VA£U€$ (The Blog)
August 25th, 2010
The Social Innovation Fund established by the Obama administration is an important pilot of a new approach to scaling up successful ideas by social entrepreneurs, that we believe could be a model of philanthrocapitalism at its best. (See Matthew’s article on social innovation in The Economist.)
However, what Steve Goldberg calls a “kerfuffle” has taken place over the alleged lack of transparency in grantmaking by SIF, alleged conflicts of interest and alleged favouritism shown to one grantee, New Profit Inc, a venture philanthropy that we feature in the book.
We decided to make this the subject of our second debate on Twitter, where Matthew goes by the alias @mattbish and Michael is @shepleygreen. (Our first debate was on profits and the poor.) This took place from 3-4pm Eastern time on August 25th. It was a lively debate, with 58 different contributors, including our friend Stephanie Strom, whose article in the New York Times introduced the kerfuffle to a global audience. You can read a transcript of the debate here – best done by skimming down the page, rather than concentrating too hard 
These were the rules of engagement: Keep your comments to under 140 characters each. Always include the hashtag #SIFDEB (for social innovation fund debate). The hashtag allows people to follow the flow of debate without everyone having to retweet comments they refer to. If you respond to a particular person’s comment, start your tweet with re and the person’s twitter name: for instance, if you respond to a comment by @mattbish, start your tweet: Re @mattbish and end it with #SIFDEB. Other than that, please avoid personal abuse.
Do let us know if there are other topics you would like to debate on Twitter.
Tags: Barack Obama, New Profit Inc, New York Times, Social Innovation Fund, Stephanie Strom, Steve Goldberg, The Economist
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August 24th, 2010
Two recent articles in the Wall Street Journal have taken shots at elements of philanthrocapitalism – the idea, endorsed by many of the most successful capitalists, that capitalism needs to make a more deliberate effort to improve society. Like Dickens’ Mr Scrooge, the writers’ response to the suggestion that firms and business leaders could do a better job in serving society seems to be “Bah! Humbug!”- and, in saying so, they are letting down the capitalist cause they claim to defend.
The first, by Kimberly O. Dennis, who runs the Searle Freedom Trust, takes a sideswipe at the Gates/Buffett Giving Pledge, worrying that the signatories are giving away too much money, since “the wealthy may help humanity more as businessmen and women than as philanthropists”. This is a line the Journal has run before. Three years ago, in fact, in an article by the Harvard economist Robert Barro, which we discuss at some length in the concluding chapter of the book.
Dennis does make the important point that the idea of the rich ‘giving back’ can give the impression that they have taken something in the first place when, in fact, they have created wealth and jobs through their entrepreneurship. (A Marxist wouldn’t agree with her, of course – but you don’t have to be a Marxist to acknowledge that at least some billionaires around the world have made their money not by creating wealth but by expropriating it, through running exploitative monopolies or ripping off the public by acquiring assets on the cheap in dodgy privatisations.)
One weakness in the Dennis/Barro argument is that they think there is a contradiction between giving money away and wealth creation. That’s not how Warren Buffett sees it – as he approaches his eightieth birthday he is as focused as ever on making money. George Soros too told us how philanthropy cured his mid-life crisis and inspired him to make even more money. True, Bill Gates has stepped down from running Microsoft – but, as we report in the book, he felt that the time had come to give someone else a go at the helm of Microsoft and that his energies would be better engaged on new projects, philanthropic and otherwise. Maybe he, not a lobbyist or an academic economist, is the right person to judge in what activities he can achieve most with his time, energy and entrepreneurial gifts. (Dennis, in particular, should agree that nobody is more likely than Gates to know how to run his life and how to deploy his assets, given she runs an organisation with the mission to “promote individual freedom and economic liberty”.)
Another weakness in the argument against giving is the assumption that philanthrocapitalists will inevitably be less successful in improving the world through their philanthropy than they have been through their money-making. This is nothing more than defeatist thinking. As we describe in the book, the new generation of givers led by Gates and Buffett are applying many of the skills and strategies that they honed in business to their giving, and are starting to achieve some success. It is true that the failure rate in philanthropy is high – but, as Buffett points out, that is because the problems are often harder than those facing a business person such as himself, who he describes (perhaps with excessive modesty) as always going after the “low hanging fruit”. Our society stands to gain from the fact that our most successful business people are increasingly trying to put their skills and assets to work in tackling some of society’s biggest problems and it is premature, to say the least, to assume they are doomed to fail.
Nor do many of today’s philanthrocapitalists make the sharp distinction that Dennis does between making money and giving it away. Many of them are into making a buck while doing good. E-bay founder Pierre Omidyar has set up his philanthropic organisation Omidyar Network not as a traditional foundation but as a company that can apply the right kind of capital to the problem in hand – sometimes grants, sometime for-profit investments. He has already had some success in encouraging for-profit microfinance, falling out along the way with Muhammad Yunus, the Nobel prize-winning founder of the Grameen Bank. Others, including Gates, are also entering this growing “social investment” space – which rather than harming the process of wealth creation may actually lead to the discovery of better ways of wealth creation that will make capitalism more successful than ever.
Companies, too, are increasingly rethinking their engagement with society not out of charity but with a view to ‘doing well by doing good’ – although this too provokes the Journal’s ire. This time it is Aneel Karnani, a strategy professor at the University of Michigan, whose arguments are so confused that he has surely been advising that state’s car makers on strategy for the past 30 years. He has the cudgels out for the corporate philanthrocapitalists because “in most cases, doing what’s best for society means sacrificing profits”.
Karnani believes there are two possible states of the world in which business operates – one in which markets are perfectly aligned with public interests, in which case corporate social responsibility is unnecessary; the other, in which the market is not aligned with public interests, in which either the drive to make profit will overwhelm any pressure to be socially responsible, or socially responsible behaviour will harm the paramount interests of shareholders. The only real solution, he says, is government regulation – though ultimately he doesn’t seem convinced that will work either, which leaves us, er, where, exactly? Still, the Wall Street Journal’s editors must really hate CSR if they are willing to give so much space to someone arguing (even half-heartedly) for more government regulation. The big surprise is they didn’t run our friend Chrystia Freeland’s recent article blaming the BP oil spill on CSR.
There are some grains of truth in Karnani’s article. There has been plenty of bad corporate philanthropy over the years. The phrase corporate social responsibility is certainly unattractive and clunky, not designed to excite the animal spirits as we would wish. But he, along with most of today’s critics of CSR, fails to engage with what is actually going on in leading firms in the name of CSR and, in particular, of doing well by doing good.
Above all, the description of a world stuck in two states, one of markets aligned with public interests the other not, is a fantasy. In reality, markets and their relation to public interests are constantly evolving – and the actions of companies play a crucial role (through the sort of products they introduce and through lobbying, for instance) in whether they evolve in a direction that serves the public interest or undermines it.
Much of the current focus on doing well by doing good is the result not of pressure from outside busybodies but of companies trying to figure out how to build flourishing markets in the developing countries where they hope to enjoy much of their future business growth and how to win the battle for talent in a world where workers are increasingly choosy about the ethics and mission of the firm they work for.
As we argue in our latest book, “The Road From Ruin”, the current economic crisis was caused not least by endemic short-termism in capitalism, whereby the leaders of many firms put short-term profit maximisation ahead of long-term profit maximisation. Our belief is that had they focused more on the long-term, they would have followed strategies that were much better for society and for their shareholders – who, let’s not forget, are all of us who live in society, as we collectively own many of these firms through our savings.
Corporate history is littered with companies who went for the fast buck and cut ethical corners – think of Nestle selling babymilk formula and Nike’s once-cruel supply chains – that cost their shareholders dear. (Both firms learnt the hard way that such social failures were bad for long-term shareholder value.) More of the sort of pressure on executives demanded by CSR to take off the quarterly profits blinkers and look at the wider picture would surely be a positive development in capitalism.
Karnani’s argument reminds us of the old joke about the economist who won’t pick up a $20 bill left on the sidewalk, reasoning that if it were a $20 bill someone else would have picked it up already. That jibe is made at the expense of economists who believe that markets are always efficient and that, therefore, there could never be a massive market crash. Oh dear. Yet the supporters of this idea have responded to the financial crisis by blaming all the problems on government meddling in markets rather than any imperfection on the part of the markets. This denialism now seems to have evolved into outright hostility to any suggestion that anything but capitalism red in tooth and claw is a perversion of the true faith, rather than constructive engagement with ideas designed to improve how capitalism works.
When Philanthrocapitalism came out, just as the markets crashed in September 2008, the Journal gave the book a very favourable review. In the aftermath of the biggest crisis of capitalism in more than half a century, hopefully philanthrocapitalism has not become a heresy for this influential pro-market newspaper.
Tags: Aneel Karnani, Chrystia Freeland, CSR, George Soros, giving pledge, Grameen Bank, Kimberly Dennis, Muhammad Yunus, Nike, Pierre Omidyar, Robert Barro, Searle Freedom Trust, Wall Street Journal
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August 18th, 2010
“A classic PR idea gone bad” was one of the derisory reactions to the news on August 16th that Tony Blair is going to donate the profits (the advance alone is £4.6 million, around $7 million) from his forthcoming memoirs to a charity helping ex-servicemen in Britain. That may well be true, although Mr Blair is adamant that he always planned to give the money away as an act of principle, not as a cynical attempt to burnish a public image tarnished by his role in the Iraq war. Mr Blair is not the first politician to have given his book earnings away – Bill Clinton donated $1 million of the $6 million he got for his book Giving - and won’t be the last: Gordon Brown, Mr Blair’s successor, is well known for his piety and asceticism (as well as his rivalry with Mr Blair) so surely won’t want to be outdone on generosity.
Maybe this should be a model for all political memoir writers? After all, they are largely making money out of the public’s interest in how they performed their public duties (and if they really need to cash in on their experiences, they can do so in other ways through directorships, consultancies and speaking fees). Perhaps Mr Blair could make this the start of a political giving pledge to mirror that of Bill Gates and Warren Buffett in the business world – how could Prime Minister Cameron, or Mr Blair’s old chum former President Bush, refuse if asked to sign up to give away, say, at least half their book proceeds?
But why stop at politicians? As we write in the book, ex-leaders such as Messrs Blair and Clinton, are a subset of a category of philanthrocapitalists called “celanthropists”, whose fame is a key source of their ability to drive change. How about the rest of the celanthropists following Mr Blair’s example? Ludicrously well-paid sportsmen, like Britain’s footballers, pump out mind-numbingly tedious ghost-written memoirs for the Christmas market each year – how about turning at least a chunk of those earnings over to the public good? So too with those celebrities who do nothing except be a celebrity. Their giving, unlike Mr Blair’s, might actually be a smart piece of PR.
