Warren Buffett's philanthropy is well-publicized; the man will end up giving away nearly 99% of his wealth to charity.
As I've written before, Buffett's charitable pledge is larger than the sum total, in inflation-adjusted terms, of the donations made by Carnegie and Rockefeller combined. In a word: wow.
Millionaires making good
But while Buffett is an extreme example of philanthropy, he's not alone.
The Chronicle of Philanthropy lists its most generous donors each year. The list is like a who's-who of Corporate America success stories. Take a look at some of them:
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Donor
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Business That Made Them Wealthy
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Buffett
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Founder and Chairman, Berkshire Hathaway
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The Sandlers
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Co-CEOs of Golden West, which merged with Wachovia (:WB)
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Phil Knight
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Founder, Nike (NYSE:NKE)
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Larry Ellison
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Founder, Oracle (:ORCL)
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Peter Lewis
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Founder, Progressive Insurance (NYSE:PGR)
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Pierre and Pam Omidyar
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Founder, eBay (NASDAQ:EBAY)
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Irwin Jacobs
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Founder, Qualcomm (NASDAQ:QCOM)
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Paul Allen
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Co-founder, Microsoft (NASDAQ:MSFT)
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Source: Chronicle of Philanthropy, "America's Most Generous Donors."
All of these people (1) created lasting businesses, (2) owned substantial portions of those businesses, and (3) donated large sums of their wealth for philanthropic purposes. (The table should also tell you that insider ownership is very, very important in small companies.)
Don't roll your eyes yet
Let me point out the obvious here: Of course these are the most generous donors in America ... they have the most money to give away!
So, to recap: Vast philanthropic donations require vast sums of wealth.
That statement's not as useless as it may seem. In fact, according to a recent article in Portfolio magazine, "People do give more when they become richer ... but people also grow wealthier when they give more."
Giving money makes you money?
Portfolio chronicled an eye-opening study, the conclusion of which seems counterintuitive: Giving makes you wealthy.
The study, from the Social Capital Community Benchmark Survey, looked at philanthropic behaviors and household income, factoring in age, religion, education, race, and other such factors.
While a higher income resulted in higher charitable donations, "more giving doesn't just correlate to higher income; it causes higher income." [Emphasis mine.]
The path to prosperity
The brief explanation for why this happens is that giving "stimulates prosperity," but that sounds too vague to be useful. So let me offer a more detailed armchair hypothesis.
You see, giving is emblematic of other personality traits that allow givers to get ahead. In particular:
- Givers are smarter with their money than non-givers. Donating to charity demonstrates knowledge and confidence about one's personal financial situation and, more specifically, shows a level of tax smarts. That undoubtedly explains some of why the billionaires in the above list are so generous.
- Givers tend to be generous in other aspects of their life. It's not a stretch to conclude that generosity would be a trait that employers and colleagues find desirable, and that that could result in higher overall pay and success generally.
What you can do today
Giving makes you wealthy. That's a powerful conclusion, and it's one we're paying close attention to at Foolanthropy, The Motley Fool's philanthropic campaign.
Aligning our charitable efforts with our core philosophy -- that with the right tools and information, every American can take control of their financial destiny and make sound decisions with their money -- Foolanthropy is focused on curing financial illiteracy among the young, the poor, and the needy.
I encourage you to read about our five hand-picked charities. I also encourage you to donate -- not only will you get the intangible value of having done some good, you'll get a heckuva tax break (no doubt a key motivation for billionaires' generosity), something to consider as the tax year rapidly comes to an end.
Who knows -- perhaps giving will even stimulate prosperity in your own life.
Click here to learn more about each of the five charities in our Foolanthropy campaign.
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