The Real Difference Between Charity and Philanthropy

"The most powerful force in the universe is compound interest."
Albert Einstein
The adage "give a man a fish, you feed him for a day; teach a man to fish, you feed him for a lifetime" is, for many, at the heart of the difference between charity and philanthropy. Charity refers to the relief of suffering while philanthropy is the seeking out of the root causes of social problems and solving them. There is much truth to this. After all, that's the distinction Rockefeller and men like him drew when they insisted that they were doing something more, something greater, than their merely charitable peers.

Nonetheless, I believe that the true difference between the charity that is practiced by your average schmoe who tosses the Salvation Army a few coins at Christmas, and the philanthropy practiced by a man whose foundation is involved in a number of innovative initiatives aimed at effecting important social change is much simpler: compound interest.

While I marvel at American philanthropy's insistence on private solutions to public problems, its Tocquevillean associations, and its incredible can-do Yankee individualism and generosity, I am in still greater awe of its true genius: an entire system dedicated to harnessing the engine that is compound interest for the good of humanity.

When the charitable man makes a donation, he digs in his pockets for whatever he's got on him or he conscientiously strokes a check for a sizable sum and hands it off to a grateful beneficiary. Bada-bing-bada-boom. Charity.

When your philanthropist, on the other hand, makes a grant, that money's coming from a foundation, or a giving circle, or a donor-advised fund, where that money is invested for social benefit. You can make grants for the next five days, the next ten years, or forever. Bada-bing-bada-BOOM! Philanthropy!

While the charitable man's power is exerted and exhausted in the act of giving, the philanthropist's power is conserved even as it's exerted.

Give a man a fish, feed him for today. Teach a man to fish, feed him for a lifetime. Charity is for today; philanthropy is forever.

There's your difference between the philanthropic and the "merely" charitable: compound interest.