Tags: Bill Clinton, celanthropists, David Cameron, George Bush, giving pledge, Gordon Brown, Royal British Legion, Tony Blair
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August 10th, 2010
When Britain’s leading liberal commentator on social affairs, Polly Toynbee, laid into Prime Minister David Cameron’s Big Society project last week, she was at pains to say that she has nothing against stronger communities and more volunteering - she was bristling at the fact that the public spending axe has fallen on charities. Since “governments are defined not by words but by how they distribute their budgets”, she argued, the Big Society is a “big, fat lie”. Maybe. Yet by putting on her tin helmet and digging in to defend the status quo Polly is showing her own, and much of the charity sector’s, unwillingness to engage in the debate about how to remake Britain’s social model.
Public expenditure is going to have to fall, that’s inevitable. (For what it’s worth, we think that Cameron’s government plans to cut too quickly, responding to political rather than economic considerations. But that is a question of timing - sooner or later government in Britain, like other countries, is going to have to get smaller.) Polly does not seem to dispute that point, her challenge is that it is wrong, indeed hypocritical, for the pain to be inflicted on the charitable sector.
Read on, however, and there is the startling statistic that “the £35bn voluntary sector is 40% sustained by state support – more than in most countries”. If that’s the case, it’s pretty hard to see how the charity sector can avoid feeling some of the pain from public expenditure cuts. Nor does Polly ask whether that £14 billion or so is actually being well spent. Yes, she points to charities that are suffering from the cuts – but maybe that money is better spent elsewhere?
The fact that this question is probably unanswerable highlights the central problem – as New Philanthropy Capital has pointed out – we have very little idea about the impact of the billions of pounds that the government grants to the charity sector each year. Yes, there is a danger that slash and burn emergency budgeting means that good charities will suffer undeservedly but we cannot ignore the fact that government is probably going to have to spend less on the voluntary sector and look for better value for money.
As well as better measurement of charity impact, which will take time to feed through, we think that match funding initiatives by government have the potential to leverage more private giving – every scarce tax pound can work harder if it levers another pound of philanthropic giving. We don’t expect Polly to agree with us on this one. Her 2008 assault on the rich, Unjust Rewards (co-authored with David Walker), sneers at philanthropy and argues for more taxation as the route to social justice. This stance plays well with the followers of her column in The Guardian, many of whom work in the charity sector, but does not really help. Tax rates are shooting up already (Yes, Polly, we can hear you – it’s all the bankers fault, they are rich and some of them are even philanthropists – but massive tax hikes are as unlikely as they would be unhelpful to the economic recovery we need if we are to keep financing essential public services.) We need new thinking, not old bash-the-rich orthodoxy.
So how do we get private giving, which is also being hit by the recession, to fill the funding gap and drive a productivity miracle in the social sector?
This is a change that has already started. As we argue in the book, Britain lost the giving habit in the 20th century as marginal tax rates rose and the social contract settled around the idea that government would provide for society’s needs. Over the last 30 years tax rates have fallen and there has been a resurgence in entrepreneurial wealth, which is starting to turn into a revival of interest in philanthropy. The challenge is accelerating that cultural change (a challenge that the Prime Minister has so far shied away from, probably for fear of associating the Big Society with the largesse of the rich).
Creating a culture of giving, and a bit of competiton, is part of the solution, which is why we would love to see a British Giving Pledge. But this culture shift is not just about the rich. Our political leaders also need to be clear about the areas where the state is going to have to pull back and where philanthropy needs to step in (like the arts and higher education) and, in the short term, a 5% payout rule, for foundations could release maybe a billion pounds a year of extra funding for the charitable sector.
Commentators also have a part to play. Polly Toynbee is an important and influential champion for social justice but in refusing to accept that things need to change she is doing the cause she serves an injustice. Polly, it’s time to take off the tin hat, leave the trenches and join the debate.
Tags: David Cameron, giving pledge, New Philanthropy Capital, Polly Toynbee
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August 7th, 2010
While the overall reaction to this week’s Giving Pledge has been positive, there have been a few critical voices. Rather than knocking the generosity of the individual billionaires, critics have focused on the wider questions about inequality, taxation and plutocracy. These are important issues that we discuss in detail in the book. As we argue, there are three key tests of a ‘good billionaire’.
First, how did they earn their money? America’s billionaires mostly have a good claim that they have earned their money fairly. “In America, there is equality of opportunity”, argues the Peruvian economist Hernando de Soto. “At the end of the day,” he says “the argument that Bill Gates can use against anybody in the U.S. is ‘you could have done it, too’”. But what about Microsoft’s brushes with anti-trust regulators in the U.S. – surely that means that at least some of his gains are ill-gotten? Well, that’s actually de Soto’s point – in America and other advanced economies the rules of the game mean that corporations are held to account and if they cross the line, as Microsoft was judged to have done, they have to pay the price. In the developing world, however, this may be a different story, where spectacular wealth has been acquired, in some cases, by ripping off the public in dodgy privatisations or through monopoly power. If Gates and Buffett roll the pledge out globally, this is going to be an important question for some billionaire donors. Yet even in America it is right to question the individual donors about their business practices – making money through shoddy labour practices or pushing sub-prime mortgages on poor people who cannot afford them does deserve criticism – but this should be done on a case by case basis, rather than assuming that all wealth is the product of exploitation.
Second, yes, billionaires need to pay their taxes and billionaires who choose to pay more tax, say by refusing to move to a tax haven, should be given credit for doing so. Some of the critics seem to assume that the wealthy are all a bunch of tax avoiders who would resist paying more tax at all costs. Yet Buffett, along with other billionaire donors like George Soros and Ted Turner, spoke out against President George W. Bush’s abolition of inheritiance tax, observing that he is not a believer in the “lucky sperm club”. Of course there will be anti-tax billionaires on the other side but, again, it’s about judging the super-rich on a case by case basis.
Third, how much do they give? We support the Giving Pledge because it sets a sensible benchmark of half their wealth as a measure of billionaire generosity. As important as how much is given, however, is how the money is used. Some critics rightly point out that American philanthropy enjoys a generous tax subsidy and we would back a British-style public benefit test for charitable donations as a sensible compromise between the rights of the donor and their public responsibilities. We also hope that the pledgers will get on with their giving sooner rather than later – channelling the donor’s own passion and harnessing the donor’s skills is likely to mean that the money is better used rather than just being posthumously dumped into a foundation for some philanthrocrat to give away.
The really important question is how do the rest of us harness this new wave of giving so that it delivers the maximum benefit for our society and our environment? We believe passionately that for the philanthrocapitalism revolution to achieve its full potential there needs to be transparency from donors – about their failures as well as their successes – and a willingness on all sides to join in the debate. For that reason one of the most important spinoffs of the Giving Pledge is the way that is has, hopefully, started that crucial discussion.
Tags: anti-trust, giving pledge, Good billionaire guide, Hernando de Soto, plutocracy, taxation
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August 4th, 2010
“Why isn’t it better to be the biggest giver rather than the biggest hog?” That was the challenge laid down in 1996 by the godfather of philanthrocapitalism, Ted Turner, to two tight-fisted billionaires – Bill Gates and Warren Buffett. Fourteen years on and Gates and Buffett are the world’s biggest givers who have laid down their own challenge to their fellow billionaires to give away at least half of their fortunes.
Gates and Buffett deny that Turner’s naming and shaming was the inspiration for their extreme generosity, which they say had been long-planned. Gates, in particular, has sold philanthropy to his peers on the basis that it is enormous fun. The Giving Pledge update that they released earlier today is testimony, however, to the power of peer pressure. With their encouragement, 40 super-rich Americans have signed the pledge – that’s 10% of the country’s 400 billionaires by Sean Stannard-Stockton’s calculations - and more are expected to follow at home and abroad. The pledge is already proving a big step forward for the philanthrocapitalism movement.
This new philanthropy A-list includes plenty of familiar names – like Michael Bloomberg and Eli and Edythe Broad who are veteran givers – but, at least one surprise: Larry Ellison, the CEO of Oracle and one-time rival to Gates for title of the world’s richest man. His name is unexpected, in part because he has rather blown hot and cold over philanthropy in his public statements over the years but also because there is no love lost between he and Gates. Ellison’s pledge admits that it was Buffett’s arm-twisting that got him to sign up on the grounds that it might influence others to give, with a rueful comment “I hope he’s right”.
At the start of the year we predicted that another IT magnate, Steve Jobs, would be the one to go big on giving in 2010. Ellison surprised us all by getting in first but if the Giving Pledge can keep up this momentum Jobs may be adding his name soon, along with the other 359 American billionaires. Let’s hope.
Tags: Bill Gates, giving pledge, Larry Ellis, Warren Buffett
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August 4th, 2010
Ordinary folks are, once again, dipping into their pockets to help out the victims of a natural disaster but once the waters have receded in Pakistan what will happen not just to those affected by the floods but the tens of millions trapped in grinding poverty?
It is a question that we posed earlier this year after the catastrophic earthquake in Haiti. Yet, for all its problems, the challenge in Haiti pales in comparison to the obstacles in the way of the poor of Pakistan. Here is a country that has received billions of dollars of aid over the last thirty years but where human development has flatlined. And the only ‘progress’ the country has made in this period is acquiring nuclear weapons.
We know that this is not just a moral challenge. The West understands that instability in Pakistan is a threat to global security, which is why the US voted through more aid for the country in 2009 and appointed perhaps its most experienced diplomat, Richard Holbrooke, as envoy to the region. Yet the new aid package has quickly run into trouble. As blogger Mosharraf Zaidi explains, this is not just America’s fault - Pakistan’s dysfunctional government is equally to blame. Can philanthrocapitalism help break this cycle?
One area that is ripe for innovation is education. School enrollment in Pakistan is 39%, worse than Sudan, and the education most kids receive (in public schools as well as madrassahs) is, frankly, rubbish. We cannot afford to wait for the government to turn this around. Private provision – for-profit and charitable – is going to have to take the strain. In India, the nonprofit Pratham is playing a crucial role in both the direct provision of education and in reforming government education programmes – philanthrocapitalists can help grow a Pakistani equivalent.
For-profit and social entrepreneurship, to create businesses that help people work their way out of poverty and to create sustainable ways to tackle social problems, is crucial too. This is a tough job, often hampered by bureaucracy (see, for example, the difficulties that Kiva.org has faced in building a programme in Pakistan), which is why the leading microfinance lender, Kashf, is still several orders of magnitude smaller than, say, Grameen in Bangladesh or SKS in India. The business skills of the philanthrocapitalists could help to turn this around.
