Next gen donors find many faults in old‐school philanthropy, the greatest of which being that many of our most troubling social problems persist despite decades of philanthropic giving. If all that giving to education has led to the largely dysfunctional system we have now, something isn't working. If we still have dramatic, rising economic inequality despite hundreds of millions of dollars in philanthropic giving to address this specific problem, then maybe, next gen donors reason, it's time we try a new approach.

Their desire to make seemingly intractable problems tractable motivates next gen donors to try innovative methods. In fact, their willingness to veer away from the usual suspects in the philanthropic lineup and experiment with new approaches is perhaps their most revolutionary characteristic. To achieve the big impact they long for—revitalizing education, eliminating health disparities, and so on—they feel they need a bigger and better tool belt. And sometimes they feel the need to take more dramatic steps, even if that means blurring the lines between the nonprofit sector and other sectors.

Next gen donors aren't just less afraid than previous generations to experiment with unlikely mechanisms for change; they're downright eager to try nontraditional funding vehicles. In a way, they want to disrupt philanthropy, just like Amazon disrupted the publishing industry, and Airbnb the hotel industry.

Experimentation, like revolutions, can be chaotic and risky. Failure is a very real possibility. But if the payoff is progress on our toughest social problems, then next gen donors think temporary chaos is a small price to pay.

Excited About Innovation, Okay with Blurriness

Next gen donors have the advantage of being new to the philanthropic game. Or at least they see this as an advantage. As one donor put it, the next gen donors in his family “aren't shackled by inherited wisdom about how things are done and should be done,” and this “naiveté” is a “great asset,” because they can “come into the room and ask very basic questions” about why things are done a certain way and why other options aren't being explored.

Our interviews revealed that next gen donors love to shake things up with these sorts of questions, in part because they have a profound belief that “there has to be a better way.” They believe in the power of innovation, and they want to design that better way. “We want to invest in innovators because these problems have been happening for a while, and they're not going to be solved by the same type of approaches,” explains one next gen donor.

Another donor underscored how this was part of a generational shift, a willingness to let go of assumptions about what has been and an open‐mindedness to what could be: “I think there is an element in this next gen of being totally open and okay with things that were taboo not too long ago. There's an element of accepting things that the older generations just didn't. Boundaries are just being completely obliterated, for better or worse.”

If not all boundaries are being “obliterated,” lots of them—especially the boundaries between the traditional for‐profit and nonprofit sectors—are being blurred by the innovations that so excite this next generation. They see this as a positive shift and even a harbinger of changes across the philanthropic landscape.

Maybe the most visible example of this blurring is the Chan Zuckerberg Initiative (CZI), which we introduced earlier in the book. CZI was established not as a traditional family foundation or charitable trust but as a “charitable limited liability company (LLC).” This variation on the for‐profit legal form allows Mark Zuckerberg and Priscilla Chan the freedom to deploy their assets for good across multiple sectors. They can make philanthropic gifts but also invest in socially responsible companies or support public policy advocacy and campaigns without the restrictions that traditional nonprofit entities would have. And while critics argue that by funneling their philanthropy through an LLC, Chan and Zuckerberg skirt certain transparency and disclosure requirements, the founders insist that their justification for this unusual path is to be able to use as many mechanisms for change as possible and to avoid the limitations of purely charitable vehicles.¹

Though older generations are often uncomfortable with blurring boundaries—they worry about a slippery slope toward commercializing charity, for instance—Gen Xers and Millennials have a much higher tolerance for this approach. In fact, they are excited about it: “I think it's a very exciting time to be involved in this [field.] People are just thinking differently about philanthropy. They are not just writing checks to established nonprofits, to the United Way or the Red Cross. They're saying, ‘Well, there are these Kiva loans and there are these social businesses and there are these double‐bottom‐line, triple‐bottom‐line investments.’ There are a million different ways to be philanthropic in 2012 that there weren't in 1985.”²

It isn't hard to understand why these generations are more comfortable with this blurriness when we consider that they were steeped in sector‐blurring innovations throughout their formative years. They grew up buying pink M&Ms that both tasted good and funded breast cancer research, choosing among various fair‐trade coffee options that offered a great beverage and supported indigenous farmers, or buying fashionable Feed brand handbags stamped with numbers to signify the number of meals or micronutrient packets provided to hungry people as a result of its purchase.³ Younger generations grew up in a time when companies marketed themselves as “socially responsible,” especially Millennials, whose cohort recently surpassed the Baby Boomers in size and who represent a massive consumer block.

