I think there are still non-profits that are genuinely dedicated to a philanthropic mission. Catholic Charities comes to mind.
Other nonprofits are dedicated mainly to rewarding insiders - Arnold provides several examples. The non-profit hospitals in neighboring towns provide some dramatic anecdotes. Both hospitals had been founded about a hundred years ago, and were under the control of "corporators" - prominent local citizens who were supposed to ensure the health of the hospitals. I think they knew little about managing hospitals, but a great deal about doing business with hospitals. By 2010, both hospitals were in very precarious positions, and they had to be taken over by a for-profit hospital company in 2016. The state demanded various conditions from the hospital company, intended to continue service to the local community. Both hospitals continue to operate, although one no longer has inpatient care, aside from emergency psychiatric care (generally limited to 3 days, which is the amount covered by insurance). The hospital company's most reported activity was selling the hospitals' real estate to its management company and then leasing back. This year, both hospitals were acquired by one of the state's large hospital networks.
I now donate to no charity that I'm not thoroughly familiar with.
For anyone considering donating to a charity through their wills, I'll offer a cautionary tale. My grandmother spent the last several years of her life in a lovely nursing home operated by a Baptist charity. In gratitude, my father left some money to the home. When my father died, the home had been taken over by a for-profit nursing home company, and the remaining assets of the charity had been turned over to a county environmental group. Our attorney advised that it would be much simpler and cheaper to send the money to the environmental group, so my father's wishes were thwarted.
And a philosophical proposal: My great aunt said that she was happy to support her church and her college while she was alive, but would leave them nothing in her will. She thought organizations should earn the continuing support of living people, not subsist on the generosity of the dead.
Another concern for people considering leaving a charity money in their wills—
An elderly bachelor in my mother's home town—call him Adam—had drawn up a will leaving some portion of his estate to one of the major medical charities—Heart Fund, American Cancer Society, Red Cross, or the like. As he got older, he came to rely more and more on a neighbor couple, the Smiths, who drove him to doctor appointments, got him groceries, and generally made sure he was OK. Grateful for this, he wrote up a new will, in which the Smiths got a share, and the American Disease Fund got less. After Adam's death, the ADF contested the new will, arguing that the Smiths had improperly influenced him to leave them a piece of the estate.
So, kids, if you're going to leave money to a major charity, don't let them know...
"I would rather that the oligarchs just kept the money and invested it in profit-seeking enterprises."
I've often claimed that Bill Gates did more for humanity by making computing so simple even his mother could do it, by several multiples, over whatever he accomplished by funding The Gates Foundation.
“Economists] found that because nonprofit hospitals cannot distribute profits to shareholders, they accumulate excess tax-free cash — and spend it on themselves. Their facility-wide general and administrative wage expenses run 26 percent higher than comparable for-profit hospitals. Their managers use the surplus to pursue what the researchers bluntly call “empire-building through capital expansion.”
The incentives are all wrong—you reap what you sow.
If patients and the “public” wish for better outcomes, their wishes cannot come true; not unless hospitals must compete for our business. This cannot happen if medical services are subsidized and prices are negotiated by third parties.
PS—I have discussed emergency situations which obviates a patient’s immediate choice of providers. This cost to patients (in a competitive market) would come down as hospitals become increasingly more competitive and efficient (especially as treatment options improve).
When thinking about non-profits, I image a business and then remove accountability and desire to solve the problem. Reading this post I now have to include: insidiously striving against the stated mission. On a more positive note, I found that give.org, operated by the BBB, seems to be one of the better charity evaluators out there. But caveat emptor always.
Re: "A nonprofit can be wrong about everything for decades and still get the check, because the check-writer has switched into a different cognitive mode than he or she was in when the wealth was actually built." - Joe Lonsdale (quoted by Arnold)
Colleges and universities - alma mater - are a special case in lack of accountability to donors.
