The Danger of Donations

The Encyclopedia Foundation, inspired as we are by the late great Dr. Isaac Asimov, is no stranger to the lessons to be learned from the stories within his “Foundation Trilogy”.

One story was this, as quoted from the first book, “Foundation”:

“A horse having a wolf as a powerful and dangerous enemy lived in constant fear of his life. Being driven to desperation, it occurred to him to seek a strong ally. Whereupon he approached a man, and offered an alliance, pointing out that the wolf was likewise an enemy of the man. The man accepted the partnership at once and offered to kill the wolf immediately, if his new partner would only co-operate by placing his greater speed at the man’s disposal. The horse was willing, and allowed the man to place bridle and saddle upon him. The man mounted, hunted down the wolf, and killed him.

The horse, joyful and relieved, thanked the man, and said: ‘Now that our enemy is dead, remove your bridle and saddle and restore my freedom.’

Whereupon the man laughed loudly and replied, ‘Never!’ and applied the spurs with a will.”

That story was told by the character Salvor Hardin to the acting Head of State of a not-so-friendly power. The planet had accepted aid from Terminus, and now found that they were under the control of Terminus because of it.

Which leads us to question the value of donations. What are donations, and are they a good thing?

Well, at the Encyclopedia Foundation, we’ve noticed that donations usually don’t actually exist. No, we aren’t speaking of any failed fundraiser (we’ve never had one!) but rather our belief that “donations” as thought to be, don’t actually exist.
A donation is supposed to be distinct from a purchase. While if someone gives money to a store owner, and gets a good or service back, that is a purchase. But if you give money to a charity, you get nothing back, that is a donation.

Of course, it can be seen that this is not entirely true. One does get something from a donation, they at least get a good feeling of having supported a worthy cause. And that, while intangible, is no less of a purchased “thing” then the man who purchases the memory of a baseball game at Busch Stadium with his son. One can see that there is no actual thing as a pure donation, it is always a “purchase”.

When it comes to routine donations – such as ten bucks sent to Red Cross when tornados hit a region – it is actually a relatively simple purchase. You pay ten dollars, you now have the good feeling of knowing you helped. You also get the benefit of an additional deduction at tax time. That was “purchased”, too.
And for routine donations/purchases, that is all it is. You bought a feeling of lending a hand, and got a tax deduction.

When it comes to larger donations – purchases – it gets a bit more tricky. Those with large amounts of money to give out expect more than just a “good feeling”. They enjoy tax deductions, but can get those by giving to any charity. Thus a non-profit, a church, an educational institution, finds that they – like any business – are competing for the donation dollar.

One competes by offering more. More than just that good feeling and tax deduction. This could be as simple as a t-shirt saying “Greenpeace”. Or it could be the University Library named after you. It can be more, too.

And that’s where the problems start. “Free” things are usually the most costly of all, but while the adult child staying “rent free” at grandma’s place knows the staggeringly large hidden costs of that, many people running churches and charities and colleges seem to forget it. But donors giving “Free” money are like grandma’s giving “Free” room and board – they expect obedience, and no lip!

Consider the larger type donations, such as a wealthy patron might give. He may wish a library named after him. And he gets it. All done? No. There is next year. He might give again. What does he want? Ahh, that is for the University to figure out, and they will throw all manner of inducements at him. And he’ll take them – and then tell them what he really wants, and get that, too!

I was struck by a quote in another scifi author’s book, “The Number of the Beast” by Robert Heinlein. He had one of the character’s say, “I’ve heard that there are things no whore will do for money, but I have yet to find ANYTHING that a University Chancellor faced with a deficit will boggle at…”

The wealthy donor’s child being admitted with substandard grades? No problem, they did that without him asking. Invites to any and all campus events? Of course, of course, chump change. Was the child involved in a regrettable “incident”? That’s okay, that’s why the University has their own police force – so that they can better serve the special needs of their Alumni and students!