We are not saying that working in Pakistan is easy. Indeed, that’s why we think it’s ripe for help from the philanthrocapitalists – to take the risk to work in this tough environment, to innovate and figure out what works. It will mean working with organisations, like Frontier Development Support, that have relationships of trust with local communities, particularly in the tribal areas.
Pakistanis themselves, at home and abroad, are in the vanguard of the humanitarian effort to help the flood victims but can they step up to the long term development challenge? The Haitian diaspora in America has taken a lead in rebuilding their country, not just through their giving but through organised lobbying of the US government on issues like trade rules. The winners from India’s economic boom, like IT billionaire Azim Premji, have also quickly moved into philanthropy, accepting a responsibility for the social and economic development of their country. The Pakistani diaspora has not yet organised itself and Pakistani elites have not yet stepped up to major giving – they might do well to learn from the example of others.
At the start of the year, we made ten predictions for 2010, one of which was that philanthrocapitalists would play a role in some of the tougher development challenges, like helping Pakistan. Some of our predictions have already been fulfilled. Let’s hope that Pakistan will be next.
Tags: Frontier Development Support, Kashf, Pakistan, Richard Holbrooke
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July 30th, 2010
Our post on whether it is right to profit from the poor generated lots of interest, so we decided, as an experiment, to hold a “Twitter debate”. It went well, as the transcript shows. If there are topics you’d like us to Twitter debate about in future, let us know!
Matthew, who on Twitter goes by the name @mattbish, kicked it off at 2pm Eastern Time (7pm UK time) on July 30th, and it ran for an hour. (Michael’s Twitter handle is @shepleygreen – as you can see, he is a fan of extreme food.)
These were the only rules. Keep your comments to under 140 characters each. Always include the hashtag #propoor (for profits and the poor). The hashtag allows people to follow the flow of debate without everyone having to retweet comments they refer to. If you respond to a particular person’s comment, start your tweet with re and the person’s twitter name: for instance, if you respond to a comment by @mattbish, start your tweet: Re @mattbish and end it with #propoor
Other than that, please avoid personal abuse.
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July 28th, 2010
“This is pushing microfinance in the loansharking direction,” said Muhammad Yunus, the Nobel peace prize-winning founder of Grameen Bank, in response to today’s news that SKS, an Indian microfinance institution, has gone public. ”It’s not mission drift. It’s endangering the whole mission.”
We respectfully disagree. The keenly anticipated initial public offering, which aimed to raise $354m, is another important step towards fully engaging the mainstream capital markets in the fight against poverty.
As we reported in the chapter of Philanthrocapitalism called “philanthropreneurship the eBay way”, Yunus made similar comments about the successful IPO of Compartamos, a Mexican microfinance bank, in 2007, and about the efforts of philanthrocapitalist Pierre Omidyar, the founder of eBay, to encourage the development of for-profit business models for microfinance.
As we concluded in the book, “a big opportunity for philanthropists may be to back ideas that, if they succeed, would profitably solve social problems, but which have a higher risk of failure than commercial providers of capital, including venture capitalists, are willing to bear. Bearing the risk of ascertaining whether the idea can be pursued profitably is well suited to philanthropy. If the idea is a dud the money can be counted as a donation to the cause of increasing human knowledge; if it only works as a non-profit, philanthropists can choose to keep funding it; whilst if it succeeds, the philanthropists can let for-profit investors take it to scale while they, having played a crucial catalytic role, can put their philanthropic risk capital to work elsewhere.”
The SKS IPO is a case in point. Whereas Compartamos got its seed funding from charitable sources, such as the Accion microfinance network and the Mexican billionaire Alfredo Harp (Carlos Slim’s cousin), SKS was seeded by traditional mainstream investors, including Sequoia Capital, a Silicon Valley venture capital powerhouse, and Sandstone Capital, as well as George Soros and Indian outsourcing billionaire (as well as noted man of integrity), Narayana Murthy.
Hopes are now high that other for-profit investors will put their money into the emerging for-proft “bottom of the pyramid” marketplace. Already this is expanding beyond the traditional microcredit pioneered by Yunus at Grameen. SKS has already sold 12.5m micro-insurance policies. Ignia, an investment firm co-founded by Alvaro Rodriguez, the chairman of Compartamos, and backed by investors including Omidyar, is seeking for-profit opportunities in firms providing a range of services to the poor, from health care to low-cost housing to schools.
”By offering an IPO, you are sending a message to the people buying the IPO there is an exciting chance of making money out of poor people. This is an idea that is repulsive to me,” says Yunus. ”Microfinance is in the direction of helping the poor retain their money rather than redirecting it in the direction of rich people.” A better way to look at it is to see the emergence of a win-win, in which investors can profit by putting their money to work to help poor people enjoy a higher standard of living.
Certainly, profiting from providing services such as microfinance to poor customers can feel uncomfortable. Yet the experience of Compartamos shows the benefits that can flow from it. High interest rates were charged – upwards of 70% a year – but the profits Compartamos earned attracted lots more capital into Mexican microfinance, greatly extending the availability of credit to poor Mexican borrowers who would otherwise have had to go without or turn to real – ie, really nasty – loan sharks. Had Compartamos remained a non-profit, Mexican microfinance would almost certainly have stayed far smaller, with many of its current clients left worse off. Now the combination of economies of scale and competition from new entrants is starting to drive down interest rates to less alarming levels. Expect the SKS IPO to initiate similar trends in India.
Yunus has been busily developing a rival business model to the for-profit bottom of the pyramid sort. Called “social business“, it aims to earn a profit but not to return any money to investors. The most notable example so far is a joint-venture between Grameen and Danone to provide yoghurt enhanced to promote basic health to poor Bangladeshis. He is, reportedly, also to appear in the Simpsons cartoon later this year. It is not known if he will try to recruit Marge to a classic Grameen-style all-female lending circle, but Homer had better not try to start a for-profit microfinance institution in Springfield. Doh!
Tags: Alfredo Harp, Alvaro Rodriguez, Carlos Slim, Compartamos, Dannone, George Soros, Grameen, Ignia, microfinance, Muhammad Yunus, Narayana Murthy, Pierrre Omidyar, Sandstone Capital, Sequoia Capital, Simpsons, SKS, Social business
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July 26th, 2010
Talking about the number of people living on or below a “dollar a day” is a simple, effective way of telling the story of progress (or the lack of it) in reducing global poverty. But focusing on income alone has obvious limitations as a measure of extreme poverty. These have been highlighted by the launch this month of a new index of “multidimensional poverty”, which takes into account specific deprivations such as inadequate education, sanitation and electricity as well as low income. There are ten different measures in all, and someone deficient in 70% of these is clearly worse off than someone lacking in 40%.
As well as providing greater detail about the different forms of extreme poverty in different parts of the world, the new measure, devised by the Oxford Poverty and Human Development Initiative and the United Nations Development Programme, shows that there are many more people living in extreme poverty than is suggested by the dollar a day measure (or, strictly speaking, $1.25 a day): 1.7 billion, rather than 1.3 billion.
The index will be incorporated into the UNDP’s annual Human Development Report, the 20th edition of which will be published in October, and should improve its already invaluable Human Development Index.
To see the difference the new measure makes, consider two African countries, Tanzania and Ethiopia. Using the income measure of poverty alone, Ethiopia looks much the less impoverished of the two – 39% of its population living in extreme poverty compared to 89% of Tanzanians. Use the multidimensional poverty measure, however, and the picture is reversed: around 65% of Tanzanians are in extreme poverty, compared with 90% of Ethiopians. Niger has the highest percentage of people in extreme multidimensional poverty, at 93%.
Despite these examples, and Africa’s generally impoverished image in the media, it accounts for ‘only’ 28% of the people in the world living in extreme multidimensional poverty. Over 51% live in South Asia. Despite India’s consistently strong economic growth, the 421m people living in extreme multidimensional poverty in eight of its states exceed the total number living similarly impoverished lives in the 26 poorest African countries combined.
These new numbers should add to the sense of urgency not only among India’s growing army of billionaires, at least some of whom are exploring how to be effective philanthrocapitalists, but also at the various international meetings scheduled for September to consider how to make greater progress towards achieving the Millennium Development Goals by 2015. The more subtle measurement of the details of poverty in different places should be of great help to philanthrocapitalists and others as they try better to target their efforts on the areas of greatest need.
Tags: Africa, Ethiopia, Human Development Index, Human Development Report, India, Millennium Development Goals, Niger, Oxford Poverty and Human Development Initiative, Poverty, Tanzania, UNDP
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July 20th, 2010
Is corporate social responsibility to blame for the oil spill in the Gulf or for the meltdown of the global financial system in late 2008? This accusation has been made by our friend Chrystia Freeland in the Washington Post.
While it is easy to understand the contrarian appeal of this claim – how ironic that the instinct to do good resulted in doing bad; if only they had stuck to greedily pursuing profit maximisation – it is nevertheless utterly absurd. The lack of any evidence in Chrystia’s article, beyond the fact that both BP and Goldman Sachs have long been seen as leaders in the CSR movement, is telling. We are only surprised that she overlooked the fact the Toyota has also been found wanting in its core product quality, despite its public association with greenery. Three prominent failures by CSR leaders would have met any journalist’s definition of an ‘indisputable trend’.
Let’s consider BP and Goldman Sachs in turn. The exact chain of events that led to BP creating America’s (probably) worst environmental catastrophe remain to be seen. Certainly, individual errors will be found, and corners were probably cut. Yet it is also clear that the rest of the oil industry drilling in the Gulf were as equally unprepared to deal with such a spill as BP, even those – as Chrystia presumably prefers – most committed to maximising profits regardless of the cost to the environment. All of them seemed to believe that walruses would have to be rescued in the event of disaster in the Gulf, because they had simply copied disaster response plans designed for colder parts. As The Economist reported, according to Amy Myers Jaffe, an oil expert at Rice University, the industry’s strategy on blowouts was not to have them, rather than to work out how to put one right quickly. Surely no one believes that a strategy based on zero failures is prudent.
It is true that, according to BP board member Walter Massey, its espousal of CSR did buy the firm time and greater leniancy than it might otherwise have received after the fatal accident at its Texas refinery. “The company’s reservoir of goodwill, built up over years of committed corporate stewardship, was of critical aid in helping us to weather the storm,” he said in March. But there is no suggestion that this led the firm to think it could get away with anything.
Moreover, after the initial thrill of an oil major declaring the need to go “beyond petroleum” to stop climate change, the CSR movement’s enthusiasm for BP had waned long before the recent disaster. In particular, BP had been criticised for silo-ing its renewable energy activities away from the firm’s mainstream activities, and for increasingly putting financial performance ahead of everything else. Ironically, one of the justifications for replacing Lord Browne with Tony Hayward was his lordship’s lack of technical experience.
