On 23 December 1999 there was a poor man in Kansas City looking for some warm winter clothing in a Salvation Army thrift shop. He had seventy-five cents in his pocket. Suddenly someone approached him from behind and said, “Excuse me.”
He turned around, and a man pushed a hundred-dollar bill into his hand, said, “Merry Christmas,” and walked away.
That wasn’t the first time something like this had happened. It had been going on for years, and no one knew the giver’s identity. He was only known as Secret Santa. He would walk around during the Christmas season giving money to people who needed food, clothing, or shelter.
He came forward in 2006, because he had terminal cancer and was given one month to live. His doctor told him that if he wanted anybody to understand his mission then he should reveal his identity. Secret Santa’s real name was Larry Stewart, and he was a very wealthy entrepreneur.
He’d given away $1.3 million in hundred-dollar bills, but he had also given away tens of millions of dollars more in traditional philanthropy—building youth centers, building a YMCA, and helping the community.
When the press asked him why he gave so much, he said, “I’m just doing what the Lord is directing me to do. I’m just a pair of hands and feet. He’s using me. He’s lighted my path. Part of my daily prayer was, ‘Lord, let me be a better servant.’ I had no idea this is what he had in mind, but I’m happy. I’m so thrilled he is able to use me in this way.”
Larry Stewart, aka Secret Santa, honestly believed that the secret to his happiness was his giving. In my research I have found that part of the secret to his prosperity was also his giving.
• Why Giving Matters •
Americans give at an astounding rate. Last year Americans privately gave $295 billion to charity. That’s more than the entire gross domestic product of all but about twenty-five nations in the world.
About three-quarters of that comes from private individuals writing checks to their favorite charities and churches. Only about a quarter comes from foundations, corporations, and bequests.
The average American gives three and a half times as much money to charity as the average French citizen, seven times as much as the average German, and fourteen times as much as the average Italian. That’s not because of income differences or tax differences; that’s because of values and culture.
The question, of course, is why does it matter? Go back to Larry Stewart, Secret Santa. He said, “I can’t be happy unless I give.” I’m an economist, and I also teach in an entrepreneurship department at Syracuse, so I work with successful entrepreneurs all the time. Most of them are exceptionally generous people, and they always tell me the same thing: part of my secret to success is how much I give away.
I didn’t believe them for the longest time. When you study economics you learn that you have to have money before you give it away. But every entrepreneur I’ve ever talked to said you’ve got to give it away before you can have it. John D. Rockefeller was famously quoted as saying in 1905, “God gave me my money to use as I see fit for the benefit of my fellow man.” He believed that if he did not do so, God would take the money back. In other words, he thought he was rich because he gave.
I decided to test this and prove the theory was incorrect, so the next time an entrepreneur told me that part of his or her success was due to their giving, I could say, “I actually tested that, and it’s not correct.” It turns out the joke was on me. I’m going to show you how wrong I was, why I think it matters, and how it changed my understanding of charitable giving.
• Giving's Return on Investment •
In 2000, Harvard and other universities and community foundations in forty-one United States communities sponsored a study of thirty thousand American families. Named the Social Capital Community Benchmark Survey, it asked families what they do with their time, where they donate, if they volunteer, how much money they make, and what their jobs are. It’s an incredibly exhaustive survey.
I expected to find that when people got rich they gave more but that when they gave more they didn’t necessarily get richer. What I learned from this great data source is that when people get ten percent richer in income, they give away seven percent more money to charity, and that when people give charitably they also get richer. Imagine you have two families that are exactly the same demographically. Same level of education, number of kids, region of residence, ages, religion—the only difference is that the first family gives $100 more to charity than the second family. It turns out that first family will earn, on average, $375 more than the nongiving family, and that extra income is attributable to the charitable donation.
When I realized this, I thought that was completely wrong. As a matter of fact, I got new data and rewrote my analysis, because I thought I’d done something wrong. The analysis was suggesting that the return on investment to a dollar given to charity is $3.75. That’s an incredible investment. So I got new data, and it kept coming up again and again.
