Last week the Wall Street Journal (subs rec'd) published an article which described a recent trend in charitable giving: individuals are increasingly making "Stretch Gifts" which are a large-enough percentage of their net worth so as to negatively impact their lives. One example is James Doty, a 51-year-old neurosurgeon with a 3-year-old son who recently gave away $37 million - which amounted to 99% of his net worth. Doty will have to keep working for a long time to save enough for his child's education and his own retirement.
The reasons for literally giving until it hurts are many. Some are looking for greater meaning to their lives. Others are tired of gathering "things" and shun the second homes and luxury lifestyle. Many want to repay the organizations that helped them reach success in the first place. And still others feel that passing along a large inheritance could spoil their children (see my post on the Estate Tax)
But the most fascinating insight is that these Stretch Gifts not only make a bigger impact on society, but they might create more incentive for the giver to do even more. Syracuse University professor Arthur C. Brooks published research in his book Who Really Cares that shows a dollar donated to charity brings on average an additional $3.75 back to the giver. According to Brooks:
"They often create great discomfort among their families, but when people give there is substantial personal transformation. They tend to work harder," leading to greater prosperity, and in the long run, he says, "this leads to more success, both financial and nonfinancial."
In effect, Stretch Gifts put pressure on the giver. They are newly challenged to work harder to pay the bills. This leads to a burst of new productivity, and in turn added income to give away. The challenge of a Stretch Gift drives the dividend of added income for the giver - which he or she can use to improve the world further with even more charitable giving.
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