With Charity for All

When you walk through any American city, you're surrounded by charities—hospitals, churches, schools, foundations, and service organizations. In With Charity for All, Ken Stern argues that the nonprofit world is not a peripheral industry; it is a core pillar of American life, generating over $1.5 trillion in revenue and employing millions. Yet despite its scale and influence, the charitable sector operates with striking opacity, weak accountability, and perverse incentives that reward emotional stories over proven outcomes.

Stern's core claim is simple but unsettling: if you think of donations as investments in public good, you’ll see that the charitable marketplace is deeply inefficient. Most donors give reactively, charities underinvest in infrastructure, government outsourcing blurs accountability, and public oversight is thin. The book offers both diagnosis and prescription—showing why good intentions so often produce mediocre or harmful results, and how donors, regulators, and organizations can cooperate to create an evidence-based, outcome-driven system.

A System Hiding in Plain Sight

Every year, more than 1.1 million U.S. charities mobilize about 10% of the nation’s economic life. The sector delivers core public functions—from hospitals to emergency relief—yet remains privately governed and publicly financed through tax exemptions and direct government grants, roughly $500 billion annually. When you donate, you’re participating in a hybrid marketplace where your dollars mix with public funds, but rarely with public transparency.

This hybrid nature stems from post–World War II tax reforms that supercharged giving. The Internal Revenue Code encouraged foundations, and governments embraced “third-party” models, outsourcing welfare, education, and health services to private organizations. What emerged was a vast ecosystem that blends private generosity and public policy—but never developed the regulatory standards or performance culture you might expect in markets or government agencies.

Misaligned Motives and Market Psychology

Donor psychology underpins much of the dysfunction. You tend to give for the “warm glow”—the emotional lift of helping an identifiable person or cause—rather than to maximize measurable social return. In behavioral studies, donors like the identifiable child Rokia elicit more giving than data showing millions in need. Charities know this and optimize fundraising for story and sentiment, not for verified results.

That dynamic explains why marketing-heavy but ineffective programs like D.A.R.E. persisted for decades, consuming public and private dollars despite randomized studies proving no effect. It also explains why emotional crises—earthquakes, floods, terror attacks—produce waves of sometimes fraudulent fundraising, with fake charities preying on urgency and empathy. The challenge isn’t your compassion; it’s that your emotions get decoupled from evidence.

The Cost of Overhead Myths

Stern dismantles one of philanthropy’s most enduring fallacies: the obsession with low overhead. Donors often reward charities that report minimal administrative costs, equating thrift with virtue. But when you punish investments in technology, training, and logistics, you hobble capacity. The American Red Cross’s failures in Katrina trace back to exactly this problem—the refusal to fund systemic improvements that would have prevented chaos.

What business succeeds by cutting all infrastructure? Capacity enables effectiveness, and the same principle applies to social missions. When you fund “invisible costs,” you’re actually funding better outcomes later. The irony is that measuring and proving impact—what donors crave—requires the very overhead they often resent.

Evidence, Accountability, and the Missing Market Signals

Few nonprofits rigorously assess their work. GiveWell’s founders, Elie Hassenfeld and Holden Karnofsky, discovered that most charities refused or couldn’t share outcome data. Among hundreds analyzed, only a handful passed even minimal transparency tests. The implication is unsettling: most giving rests on faith, not proof.

Without reliable data, donors can’t make rational choices. And because the sector lacks competitive “creative destruction,” ineffective incumbents survive indefinitely. Governments reinforce this inertia by funding familiar names, not effective programs. Structural reform matters because incentives—not intentions—determine results.

When Charity Becomes Business and Politics

Stern catalogs how charity law’s broad boundaries allowed hospitals, sports events, and elite arts institutions to become quasi-commercial empires while retaining tax privileges. The Unrelated Business Income Tax was designed to curb such abuses, but its weak enforcement lets entities like bowl games or luxury hospitals enjoy benefits meant for genuine public services. The Biltmore of hospitals and the private opera box both illustrate a key distortion: you subsidize exclusivity under the banner of charity.

Meanwhile, lax oversight and minimal audits invite fraud—from fake veterans’ associations to insider embezzlement at Goodwill chapters. Roughly $40 billion may leak annually through theft and scams. The lesson: moral missions do not self-police. Oversight must catch up to the money flow.