Financial short-termism seems the likeliest explanation for the problems of Goldman Sachs – though there is again no evidence to suggest that the Goldman’s commitment to social responsibility played any part in the financial crisis nor the unpopularity of the Wall Street bank after it. Goldman actually exposed society to less systemic financial risk than its rivals, including Lehman Brothers, Bear Stearns and Merrill Lynch. Ripping off customers – for which it has just agreed to pay a large settlement to the SEC, without admitting any fault – is easier to attribute to sacrificing long-term reputation for short-term profits than it is for being blindsided by the urge to be socially responsible.
Unlike BP’s recognition that it needs eventually to move beyond petroleum if it is to survive, the 10,000 Women campaign launched by Goldman Sachs, though brilliantly designed and executed, can hardly be viewed as core to the bank’s business strategy. In that respect, it is somewhat at odds with the trend in the CSR movement to focus on the sort of doing good that helps the firm do well. (And, let’s be clear, there are plenty of things to criticise the CSR movement for – just not the things that Chrystia claims.) Goldman Sachs is notable in doing its corporate philanthropy, and encouraging the personal philanthropy of its staff, in ways that entirely ring-fence them from the every day business of making money.
Indeed, the main reason Goldman Sachs is so unpopular today is surely that it made so much money after the financial crisis, and paid its staff such large bonuses. In this respect, it failed to recognise that the world had changed – that the public had bailed out the banking industry, Goldman Sachs included, and in return expected some evidence of gratitude and remorse for the events that had made the bail out necessary. From Goldman Sachs, it got neither.
It is our belief that a firm that had been more attuned to society and more committed to engaging with it constructively – the main goals of the CSR or corporate citizenship movement – would have been far less likely to make the basic mistakes that Goldman Sachs did, the costs of which are only starting to become clear. As we have said many times, the firm would have done far better, even in PR terms, if it had paid far smaller bonuses and given away far more of the money. (A more core strategy, for the longer term, would be to use its undoubted financial skills to do good, for example by helping to develop the nascent social investment market.
Rather than justifiying Chrystia’s dismissal of CSR, the failings of Goldman Sachs and BP underscore the need for firms to take their engagement with society more seriously, and to put being on the right side of social progress at the core of their long-term profit-making strategy. A firm that did this would not cut corners with safety or show so little gratitude to taxpayers for helping it survive.
Rather than criticise firms for being part of what Chrystia calls the “cult of CSR”, we should be figuring out how to destroy the cult of financial short-termism in the business world. (Our new book, The Road From Ruin, has some suggestions for doing that!) Admittedly, the conclusion that firms need to get better at CSR, and pinning the blame for BP’s oil spill and Goldman Sachs’s errors instead on short-termism, lacks the contrarian appeal of attacking CSR. But it does at least have the ring of truth.
Tags: 10000 Women, BP, Chrystia Freeland, CSR, Goldman Sachs, The Road From Ruin, Tony Hayward, Washington Post
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July 15th, 2010
By providing much needed transparency to the giving marketplace, the Center for Effective Philanthropy has become one of the leading intermediaries in philanthrocapitalism. In particular, its “grantee perception reports”, which get those receiving money from a foundation to disclose (confidentially at the individual level) what they think of a donor and its processes, has helped improve the quality of the grant-making process since CEP was founded in 2001. It recently produced a quite critical grantee perception report on the Bill & Melinda Gates Foundation, which many grantees will hope results in significant change at the world’s most prominent foundation.
Interestingly, news of the findings were released by the foundation just before Bill Gates and Warren Buffett announced their new giving pledge - which sceptics might regard as an extremely effective damage limitation exercise by the Gates Foundation PR team, releasing bad news whilst diverting the attention of journalists (us included) elsewhere. Still, even the usually hostile Gates Keepers website (sort of) applauded the foundation for owning up to the bad news, which it didn’t have to.
The report, the results of which the Gates Foundation has published on its website (along with recordings of two calls between Jeff Raikes, its CEO, and some grantees), found that grantees think the foundation has a “positive impact on knowledge, policy, and practice” in the areas in which it works. However, Mr Raikes acknowledged, it also found that “Many of our grantee partners said we are not clear about our goals and strategies, and they think we don’t understand their goals and strategies. They are confused by our decision-making and grantmaking processes. Because of staff turnovers, many of our grantee partners have had to manage multiple Program Officer transitions during the course of their grant, which creates more work. Finally, they say we are inconsistent in our communications, and often unresponsive.”
This damning verdict certainly tallies wth many negative comments we have heard about the way the Gates Foundation operates in its dealings with outsiders, where admiration for the generosity of the founders and for their thoughtful attempts to solve some of the world’s thorniest problems are often tinged with complaints about its classically bureaucratic behaviour in how it works with them. So thank goodness the message has now been given in no uncertain terms to those in charge.
Mr Raikes has announced a five point plan to improve relations between the foundation and grantees by 2013, when another grantee perception report will be commissioned. “Specifically, our commitments to our grantee partners in the short-term are: To better explain how our proposal and approval process works. To clearly communicate the point of contact for grants. To orient all new grantees, set expectations, and answer their questions and hear their concerns at the outset. To provide timely and substantive responses to all the progress reports they submit. To open up new channels of communication, including more frequent check-in calls with program managers and conference calls that give all our grantee partners the chance to ask questions of our executives.”
This is exactly the sort of response that the Center for Effective Philanthropy was created to bring about. Its grantee perception reports should be much more widely used – by more foundations, but why not also by governments and multilateral agencies. That said, the reports need to be read carefully. After all, having unhappy grantees is not always bad news. Some senior executives at the Gates Foundation think that some (but certainly not all) of the negative feedback reflects the fact that they are more results-oriented than other foundations and so quicker to cut off the money supply when an initiative is clearly not succeeding. For obvious reasons, this could be upsetting to those grantees affected – but their unhappiness could be a sign not of problems but of progress.
Tags: Bill and Melinda Gates Foundation, Center for Effective Philanthropy, Gates Keepers, grantee perception report, Warren Buffett
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July 9th, 2010
Bill Gates stole the show this week with his debut at the annual Aspen Ideas Festival. He appeared first in a cameo role in an advance screening of a forthcoming movie, “Waiting for Superman“. (No, he did not appear sporting a cape and red underpants, we are happy to say – and the movie did not actually argue that even metaphorically he is the Superman in question.) The movie is a powerful, and at times heartbreaking, call for the sort of reforms to America’s publicly-funded school system that Mr Gates is backing through his foundation, and is intended to help create the sort of public outcry and mass advocacy movement that is almost certainly needed if the long history of failure by education reformers in America is ever to end.
“Waiting for Superman”, which showcases icons of philanthrocapitalism such as Harlem Children’s Zone and KIPP charter schools, is the work of another of the philanthrocapitalists who we feature in the book: Jeff Skoll. His mission driven for-profit moviemaking company, Participant Media, has again backed the film-making duo responsible for the Oscar-winning climate change documentary, “An Inconvenient Truth”, and it is believed that a similarly large marketing budget has been allocated to try to turn school reform into a cinematic blockbuster. It deserves to succeed, but turning a worthy subject into a hit twice will take some doing.
Still, the movie has a villain from central casting that the audience can hiss at and boo: the teachers unions and especially the head of the American Federation of Teachers, Randi Weingarten. The movie’s message, put simply, is that teachers are mostly great, and need to be appreciated more, whilst the unions, through their implacable opposition to the sort of high-performance charter schools that we now know can successfully educate poor kids, are the root of all evil.
Interestingly, in a discussion after the film, Mr Gates took a far more conciliatory approach towards the unions. He argued that Ms Weingarten has lately been willing to engage in some pilot schemes to assess teacher performance – previously a complete no-go area for the unions – with a view both to identifying and spreading best practice and to rewarding better teachers more generously and weeding out the worst performers. Mr Gates will even deliver a keynote speech to the American Federation of Teachers annual convention on July 10th, which may prove a lively audience. His message: studying and measuring the performance of teachers and allowing the resulting knowledge to influence best practice and staffing decisions, is essential if America’s schools are ever to be improved. And unless any system of performance measurement has the support of the majority of teachers, it is doomed to fail.
Mr Gates hopes that the pilot schemes will convince the majority of teachers that performance measurement and its consequences are an opportunity, not a threat. The heart-rending images in “Waiting for Superman” of young children realising that their dreams had been crushed by their failure to win in a lottery the few available places in charter schools make clear how important it is that Mr Gates is right.
Tags: An Inconvenient Truth, Bill & Melinda Gates Foundation, Bill Gates, Harlem Children's Zone, Jeff Skoll, KIPP, Participant Media, Randi Weingarten
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June 21st, 2010
Imagine if countries competed with each other to create the best environment in which social innovation can happen…
That’s the idea behind a new project we are working on, with Jed Emerson of Blended Value fame: the “Social Competitiveness Index”. The concept has been developed under the auspices of the World Economic Forum’s Global Redesign Initiative, by the Global Agenda Council on Philanthropy and Social Investment, and is now being advanced with support from the Avina Foundation together with a crack team of volunteer researchers from Deutsche Bank. We we would like your help to think it through.
Three decades ago, the WEF produced its first Global Competitiveness Report (GCR), the most authoritative comparative assessment of countries’ capacity to generate economic value. Unlike traditional measures of economic development that look at levels of national income, the GCR asked about the future potential for economic growth. In doing so, it has helped policy-makers to map out and drive change to make their economies stronger and more productive.
Yet the GCR only captures the economic capacity of countries, not their ability to create social value. Other indices, such as the UN’s Human Development Report, provide comparative information on different aspects of human wellbeing – but these largely reflect countries’ accumulated social value rather than countries’ capacities to respond to new challenges on a prospective, forward looking basis.
The Social Competitiveness Index (SCI) would rank countries according to the effectiveness of their legal, fiscal, governance and cultural environment with regard to social innovation. It would drive the creation of a systematic body of knowledge about the current structure of legal, tax and other policies toward social innovation, and about what works best. In doing so, it would provide a meaningful tool for decision-makers in all sectors to benchmark a country’s ability to tackle social and environmental problems and, through case studies, identify concrete steps on how to enhance this capacity.
So what makes a country socially competitive? Our working hypothesis (which you can read about in more detail on pages 103-108 of this report) is that it’s about the capacities of government, the private sector and the non-governmental sector to do three things:
First, to innovate and create new models or technologies. This means having a strong civic sector that is able to come up with new ideas, a legal framework that allows these ideas these to be shared (freedom of expression, etc) and funding to get these ideas tested.
