Yale School of Management

Center for Customer Insights

Advancing the frontiers of consumer understanding

The Myth of Win-Win

Strangely, it's okay to make money hurting the poor, but not okay to make money helping them.

August 26, 2014

“We allow people to make huge profits doing any number of things that will hurt the poor, but we want to crucify anyone who wants to make money helping them.” These are the words of Dan Pallotta, an entrepreneur who, until the early 2000s, ran a company that organized charity fundraisers. In 2002, the company netted $81 million for charity—a figure equivalent to about half the annual giving of The Rockefeller Foundation. But it was based on a for-profit model, and it compensated as such, with Pallotta himself earning about $400,000 per year. When word of his salary got out, he came under intense criticism. “Shame on Pallotta,” concluded one critic.

But why? “Want to make a million selling violent video games to kids? Go for it,” Pallotta is quoted as saying in a 2008 New York Times column by Nicholas Kristof. “Want to make a million helping cure kids of cancer? You’re labeled a parasite.”

The problem is, people have a “general bias against the very notion of seeking personal gains from charity,” according to a recent paper in Psychological Science, authored by George Newman and Daylian Cain, both of Yale SOM. “People [evaluate] charitable actions that were ‘tainted’ by personal benefits as worse (less moral, ethical, etc.) than equivalent self-interested behaviors that produced no charitable benefit.” The authors labeled this the tainted-altruism effect.

To test the theory, Newman and Cain ran a series of experiments that presented survey-takers with vignettes tying together self-interest and charitable giving. In the first test, for instance, participants read about a man who, in order to gain a woman’s affection, volunteered several hours per week at her workplace. One group of participants read that the woman worked at a homeless shelter, another group read that she worked at a coffee shop, and a third group read both vignettes. It was explicitly stated that, although the man’s intentions were self-interested, he did a good job at helping out.

Surprisingly, they found that test participants rated the man as significantly less moral when he volunteered at the homeless shelter as opposed to the coffee shop. In both cases, his actions were rated as equally beneficial. Among participants who read both vignettes, however, the actions were morally equivalent, and time volunteered at the homeless shelter was considered more beneficial; this signals that people only think that volunteering at the shelter is worse when they fail to consider the alternatives—volunteering at a coffee shop, for instance.

Across four tests, including a real-world study of Gap’s (RED) campaign, Newman and Cain “found that the presence of self-interest in the charitable domain was seen as tainting, such that people judged efforts that realized both personal and charitable benefits to be less moral than analogous self-interested behaviors that produced no charitable benefit.”

People have a general bias against the very notion of seeking personal gains from charity.

The authors found a way to mitigate this effect. They assumed that tainted altruism is a product of what, and how, information is presented. When people consider charitable efforts that realize personal benefit, the two ends appear to be in contrast; people consider the same behavior as it might occur in the absence of self-interest and ultimately conclude that the person (or organization) did not behave as altruistically as he or she could have. However, when someone is only selfish, then that is the only behavior present. People do not spontaneously consider whether the person could have been more altruistic.

Newman and Cain thus ran experiments in which they provided different frames around the charitable giving. Their experiment on Gap (RED) presented four conditions: in the control condition, participants were simply given information about the Gap. In the altruism condition, participants read about the Gap and the (RED) campaign, through which 50 percent of profits were donated to charity. In the tainted-altruism condition, participants read about the Gap (RED) campaign, its donations, and the fact that the other 50 percent of sales profited the company. Finally, in what they called the counterfactual condition, after reading that Gap (RED) raised money for charity and earned a profit, participants were reminded that the Gap did not have to donate to charity.

The simple addition of this counterfactual was enough to reverse the results: whereas people would have typically judged charity paired with self-interest more negatively than no charity at all, by mentioning that Gap could have simply kept all the money, this perspective disappeared. As the authors put it, “presenting the counterfactual information…significantly increased ratings of morality.”

Alfred Tennyson famously wrote “‘Tis better to have loved and lost / Than never to have loved at all.” In the world of charity, without the proper frame around what is given and what is taken, the reverse appears to be true: ‘Tis better to have not given at all / Than to have given and benefitted too.