But we should be careful not to assume that this embrace of blurriness—and of tools that borrow business methods, logics, and language—arises out of a heightened commitment to or infatuation with capitalism among rising generations. Rather, it stems from their desire to have more “tools in their tool belt”—a metaphor we heard a lot. They want to design the best solutions to problems. If that means trying out ideas from the business world, then why not? Sector boundaries are not sacrosanct to the next gen. If crossing or blurring boundaries in smart ways can help those in need, advance environmental sustainability, or improve health outcomes, then why not embrace this?

The New Tool Belt

We heard this revolutionary call for trying new, innovative methods loud and clear throughout our years of research. Next gen donors talked about a litany of particular methods they want to add—or maybe already have added—to their philanthropic portfolios. Below are the most common new tools they want to explore as they become the dominant donors in our society.

Using Every Tool for Impact

Say “philanthropist” to someone today, and one of the names likely to come up is Rockefeller—a name synonymous with extraordinary giving in this country. Most people know the Rockefellers for having made one of the largest fortunes in American history from oil and for being affiliated with Rockefeller Center in midtown Manhattan. In addition, the family has founded many universities, cofounded institutions like the Museum of Modern Art, generated 24 Nobel prizes out of Rockefeller University, and guided several philanthropic foundations, starting with the Rockefeller Foundation in 1913. Rockefeller philanthropy was behind Grand Teton National Park, the yellow fever vaccine, and so much more.

From the beginning, the Rockefellers have been concerned with giving efficiently and effectively.¹⁰ John D. Rockefeller Sr.'s great‐great‐grandson, Justin Rockefeller, is deeply proud of his family's philanthropic achievements. But like other next gen donors, he thinks his family can and should evolve its approach to increase their impact.

Justin could easily assume the prestigious mantle of his family's philanthropic empire and do a lot of good in the world by carrying forward what they've done for decades. He sees the power in the assets he inherited—the famous name, the endowments and institutions already built and designated for charitable use. But he wants to be an innovator—not because he just wants to “make his mark” somehow instead of only being known as the next one up in the Rockefeller line; he wants to prove a new approach because he's convinced that is what's needed to maximize impact.

To make real change now, though, he wants to add new tools like impact investing or other innovations from social entrepreneurs—even if doing so means his family foundation divests from the very sources of capital that made the fortune in the first place. And he is working to help others in his generation do this as well, to build a movement of entrepreneurial next gen donors and impact investors who have the chance to transform the landscape of major giving in the future.

Aspirational Innovators

Unlike Justin, not all next gen donors are avidly using the range of new tools available, at least not in their current giving. In fact, our survey showed that next gen donors still primarily give through traditional vehicles—as part of a family foundation; through a donor‐advised fund; online to organizations or through giving portals; or by check, cash, or workplace giving.¹³ But when we asked them about their future giving, we found clear evidence that many are eager to expand their repertoire of vehicles. “There is a difference between what I think is important and what is actually reflected in my current giving,” one explained. “There are many ideals I strive for that I have not yet hit.” And those who were currently experimenting with new tools were, like Justin, exceedingly passionate about them. They often proselytized among other rising donors, cajoling them to try new approaches.

For those next gen donors who still give primarily through a family foundation started by previous generations, their excitement about new tools means they find themselves lobbying for change within their families. Many talked about pushing their families to do more impact investing of their charitable endowments, for instance, or to think about investing in PRIs or funding more advocacy. Some were just eager to see their family foundations embrace new ways of working; as this young trustee exclaimed, “I wish they would just knock down all the walls at the foundation and put drafting tables in the middle of the space and everyone could just work together!”

Keen next gen changemakers know this sort of transformation in family institutions can be slow, but they see pushing for it as their objective. One donor who was active in her family's large foundation explained the challenge well: “I think there is a certain appetite [among older family members and staff] for exploring different models, but at the same time, I think as an organization it's just inevitable that change is going to be very, very slow. I think it's that metaphor of the cruise ship versus the speedboat. A cruise ship is not going to turn on a dime when you start swinging the wheel; it might be five minutes before the thing starts to turn because it's just so massive.”

