Giving vs. investing — and the gray area between

I was on Talk of the Nation yesterday, speaking with Neal Conan about microphilanthropy. NPR’s producers found a USA Today column I wrote about the topic last year. If philanthropy is the voluntary promotion of human welfare, microphilanthropy is doing the same thing on a much smaller scale. It’s about establishing a direct connection between donor and recipient, with donors choosing projects and getting updates along the way. Some of the best known organizations that dabble in this kind of philanthropy are Donors Choose, Global Giving, Modest Needs, Citizen Effect, and Kiva.

Talking about it with Conan and various callers, though, another name kept coming up: Kickstarter. This crowdfunding site helps creative types raise money for projects like albums, concerts, books, etc. While crowdfunding and microphilanthropy aren’t exactly the same, I loved that we got to talk about this, because they are incredibly intertwined, and all stem from the same technological forces.

Basically, technology democratizes things. It establishes direct connections between people. It lowers the costs of transferring small amounts of money. It produces copious information. Whether you’re contributing to a well project in Tanzania or, as a caller named Evan discussed, a local brewery in Kansas City, you are bringing people together to support something bigger than themselves.

Conan asked if contributing to the local brewery was more of an investment than a donation. While SEC rules basically prohibit crowdfunding projects from granting people equity (though there is a bill in Congress to change this), Evan said it turned out to be an investment, because after the brewery was funded, the owners taught him how to use the equipment so he could go partially into this line of work himself. It was a “personal investment,” he said.

Sometimes, philanthropy is about helping the destitute, but if it’s about promoting human welfare, this can also mean helping to create a community in which you’d want to live. Evan wanted to live in a community with a thriving local brewery scene. He used his money as a tool to help fund that, and in turn, it wound up enabling him to learn a new skill.

Is that philanthropy? Is it investment? Or a combination of the two? I don’t know, but it’s a fascinating new space in how we can use money as a tool to change the world around us and help us create the lives we want. Welcome to the joy of selfish giving, or perhaps the altruistic side of investing!