Monday, June 28, 2010

Gates, Buffett, and Philanthrocapitalism

In the last couple of weeks, there's been no shortage of coverage about Bill and Melinda Gates, together with Warren Buffett, offering a Giving Pledge. The goal: to convince their fellow billionaires to pledge to give away 50% (or more) of their net worth to charity during their lifetime (or, at the very least, upon their death). If you've missed the coverage, then here is some of it.

(This Bill & Melinda Gates video is from January 2010, before the challenge was made public.)

Coincidentally, this announcement came as I was reading the book Philanthrocapitalism: How the Rich Can Save the World by Matthew Bishop & Michael Green. (The newer version of the book, according to, has been rebranded with the subtitle "How Giving Can Save the World" and an introduction by Bill Clinton.) The book begins, understandably enough, with Buffett's 2006 decision to give the majority of his vast fortune to charity - the bulk of it to the Gates Foundation, for their work in world health and development.

In the Charlie Rose interview on this new challenge, Buffet lays out some of his philanthropic thoughts (also detailed in this article):

So the truth is I’ve had everything in life, everything in life I’ve ever wanted. I have never given away any money that’s caused me to give up a movie or dinner or trip to Disneyworld or anything of the sort.
So it’s cost me nothing. So I have these little pieces of paper in safe deposit box which I bought about 40 or 45 years ago and they’ve grown in value enormously. And what they are is they’re claim checks on something in the future.
I don’t have anything I need in the future. All kinds of other people have all kinds of needs. And it’s a way of cashing those claim checks in a way where people’s lives are changed for be the better. Mine’s already changed for the better. It couldn’t get better.
If those little pieces of paper translate whether it’s into children avoiding diseases, becoming better educated, people having a better life in their own age, whatever it may be, that’s terrific. I think a lot of people feel the same way.

This is a profound statement, and certainly true ... for billionaires.

For most of us, of course, choosing to give something does mean that there are some sorts of desires that we have to pass up. People with this degree of wealth don't run into this problem (financially, at least), but when you think about things on a global scale, this situation extends to the majority of people in America.

Worldwide: The poorest 75% of the world lives on only 25% of the resources! At least 80% of the human species lives on less than $10 a day.

By extension, living on $3,650 a year means that you are among the wealthiest 20% of the people on the planet Earth! (Note: This is 2005 data, so the number would be a bit higher now ... but not much.)

Depressing, isn't it?

So the arguments that Buffett make are all, by extension, arguments that could apply to the majority of us. We can all afford to give a bit more, even if all we can give is of our time or our sympathy.

Elsewhere in the interview, Bill Gates recounts an early dinner party where these three billionaires gathered with other billionaires in an effort to help convince them to give more. The group of billionaires share their stories of philanthropy - how they got involved, what causes they're committed to, and so on - and there was a tangible energy and enthusiasm among the group, which Buffett and the Gateses wanted to harness. Gates makes the observation:

And one thing more I would like to say is no one said that they felt bad they’ve given the money. Everybody felt more fulfilled, were able to use their creativity in some special ways.
I would certainly agree with this. There have been a handful of people who have come forward to me, saying that they were motivated give in part thanks to my 40 Days of Giving project. Not a single one of these people has said, "You know, I gave this money, and just think it was a waste!"

The amazing thing about this isn't just the money itself (although Carol Loomis makes a strong case that this will profoundly increase the money going into charitable giving). Many billionaires are self-made entrepreneurs and businessmen, like both Gates and Buffett themselves, and if they turn their eye toward philanthropy, it's unlikely that they will do so in a passive way. The sheer amount of innovation, brainpower, and overall resources that this could turn toward philanthropic goals is astounding.

And this is the the whole point of Philanthrocapitalism, which talks about the way that these powerful capitalists can leverage their talents in that area toward philanthropic goals. A similar case was made by David Bornstein about social entrepreneurs in How to Change the World.

And these sorts of thinkers are crucial, because the problems we face today - climate change, oil spills, clean energy, clean water, diseases such as malaria and AIDS, rogue states, terrorism, and so on - literally cannot be solved solely by throwing money at them. These are real problems that require careful thought by innovators, and it's important to get the innovators engaged.

That is the real goal of the Buffett-Gates challenge, because they know that they are in a position to turn serious people onto these issues. The money can be used for good, but it's the human capital that they really want. They want solutions ... and as businessmen and innovators, they know that you can never predict where the real solutions are going to come from. They want to get as many people as possible into the marketplace of solutions.

It's saving the world, free market style. You've gotta love it, America!

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