Suppose there is a charity fundraiser, and wealthy supporter Alice wants to help by donating $1000. But to make a bigger impact, she designates it as “matching funds”, and as we all know, donors are more willing to give when they know their donation will be doubled.
One of those donors, Bob, is about to do so when he realizes that his $1000 could have an extra impact as well. He could add to the matching limit, raising it to $2,000, but instead decides to designate it as a separate, parallel matching fund. Now the next $1000 in donations will be tripled!
This catches the attention of Carol and Dave, who are each inspired to give $500. By this point the charity, having seen how the matching funds encourage new donors, provides the option of directing new donations into additional matching multipliers. Carol and Dave say ‘why not’, and their donations stack to bring the matching multiplier to four.
The next donor Eve gives $1000 without even noticing the option to direct it to matching funds, so while she is happy knowing her donation was quadrupled, the charity is disappointed that instead of increasing the match multiplier at no cost to Eve, the fundraiser no longer has matching funds with which to entice new donors. They’ll have to wait for a few more consecutive donors to elect to designate matching funds.
To make this more efficient, they switch the option to ‘opt-out’. The match multiplier skyrockets, and while people are skeptical, the charity’s finances are transparent, and the matching funds are indeed there waiting for their donation. Then, wanting to avoid the occasional matching fund depletion, the charity removes the option to opt out of matching fund designation, and the multiplier increases continually until the fundraiser is over. Almost symbolically, the charity regards the last $1000 as the actual donation total, which is multiplied by 634 to get $634,000, by far the largest fundraiser for the charity to-date.
What should we make of this? Alice and Bob’s actions seemed pretty typical, but things got strange at some point, and perhaps by the end donors were being deceived into thinking their donation would be matched when, according to the fine print they didn’t read, it would actually only be used to match a future donation. But to me this illustrates that fund matching is a gimmick. The donors in this example all had the same intention as Alice, but when taken to its logical conclusion we see that nothing is actually multiplied. It’s basically saying, “someone already pledged money to us, but we’re linking it to your donation so that you feel responsible for it.”
The only way I can see the motivation of matched donations as legitimate is if the matching limit was higher than the matching fund provider was comfortable giving, so that an additional donation of $10 really does result in the charity receiving $20 more than they otherwise would have. But rich people are providing the matching funds, and rich philanthropists are careful with their money, so I find it hard to believe that they would pledge uncomfortable amounts.
That’s why I ignore donation matching and focus on how to maximize the good that comes from my donations.