Second, a capacity to test these ideas and figure out what actually works. The quality of charities’ and social enterprises’ own reporting, as well as the quality of academic and media debate about the social sector is clearly important here. Yet so, too, is the openness of government, which is a crucial source of data on the nature of the social and environmental problems that needs to be tackled, as well as the effectiveness of a government’s own programmes.
Third, funding to get the ideas that work to scale. If social innovations are to reach meaningful scale they need to tap into sources of funding beyond the always limited pool of philanthropic grant capital. Governments must be ready to work in partnership with the social sector, to take new ideas and scale them up. Corporations must be willing to take new ideas of social and environmental responsibility and make them part of their mainstream business models. New legal structures for social investment will also be crucial to take ideas to scale.
We understand that creating the SCI is a huge a challenge, particularly if we are to make comparisons across countries with very different levels of development, different economic models, different social and cultural models. Over the next few weeks, we are looking forward to discussions with a number of others currently exploring this concept (or something similar). We also want your input. Have we nailed the essence of social competitiveness or are we way off the mark? Comment on this blog post. Join the discussion on our Facebook group. Join the debate on twitter with the #socindex hashtag. E-mail us at philanthrocapitalism@yahoo.com. Write a response on your own blog, or maybe be a guest on the Philanthrocapitalism blog.
What we want most of all is the debate. Even our critics share the view that something is changing in the way that the world tackles social problems, in this era of social entrepreneurship and multi-stakeholder initiatives. We all have an interest in figuring out how to turn this social innovation movement into real change in the world.
The WEF’s Global Competitiveness Report has proven itself to be a powerful tool in enhancing the performance of the world economy. As globalization moves ahead and creates new challenges, the Social Competitiveness Index has the potential to drive social innovation higher up the political agenda and make the world a better place to do good.
Over to you!
Tags: Avina Foundation, Global Competitiveness Report, Global Redesign Initiative, Jed Emerson, Social Competitivevness Index, Social Innovation, World Economic Forum
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June 16th, 2010
Today’s launch by Bill and Melinda Gates and Warren Buffett of the giving pledge is a big step forward for philanthrocapitalism. Indeed, it marks philanthrocapitalism’s coming of age as a movement, with the Gateses and Buffett as its activist leaders. They are challenging every billionaire family in America, and ultimately the world, to pledge in a public letter to give away at least half of their wealth. Those who do so will be invited to brainstorm with the Gateses and Buffett about how to be more effective philanthropists at an annual “Great Givers” summit, the first of which is likely to take place in October.
The idea first started to take shape in May last year at the secret meeting of leading philanthropists in New York that we have blogged about and which we write about in the preface to the paperback of Philanthrocapitalism (which, happily, is now out on kindle, at last). The Gateses and Buffett will be talking about the giving pledge tonight on the Charlie Rose show.
The launch of the giving pledge comes at a time when the rich are generally viewed more sceptically in America than in many years, and in which philanthrocapitalism is being questioned like never before (see this New Republic editorial, for example, or Diane Ravitch’s latest book on education reform). Yet, as readers of our book know, we think that in these tough economic times there is more need for philanthrocapitalism than ever before, and are delighted that the Gateses and Buffett have decided to play a more active role in promoting it.
In the book, we report Bill Gates’s estimate that only around 15% of the wealthy who could be giving away substantial amounts of money are doing so, though he believed that this would eventually rise to around 70%. Here’s hoping that the giving pledge will help this dramatic shift happen.
Tags: Bill Gates, Charlie Rose, giving pledge, Melinda Gates, New Republic, Warren Buffett
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June 14th, 2010
What do the victory of billionaire Meg Whitman in the recent primary to be the Republican candidate for governor of California, and the controversial Gaza aid flotilla have in common? Both these recent new stories highlight the difficult questions that arise when philanthropy merges into politics.
At first glance this is a bit of non-question. Doing good for others by giving seems a million miles away from murky party politics or violent clashes on the high seas. Indeed, the tax-exempt status of US foundations is clearly defined on the basis that they stay out of party politics. Yet dig a bit deeper and lines between philanthropy and politics quickly start to blur.
By giving to certain causes rather than others, philanthropists are pushing their vision of what makes a good society. California billionaire Eli Broad, for example, gives substantial amounts to the arts, a decision he explained to us on the grounds that “to have a productive, inventive, creative populace, the arts have a role to play”. For some, this is a matter for the donor alone. Others, however, would argue that, given the tax subsidy to giving, the public should have more say on the causes philanthropists give to (this debate is live in Britain at the moment, where elite private schools, such as Eton College, where Princes William and Harry and Prime Minister David Cameron were all educated, are being leaned on by the charity regulator to show that they are helping poor kids as well as those born in with silver spoons in their mouths).
One might also grumble that giving crosses the line into politics when it directly distorts public policy choices over how taxpayers’ money is spent. Take Andrew Carnegie’s massive library-building programme across America and other countries more than a century ago – if local governments were not willing to commit public money to pay for the upkeep of the steel baron’s gift, they did not get a library. Or look at the giving by the Bill & Melinda Gates Foundation to tackle diseases of the developing world. This generosity has been used, for example, to lever matching commitments from governments to new aid agencies like the the Global Fund for AIDS, TB and malaria, which critics could argue has distorted international priorities in financing for development.
A more fundamental concern may be that some charitable causes are objectionable in their own right – at least to those who disagree with them. The high priest of atheism, Richard Dawkins, for example, blasted the Templeton Prize in his book The God Delusion as “a very large sum of money given…usually to a scientist who is prepared to say something nice about religion”.
This type of criticism gets even more intense when philanthropists stray from metaphysics into politically sensitive areas. Conservatives, for example, love to rail at George Soros’ donations to what he calls ‘open societies’, labelling him ‘Dr Evil’, ‘Soros the beastman’ and even ‘Dr Evil’. Liberals, for their part, less colourfully, bridle at the influence of the Olin Foundation (brilliantly profiled by John J. Miller in his book A Gift of Freedom), which sowed the intellectual seeds of the renaissance of conservative thinking in America.
This is all good knockabout stuff, as one group accuses the other of using rich donors’ cash to win the upper hand in the public debate. If anything the volume of accusations and counter-accusations shows how philanthropy adds to the richness of debate, rather than favouring one side or the other. Yet when the super-rich cross the line into electoral politics, this raises some more profound questions.
Getting stuck into politics for real may be the most direct route for a philanthropist to achieve their goals. That’s what the billionaire mayor of New York Michael Bloomberg thinks. As an ex-smoker he has given generously to the anti-smoking cause but rates the influence of the ban on smoking in public places that he introduced in New York as having much more impact. As a self-funded politician he also thinks he can govern without the dependence on funders that hamstrings other politicians.
If Bloomberg is the acceptable face of the billionaire politician, his fellow media tycoon and scandal-ridden prime minister of Italy, Silvio Berlusconi, is surely the unacceptable face, highlighting that there are dangers when the super-rich start to dabble in politics. The lesson here, however, seems to be that the strength of the rules and institutions preventing abuse of the system are crucial. On that basis, we are relaxed that Meg Whitman, formerly the CEO at eBay, wants to use part of her fortune to pursue a political career. Her money will not allow her to buy votes or distort the media - in the end it is the people of California who will decide whether she is the right person for the job. (Although we note that she hasn’t yet blazed much of a trail in philanthropy, except dropping a $30 million gift on her alma mater, Princeton University, in 2002).
So what about the flotilla? In a recent post on her Wonderment Woman blog, Turkish-American Elmira Bayrasli drills down into the back story behind Insani Yardim Vakifi (known as IHH), the Turkish charity behind the flotilla. She argues that IHH is too glibly dismissed as a “terrorist organisation”, when it is, in fact, a product of a philanthropic humanitarian awakening among the Turkish middle class, and she calls for a more informed debate about Muslim philanthropy.
While others would vigorously contest such a characterisation of IHH, Bayrasli is making an important call. Certainly some Muslim charities have been used and continue to be used to project extremist messages, including calls to violence (indeed, in the book we discuss whether the wealthy Osama bin Laden might see himself as a philanthrocapitalist, though the terrorist leader certainly doesn’t meet the criteria we set out). This is clearly morally repugnant. Yet other Muslim charities which have no interest in violence will see their humanitarian mission in terms of projecting their religious values (just as many Christian charities do), or their political values (just like Soros’s open society or Olin’s freedom agenda), and, according to one interpretation of what the flotilla was up to, may even stray into illegal activity to get their message across (just like Greenpeace, according to the Japanese Whaling Association).
To argue that philanthropy and politics are separate spheres that should never touch is simply unreal. In a multitude of ways philanthropists are contributing to the political process, directly and indirectly. In America, the rules and boundaries have been debated constantly for more than a century because of worries about the influence of the rich on politics. Whether it is Broad, Gates, Templeton, Soros, Olin, Bloomberg, or Whitman, there are precedents to guide whether these western philanthrocapitalists have crossed the line. As Bayrasli argues, by the same measure vibrant Muslim philanthropy will inevitably sometimes challenge Western policies – we need a more informed debate to decide whether organisations like IHH are pushing the boundaries or crossing the line.
Tags: Bill Gates, Eli Broad, flotilla, George Soros, Global Fund, IHH, Meg Whitman, Michael Bloomberg, Olin Foundation, Richard Dawkins, Silvio Berlusconi, Templeton Prize
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June 4th, 2010
“There can be no turning back on data. We’ve got to accept that measurement is here to stay, and make it work”. So said Geoffrey Canada, the driving force of the Harlem Children’s Zone, on June 2nd at the annual conference of the Committee Encouraging Corporate Philanthropy.
Mr Canada had discovered the importance of measurement in the non-profit world as he grew HCZ – which focuses on helping children in poor areas succeed, especially through education – into one of the most admired newish non-profits in America, where it is being scaled up, by replication, by the Obama administration through its Promise Neighborhoods programme. Apparently, at one point some of his colleagues at HCZ felt that Mr Canada had become so obsessed with measurement that they started saying “Geoffrey cares more about data than children”, to which he replied “if you really care about children, you have to care about data.”
This captures in a nutshell a crucial debate that is intensifying across the social innovation sector. Our arch critic, Michael Edwards, loves to bemoan the evils of using measurement in the non-profit world, and usually gets plenty of sympathetic nods from non-profit workers in the audience when he does so.
We are certainly not uncritical advocates of measurement. As economists, we are all too aware of the famous dismissal of economists as people who “know the price of everything and the value of nothing” – which is another way of saying you can measure the wrong thing and also, perhaps, that the easiest things to measure (such as a price) may not be the right things to measure. We also recognise that there is a temptation, often succumbed to even by philanthrocapitalists, to deploy data in a defensive way, to cover their back in case things don’t work out rather than to improve the chances of having the best possible impact. We are hugely suspicious of people who focus on data to the exclusion of other less numerical information, including gut instinct.
