Your Brain on Philanthropy: Relative Comparison biases

Earlier this year (just days before the State of Hawaii was issued a shelter-in-place order) I attended a Planned Giving seminar. The main speaker was Russell James, and wow. I was all a-tingle with nerdy joy at the content and depth of his research. He works for Texas Tech and researches the psychological influences on why and how people give.

It’s easy to focus on cash gifts, because those are now. And every nonprofit organization needs cash now, and our board and our leadership often expects us to ask for cash in the door, in our pockets, to be put right to work easily, no muss no fuss.

The problem with asking for cash gifts is that people think small when thinking about cash gifts, because of the the many biases that are driven by Relative Comparison. When people think about giving out of their cash, they think about other things they spend cash on. Groceries. Mortgage payments. Lattes. Bills. They think about what comparable expenses they pay with cash. And these are all relatively small amounts if you are a Major Gift fundraiser.

“What kind of impact can this cup of coffee beans make at your organization? I’ll give you two.” Photo by Lukas from Pexels

The reality is, most people’s wealth is held in non-cash assets. Stocks, bonds, IRAs, second homes, trusts, etc. What our donors hold (and thus can give) in cash is usually quite small compared to what they have invested and hold in non-cash assets.

Thus, we want to ask people for gifts out of the bigger of their net worth — out of their wealth, their non-cash assets. Our asks will feel smaller and more doable for the donors for the simple reason that the ask amount will be smaller when compared to assets rather than to cash.

Plus, this way of asking for support is way more fun! Non-cash asset gifts require creativity and ingenuity. Everyone knows they can write a check to charity; not everyone knows that they can avoid capital gains taxes by donating their capital gains to a nonprofit organization. Most people don’t know the ways setting up a CGA or a CLT or a CRT can help them reach their financial goals and allow them to donate to a nonprofit of their choosing. In talking about these kinds of gift vehicles, we establish ourselves as philanthropic advisors, not just fundraisers.

It’s simple — if we want bigger gifts, we need to be talking to donors about giving out of their wealth, not their pocketbook. Giving them their own wealth as a comparative starting point (recall the Anchoring Effect?) will inspire them to give a larger gift than they may have ever considered when they had only their available or future cash in mind.

Also, do yourself a favor a check out James’s YouTube channel. It is chock full of lectures and trainings that will help you get a solid grasp of what successful fundraising looks like and breaking down different vehicles and elements of charitable donations, based on the science of psychology and economics. It’s delicious.

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