To be clear, pursuing a range of new methods doesn't mean abandoning the traditional tools. Rather, next gen donors want to add these innovations to the portfolio of options they have for doing good.

Being Unreasonable to Do Something Extraordinary

Making the sort of changes to philanthropy that next gen donors want to make—and using the innovations that so intrigue them—is, as we've said, disruptive. Interestingly, we met many younger donors who define their emerging philanthropic identities around this disruption. They want to challenge the status quo, to fund neglected ideas, and to be “unreasonable” in a field that values everyone getting along. For them, the payoff from this disruption is more impact, perhaps even extraordinary impact.

Scott Belsky is one such disruptor. A successful tech businessman and investor, Scott is also an inheritor of a family tradition of philanthropy as the grandson of the education entrepreneur Stanley Kaplan. Scott cut his philanthropic teeth at the family foundation table before growing and selling his own company to Adobe and then creating his own foundation with his wife, Erica. His current approach to giving—which he calls “responsible” yet “contrarian”—also owes a great deal to what he has learned as an entrepreneur and early‐stage investor. He is adamant that the same strategy of searching for innovative models that he uses as an investor can serve him well as a donor.

Scott certainly highlights many of the strategic preferences that we identified in the previous chapter—being responsible about due diligence, focusing on results, and so on. But we can sense from him that these strategic imperatives to be serious and responsible do not mean being cautious. We sense from him the excitement that next gen donors have for exploring new terrain and embracing innovation even if that means being nonconformist. He wants to take risks on orphan causes and neglected people and organizations—on ideas “at the edge of reason”—because those are the ones that could create epic change.

Taking Risks and Failing Forward

Next gen donors like Scott insist that to have the impact they want, they will need at times to experiment, to be bold, and to take risks that seem unusual or even unreasonable to many others. They want to take risks on new ways of attacking the causes they care about, not just trying to make the old ways more efficient. And they accept that the price for taking these risks is the possibility of failure.

These donors reject the risk‐averse approach of much of traditional philanthropy. That approach, they insist, is a recipe for continued mediocre impact. Here again, many of the next gen donors advocating for more risk‐taking see that mindset as something philanthropy would do well to adopt from the business world. Next gen donor Hadi Partovi, a successful tech entrepreneur and an investor like Scott who will be featured in Chapter 6, echoes this critique of traditional philanthropy and the call for emulating the risky “big‐bet” approach of the tech world:

Traditional foundations are extremely risk‐averse. If you wanted to get $1 million from them for some really bold idea that has no evidence that it could work, but it could be really big, it's just impossible. But that's where the most impact is doable. If you look at the for‐profit landscape, the highest‐impact companies started out that way, with this crazy idea that nobody thought would make it. But somebody took the bet on it and suddenly it's the next Uber or the next Facebook. There's no reason that shouldn't be happening in the nonprofit space.

Accepting the reality of failure is something that other prominent next gen donors, like Cari Tuna and Dustin Moskovitz, who we introduced in Chapter 2, consider essential to their improved philanthropic approach. As Cari has said, “I actually expect that most of our work will fail to have an impact, and that is part of doing high‐risk philanthropy well.”¹⁴ Donors we spoke with agreed that their new approach requires what one labeled an “appetite for risk.”

But what does this “high risk, high reward” giving look like? For many it means making a bet on untested, often smaller organizations with big ideas. Giving to these organizations “could make a huge difference, but with no guarantees.” For others, risk involved trying out new funding models like low‐ or no‐interest loans, funding nascent movements, or being the first funder to commit to a potential collaboration without any promise that others will join.

The possibility of failure always lurks behind this sort of risky giving. But these younger donors have a strong belief that failure can be helpful at times. It can lead to learning and improvement. “Failing forward” is considered a virtue. As one said bluntly, “Some organizations are going to fail. They're going to die and pass away. But to me that's okay, because they inform a new model for how things are done going forward.”

What Does This Mean?

We argue in this book that the next generation of major donors will be the most significant philanthropists in history. This is not just because they have unprecedented resources to give. It's because they want to fundamentally change how giving happens. This often means trying new methods and new tools, even if these entail greater risk.