Yet, in the end, Mr Canada is right. In a world of scarce resources, not to try to measure how well those resources are used is, ultimately, a failure to care enough. The challenge we all need to wrestle with is how to get the measurement right, so it really helps us to achieve the change we want.
This seems to be a task to which many in the corporate giving world are warming, as blogger Alice Korngold reports. So, too, the Obama administration, as is evident from this blog by Peter Orszag, the director of the White House Office of Management and Budget. On the same panel as Mr Canada, Patrick Corvington, the CEO of the US government’s Corporation for National and Community Service, indicated how radical this move towards meaningful impact metrics could be. “No longer will we equate success with increasing the number of Americans who volunteer,” he said, promising to unveil soon a raft of new measures designed to indicate whether the service his organisation encourages is making the difference it is supposed to.
These new measures should certainly be scrutinised carefully, to make sure they are really shedding light on the right things and do not inadvertently create incentives for undesirable activity. But that scrutiny should be undertaken with a view to improving the data, not, as we fear will be the case for Mr Edwards, to provide an opportunity to say “I told you so”. The money available for building a better world is too scarce, and the problems too pressing, for critics of data to ever indulge in Schadenfreude.
Tags: Alice Korngold, Committee Encouraging Corporate Philanthropy, Geoffrey Canada, Harlem's Children Zone, Michael Edwards, Obama, Office of Management and Budget, Patrick Corvington, Peter Orszag, Promise Neighborhoods
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June 1st, 2010
The Eurozone has so far borne the brunt of the financial markets’ scepticism about the sustainability of public expenditure in the developed world, forcing countries like Greece, Spain, Italy and Ireland to introduce tough austerity measures. Can philanthrocapitalism help the big-government-loving Europeans to steer their way through the crisis?
Hopefully that question will be on the table at the Foundation Week conference that is being held in Brussels at the moment, under the auspices of the European Foundation Centre (EFC). (Alliance Magazine has a series of blogs from Foundation week here.)
On the face it, a European philanthropic flowering looks pretty unlikely. True, there are a few new donors, working through groups like the EFC and the European Venture Philanthropy Association, but European philanthrocapitalism has still not reached critical mass, as it is starting to do in the UK and in some emerging markets in Asia and Latin America. Giving levels in Europe, among rich and poor alike, are still low and, well, philanthropy is often seen as a strange Anglo-American habit.
That is a mistake. Europe has a rich philanthropic tradition starting with the first microcredit institutions, the Monti di Pieta of Renaissance Italy, through to enlightened industrialists like Ernest Abbe of the Zeiss corporation in Germany in the 19th century. Europe’s foundations are also, not to put a finer point on it, stinking rich – according to one study back in 2007 (sadly not available on the web), the top 50 European foundations had total assets worth 10% more than their U.S. counterparts.
Admittedly this valuation is disputed as these assets are especially hard to measure. Many European foundations hold the bulk of their assets in shares donated by their philanthropic founder, and value them in terms of the price of the shares when they were put into the foundation rather than their current market price.
As we report in the book, the largest foundation in the world may not be the Bill and Melinda Gates Foundation but, according to the Economist, the Stichting Ingka, the Dutch-registered foundation that owns the flatpack furniture giant IKEA. Never heard of it? No surprise really, because it does not give much money away and its target beneficiary is… promoting better design.
Stichting Ingka may be a bit of an outlier but, on the whole, Europe’s big foundations do seem to be performing far below their potential. Italy, for example, is home to several mutli-billion dollar foundations created by bank privatisations in the 1990s (some of which were the descendents of the pioneering Monti di Pieta) that seem overly concerned with grant-making to art and heritage rather than driving deeper social transformation. Much philanthropy in France is still channelled through the Fondation de France, which is a government-sponsored national community foundation that seems designed to keep giving firmly within limits.
So maybe, just maybe, the fiscal crisis is a chance for the countries of Europe to look again at the sleeping giants of the foundation world and think about how these under-used assets could be harnessed to tackle social problems at home or fill the funding gaps likely to result from cuts in government aid to the developing world. A good place to start, this Foundation Week, would be for Europe’s foundations to provide (or governments to require it if they don’t) some genuine transparency about what European foundations are worth and what they are doing.
An even bolder move would be for Europe’s governments to follow what America did four decades ago, and require that foundations give away each year a minimum percentage of their assets (5% in America) in return for their considerable tax advantages. There’s a big idea to champion this Foundation Week!
Tags: Ernst Abbe, European Foundation Centre, European Venture Philanthropy Association, Fondation de France, Foundation Week, IKEA, Monte di Pieta, Stichting Ingka, Zeiss
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May 28th, 2010
As rock star and aid champion Bono lies prone in his sick bed with a back injury that has forced him to cancel his forthcoming festival appearances with his band U2, he will be wondering not just about how to spend his summer but what to do next in his campaign for more aid for the developing world. While he can be pleased with what (most of) the rich world has done to deliver on the big aid pledges made five years ago at the G8 Gleneagles Summit, the next five years look more uncertain as governments around the world tighten their belts. Is this the passing of the brief golden age of aid?
Every year since the Gleneages summit, Bono’s lobbying organisation, the One Campaign, has published the DATA report, in which it grades the generosity of the rich world. The commitments made at Gleneagles ran to 2010, so this year’s report will be the last. “The G7 are on track to deliver a $13.7 billion increase, or 61% of the development assistance increases promised”, is the good news (well, a B is a pretty good grade for governments).
Top of the class is the UK, which under Tony Blair’s leadership at Gleneagles joined Bono and friends to gang up on the (other) heads of state and shake them down for more aid cash. The US, Canada and Japan all get a pat on the head for meeting or exceeding pledges that were, the report says pointedly, “modest”. Germany and France are acknowledged for making some improvement yet also chided for their boastfulness, as they only stumped up a quarter of what they promised.
Bottom of the class comes Italy, which the DATA Report does not even give a pass mark for effort. “Italy is an utter failure as a member of the G7,” says headteacher Bono, unequivocally.
As he looks forward in the report, Bono does his best to be optimistic. “We’ve come pretty far, having passed (maybe mostly) through the fog of financial crisis,” he writes in his foreword. Given that three members of the G7 have spent the past few weeks fighting off the implosion of the Euro it seems that the financial crisis has ‘mostly maybe’ passed rather than ‘maybe mostly’. Worse, even if the Eurozone does avoid meltdown that does not mean good news for aid.
When the DATA report warns of “a new debt crisis” round the corner, you have to wonder whether it’s talking about the rich or the poor world, or, indeed, both. The public debt of the donor countries has spiralled during the current economic crisis and with taxpayers on a fiscal crash diet it’s hard to see even current levels of generosity to the needy abroad being sustained.
The tragic irony, of course, is that evidence is filtering through that the aid splurge of the past five years may have started to achieve something. Two hundred million bednets have been distributed since 2006, cutting deaths from malaria by half in some African countries. The number of people with HIV in Africa receiving anti-retroviral drugs has gone up from 100,000 in 2003 to 3 million today. Another 42 million kids are enrolled in school. But that evidence is unlikely to have much of an impact on governments pondering whether to cut spending on things that directly benefit their own voters to pay for aid to non-voters in other countries.
Like it or not, we have to find new ways of making the aid money go further and find new ways of financing development that do not depend on the political will of a few rich countries. Philanthrocapitalism, by tapping the expertise, creatvity, money and other resources of the private sector, has to be central to a new development strategy. First, to pilot and test ideas to make aid smarter and more effective. Second, to leverage more private capital – full for-profit, ethical investment and donations – to fill the gap.
As we have argued before, this means thinking about aid not as the exclusive preserve of government but as a partnership with philanthrocapitalists, rich and less rich alike. This challenge is urgent and the rich countries are being slow to take it up - Britain’s new government, in particular, seems set on business as usual (although there are plenty of disgruntled voices on the right who would like to see an axe taken to the aid budget).
Yet there are some tentative signs that things are starting to change. Women’s Ministers from the Commonwealth countries will be looking at philanthrocapitalism as part of their meeting next month (where Michael will be speaking) on putting gender equity at the top of the development agenda. And new USAID Administrator and Gates Foundation veteran Raj Shah will be charged with building more partnerships with private organisations, if a recent leaked strategy document is to be believed, which it should be.
As he recuperates and ponders the last five years, Bono can take pride in the way he has pushed governments to increase what they spend on aid. He may shed a tear for the passing of that era but something new is now needed. Hopefully he will soon find what he’s looking for.
Tags: Aid, Bono, Britain, Canada, Commonwealth, DATA, development, France, G7, G8, Germany, Gleneagles, Italy, Japan, One Campaign, Ray Shah, Tony Blair, U2, USA, USAID
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May 20th, 2010
Tuesday saw the first fruits of Prime Minister David Cameron’s big election idea, the Big Society, with the launch of a rather modest reprise of some of proposals in the Conservative Manifesto, glammed up with a conversation and photo-op with a group of Britain’s top social entrepreneurs.
We are sympathetic to the Big Society because it points towards some of the fundamental changes that are required in how government works with private actors to solve social problems. It is still too early to tell what this is going to mean in practice under Britain’s new Conservative/Liberal Democrat coalition government but, having sifted through the tealeaves, we see a couple of dangers and one big opportunity.
We were a little saddened to see that the new government has gone ahead with changing the awfully-named ’Minister for the Third Sector’ to the equally ghastly moniker ‘Minister for Civil Society’ (no disrespect to the incumbent of the new post, Nick Hurd MP). OK, so the ‘White House Office for Social Innovation’ is not going to win any prizes for elegance of expression but at least you know it is there to achieve an outcome that (sort-of) means something, whereas its British counterpart sounds all too much like it is there to glad-hand the non-profit sector, as its predecessor did.
Titles aside, our bigger worry is the ‘blueprint for David Cameron’s Big Society’ published a few days earlier by Res Publica, the think-tank of Conservative philosopher-in-chief Philip ‘Red Tory’ Blond (and commissioned by UnLtd, a charity endowed with £100 million from the National Lottery to promote social enterprise). The report, called ‘The Venture Society’, calls for the creation of ‘community lablets’ to nurture new social enterprises, a network of ’social hubs’ to support the lablets, a Bureaucracy Task Force (anti- rather than pro-) to cut back the stifling red tape, and ‘pilot virtual advisory boards’ to raise money.
Jargon aside, there are some reasonable ideas here to stimulate more grassroots social enterprise. Yet whilst grassroots is great, it is simply not enough. One of the most exciting trends in philanthrocapitalism has been the growing interest in taking great ideas and growing them to scale through venture philanthropy and new forms of grant-financing and social investment. Sadly, ‘The Venture Society’ has little to say about being tough-minded on outcomes (a crucial issue where change is much needed, as New Philanthropy Capital has pointed out to the new Minister) and kicks the question of financing for scale into the long grass.