1) It often occurs that an alum/donor has not switched into a different cognitive mode, and indeed perceives and even laments alma mater's stray from mission, but persists in generous philanthropic support, seemingly motivated by a "sense of loyalty" equilibrium among alma mater's major donors.
2) Alma mater is adept at pitching causes that *sound* good, but enable the gifts to be *fungible.* A classic example is gifts for financial aid. The gift makes its way through the budget as untraceably as rivers flow into the sea.
3) Major donors typically have made their fortunes through entrepreneurship and for-profit firms, but often partly via networks rooted in alma mater. Perhaps this is an element in the loyalty equilibrium.
4) A grateful disposition is a personality trait that tends to help one succeed in the game of life. Alma mater seems to be a salient focal point for gratitude, again, via the career networks that spring therefrom. A person who was bound to succeed, thanks to personality and intelligence, then gives disproportionate credit to alma mater.
Any idea what drives these non-profit endeavors? The easy answers are taxes, prestige/guilt, and wanting to reshape society via government, but I've never known anyone rich enough to ask.
Sorry; your comment ended with "but I've never known anyone rich enough to ask", so got the impression that you were asking why the very rich would establish charitable foundations, etc. If not that, then could you elaborate on what you were asking in that original comment?
I may have asked it poorly, but I asked particularly why people establish "charitable" non-profit organizations, since "non-profit" is entirely a tax category and would not exist if there were no tax advantages.
You asked why the fundamental incentives have to be different, but you did not ask only that; you created two new subcategories, "rich-people charity" and "those for sub-billionaire donors to nonprofit organizations".
So I asked why you created those two subcategories, one for "sub-billionaire donors" and the other for "rich people". I had said nothing about billionaires. That was entirely in your response, not my question.
I think there are still non-profits that are genuinely dedicated to a philanthropic mission. Catholic Charities comes to mind.
Other nonprofits are dedicated mainly to rewarding insiders - Arnold provides several examples. The non-profit hospitals in neighboring towns provide some dramatic anecdotes. Both hospitals had been founded about a hundred years ago, and were under the control of "corporators" - prominent local citizens who were supposed to ensure the health of the hospitals. I think they knew little about managing hospitals, but a great deal about doing business with hospitals. By 2010, both hospitals were in very precarious positions, and they had to be taken over by a for-profit hospital company in 2016. The state demanded various conditions from the hospital company, intended to continue service to the local community. Both hospitals continue to operate, although one no longer has inpatient care, aside from emergency psychiatric care (generally limited to 3 days, which is the amount covered by insurance). The hospital company's most reported activity was selling the hospitals' real estate to its management company and then leasing back. This year, both hospitals were acquired by one of the state's large hospital networks.
I think government-supported NGOs are much worse.
Other "nonprofits" simply use the legal structures to funnel money to family members of rich people. Warren Meyer gives a good description of how this variation works. https://coyoteblog.com/coyote_blog/2026/06/the-original-non-profit-abuse.html
I now donate to no charity that I'm not thoroughly familiar with.
For anyone considering donating to a charity through their wills, I'll offer a cautionary tale. My grandmother spent the last several years of her life in a lovely nursing home operated by a Baptist charity. In gratitude, my father left some money to the home. When my father died, the home had been taken over by a for-profit nursing home company, and the remaining assets of the charity had been turned over to a county environmental group. Our attorney advised that it would be much simpler and cheaper to send the money to the environmental group, so my father's wishes were thwarted.
And a philosophical proposal: My great aunt said that she was happy to support her church and her college while she was alive, but would leave them nothing in her will. She thought organizations should earn the continuing support of living people, not subsist on the generosity of the dead.
Another concern for people considering leaving a charity money in their wills—
An elderly bachelor in my mother's home town—call him Adam—had drawn up a will leaving some portion of his estate to one of the major medical charities—Heart Fund, American Cancer Society, Red Cross, or the like. As he got older, he came to rely more and more on a neighbor couple, the Smiths, who drove him to doctor appointments, got him groceries, and generally made sure he was OK. Grateful for this, he wrote up a new will, in which the Smiths got a share, and the American Disease Fund got less. After Adam's death, the ADF contested the new will, arguing that the Smiths had improperly influenced him to leave them a piece of the estate.