Towards a Smarter Giving Marketplace

Stern ends on a constructive note. The rise of intermediaries like New Profit and GiveWell points toward a more rational future—where philanthropy behaves like venture capital: pooling funds, vetting programs, and scaling only what works. Evidence-based models like Youth Villages, Nurse-Family Partnership, and VillageReach show that rigorous measurement, patience, and disciplined scaling deliver real results.

If you want your gift to matter, think like an investor: ask for data, reward capacity-building, and support intermediaries that translate research into action. Stern calls for renewable nonprofit status, stronger enforcement, and evidence-based procurement so government funding rewards outcomes, not overhead optics. Charity should not escape scrutiny because it speaks the language of virtue. In a trillion-dollar system intertwined with your taxes, expecting proof is not cynicism—it’s citizenship.

Ken Stern explores why you give as much with your heart as with your head. Donations often come from personal resonance, stories of suffering, and the desire for connection—not necessarily from calculations about impact. Behavioral economists like James Andreoni describe this as the warm glow of giving: a personal emotional return distinct from pure altruism. Brain studies confirm that acts of generosity stimulate reward centers identical to those triggered by pleasurable stimuli.

Once you understand that donors crave personal payoff, you can see how charities evolve to feed that desire. They personalize appeals, promise recognition, and tell vivid single stories rather than abstract statistics. The famous Rokia experiment showed that people give far more when faced with one named child than with data about millions suffering. You may want to believe you’re solving systemic poverty, but your empathy is wired for one face at a time.

Warm Glow versus Altruism

Two motives drive giving: altruism and warm-glow gratification. Altruistic givers look for maximum social return; warm-glow givers seek personal fulfillment. Most of us blend the two. This continuum explains why programs that photograph wells, feature testimonials, or give you a tote bag thrive—they let you feel the impact even without evidence that it lasts. At the high end, the same psychology powers “conspicuous compassion”: gifts that signal moral or social status. Joan Kroc’s enormous but emotionally driven philanthropy exemplified this pattern.

Social Signaling and Influence

Philanthropy also serves as public signaling. Brooke Astor’s society gifts or corporate board donations aren’t just charity—they confer influence and prestige. In modern terms, donor boards sometimes operate like markets for visibility and power. The pattern is not necessarily harmful—social proof can attract others to give—but it distorts focus. It rewards glamour projects over systemic solutions.

The Consequences of Emotion-Driven Funding

Because donors reward emotional appeal, charities spend disproportionate energy on marketing rather than metrics. The result is a culture that prizes immediate storytelling over sustained impact. If you want to change this, shift your attention from the story you’re told to the outcomes that can be verified. Recognize that the strongest evidence of effectiveness—controlled trials, longitudinal follow-ups—rarely fits neatly into campaign brochures.

Takeaway

Your intuition to give is good. Just balance empathy with evidence. The more you ask for results instead of stories, the more responsible—and effective—the charitable system becomes as a whole.

When you judge a charity by how little it spends on administration, you may unintentionally sabotage its success. Ken Stern argues that the obsession with minimizing overhead has crippled nonprofit performance. Donors, watchdogs, and media all valorize lean structures, forcing organizations to underinvest in infrastructure, technology, and personnel. Yet those investments—what you might call “organizational muscle”—are what determine effectiveness during crises.

Learning from the Red Cross

After 9/11, Red Cross head Bernadine Healy proposed using excess Liberty Fund money to strengthen future disaster response. Public backlash forced her resignation; donors demanded every dollar go directly to victims. Four years later, Katrina exposed the consequence: botched logistics, untrained volunteers, and chaotic response. Analysts called the Red Cross effort “amateurish.” The moral is clear—refusing to fund preparation leads to failure when it matters most.

Capacity as Impact

Capacity spending—training, technology, staff development—is impact spending. In business, these are table stakes; in nonprofits, they’re stigmatized as overhead. You can think of it as paying for the orchestra’s instruments, not just the concert. Without solid systems, even inspired missions falter. The same dynamic recurs across sectors: from under-equipped shelters to understaffed health programs, lack of infrastructure translates directly into reduced outcomes.

Changing Donor Expectations

The key change in mindset is recognizing that good stewardship doesn’t mean penny-pinching; it means investing wisely for lasting effect. Support for monitoring systems, logistics, and evaluation is often the most efficient way to multiply benefits. The next time a charity touts its 95% program ratio, ask what it’s sacrificing to achieve it.

Lesson

Low overhead can mask low competence. Effective giving means funding durable capacity, not just direct relief.

