3 Secrets Behind the '80/20 Rule' of Giving -- and Getting More In Return
I’ll go even further: In the same way 20 percent of customers produce 80 percent of sales, a charitable donation correlates to four times more in additional income. The statistics back it up. It’s the 80/20 rule of giving.
Research by Arthur C. Brooks, president of the American Enterprise Institute, bears this out. Drawing from Harvard data on 30,000 American families, Brooks discovered a family giving $100 more to charity earns about $375 more income than a non-giving family that is similar in every other factor. For every dollar they give, they earn nearly $4 more.
What could be more counterintuitive? In giving, we receive. (That’s four times more -- an 80:20 ratio -- to be exact.) Or is it simply that people who have more are able to give more? In my experience, it tends to be the opposite, and Brooks agrees with me on this.
I used to be a little miserly until my wise wife persuaded me to open my wallet and help the needy. Funny thing, a wheelbarrow of money seemed to show up after I switched to her plan.
I believe that in some unconscious way, people who start businesses already get this concept.
Entrepreneurs are more generous than most. On average, we give 2.53 percent of our income to charity, versus 1.27 percent for everyone else. We give more in every income bracket, according to a study of IRS data by the Center for Data Analysis and the Heritage Foundation.
I think three factors play a role in this phenomenon:
1. It’s a state of mind.
Giving is a state of being and, frankly, it’s a better way to be in the world. Psychological studies show that giving makes people happier, Brooks explained during a 2009 speech at Brigham Young University.
He laid out how happiness translates into business success: “If you want to have a productive business, if you want to be a productive person, work on your happiness. Happy people show up for work more, they work longer hours, they work joyfully, they’re happier with every aspect of their productive lives. Happiness is the secret to success, and if that’s true, here’s the answer.”
Misers are miserly when they’re on the clock, too.
2. It creates reputation.
I wouldn’t suggest that Bill Gates sits around saying, “My work to end AIDS in Africa is going to grow Microsoft.” But I’m sure he doesn’t mind being seen as a global philanthropist -- instead of just another billionaire. I bet it opens doors.
This isn’t merely about sending out press releases. The Bill and Melinda Gates Foundation has spent $28.3 billion since its inception to improve people’s health and alleviate poverty around the world, and create opportunity for the disadvantaged in the U.S.
David and Charles Koch -- among the richest people in America through their Koch Industries' interests in refineries, oil pipelines and much more -- have a politically charged reputation from their donations to conservative causes and candidates. But I bet David Koch’s halo would shine brighter if more people knew how much he and his foundationgive to support the arts and sciences.
Donations include $100 million for a cancer research institute at MIT, $35 million to renovate the dinosaur hall at the Smithsonian’s National Museum of Natural History, and $65 million for a new outdoor plaza at the Metropolitan Museum of Art. He’s also a big supporter of ballet and opera. That’s just a sampling of David Koch’s generosity.
3. It’s metaphysical.
I can hear the skeptics now: “Perry, this is just magical thinking.” But I really do believe there is something more to this phenomenon than the statistical dots economists like Brooks have connected between generosity and business success.
Fill in the blanks for yourself, but I think there is something going on here that reaches beyond our present scientific understanding of the world.
Whether you’re a woo-woo child or ruthless pragmatist, the fact stands: Generosity makes you more successful. You can stop resisting the urge to be generous.