Cynics may be bellowing “Bah humbug!”about how Mark Zuckerberg and his wife Priscilla Chan are planning to give away 99 percent of their wealth (currently about $45 billion) but philanthrocapitalism is on the rise because it makes financial sense. We need new models of philanthropy that can reach deeper than simply giving money away. Ultra-high-net-worth individuals like Zuckerberg are donating extraordinary amounts that obviously could provide longer lasting results if structured using a more business-like approach.
In his open letter to their newborn daughter published on Facebook, company founder Zuckerberg wrote: “We believe all lives have equal value, and that includes the many more people who will live in future generations than live today. Our society has an obligation to invest now to improve the lives of all those coming into this world, not just those already here.”
With young daughters of my own, I was especially touched by the poignancy of his message. In my post How to Buy Happiness: Invest in Generosity I cited the latest CAF research which reported that giving both in the UK and globally is growing. It seems that most of us agree with Zuckerberg’s sentiment and are generously giving to make the world a better place for future generations. The challenge is often knowing the best way to make the most of what we can offer.
Surprisingly, the Chan Zuckerberg Initiative has received mixed press with critics debating the cost to the Treasury and their decision to establish a philanthropic Limited Liability Company. Why would anyone willingly choose to donate very large sums without considering how to make their generosity tax efficient? It would be irresponsible not to consider the stewardship of such an extraordinary donation. Instead of selling their Facebook stock, thus diminishing Zuckerberg’s shareholding in his own company and incurring capital-gains tax on the proceeds, they have quite sensibly decided to donate their shares over several years to their own altruistic organisation. So long as they are devoted to charitable work and owned by a family foundation, they can claim tax-exempt status and continue to have majority shareholding rights.
It seems there are a growing number of new generation philanthropists setting up non-traditional vehicles. Being charitable isn’t just about giving away cash. It’s about contributing your skills and time selflessly. Why shouldn’t savvy donors contribute their business acumen? Setting-up organisations that can foster entrepreneurialism is smart and forward thinking. Job creation is not generally considered philanthropy however many agree with Carlos Slim’s view of giving back – he stated that “the most important thing I can do with my money is to create jobs”.
Philanthropists are expanding far beyond the activities of previous generations when it was enough to fund a specific project. New forms of philanthropy have emerged and philanthropic approaches have become more holistic, incorporating business concepts and investments that provide both financial and social benefits.
Broader in its scope, philanthrocapitalism engages in socio-economic debates, increasing the demand for real solutions to root causes rather than temporary treatments of identified problems. If what the world needs is more economic growth then modern capitalism, even with all of its inequalities and injustices, has much to impart. While major giving and family foundations remain important, there is a need for philanthropists to engage in activities that go beyond traditional philanthropy. Aiming for radical solutions to rising inequalities, philanthrocapitalists are increasing engagement in new projects that promote sustainable and economically profitable outcomes. From venture philanthropy and impact investing to microfinancing, philanthrocapitalist projects are encouraging entrepreneurialism and employment and stimulating growth for the good.
Initiatives like the widely publicised Giving Pledge have significantly contributed to the growth of philanthropy. Spearheaded by Bill and Melinda Gates and enthusiastically promoted by Warren Buffett, it has informally signed-up 138 billionaires from 16 countries to donate at least half of their fortunes to charity.
In his pledge letter, Russian entrepreneur Yuri Milner stated: “The Giving Pledge encourages more than investing in problem solving. It brings something approaching the scientific method to philanthropy. This means not just giving but trying to learn from real-world experience and experiment in order to give effectively. This is a sure sign of progress: we are finding more answers, and we are getting better at asking the right questions.”
The need for new models of philanthropy goes beyond the parable about giving someone a fish versus teaching someone to fish. The possibility of building a sustainable future for oneself and one’s family is more valuable than one-time gifts, no matter how generous. This principle has encouraged the expansion of philanthropy towards new forms of charitable activities that spur economic growth and opportunity.
For some pledged billionaires like Oracle founder Larry Ellison who had already committed to donating 95% of his wealth, the Giving Pledge was a change in attitude about keeping one’s donations a private matter. While I certainly appreciate that we should give without needing a ‘shout out’, I do believe that sharing our charitable endeavours helps to set an example and inspire others. In CAF’s latest UK giving report John Low, Chief Executive of CAF, said: “In this country, we need to be more open about giving in the public eye, with high profile advocates ready to stand up and talk about the essential support they give to charities, and inspire others to do the same.”
The fact that a number of billionaires are pledging their fortunes to charity rather than seeking to pass them down to their descendants is already having an impact. This new pledge from Zuckerberg and Chan certainly represents a raising of the bar as they put their money to work on such a scale; in doing so they are redefining philanthropy for generations to come.
Quadrant Group works with high-net-worth clients to create life and financial plans that include philanthropic gifting and socially-conscious investing. If you would like to consider how to improve the cost-effectiveness of your charitable giving or want to consider becoming a more socially-active investor, please get in touch.
Do you agree with philanthrocapitalism? Are you inspired by the Giving Pledge and the example set by Zuckerberg and Chan?
P.S.: On my holiday reading list is ‘Philanthrocapitalism: How the Rich Can Save the World‘
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