Now comes the actual time of the hoped for donation. The University has worked for it, they have hoped for it, they have already sold portions of their soul for it…and he asks for a spot on the Board, for himself or someone he knows. And if the donation is large enough, he’ll get it, too. Or equivalencies. Appointments or promotions or demotions of various faculty or staff. A hand in the curriculum. A say in where a construction contract for a new facility will go. Usually to a firm that has his – or a friend’s – last name in it. Etc.

Of course, no one doubts that it would take a very large donor to accomplish this at a large university. Just as no one doubts that it would take far smaller donations to accomplish the equivalent at a local church of 35 members. But be it store front church or Ivy League University, the major money is going to purchase not “good feelings” but power. The purchase is actually of the Institution itself, as much or as little as the purchaser (donor) cares to afford.

In theory, there is no problem in this. The donor has the best interests of the institution – be it church or college or charity – at heart, so obviously wishes it to succeed. True enough. But there are many paths to “success”, many ways of growing, many directions to take, and it is doubtful that his is the same as the current Board and leadership. He’d hardly need to donate if the college, church or charity was already doing exactly as he wished, and going exactly where he wished it to go.

No, the large donations are solely to purchase control and swerve the institution into a more desirable – for the donor – course.

And what if any institution accepts a large yearly gift from a donor who asks for nothing? Wait. Watch. After five years, when the institution has grown because of that counted upon annual gift, then the price will come due soon enough. For a common feature of most of our culture’s institutions is that as hard as “growing larger” is, going back to a smaller level is pretty much impossible. You grow, at least stay the same, or die.

Thus the institution seeking funds is like the horse. And the benefactor with large amounts of money to donate is the man. And the goal of the institution is the wolf. The institution accepts the donor’s “bridle and saddle” to achieve the goal, but does not find it very easy to shake the donor off afterwards. Thus one should be careful of who a large donor is and what their motivations are.

That would seem to be easy enough, and for most institutions – including the Encyclopedia Foundation – there is little danger as no long lines of large benefactors are forming at our doorsteps! But if an institution does not have a large donor/benefactor, they are not as yet out of the woods.

Other places for donations besides the mega-rich man is grant bestowing foundations, corporations, and the government. And given the sums they toss, they don’t even play at being kind like the rich man does, they just flat out tell you what you will and will not do. And there are no “no strings attached” grants, when you see one that looks like that, it just means that rather than them ask something specific from you, they’ll just let you dance even harder trying to anticipate what will secure the grant’s renewal.

Then there’s the last means of routine donations, the regular $10 man, per month or one time. These are perhaps the safest donations, in that no single person is donating enough to expect more than access to your monthly online newsletter. Perhaps a t-shirt if they are a $35 “big spender”. Or even “membership” if they agree to a monthly pittance, “membership” being semantically equal to “newsletter subscriber” at best.

Yet are these entirely safe? For all short term practical purposes, they are somewhat safe. The “membership” expects only what was offered up front. A feeling of doing good, of belonging, and perhaps a t-shirt or ball cap so as to let others know he is special. But in the aggregate, they are donating much, and an institution, especially a long term institution, should be sensitive to things that can change that.

Why? Well, it can be like the poor fool who was cursed winning the lottery. True, he feels he’s lucky. He won ten million dollars and promptly bought a 3.5 million dollar mansion. No one told him that the upkeep on such was $50,000 per month, not to mention property taxes that exceed per year what his entire extended family made in the past 20 years. He quickly blows through the remaining money, and as his level is now too high to support by his labors, the moment the lottery money stops, all is lost.

Lots of people donate. And lots do so “long term”, that is on a monthly basis. But will they always? Fads come and go, what is in, what is out, cause of the week, cause even of a generation. At one time, the John Birch Society brought in quite a bit of revenue each year from tens of thousands of members who feared the Communist Menace. For that matter, the Ku Klux Klan used to be fabulously wealthy and influential as recently as the nineteen twenties. We do not believe that either are doing quite so well today.

Finally, you have bequests. These actually are safe. Well, so long as you can comply with the request that always comes with it!!

