The Karmic Capitalist: Should I Wait Until I'm Rich to Give Back?

This is a question I have fought with a lot over the years.

Spending time with the upwardly mobile in places like NYC and LA, one can't help but believe the consensus: It is better to wait until you have made a lot of money before trying to change the world? The idea (excuse?) is that you can then have a greater impact. But is it really true?

I no longer think so. There are a few reasons I have decided to commit at least $100,000 of my own money to education in the next 12 months:

1. Giving back is like investing with compound interest.

Less money earlier often beats more money later.

$1,000 invested now may very well have a much greater impact -- due to growth and ripple effect -- than $10,000 invested in 10 years. How many world leaders and innovators could you create or save if you acted now instead of at an undefined "someday"?

Here's an extreme example of how time changes value: Manhattan was bought for $27 in 1626. Invested at 7.5 percent then, compounded yearly, that $27 would be worth $22,224,711,000,000 now. Or compounded quarterly: 4.73442004 × 10^13 ($47.3 trillion). To put that in perspective, the entire yearly GDP for the USA these days is around 7 trillion. (Thanks to Ryan for this example).

Act now and very little can do a hell of a lot.

2. Prevention costs much less than cure and is ultimately more powerful.

For example: to educate a girl for 10 years in the developing world, ultimately producing an economically self-sufficient family and ending the cycle of poverty, costs a total of $2,500 with Room to Read. How much does it cost to provide aid or welfare to an entire family for decades on end, not to mention treating the famine, disease, and violence generated from this collective poverty? Look at Africa and the $50 billion+ that has been given as aid.

Charity doesn't work -- empowerment does. The good news is that the latter depends on acting early and precisely, not lots of money.

3. Giving is an investment in yourself.

Giving shouldn't be viewed as losing anything.

Based on previous polls on this blog, 32.2 percent of you make $51-100K per year and more than 20 percent make $100-200K per year. Regardless of income, could you afford to empower 100s or 1,000s of others with 5-10 percent of it, especially if it permanently increased your feeling of self-worth and contribution? Of course.

In fact, this self-perception boost is one of the greatest bargains, and performance enhancers, on the planet.

4. Changing the world is cheap.

Changing the world doesn't require much money. Again, think in terms of empowerment and not charity. How much were Gandhi's teachers paid? How much did it cost to give Dr. Martin Luther King the books that catalyzed his mind and actions?

Just imagine that you and your friends make $40,000 per year. Imagine that you convince just five of them to join you in building a children's school in Nepal dedicated to your parents (or your lifelong friendship). The total cost? 5 people x $3,000 each= $15,000. I know that most people, myself included, will put $3,000 of crap on credit cards in the next few months that could instead create a miracle... a miracle that you can visit.

You and your friends could plan the trip of a lifetime in 6-18 months to visit the completed school, teeming with dozens or hundreds of students who greet you with smiles and thank you letters. You'll know it's your school because your names will be on the door.

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If that seems like too much, you can finance a girl's education for 10 years ($2,500) and effectively guarantee a future without poverty to an entire family. How would you feel about yourself if you just did it and pulled the trigger now?

I can tell you -- it's amazing. It changes your life almost as much as it changes theirs, and you won't miss the $2,500. I guarantee it.

If you haven't given before, I encourage you to do it now. Just do it. Take it for a test drive and see how it changes you. On the personal side, you'll feel great about yourself for a long, long time. On the results side, especially with the groups I've researched and selected, you'll measurably improve the world, something few people do, and possibly win some amazing prizes I and others are offering to people who donate this month.

To whet your appetite, check out some of the projects to pick from here. From there, it's as simple as checking out the next step.

Follow Tim Ferriss on Twitter: www.twitter.com/timferriss

Comments

[SisterAnn]

Actually, the younger generations starting out who are earning $40,000 to $60,000 probably need some help themselves. They have high housing costs and all the other high expenses, plus they are paying on the college debt. Day Care for one child is $10,000.

My husband and I didn't have the money to save or invest for the future, until we were in our fifties and paid off our home. We have tried to save as much as we could in case we have a delimma and mostly in hopes of leaving something to our children.

We are just beginning to realize we would have been better off to have helped them buy a home and things like that, than to save it for their future. All three have managed to buy homes anyway, but two had to sell their homes, one because of divorce and moving back from another state and another had to sell due to a military move. We would like to help them get back into buying a home, but who knows the price houses will go down to or up to now?

It is important to save, but you also need to help the younger generations. They are being hit hard.

[dadw5boys]

So now the IRS needs to see if the school has really been built, the books bought and kids actully go to school there.
Sorry I could easily envision people buying land for a school building several buildings and painting the word school on it to get a write off and then a year later oepning a Golf Resort or Ski Resort or Beach Resort in some forgein country.
How about a group getting togeather and really checking out how the CHARITY FUNDS for sooooo many charites are spent. I have seen broadcast where they show big mansions where the Charity Officers live with swimming pools and lots of expensive vechiles but little if any money goes to the poor it was intended to help.
How exactly do the Christian Charities that take money to help the poor but build T.V. Stations all over the world help the poor when they don't have T.V.'S. Several of those stations in Africa and other countries. Only the rich have T.V.'S BESIDES that won't feed people or get them clean water or food it is called fraund to take money then use it for something else..

[mbjesq]

There is a better way to change the world for the better: give your time rather than your money.

I recognize that charitable giving is, in certain contexts, an essential tool; and I salute those who give. Still, applying your talent, passion, and sweat to something you care about achieves something that a donation does not: it not only produces change in the world, it is a transformative experience for the giver. Whether your acts of service involve major undertakings or something as simple as a five minute commitment to pick up trash in the street, they express your values in a way that is both personally satisfying and inspirational to others.

I like Mr. Ferriss's application of the analytic tools of commerce to the problem of philanthropy. I have argued in a similar vein (and at the Haas School of Management at U.C. Berkeley, no less!) that, for business-people, volunteerism is the ultimate return-on-investment: http://memestreamblog.wordpress.com/2004/11/13/service-an-entrepreneurs-perspective/.

Mr. Ferriss is right: the time to act is now. I would simply define "acting" in a way that is both broader and more broadening than check-writing.

mbjesq
www.memestream.org

[DavidJames]

Tim,

Investment in tax exempt empowerment has one other advantage, none of the income donated, goes in taxes to the misguided Bush administration.

Investing in yourself and your family though tax exempt savings has a similar advantage.

Cheers,