It is also striking that a report about rolling back the state places responsibility for making this happen with the Cabinet Office, the very centre of the central bureaucracy of this extremely centralised country. This goes to the heart of the problem with the ‘Red Tory’ vision of the Big Society – its innate suspicion of capitalism means that the responsibility for funding and facilitating the planned great empowerment rests, paradoxically, with the state. As we have argued before, meaningful social change will require a partnership not just between government and the nonpofit sector but also the private sector. We will not build a Big Society by treating capitalism as the enemy.
Reports by think-tanks are not the same as government policy, so we will have to wait and see whether the Big Society vision will embrace philanthrocapitalism. One encouraging sign has been the appointment of the ferociously clever Nat Wei as the government’s lead adviser on taking this forward. (Known by some of his colleagues as ‘Seven Brains’, his elevation to the peerage presumably means that he will now have to be called ‘Lord Seven Brains’.) With a background at McKinsey before embarking on a career in social enterprise, Wei has a good understanding of the world of business and finance, which he will hopefully bring to his new role. If he can harness the tools of capitalism to the mission of social change embodied in the Big Society then David Cameron’s big idea might achieve its potential.
Tags: Big Society, David Cameron, Nat Wei, Nick Hurd, Philip Blond, Red Tory, Res Publica, UnLtd
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May 18th, 2010
Wall Street’s rapid recovery from the financial meltdown, at least measured by profits, may have turned Goldman Sachs into Public Enemy No. 1, but it has also helped bring about a strong rebound in giving in America’s capital city of philanthropy. This much was clear from two high-profile charity events last week, both of which drew bumper crowds.
On Monday May 10th the hedge-fundie-run Robin Hood Foundation raised a record $88m at its annual jamboree. The event, which featured performances by Sting, lots of jokes about older cougar women preying on younger men, and a secret giving contest between different parts of the room, improved significantly on last year’s $72.7m. True, the 3,600 wealthy people in the room could afford to give substantially more – but it is good to see that this pioneering philanthrocapitalistic event is back on track. If only the same could be said of its London counterpart, held by ARK (Absolute Return for Kids), which despite the presence of Queen Rania of Jordan raised only $20.5m at its gala on May 14th, well down on its 2007 record of $53m.
The second event, on Thursday May 13th, was a “Meet the Finalists” session hosted by Echoing Green, one of the pioneers of venture philanthropy through its very-early-stage financing of social entrepreneurs. Since it was founded in 1987 by the senior leadership of private-equity firm General Atlantic, it has invested around $28m in seed grants to some 471 social entrepreneurs.
In contrast to the Robin Hood event, Echoing Green’s was a working meeting, finallists being considered for seed grants this year getting 90 seconds to practise their pitch before a packed audience of potential donors. All were impressive – including Anna Elliot of Bamyan Media, which makes reality TV shows in countries such as Afghanistan to teach about social entrepreneurship; Ashni Mohnot of Enzi, which is pioneering new models for lending to poor students from developing countries to get educated in America; Scott Warren of Generation Citizen, which is trying to empower political activism among young Americans; and Parag Gupta of Waste Ventures, which is trying to organise impoverished waste pickers into profitable enterprises whilst reducing greenhouse gases at the same time.
What was striking about the Echoing Green event was the absence of any of the crisis mentality that has been so ubiquitous in the past couple of years in New York, even in the philanthropic world. Business as usual is not what we need on Wall Street but when it comes to giving – especially the group of young people with great ideas competing for the funding they need to start to change the world - it’s good to see New York bouncing back.
Tags: ARK, Bamyan Media, Echoing Green, Enzi, Generation Citizen, Goldman Sachs, Queen Rania, Robin Hood Foundation, Wall Street, Waste Ventures
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May 14th, 2010
For Britain’s politicians there seems to be a consensus, at least for now, that spending 0.7% of national income on government aid programmes would be the nation’s fair share of the global effort to eradicate poverty in the developing world. Indeed, aid charities and lobby groups have consistently pushed for all rich countries to hit the 0.7% target since it was endorsed by the United Nations back in 1970. Yet maybe the time has come to give up on this target. It is increasingly impractical and, more importantly, increasingly meaningless in a world where private donors as much as governments are in the vanguard of the fight against poverty.
First, the practical point. When you think about the depth of the fiscal black hole facing Britain’s new government, it seems odd, if laudable, that one of the few concrete commitments in the deal underpinning the historic new Conservative-Liberal Democrat coalition is a pledge to stick to the outgoing Labour government’s plan to increase spending on overseas aid to 0.7% of national income. Aid is, admittedly, a tiny part of public expenditure (a little more than a penny in every tax pound goes to fighting poverty overseas). Yet to crank up UK aid from the 0.52% of national income it represented in 2009 to 0.7% by 2013 means a cash increase of about £2.5 billion (from £7.4 billion to around £10 billion) – money which could be spent on things that voters really care about like hospitals and schools at home. Given the horrible fiscal realities and the fact that Britain is one of the few countries living up to its aid commitments, you have to wonder how long British voters will tolerate this munificence abroad.
There are also plenty of reasons to ask whether the 0.7% goal ever really meant anything at all. The whole process of setting this target was, as you’d expect, rather messy and the methodology for setting such a target has plenty of flaws – see the excellent paper by Michael Clemens and Todd Moss from the Center for Global Development for the full story. One of the most important facts that has been forgotten in this story is that the targeting began with a goal for total aid, public and private combined, of 1% of the national income of rich countries. The 0.7% target was simply chosen as a rough estimate of what government’s burden should be, assuming 0.3% would come from private donations. In a world where philanthrocapitalists are taking more of the strain in tackling global poverty and where governments are having to scale back their ambitions, maybe it is time to dust off and return to the 1% combined target for public and private giving.
But how do Britain and other rich countries perform against this broader measure of national generosity?
In its new Index of Global Philanthropy, published this week, the conservative American think tank the Hudson Institute shows that, far from being one of the stingiest countries, the United States is actually one of the most generous. According to their arithmetic, in 2008 the US government gave 0.19% of national income in aid (which is very low) whereas private philanthropy to developing countries added another 0.26%. At 0.45% in total, this still puts the US less than half way towards the goal of 1% but it is a big improvement to America’s position in the generosity standings, overtaking countries which rely largely on taxes to help the poor of the developing world, including France (0.42%) and Germany (0.41%), and towering over Japan, which is equally miserly with government monies and does little private giving, at 0.2%. The UK, which is privately as well as publicly generous, scores an impressive 0.67%.
The Index of Global Philanthropy also goes one step further and throws into its measures of international money flows remittances from migrants working in countries to their homelands, which takes total American generosity past the 1% target, all the way up to 1.12% of national income. Before Americans start hugging themselves and putting away their chequebooks, we think that adding in remittances is a step too far. While some of these monies undoubtedly should count as aid – such as paying for poor relatives to go to school – much of this cash is also used to, say, buy real estate in boomtowns like Mumbai, which clearly should not count as aid. Until we can figure out the proportion of remittances that are genuine aid, it is safer to leave them out of the calculations.
Data freaks could also object to the way that the Hudson Institute calculates private philanthropic donations: there is no agreed data standard and different countries measure charity differently. By contrast, government aid statistics are policed by the Organisation for Economic Co-operation and Development. A meaningful 1% target would need to have similar rigour applied.
While they are at it, the statisticians might also usefully take a look at how social investment should be counted in the aid figures. There is growing interest among the philanthrocapitalists in harnessing capital markets to fight poverty, much of which may involve trading off some financial return in exchange for benefits to the poor. If more assistance to the poor is delivered through mechanisms such as these, the subsidy element of these market-based tools should also count towards any real measure of national generosity.
This may just sound like statistical niceties, but getting accurate data on the total aid effort – public and private – has important policy implications. Take, for example, the idea put forward by model-cum-philanthropist Renu Mehta and Nobel prize winning economist James Mirrlees for government aid to be used to match fund and lever more philanthropy from the rich. When they floated the idea last year, it received some pretty withering criticism.
Now, better measurement of private aid flows would not tackle all the problems with this idea. But it would help answer the question whether public funds used in this way were effective in promoting more aid in total. Similarly, we have argued for government aid money to promote social investment targeted at fighting poverty – getting a measure of the contribution made by these flows would, again, help test this idea.
The current 0.7% target was the product of a different age when the fight against poverty was a matter almost exclusively for governments. With the rise of philanthrocapitalism, this is no longer the case. Out statistics should catch up and recognise that 1%, not 0.7%, is the magic number.
Tags: 0.7%, Center for Global Development, Hudson Institute, Index of Global Philanthropy, James Mirrlees, Michael Clemens, oda/gni, OECD, remittances, Renu Mehta, Todd Moss, United Nations
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May 4th, 2010
‘Buy One Get One Free’, known in the trade as BOGOF, is one of the supermarkets’ favourite tools to make us spend more money – most of us can’t resist something for nothing, sometimes even if we don’t really want it. So we were excited to learn last week that a similar technique has just scored a big success as part of a major fundraising scheme for the 21st Century School at Oxford University, founded by British-born “Guru of the Information age” Dr James Martin.
In March 2009 Martin put up $50 million of challenge funding to lever other donors to his school. Last week, little more than a year later, the School announced that, with gifts from 30 donors, they had raised the full $50 million match funding. Now, $50 million may sound like small beer to American universities but this is a big leap forward for Britain, where philanthropy is still seen as a marginal part of the way to support research at higher education institutions (leaving aside the Wellcome Trust, which is a lone exception).
This is going to have to change. These are grim times for British universities in general and for scientific research in particular. Indeed so worried are the nation’s boffins that the chill fiscal wind is going to blow through their laboratories that some of them even launched a Science Party, to put the case for science on the political agenda in the upcoming general election. We wish them well but fear that British science is looking for salvation in the wrong place. While the political parties talk a good game about high-tech manufacturing and the knowledge economy, their manifestos contain little cheer for the scientific community.
Like it or not, the future of British science is going to rest with the philanthrocapitalists, which is going to require a culture shift from the universities and from donors large and small. We think that match funding schemes have the potential to catalyse that change. Last year’s Coutts Million Pound Donor report, written by Beth Breeze at the University of Kent, cited anecdotal evidence that the government’s match funding scheme has started to mobilise donors (launched in 2008, the government put up a £200 million pot to match private donations on a sliding scale, with donations to less experienced universities matched 1:1 whereas the more experienced fundraisers only receive £1 of public money for each £3 raised from private donors).
