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At the beginning of this year, a for-profit company, backed by hundreds of millions of dollars in venture capital, ran a podcast ad campaign. The company wanted its listeners to try its product, and gave them an incentive to try it out: Use a certain hashtag, that would enter them into a contest where one winner would receive $1,000.


The product in question was an online begging-bowl, and the winner of the contest would need to show “admirable character” and a “history of overcoming obstacles,” as well as “financial need.” The company buying the ads was GoFundMe, pushing the idea that if you need money to go to college, then it makes perfect sense to beg for it online.

“With college costs continuing to rise, students across the country are turning to GoFundMe to help pay for tuition,” said the ads, adding that “you may be surprised how many friends and family are ready to support you through GoFundMe.”


This development should come as no surprise to followers of GoFundMe, whose CEO, Rob Solomon, formerly of Yahoo and Groupon, loves to talk about “disrupting the giving space.” The idea seems to be: If there’s a large-scale and efficient way of doing something, let’s try to replace it with something much clumsier and vastly less efficient.

Crowdfunding, after all, is on the rise, with GoFundMe alone claiming more than $3 billion in funded campaigns to date. Many of them are medical in nature; the most successful and heart-tugging can end up raising six-figure sums, although those are a tiny minority. To start up a GoFundMe campaign is an act of desperation: You might end up winning the viral lottery, especially if you can get Taylor Swift involved, but you’re much more likely to end up far short of your goal.

As a rule, when an individual or a cause needs money, turning to crowdfunding sites tends to be a decidedly unsatisfying answer. For instance, the desperately important PEPline, a telephone hotline for doctors, nurses, and other professionals who come into contact with HIV, recently lost $460,000 in government funding; its attempt to fill that with gap online donations has so far raised less than $10,000. Similarly, while some school districts have found enough donors to pay off the debts of kids with overdue lunch accounts, others haven’t–and often it’s the richer communities that look after their own, leaving the poorest behind.

While most individual campaigns might not be successful in raising money, they all reach at least a few people, and thereby help to normalize the idea that basic needs–food, shelter, health care, education–are the kind of things that can and should be met by begging online. That was surely why GoFundMe ran its podcasting campaign, too: to plant a seed with thousands of listeners that scrounging up money from your social network is a perfectly legitimate way of paying for college.


But it’s not. Or at least it’s little more than a huge company (it was worth more than $600 million two years ago, and is surely worth more now) trying to muscle in on the checks that middle-class aunts and uncles have always handed over to their college-bound nephews and nieces. The social networks of the middle classes have been helping out with college tuition for decades, without Silicon Valley startups trying to take a cut of every transaction, and in recent years they’ve been doing so in a tax-optimized manner, through 529 plans. Those are great, and generally charge minimal fees, unlike GoFundMe.

What’s terrifying is the way that money and resources and attention are traveling up the pyramid. Government sits at the base of the pyramid, providing broad, fair, and efficient support to all who need it, using massive economies of scale and a predictable flow of pre-tax income. (By definition, all taxes come out of pre-tax income.) Next come organized philanthropies, including shelters, hospitals, colleges, and the like. As charitable organizations with a certain scale, they too can realize efficiencies and take advantage of various tax benefits, even as they attempt to allocate resources as fairly as they can, on the basis of need. Above them come things like 529 plans or even “sin taxes” on cigarettes and alcohol: fiscal nudges by a government trying to encourage individuals to direct money toward socially useful places rather than areas that are socially harmful. This is the point at which resources start becoming correlated with wealth and privilege, and flowing to the well-connected more than to the needy.


Finally, at the top of the pyramid, there’s crowdfunding, in all its narrow, unfair, and highly inefficient messiness. Resources go to the lucky, or the people who are good at editing viral heart-tugging videos; donors pat themselves heartily on the back, even as they do nothing to alleviate the underlying problems; and venture capitalists make millions by siphoning off various fees and commissions. (GoFundMe alone had revenues of more than $100 million last year.)

Not every crowdfunding campaign is an indictment of a failed democracy. Kickstarter is the foremost exception because it concentrates on creative projects and clever gizmos that are properly supererogatory: There’s no pressing social need that they should happen, and there’s no public interest in funding them with pre-tax dollars. But all too often, crowdfunding is the last desperate act of someone whom society has failed. Give if you wish, and if you can afford to. But when you do, you’re encouraging those who ultimately want to see such private actions replace the democratic norms upon which our society was built.

Host and editor, Cause & Effect

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