Does this mean that one should never accept donations? No. It means this:
1. Know the large donor and know exactly what he wishes up front. If you must, then as much at hurts, pass up the donation. An atheistic free market philosopher was once said to have turned down a million dollars to re-write her individualistic philosophy to reflect a belief in God. If you wish control of your organization, you must be willing to do the same.

This can be something that affects little charities and churches. Even some “gifts” in themselves are not worth it, such as someone wishing to donate a house that is actually condemned. Such a “gift” may just stick you with the taxes and demolition costs that you don’t have. Or you may have the capital to fix it up and generate revenue for your non-profit. Know which first!

2. One can say this for grant giving Foundations and corporations – they do tell you what they expect up front. If this is where your mission is going, great. If not, one should avoid getting into the habit of modifying the mission to be able to accept more money. Money is a means to the end, and the end should be your mission. There are limits to how much you can change, before you are just now in it for the money.

3. Government grants are honest to the extent that they are up front about their interests. It was Supreme Court Justice Antonin Scalia who in a case about whether the government had any say in the type of art it subsidized, or whether the first amendment said they did not, ruled, “The First Amendment has not repealed the ancient rule of life, that he who pays the piper calls the tune.”

That’s pretty clear. Take their money – do as you are told. They will let you know in advance what that is, so like a grant making Foundation, it may be okay. Maybe.

4. Having a large dues paying membership can be a future trap. If you come to rely on it, if your size grows to the point where you depend on it, you will find yourself shifting your mission, not at the member’s requests, but because you’ll fear losing membership. Let your fellow director post an article in your newsletter and it generate some angry comments from your membership – and a subscription or ten cancelled – and you’ll see that those members have a bit more say than you thought.

Because your first thought – and the one you’ll ultimately go with – will be to not let that Director write another article, and probably have an apology printed, too! Congratulations, the members just took control – even if only a little – of your organization.

And there is the long term problem of their continued interest. The youth who in college joins “PETA” to impress his girlfriend with his love of our animal brothers and sisters is probably not going to be donating for more than four years, tops. True, nimble organizations can take this into account, and always be planning on existing off the donations of each new fresh crop of college idealists, with even the benefit of keeping a percent of them for longer. You can do this. But prepare for it in advance, and don’t grow too big before you have this locked in.

Another concern with having a large dues paying membership – in a church or charity – is that such large amounts of revenue can attract to your organization those who just want that revenue. Churches and charities have both found themselves “hijacked” when it turned out that some who applied for positions of power and authority within the organization really just wanted to get the money. Be that the power to award contracts to their construction friends, or to direct the charity to assist those they like, or even a flat out looting. Big money attracts those who love big money. Be prepared, and remember that bigger isn’t always better.

And of course, a large member base still almost always ends in heartache as for the real long term, causes and come and go. While some seem to have staying power – like the Red Cross – others are like the Anti-Saloon Movements of the late 19th and early 20th centuries. Dead, for lack of enough people caring any more. Or the Klan or the Birchers. Your organization does not have to be right or wrong for the long term. But if it is going to depend on the masses of donors, then it must stay relevant to the masses of donors.

Or be able to do without them.

5. Bequests. These are the simplest and easiest. The person giving them is dead, he left one clear request and that’s that. Assuming it’s not too bizarre, take it and use it. However, do not use it to grow to a size that your normal revenue cannot support.

Now then, what does all of this mean for the Encyclopedia Foundation? It means that we, like the monasteries of old, do not want to rely on donations. We wish them, yes. But we do not want any change in the mission. We do not wish to rely on any current fad. We wish to be able to survive as a self-sufficient entity so that if donations come in, great, we can use them, but if they do not, fine, we are still okay. A donation should be treated like you’d responsibly treat a lottery windfall. Use it to pay off some past projects, use it to fulfill your current projects, but don’t use it to fund new and bigger projects. You might not be able to support those – over the long haul.

As to the manner of self-sufficiency in these modern times, that is another article.