You probably assume that reputable charities track their results. Ken Stern reveals the opposite: most do not, and some resist doing so. The founders of GiveWell, Elie Hassenfeld and Holden Karnofsky, left a hedge fund expecting to find top-rated charities backed by strong data. Instead, they discovered a field dominated by unverified claims, self-reported metrics, and marketing narratives. Their work shows how rare true accountability is.

The Evidence Vacuum

GiveWell’s early reviews found only about fifteen organizations out of four hundred willing to publish credible self-evaluations. Well-known entities like Harlem Children’s Zone declined to share data. Many lacked internal capacity for evaluation, others feared damaging results, and few donors demanded better. The marketplace rewarded stories, not science.

Models of Proof

Successful counterexamples include Youth Villages, which combined thorough tracking with staff training, and the Nurse-Family Partnership, which built randomized controlled trials into its DNA. VillageReach demonstrated how monitoring logistics in Mozambique increased vaccination rates from ~70% to ~95%. These organizations prove that clear measurement attracts smart money and scales real results.

Changing Incentives

If donors demand evidence, the sector responds. Incentives, not moral lectures, determine behavior. You can transform philanthropy’s culture simply by asking better questions: What is your evidence of success? How do you measure failure? How do you adapt from findings? When those become routine donor expectations, measurement becomes survival, not a luxury.

Insight

Giving based on evidence doesn’t kill empathy—it completes it. Proof-of-impact should be the new moral language of modern charity.

The charitable sector doesn’t exist outside economics or politics—it’s built by them. Ken Stern traces how tax policy, federal outsourcing, and political interests shaped today’s nonprofit landscape. After World War II, charitable tax deductions and foundation exemptions encouraged massive accumulation of philanthropic capital. The postwar welfare expansion and the Great Society turned nonprofits into quasi-public contractors. Together, these forces created what he calls a “mixed economy of welfare.”

Political Entrenchment

Both political parties like the efficiency myth of private charities. Even attempts at reform—like Rockefeller’s Filer Commission—died in Congress. The result is institutional inertia: programs like D.A.R.E. persist despite data proving their failure. Unlike corporations, nonprofits seldom face market exit when ineffective; prestige, politics, and inertia sustain them.

The Business of Nonprofits

Many charities behave like corporations but remain tax-favored. Nonprofit hospitals build luxury wings while offering community benefits comparable to for-profit peers. Sporting events like the Fiesta Bowl spend millions on self-promotion and travel under the pretense of charity. The Unrelated Business Income Tax (1950) was meant to curb abuses but largely failed. Billions in lost tax revenue subsidize institutions serving narrow constituencies.

At the same time, weak enforcement allows fraud and insider theft to flourish—from the fake United States Navy Veterans Association’s $100 million scam to internal embezzlements at churches and charities. Oversight—by IRS or state attorneys general—remains chronically underfunded.

Core Idea

You can’t fix charity without fixing incentives. As long as funding favors connections over results, efficiency will remain the exception.

Ken Stern concludes with pragmatic optimism: you can build a charitable marketplace that rewards proof, capacity, and integrity. Change begins with donors acting as investors, but it continues through stronger oversight and smarter institutions. New actors like GiveWell, New Profit, and Invest in Kids serve as philanthropic intermediaries—translating research into funding decisions and scaling proven programs like KIPP, Nurse-Family Partnership, and VillageReach.

Donors as Investors

You can shift norms by asking simple questions before giving: What data prove this works? How is success measured over time? Does the organization invest in learning and staff development? Following reputable evaluators or pooling money through intermediaries multiplies your impact and signals to the market that evidence matters.

Governments as Smarter Buyers

Because governments fund most charity operations, procurement reform is essential. Stern cites the Obama administration’s Social Innovation Fund and evidence-based budgeting memos as small but vital steps—favoring outcomes over input checklists. Imagine contracting on results like fewer foster-care placements or higher vaccination rates rather than on sheer program volume.

Structural Reform

Stern proposes renewable nonprofit status (reviewed every decade), stronger audits, higher entry thresholds to discourage vanity startups, and a clearer distinction between genuine public benefit and private advantage. Transparency databases and public reporting could make charitable performance visible—creating the equivalent of market pricing for social outcomes.

Final Reflection

You don’t have to abandon emotion to create accountability. The future of charity lies in combining compassion with data—giving that measures, learns, and scales what actually works.