What about when the whole country gives a little bit more away? Does the whole country get a little bit richer? The average household in the United States during a fifty-year period (the mid-1950s to 2004) increased its take-home income by about 150 percent in inflation-adjusted terms. This is American prosperity right here, but there’s a better reason to celebrate. The bottom line is the average amount that the household gave away to charity in inflation-adjusted terms went up over the same period by 190 percent. That means we’re getting richer fast, but we’re giving a disproportionate amount of it to charity—further proof that Americans aren’t stingy.
If we were to increase our charitable giving this year as a nation by just one percent at a private level, that would be about an extra $2 billion to charity. We could expect as a result of that, for the economy, an increase in our gross domestic product of about $39 billion. But think of the multiplier, $39 billion coming from a $2 billion investment? That tells us charitable giving is not just a great investment secret for individuals; it’s a patriotic act. It’s good for our country. It’s part of the reason that we’re so rich. We’re in a virtuous cycle of giving and getting. This is part of our secret to success as individuals, as communities, and as a nation.
• The Psychology of Happiness •
I went to a psychologist friend of mine who studies charitable giving. He says there are two reasons for the success of people who donate: (1) giving changes givers and makes them more effective; and (2) giving changes the perception other people have of givers, and that also makes them more successful. Psychologists have conducted experiments showing why people get happier when they give.
Let’s go back to Larry Stewart. He said, “I’m so happy, and I’m so happy because I’m a giver.” He explained his prosperity in happiness terms. You know, this is really the common denominator of true prosperity in our lives. Let’s look at the link that psychologists have explained between giving and happiness.
There’s lots of data out there that shows that happier people give more and that people who give more are happier. People who give some amount of money every year are 43 percent more likely than nongivers to say they’re very happy people. Volunteering one more time per week will raise your likelihood of saying you’re very happy by 50 percent. Blood donors are 50 percent more likely to say they’re very happy than people who don’t donate blood.
Psychologists have figured this out with experiments. They’ll bring in groups of people and ask them, “How happy are you?” They’ll hook up electrodes to the participants’ brains and see how much they smile. Then they’ll have half of the people serve others while the other half does nothing. Afterward, they’ll gauge their happiness again. Guess who’s happier? By a long shot, in every one of these experiments, you’ll find that after you serve you get happier.
Giving changes your brain. In 1988 a neuropsychologist by the name of Alan Lukes published an academic paper in which he described a phenomenon he called the “helper’s high,” the level of endorphins in people’s brains, the things that made them feel good. Incidentally, these are the same chemicals people experience a lot of when they use drugs and alcohol.
Psychologists have also found that stress hormones are reduced or depressed by charitable giving acts. There’s a famous study from five years ago; it’s an unusual study that had senior citizens in a clinical experiment massaging infants. Half the senior citizens massaged babies, and the other half didn’t. They found that the baby massagers had about half the level of three stress hormones in their brain at the end of the study compared to the others. Those are the three hormones coursing through your brain when you’re caught in traffic. There are a lot of studies out there that say that these stress hormones are implicated not just in unhappiness but also in poor health and early death. Giving more will actually reduce your stress hormones.
People who are less stressed-out are more focused on their tasks. They are more likely to have success in their endeavors. One of the things that we find is people get more effective when they do their work with less stress. So, if you consistently have less stress, you’re going to be a more successful person for a simple neurological reason.
Secondly, we don’t just change our brains when we give—we change the brains of other people when we give.
A year ago at England’s University of Kent, economists and psychologists undertook what they call a cooperation game, where you gather a bunch of people and give each person cash. The subjects decide how much of the cash they’ll put into a common fund in the middle of the room. Now the best thing for everybody to do is to put in all their money, because the researchers tell them that all the money collected in the common fund will be doubled and divided equally among all participants. But the dominant strategy for people who are selfish is to hold everything back and let the “suckers” put in their money, because then they’ll keep all the money given to them and get a good share of the others’ too.
In the second phase of this experiment the researchers had the subjects solve puzzles in teams, and they each had to elect a team leader. In 88 percent of the cases, the team leader who was selected was the biggest giver to the common fund.
The researchers realized that charitable giving is a leadership trait people observe in one another. Givers are perceived to be leaders. The bottom line is that giving is good for you, and it actually positions you to be perceived as a leader.