We should all brace ourselves for this potentially tumultuous time of trial and error, and for a “new normal” in which the pace of change and innovation in philanthropy moves at a much faster clip. Donors have always tried to improve philanthropy, inventing new vehicles like foundations or community chests or matching grants. But the next gen wants to accelerate that innovation dramatically. Generation Impact is willing to make bigger changes faster than previous generations.¹⁵

We should also prepare for failures. And next gen donors themselves need to be aware that, while failure when pursuing some idea or approach can lead to positive learning, it can also affect people's lives and livelihoods in real ways.¹⁶

The next gen's clear “bias toward the new” is itself reason for caution. As research has shown, innovation is not a silver bullet for solving social problems.¹⁷ Successful implementation of innovations requires much more organizational work and faces many more obstacles than most innovation champions acknowledge. And sometimes the tried‐and‐true solutions of old are still the best; they've been used for a while because they work. The next gen needs to recognize these difficulties and acknowledge that its powerful position means it could force innovation into spaces that are not ready or not right for it.

Further, the specific innovations that are capturing much of the attention from next gen donors—those that blur the traditional boundaries between for‐profit and nonprofit sectors and encourage social change efforts to use market mechanisms—make a lot of people nervous, sometimes for good reason. Some worry about the slippery slope these create toward the “commercialization of everything” and the “marketization of philanthropy.”¹⁸ Borrowing too directly from business models and translating them too quickly to the philanthropic context can ignore the subtle but vital differences in how the nonprofit sector works (e.g., how success is measured and in what time frame). One of our next gen interviewees even pointed out that there are a lot of problems in the world that markets, even socially responsible ones, simply cannot solve.

There are many problems in the world that are almost entirely created by financial markets and by the way that we do business. And because impact investing is sexier than philanthropy, there is a danger that we will all just say, “oh, this is the answer.” That is very, very dangerous because there is a high risk that it perpetuates the systems, the structures of power that exist in the world that do need to be profoundly disrupted in order to effect the social and environmental change that needs to happen.

Despite these cautions, these powerful next gen donors will continue to pursue their passion for impact investing, social businesses, loan funding, and other new approaches. And if managed carefully, these methods for social change could reap huge social benefits and even make it possible for many others in our society to use these new tools.

For instance, other, smaller investors now have the luxury of making informed impact investments precisely because many next gen individuals with considerable resources to invest are asking for ways to fit their investments to their values and for more transparency from the financial industry. The next gen didn't invent impact investing, but one could argue that next gen donors' demand for it has caused financial advisors to bring more impact‐investing options to market.¹⁹ The same can be said for the clear shift toward socially responsible businesses. Millennials calling for green products, social enterprise options for buying jewelry or eyeglasses or other items, or even jobs with multiple‐bottom‐line companies are certainly pushing the economy decidedly further in those positive directions.

The next gen's interest in new tools like impact investing, microloans, or advocacy and movement funding will certainly be a boon for groups providing those opportunities for rising donors and social investors. But existing nonprofits, even large ones, can adapt in ways that keep them relevant for the next gen as well. They can try to adapt to the faster pace of change and innovation that these next gen donors want, avoiding the problem that one donor worried about, when “foundations innovate faster than their grantees.” They can also actively collaborate with eager next gen donors in experiments with new tools—like new funding mechanisms beyond grants—and create designated paths for their next gen donors to explore new ideas inside the organizational context (instead of looking for those exciting opportunities elsewhere).

Philanthropic families can similarly adapt, widening their tolerance for risk and using this excitement for innovation as a way to engage the next gen even deeper in family giving. Families might even creatively use family history. Many family fortunes were built as a result of entrepreneurial risk‐taking and innovation, a fact noted by several next gen donors. They see their passion for finding new avenues for change as “continuing the legacy of innovation” that their parents or grandparents started; they are merely translating that legacy into the family's philanthropy. Older members of current families could frame this as permission to innovate, helping next gen donors see how they can pursue their passions within the family foundation context.

For now, next gen donors are clearly excited about trying new approaches to doing good and having greater impact in the world. They might not be using all the innovative tools they want to yet, but they aspire to once they have the chance in their families or in their own giving. It's just a matter of time before these new approaches become the norm. And after this Impact Revolution, philanthropy will never be quite the same.