So, kids, if you're going to leave money to a major charity, don't let them know...
What a cynical move by the major charity. The charity deserves to be shamed, and shunned.
"I would rather that the oligarchs just kept the money and invested it in profit-seeking enterprises."
I've often claimed that Bill Gates did more for humanity by making computing so simple even his mother could do it, by several multiples, over whatever he accomplished by funding The Gates Foundation.
“Economists] found that because nonprofit hospitals cannot distribute profits to shareholders, they accumulate excess tax-free cash — and spend it on themselves. Their facility-wide general and administrative wage expenses run 26 percent higher than comparable for-profit hospitals. Their managers use the surplus to pursue what the researchers bluntly call “empire-building through capital expansion.”
The incentives are all wrong—you reap what you sow.
If patients and the “public” wish for better outcomes, their wishes cannot come true; not unless hospitals must compete for our business. This cannot happen if medical services are subsidized and prices are negotiated by third parties.
PS—I have discussed emergency situations which obviates a patient’s immediate choice of providers. This cost to patients (in a competitive market) would come down as hospitals become increasingly more competitive and efficient (especially as treatment options improve).
When thinking about non-profits, I image a business and then remove accountability and desire to solve the problem. Reading this post I now have to include: insidiously striving against the stated mission. On a more positive note, I found that give.org, operated by the BBB, seems to be one of the better charity evaluators out there. But caveat emptor always.
Re: "A nonprofit can be wrong about everything for decades and still get the check, because the check-writer has switched into a different cognitive mode than he or she was in when the wealth was actually built." - Joe Lonsdale (quoted by Arnold)
Colleges and universities - alma mater - are a special case in lack of accountability to donors.
1) It often occurs that an alum/donor has not switched into a different cognitive mode, and indeed perceives and even laments alma mater's stray from mission, but persists in generous philanthropic support, seemingly motivated by a "sense of loyalty" equilibrium among alma mater's major donors.
2) Alma mater is adept at pitching causes that *sound* good, but enable the gifts to be *fungible.* A classic example is gifts for financial aid. The gift makes its way through the budget as untraceably as rivers flow into the sea.
3) Major donors typically have made their fortunes through entrepreneurship and for-profit firms, but often partly via networks rooted in alma mater. Perhaps this is an element in the loyalty equilibrium.
4) A grateful disposition is a personality trait that tends to help one succeed in the game of life. Alma mater seems to be a salient focal point for gratitude, again, via the career networks that spring therefrom. A person who was bound to succeed, thanks to personality and intelligence, then gives disproportionate credit to alma mater.
Any idea what drives these non-profit endeavors? The easy answers are taxes, prestige/guilt, and wanting to reshape society via government, but I've never known anyone rich enough to ask.
Why would the fundamental incentives for rich-people charity have to be different from those for sub-billionaire donors to nonprofit organizations?
Because non-profits are not the same as for-profits, the incentives are different.
ETA: to put it differently, if the incentives for both are identical, why have two different types? Ergo, they must have different incentives.
I said nothing about billionaires. What does that have to do with anything?
Sorry; your comment ended with "but I've never known anyone rich enough to ask", so got the impression that you were asking why the very rich would establish charitable foundations, etc. If not that, then could you elaborate on what you were asking in that original comment?
I may have asked it poorly, but I asked particularly why people establish "charitable" non-profit organizations, since "non-profit" is entirely a tax category and would not exist if there were no tax advantages.
You asked why the fundamental incentives have to be different, but you did not ask only that; you created two new subcategories, "rich-people charity" and "those for sub-billionaire donors to nonprofit organizations".
So I asked why you created those two subcategories, one for "sub-billionaire donors" and the other for "rich people". I had said nothing about billionaires. That was entirely in your response, not my question.