• Who's Giving? •
Ninety-one percent of religious people—people who attend their house of worship every week—give charitable donations. Sixty-six percent of secular people—those who attend a house of worship less than once per year—give charitable donations. In 2000, 67 percent of religious people volunteered, versus 44 percent of secular people. Religious people give away almost four times more money than secular people do. Religious people are 10 percent more likely than secular people to give to nonreligious causes. They are 21 percent more likely to volunteer for totally secular causes.
If it were not for religious people in your community, your PTA and United Way would be out of business. If secular people gave blood like religious people do, the blood supply in America would jump by 30 percent.
Giving makes you healthy, happy, and rich. It makes you a stronger, more prosperous, happier individual. It makes you a better citizen. It makes communities stronger. It makes us a great nation. And that means all of us are needy. We all are in a state of need to give all the time.
Here are two big facts: (1) givers are the big beneficiaries of giving, and (2) religious people are America’s big givers. To me, as a Christian, my giving to others is a gift to me from God, and that changes my notion of stewardship radically. Since I am blessed it is my responsibility to give to others and to do so faithfully. I’ve heard this verse my whole life: “For unto whomsoever much is given, of him shall be much required” (Luke 12:48). You find this idea in every sacred text. Unto whom much has been granted, much is expected.
My research assistant shared this verse with me from Mosiah 4:21:
And now, if God, who has created you, on whom you are dependent for your lives and for all that ye have and are, doth grant unto you whatsoever ye ask that is right, in faith, believing that ye shall receive, O then, how ye ought to impart of the substance that ye have one to another.
We understand this, but I want to expand that. If you are blessed to be a giver, it is your responsibility to help other people give. The essence of effective philanthropy is bringing other people into the grace that you enjoy because you’re givers. That means you’re all amateur fund-raisers.
• Giving Myths •
Myth number one is that giving makes us poor, because we give money away. This was the misconception that I had because I was stuck being an economist. I had a mechanistic view of life, but life is not mechanistic. Life is more perfect than that. Giving doesn’t make us poor; giving makes us richer.
Myth number two is that people are naturally selfish. I hear this all the time. Americans are selfish. Humans are selfish. No, we’re not. When we are our best selves, our most natural selves, when we are really acting as if we were made in God’s image, we’re not selfish. We have evidence that this is our most natural selves because this is when our brains are in tune. This is when we are in equilibrium. This is when we’re happiest and healthiest and most prosperous—when we’re giving.
Myth number three is that giving is a luxury. It’s not; it’s a necessity, because we are in need to give. I already told you about the working poor in this country. The working poor have not been convinced that giving is a luxury, because if they thought it was, they wouldn’t give. And they give a higher percentage of their income than any other income class.
Myth number four is that our nation can afford to not give. In 2000, presidential candidate Ralph Nader said, “A country that has less need is a country that needs less charity.” He meant that if governments met our needs adequately, we wouldn’t have to assist in the first place. And on its face, charity is evidence of failure. It’s failure of our necessity of helping those who are in need. I’m here to tell you that’s wrong, and if we crowd out charitable giving by paying for everything through the state, we’re going to pay the price. My data will tell you that we’re going to be unhappier, unhealthier, and poorer as a country unless we take responsibility.
Now is there a role for government? That’s for all of you as citizens and scholars to decide. I would never say that the government shouldn’t do things; that would be irresponsible. What I’m saying is that there will always be a role for private citizens to take responsibility for providing things that are important. Not just to provide the services but rather to provide the happiness, health, and prosperity that we enjoy as a great country. This is a secret to our success.
My research has really changed my life. You know, one of the great things about being an academic—a tenured professor—is that you get to research things that you find interesting and transformative. When I did this research, it expanded my consciousness about what was going on in my life, and it changed the way I give. It also told me that one of the reasons I’m a happy, healthy, prosperous person is because I live in a nation of givers like yourselves. So, thank you.
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Article written by Arthur C. Brooks
Illustrations by Jim Salvati
• About the Speaker •
Arthur C. Brooks is the Louis A. Bantle Professor of Business and Government Policy at Syracuse University’s Maxwell School of Citizenship and Public Affairs and Whitman School of Management. He has published approximately one hundred articles and books on the connections between culture, politics, and economic life in America. Brooks earned his PhD in public policy analysis from the RAND Graduate School in 1998 and also holds an MA and BA in economics.
This article is adapted from the George W. Romney Distinguished Lecture given by Brooks 16 October 2007.
