Relative wealth

Many people who haven’t done big-ticket philanthropy can be intimidated by the numbers. “How can I seriously sit across from someone and ask them for $1 million?” they will say. “I can’t even imagine$1 million.”

And therein lies the problem.

If your family wasn’t wealthy, and you’ve never been wealthy, your frame of reference is rather different than a high-potential donor. You’ll tend to think in scale with your own experience, where $1 million is a lifetime’s effort — or completely unimaginable.

Which is why it can be handy to consider ‘relative wealth.’ It’s an approach we use in our Arts Administration courses, and development trainers and mentors use as well (I learned it from veteran development expert and UW Foundation legend Don Gray). Here’s how it works: Contributions (or any other exchanges) are best considered in relative terms rather than absolute. To someone making $50,000 a year, a gift of $1000 represents two percent of their income. The same two percent for someone making $1 million a year would be $20,000. So, if you’re asking for that $20,000, consider how it would feel for someone to ask you for $1000. It might take the edge off, and it will help you place the ask in context with the donor’s perspective.

On average, U.S. households contribute about 2.5 percent of their income to charities each year. So, if you know someone’s annual income, you can get a thumbnail idea of their total giving to all causes (remembering that averages are dangerous things to build strategy upon). And you can figure if you’re asking them for a ‘stop and think’ gift or an impulse contribution.

This rough cut ignores their actual wealth, which is a rather stupid thing to do if you’re in major gifts. But it offers a gentle gateway to those who are freaked out by the scope and scale.

A rather wonderful example of relative wealth is the You vs. John Paulson website (John Paulson is a renowned super-trader who earned $4.9 billion in 2010). Type in your salary, and the site gives you the relative value (in minutes) of Paulson’s earnings against yours, as well as some handy reference prices of the things you might buy. If you enter $100,000 as your salary, you’ll discover that John Paulson makes that much in 10.7 minutes, and that dropping $400,000 for him is equivalent to you buying a giant pretzel.

The danger in this approach is that you might begin to think that wealthy individuals will just throw $400,000 at you, because it’s a giant pretzel to them. But if they don’t trust you, like you, and believe in your cause, they may not even buy you the pretzel.

Still, relative wealth is an important framing resource for newbies to philanthropy, or those who are moving from annual gifts to major gifts, or major gifts to ”ultimate” gifts.

Try it, it’s fun at parties (well, at least the parties I go to, which tend to be cluttered with cultural managers).