The Billionaire’s Guide to Philanthropy
Yesterday Elon Musk offered to pay $54.20 for each of the shares of Twitter he doesn't already own (he owns 9.2 percent of the company). If shareholders take him up on his offer, he'll pay $43 billion. Which for the world's richest man is play money, apparently, but for most of the rest of us seems like quite a lot.
Today's post is about philanthropy, and how many very wealthy people don't seem to be very good at it.
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The Billionaire’s Guide to Philanthropy
I spent some time talking with a friend last weekend about philanthropy. I have a bit of experience in that world, having spent several years on the board of and later as executive director of a mental health services non-profit in Japan, but my friend has much more experience, and offered up a story:
Several years ago, when I was working in the non-profit world, an acquaintance came to me asking for advice about philanthropy. This guy is a billionaire, and asked me simply, “Should I set up a foundation?”
I had a short answer for him: no. I asked him, “What are the issues you care about?” and he replied that human rights were at the top of his list. I said, “Well you can give money directly to Human Rights Watch. Their annual budget is $100 million, and you can give them $100 million tomorrow and make the organization impregnable forever. You could also think about the American Civil Liberties Union. You could give them another $25 million and they’ll put it to good use.
The guy is nonplussed by my advice, because he was expecting me to say, “Sure, set up a foundation!” But that just creates another layer of bureaucracy that soaks up money. Give it directly to the people who have demonstrated their ability to use it responsibly and efficiently.
The guy thanked me, and a few months later … set up a foundation.
The most generous person in the world
In 2019, MacKenzie and Jeff Bezos divorced, and the former Mrs. Bezos changed her name to MacKenzie Scott (Scott was her middle name prior to her marriage). She walked away from the marriage with US$35.6 billion in Amazon stock and quickly signed the Giving Pledge, an initiative established in 2010 by Bill Gates and Warren Buffett that aims to inspire the super-rich to give away at least half of their fortunes during their lifetimes.
Scott did not waste time starting to give money away. Within a year, she had given $1.7 billion to 116 non-profit organizations. Within another four months, she had given a further $4.15 billion to 384 organizations. Her charitable giving in 2020 totaled $5.8 billion. In June, 2021, Scott announced another $2.7 billion in donations to 286 organizations.
In two and a half years, Scott gave away over $8.5 billion, but thanks to the appreciation of Amazon stock, her net worth today is 30 percent greater than it was when her divorce was finalized. In contrast, her ex-husband, now worth over $180 billion, has reportedly given away only slightly more than $2 billion during his lifetime so far. And yes, I realize that “only” is perhaps a bit unfair, but …
The richest man in the world is Elon Musk, worth an estimated $290 billion. The 100th richest (according to some lists) is Thomas Peterffy, the Hungary-born founder of a stock brokerage firm, who is worth an estimated $17 billion. I had never heard of Peterffy, nor of Donald Bren, the billionaire just above him on the billionaires list. Nor had I heard of Pavel Durov, or Alisher Usmanov or Yang Huiyan or Vladimir Lisin, all of whom are in the bottom section of the top 100.
There is a lot of money in the world, is my point, a lot of money, and the rich are continuing to get richer. Even the most generous person in the world can’t give away her money fast enough.
Jobs for the boys
In 1960, Chuck Feeney co-founded the company that would become Duty Free Shoppers (DFS) and make him extremely wealthy. In 1982, Feeney established The Atlantic Philanthropies with the aim of giving away almost all his wealth during his lifetime, anonymously. Feeney’s name was revealed to the public in 1997 during a legal proceeding, but he continued to pursue his goal, and in 2020 he closed the foundation, having given away over $8 billion.
When The Atlantic Philanthropies closed, everyone who worked there was out of a job, and if you have ever worked, you know that most people come to the office in the morning hoping to still have a job when they leave in the evening.
While non-profit work is mostly badly underfunded (sometimes as a result of poor leadership, but mostly because there is a lot of competition for donations, and in many cases the leaders of small- to medium-sized non-profits are not expert at marketing and communications, believing that the worthiness of their cause should be good enough to attract funders), some organizations offer a more deluxe employment experience. As an example, although it has distributed over $60 billion in 20 years and is very clearly one of the good guys, the Bill & Melinda Gates Foundation occupies a $500 million “campus”.
Should I set up a foundation?
You’ve got a few billion to give away, and you’re going to take my friend’s advice and not set up a foundation. You don’t need to reinvent the wheel. Chances are someone has already established an organization dedicated to helping the people (or animals, or plants/trees, or historic buildings, or climatological situations, or whatever) you want to help.
What you need to do is identify the organization that will do the most with your money.
So how do you tell the good guys (who are transferring donations to aid recipients as efficiently as possible) from the bad guys (who are spending 65 percent of donations on starchitect-designed office buildings and private sector salaries and business- (or first!) class travel?
You’re a billionaire, so obviously, you ask someone else to do the work, and in this case, there are plenty of people who can point you in the right direction. You can look at Charity Navigator. Or CharityWatch. Or GuideStar. These organizations regularly publish lists of the most and least efficient charities, and of course you can search by sector and organization name.
Or if you prefer to do your own research (which I do), you can investigate the tax filings of U.S.-registered non-profits via ProPublica’s Nonprofit Explorer. The ProPublica search engine will allow you to access program funding details, as well as employee and director compensation (e.g. does the executive director make $150,000 a year or $1.5 million?).
The capitalist crucible
A few years ago I was in the Democratic Republic of the Congo, in a small town where an international aid organization had established a hospital. I was there for only a day or so, and I arrived in time for lunch, which off-duty staff took together in a small house, at several long tables. I got my food and sat down with my hosts, who introduced me to nearby colleagues. In explaining what I was doing there, I used the phrase “the aid business”, to which a young German woman took violent exception. “Aid is not a business,” she exclaimed, indignantly, in a tone of voice that silenced the room.
“Aid is a huge ‘business’, worth billions and billions of dollars” I replied, more than a little bemused at her reaction. The woman stormed out of the lunchroom, and I didn’t see her again during my short stay, but I have told the story many times since. That young German aid worker was a Believer (did I mention she was young?). She believed in the work she was doing (which is good!), and obviously felt it ranked far above the crass material graspings of the grubby commercial world.
Well, yes, but the grubby commercial world has lessons to offer all of us.
At around the same time, a young friend of mine who worked in communications for an emergency medical relief agency asked me what I thought her next career step should be. I told her to go to work in the commercial sector, at a major advertising or public relations agency, for one or two years. To toil at the capitalist coal face, up against unreasonable client-imposed deadlines and in competition with other starving (and sleep-starved) agency hacks.
Survival of the fittest. Best education you can get.
The Scottish economist Adam Smith was – like me – a strong advocate of trying to persuade people to see your point of view by pointing out “what’s in it for them”. In his magnum opus, An Inquiry into the Nature & Causes of the Wealth of Nations, Smith wrote, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages.”
Exactly the sort of thing you might expect from “the father of capitalism”.
And yet, in the same book, Smith wrote, “No society can surely be flourishing and happy of which by far the greater part of the numbers are poor and miserable.”
"Do all the good you can,
By all the means you can,
In all the ways you can,
In all the places you can,
At all the times you can,
To all the people you can,
As long as ever you can."
— John Wesley