09/22/2013 12:18 pm ET | Updated Nov 22, 2013

Receiving and Giving: Perspectives on Philanthropy

Click here to read an original op-ed from the TED speaker who inspired this post and watch the TEDTalk below.

I recently watched Dan Palotta's TEDTalk and later spoke with him on a conference call related to a new compassion initiative of which I am a part. His talk reminded me of a number of my own experiences and the unique perspective as an entrepreneur who made (and lost) millions, who has given away close to thirty million dollars to charity and who founded and directs a non-profit organization (CCARE) that examines the neuroscience of compassion and altruism.

I share with you also the reality that not every decision related to my own philanthropy was perfect and I had a few lessons to learn. The other reality is that while I now spend a significant amount of time as director of CCARE whose work is renowned worldwide, funds that would allow me to do this work full-time are inexistent. The other reality is that a great amount of my CCARE time is spent in fund-raising mode that takes away from complete focus on the mission. Our present method of philanthropy is at the root cause of this type of problem.

Can the best and the brightest be blamed for not choosing to dedicate their lives to charitable or non-profit causes because they don't want live at the poverty level? -- John R. Doty, M.D.

It seems to be an all too common perception among philanthropists that if one has chosen to work in the nonprofit environment one has concurrently accepted a vow of poverty. Asking for a wage comparable to a for-profit equivalent position somehow seems sinful or "signifies of lack of commitment" -- as one billionaire remarked to me (note that this individual had had recently spent $30 million for a third home). Why is this? Many of these same individuals have no problem spending immense amounts to recruit a talented executive for a for-profit company. In fact, it would seem nonsensical to even debate about salary in that situation. Can the best and the brightest be blamed for not choosing to dedicate their lives to charitable or nonprofit causes because they don't want live at the poverty level? Don't get me wrong, many dedicated individuals have accepted this present reality at extraordinary sacrifice but is it fair and is it not too much to ask? I know of one very dedicated individual with a Ph.D. from an Ivy League university working for a significant non-profit as executive director who must work a second job just to cover rent, childcare, and food. In no way does she live an extravagant lifestyle.

Another too common reality that I've run across again and again are philanthropists telling me they will consider funding but don't want any of their monies to go to overhead costs. At major academic institutions such as Stanford where I am located there is a dean's tax for overhead that oftentimes is 13 percent or more. Every organization has some amount of administration or overhead costs. Again, in the private sector would anyone dismiss the need for such costs? Where else are these monies to be found? I was recently in a conversation with a potential donor worth hundreds of millions of dollars who spent the greater part of our meeting denigrating organizations that spent any funds on overhead. I'm not aware (nor was he) of any funding organization of non-profits that explicitly states they wish to only fund overhead costs. Such thinking creates another onerous and distracting burden on non-profit organizations and those that run them.

The other issue that Dan points out so eloquently is the reality that it costs money to make money. Yet, it is heresy in the non-profit world if an organization reports in their financials that $100 million was raised but it cost $25 million to do so... again, the immediate response is that something unseemly is going on. Yet, it would not have been possible to raise such a sum without paying a fund-raising or marketing professional appropriate compensation. As any successful professional knows, you get what you pay for. One of my entrepreneurial activities was founding a company that created centers that provided a form of cancer therapy. That experience and that of others in the field confirmed that if money wasn't spent on advertising to attract patients, it had a profound affect on the number of patients who were referred. Typically, the cost was 18-22 percent of revenues. If you can't spend the money to get your message out, how can you expect the message to resonate? Simply looking at the movie industry demonstrates this reality... the difference between a good movie and a blockbuster often depends on how much was spent upfront on marketing. This is a reality not only in the for-profit world but in the nonprofit world as well.

My point is not to denigrate philanthropists, nor to ignore the fact that the U.S. is the largest donor per capita of any country. It is to point out that for charities to reach their full potential, donors must look at their giving in a different way. By applying those principals that have been so successful in the for-profit world, one's contribution has the potential to go exponentially further and inspire the best and the brightest to chase their passion to serve others. Watch Dan's talk... it's amazing and will give you an entirely different perspective on philanthropy.

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