Silicon Valley’s ‘prosperity paradox’ explains how 76,000 millionaires and billionaires fail to fix local poverty

caption
Anna Haynes, a homeless encampment occupant, collects her belongings as authorities break down massive homeless encampment known as “The Jungle” in San Jose, California.
source
Beck Diefenbach/Reuters

Silicon Valley is a land of extremes.

At one end are California’s wealthy and super-wealthy – the 76,000 millionaires and billionaires who call Santa Clara and San Mateo counties home. At the other end are the thousands of people who struggle to feed their families and pay their bills each month. Nearly 30% of Silicon Valley’s residents rely on public or private assistance.

Wealth inequality gaps of that size exist elsewhere, but in America’s epicenter of innovation, the gaps demand extra attention. And if Silicon Valley manages to close those gaps, perhaps less-unequal areas could do the same.

“The wealth is palpable,” philanthropy adviser Alexa Cortes Culwell tells Business Insider. “You come home and every neighbor has a Tesla parked on the street, with a cord running out to it. It’s a weird, surreal place to live right now.”

According to a new report Culwell published with social sector expert Heather McLeod Grant, local nonprofit organizations seldom see any of that wealth come their way, despite the huge impact it would have on reducing poverty.

Culwell and Grant describe a profound empathy gap between Silicon Valley’s highest earners and the nonprofits in their area. The co-authors dub this the “prosperity paradox.” Basically, neither side has any idea what the other is thinking or feeling – and in the case of Silicon Valley’s wealthiest, that the other side exists at all.

caption
Homes along Clearview Drive in Santa Clara County that are priced between $594,000 and $899,000, according to real estate database Zillow.
source
Norbert von der Groeben/Reuters

“The social and economic stratas send people down different routes, different highways, different grocery stores,” Culwell says. Very few of the 100 high-net-worth individuals she and Grant spoke with said they knew what kind of organizations were in the poorer parts of San Jose and San Carlos.

“Nothing in their lives takes them to those areas,” Culwell says. If people gave at all, it was to brand-name organizations whose missions were much larger in scope than the two counties included in the report.

In other words, according to all the data that was collected, Culwell and Grant say the stereotype of Silicon Valley elites as greedy hoarders turned out to be mostly false. A lot of people expressed a desire to give more of their portfolio to local groups; they just didn’t know where to begin.

It’s not just the wealthy

Nonprofits shared some of the responsibility in creating the paradox. Only a small portion of the 140 local nonprofit leaders interviewed for the report used language that Culwell and Grant thought would resonate with Silicon Valley-types.

“Donors typically come from the private sector, and they think about companies in financial narratives,” Culwell says. They use the language of numbers, of revenue growth year over year. “Nonprofits speak a more social and moral language.” They talk about how important the work is they’re doing, and how happy it makes people.

That gap can create awkward encounters if a donor wants to help out.

“If a donor asks you how many people you serve and how much it costs per person, you can’t stop and go look that up,” Culwell says. “In their world, that would never happen.”

caption
Food bank workers pass along bags of food.
source
Getty Images/Andrew Burton

How to bridge the divide

For both sides to work together effectively, each has to recognize the challenges of the other. That’s the empathy gap the researchers identified: There’s currently a disconnect between what donors need to know before donating, and what nonprofits have focused so much of their energy on.

Culwell and Grant are optimistic the gap can be bridged.

At the bottom of their report, they list several steps each side can take to reduce overall poverty in Silicon Valley. Nonprofits could brush up on their numbers and set clear goals for how far the donations will go, while potential donors could join a giving circle to educate themselves about the nonprofit world or give money to finance back-end costs if they aren’t interested in supporting a cause directly.

Culwell says success in Silicon Valley would be a great omen for the rest of the country, especially since innovation is baked in to the region.

“The prosperity paradox in Silicon Valley gives us this opportunity to use all the ingenuity of the Valley to create the bridge to this divide,” she says. “We talked to 300 stakeholders, and afterward we felt like if we could just get them to keep talking, extraordinary things could happen.”