment, then the organization has proven worthy of a greater level of investment.

The problem with this approach is that small-scale funding doesn't allow for long-term strategies or bold experimentation. Furthermore, the impact financiers expect from small, short-term investments is often unreasonable and unrealistic, especially when it comes to financing aspects of political, social, and economic transformation.

Recognizing the fallacy of this logic, and aiming to exemplify abundance thinking, the Kataly Foundation initiated larger, catalytic investments in organizations we hoped would enable our partners to make exponential progress. These grants were made without defined expectations or predetermined outcomes defining the outcome of the investment; this was intended as an intentional demonstration of faith and trust in the capabilities and abilities of the supported organization.

Another drawback of applying a scarcity mindset to philanthropy is that rather than supporting a robust ecosystem that operates with a thriving infrastructure, funders, believing that resources are scarce and sporadic, tend instead to focus on grantmaking strategies that allow individual groups to excel and grow, without considering how this might weaken the collective dimension.

Building and maintaining strong, resilient movements requires caring for the ecosystem as a whole and recognizing the valuable role each part plays in ensuring that the whole continues to operate effectively.

This is why we always ask our grantees who we should fund to ensure their work is successful. It's an important and enlightening question, as it provides us with a comprehensive picture of the ecosystem within which our grantees operate, and allows us to strengthen the work of our partners by funding groups that add value and with whom they collaborate.

This is how movements are funded when they are meant to succeed. To thrive and achieve the desired changes, organizations need their partners to be strong, strategic, and prosperous.

Another of our modus operandi is to start from a position of "yes." This means we strive to accommodate our partners' requests, consider and clearly explain the reasons behind a "no," and ask ourselves what would be the point of saying "yes" before we actually say "no." Doing so has helped us think about resources differently and reflect on our value, which goes beyond the funding we provide . This doesn't mean we accommodate every request, but by approaching a conversation affirmatively, we keep the line open for questions and communication. This approach also pushes us to explore creativity and possibilities. If we can't do things a certain way, what might be another way to get there?

Fundamentally, the scarcity narrative that continues to prevail in philanthropy is the result of a relentless pursuit of relevance and longevity. By disbursing resources in dribs and drabs, funders can live forever. Some try to justify it by pointing to the countless injustices that exist in society and asking this question: if foundations distribute all their resources now, who will support the battles that await us in the future?

The solution isn't for all foundations to spend their entire endowments immediately, but philanthropy needs a revolution in how we think about the purpose and process of wealth redistribution. If we funded social movement partners expansively, without restrictions, how would this allow organizations to build on those resources and continue to regenerate wealth that can remain in their communities for the long term?

A truly liberating future is one in which social movements are not perpetually dependent on philanthropy to achieve their goals. A vision of abundance for philanthropy should not be defined by the effort to live forever in a relationship of supplication, but rather by creating the conditions where philanthropy is no longer necessary , because we live in a world of shared prosperity.

The opening photo is by Photo by Mika Baumeister on Unsplash

Tags:
• Philanthropy
• Produce Well