James Martin’s experiment, which he modestly told us “just seemed like a good idea”, provides further evidence that the BOGOF principle does seem to be working as a way to ‘nudge’ more giving. (As does The Big Give, which is an opportunity that at least one university has already taken up.)
With public budgets under pressure, government funding for science is going to be squeezed not just in absolute terms but also towards projects that fit political priorities and deliver concrete outcomes in three to five years. Since philanthropy is often at its best when it thinks long term and takes risks that government cannot, we believe that there is a huge opportunity for donors to make a big impact by giving to support scientific research. It would also be great to see more innovation in giving to science, perhaps through social venture capital equity investment in technologies that tackle climate change and disease. Hopefully the next British government will use the power of BOGOF to save British science.
Tags: 21st Century School, Coutts, James Martin, match funding, Oxford University, Science Party, The Big Give, Wellcome Trust
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April 29th, 2010
The Big Society was supposed to be the big idea that would sweep the leader of Britain’s Conservative party, David Cameron, into power in little more than a week’s time. Yet Cameron is struggling to sell the Big Society to the voters. The niggling problem he seems to be facing is that while the Big Society sounds OK, no one quite knows what it means, which has allowed his opponents to claim that this is just “the same old idea of laissez faire, self-help that we saw in the 1980s, in new clothes” (in the words of rising Labour star Ed Miliband, for example).
If the Big Society does mean free-market orthodoxy, then it is a betrayal of the man who is claimed to have shaped Cameron’s vision, Phillip Blond. In his new book, Red Tory, Blond lays out the philosophy behind the Big Society and gives it, and Mr Cameron, a big plug. The thesis of Red Tory, is in some ways uncontroversial – that neither big government nor the free market have served us particularly well in recent years – although Blond spices this all up with lots of finger-pointing and large dollops of nostalgia for a more civic past (as well as a little Catholic social thought from the likes of G.K. Chesterton).
Blond does, however, come up with an original mix of prescriptions. Some of them – a big redistributive tax hike by cutting tax relief on middle class pension contributions – are very red indeed and would never get into the manifesto of any political party, let alone the Conservatives. Others are just plain crackpot – turning the Royal Mail into a giant Soviet-style logistic network to transport everything from people to potatoes around the country (in eco-friendly vans that will be made in Britain to revive the motor industry).
Yet Red Tory does also lend its name to some good ideas. In The Road From Ruin we argue that tackling financial illiteracy and strengthening financial inclusion have to be part of rebuilding our economic system, which are both themes that Blond echoes (although his praise for the Community Reinvestment Act may raise a few eyebrows from conservatives in America who blame the financial crisis in large part on this legislation). Blond is also a fan of social investing and supports the creation of a Social Investment Bank (although it is not clear what makes these ideas Tory, since it was the then Chancellor of the Exchequer Gordon Brown who, back in 2000, convened the Social Investment Task Force that pioneered various innovative British approaches to social investing).
While there is some agreement between Red Tory and Philanthrocapitalism, we disagree fundamentally about capitalism. Blond thinks modern capitalism is so flawed that it must be destroyed and replaced with co-operative based economy of artisans and guilds, and has no vision for how capitalism can be part of building a better society.
Well, almost no vision. At the end of his chapter on ‘Creating Popular Capitalism’ Blond sings the praises of microfinance and draws encouragement from signs that pension funds have started to invest in an industry that “has paid out returns as high as 20%, while fulfilling an aim to lift households out of poverty.” Indeed. Microfinance is just one way that the tools of capitalism are being harnessed for social good by the philanthrocapitalists.
Rather than trying to dispatch capitalism to the dustbin of history, as Blond does, we think it is better to work out how businesses, investors and philanthropists can provide the skills and capital needed to drive social change. Moreover, as ordinary citizens work together as consumers, investors and givers to change the way our system works, so we can build the fairer, more responsible society that Blond craves.
In publishing, like much else in life, timing is everything. Britain’s general election is the perfect marketing hook for Red Tory. Sadly, the rush to publish seems to have gone to Blond’s head and the result is a messy, incoherent diatribe rather than a programme of meaningful reform. Maybe a sequel masterpiece, perhaps called The Big Society, is in the pipeline? Yet unless Blond’s political patron, David Cameron, can start to energise voters with some big ideas about how to build a big society, it may be too late.
Tags: Big Society, David Cameron, general election, Gordon Brown, Red Tory, Social Investment Task Force
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April 26th, 2010
A few months ago we were delighted to take part in a new Australian Broadcasting Corporation documentary about philanthrocapitalism called Now I Can Change the World, the first episode of which was released on the web last week. Yet we were intrigued to see that part two of the programme was going to feature a philanthrocapitalist that we had not written about and, indeed, had never heard of – one Harrison Wyld. It turns out that the ‘documentary’ is the set up for a new ‘online alternate reality drama’ called Bluebird AR, all about a reporter discovering murky goings on behind the mask of Mr Wyld’s philanthropy.
The idea of superficially benign rich people up to no good will be familiar to anyone who has ever seen a James Bond movie, although we think it is good news that giving is attracting more media interest (Bluebird AR follows on the heels of last year’s satire The Foundation on Canadian television). Novelists like Charles Dickens and Anthony Trollope made powerful contributions to the debate about philanthropy in Victorian England, as a few years later did George Bernard Shaw. Let’s hope that Bluebird AR matches up to the standard of those past greats!
Tags: Anthony Trollope, Charles Dickens, George Bernard Shaw, Harrison Wyld, The Foundation
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April 22nd, 2010
As the would-be next Prime Ministers of Britain gear up for tonight’s second televsion debate, focused on foreign policy, we thought we would offer a few thoughts about one of the most important questions: what to do about foreign aid. At first glance, there seems to be little up for grabs. Labour, the Conservatives and the Liberal Democrats all swear solemnly that they will stick to the existing (so far unfulfilled) plan to spend 0.7% of Britain’s national income on aid by 2013. Yet whoever wins the mandate of the British people on 6th May, will face some crucial choices.
The Labour Government that has been in charge for the past 13 years can certainly take credit for a huge increase in aid during its time in office – in 2009 the United Kingdom spent more than £7 billion helping poor countries, compared to little more than £2 billion when Labour came into government. Inflation and economic growth have helped to boost that cash figure but, even as a percentage of national income, Labour has doubled the British taxpayer’s generosity from 0.26% of national income in 1997 to 0.52% in 2009.
Yet, if the other parties are equally committed to continuing to push up the aid budget, so what? Well, Labour wants us to believe that their claim is more plausible since it has actually increased aid while in office, whereas the Conservatives halved the aid budget during their last 18 years in power (aid was 0.51% of national income when Margaret Thatcher won her first election in 1979). This criticism of David Cameron’s Conservatives was echoed by some aid veterans in a recent letter, who aired their fears that the Tories are just making the right noises to fend off the old charge that they are the ‘nasty party’ (”political positioning rather than a serious commitment to tackling global poverty,” as they put it). Cameron has fended of these charges by speaking up vigorously for causes such as eradicating malaria and has even convinced aid champion Jeffrey Sachs to be a cheerleader for him.
The reality, however, is that this debate over the 0.7% target is rather beside the point. All the political parties are ducking the tough decisions on public spending that will come thick and fast after the election. In reality, it is hard to believe that aid can be protected from the fiscal axe when it is up against claims on public spending that voters care about far more (polls show that the British public’s support for aid is broad but thin and, for the first time, declining).
Worse, while the UK has stuck to its aid pledges made at the Gleneagles G8 summit in 2005, many of the other rich nations at that meeting have already started resiling from those commitments. Indeed, in 2007, the last time rich countries were asked to throw money into the hat to subsidise World Bank loans to the poorest countries, the UK ended up paying in more (14%) than the United States (12.2%), or Japan (10%), or even Germany ( 7.1%) and France (6.5%) combined.
When the political leaders debate tonight, the real questions they should be addressing are how to make aid achieve real outcomes and how to harness philanthrocapitalism to lever in new financing to close the gap left by shrinking government aid budgets.
One might expect the Conservatives to be taking a lead here, given their anti-big government, ‘Big Society’ agenda. Sadly, they are not. The international development section of their manifesto is a barely-warmed-over repeat of their rather uninspiring policy statement from last year.
The Labour manifesto is an equally disappointing read, especially as Gordon Brown has been a big supporter of philanthrocapitalism in the past through the Social Investment Task Force that he created as Chancellor of the Exchequer in 2000 and through his work with the Gates Foundation on new aid mechanisms like Advance Market Commitments for medicines.
Is Nick Clegg, the leader of the Liberal Democrats, whose promise of new thinking has wooed British voters so far in the campaign, the man to break away from the old aid orthodoxies? Not if you read his party’s manifesto, which offers nothing but platitudes on the subject.
So what should a British government do? Well, it is all set out in our own ‘Philanthrocapitalist Manifesto’ and available to one or all of our political leaders to adopt as their own. Gordon, Dave, Nick – call us.
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April 19th, 2010
One of the books that influenced our thinking about Philanthrocapitalism was “The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits“, by the management guru C. K. Prahalad, who sadly has just passed away. If you have not read the book yet, you should.
Frustrated by the failure of traditional aid to end poverty, Prahalad urged the private sector to get involved – especially the for-profit business sector. He saw a potential win-win, whereby businesses could profit by providing products, services and work that helped to raise the living standards of the 4 billion least well-off people on the planet. In the six years since his book appeared, this idea has gone from the wild fringes of development and business thinking, to the mainstream – though, as he readily conceded, the action has yet to match the volume of the rhetoric. However, the boom in mobile telephony and of for-profit microfinance among poorer communities in the past few years is proof that the idea that the profit motive can be harnessed to do good has genuine power to change the world.
Prahalad rightly worried that using terms like “the poor” reflected a mindset of low expectations: far better to see the four billion people at the bottom of pyramid as (potential) customers, entrepreneurs or investors – or, if you like, micro-consumers, micro-entrepreneurs and micro-investors. He was adamant that these people should be served with the latest technology, albeit tweaked to reflect their lesser incomes, and that the “frugal engineering” that is needed to profitably serve them would spawn innovations that would soon flow back to the rich world.
Prahalad also saw that there is a crucial role to be played by philanthrocapitalism. Business requires an effective ecosystem if it is to operate effectively – the lack of an appropriate ecosystem of trust, information, rule of law and so forth is often the biggest obstacle to the creation of successful businesses at the Bottom of the Pyramid. Business must therefore take the lead in building suitable ecosystems, Prahalad argued – something that will require it to partner effectively with philanthropists and non-profit organisations, as well as perhaps with government. These are the sort of partnerships that are increasingly common in the developing world – a key part of the Gates Foundation’s global development strategy, for example.
Prahalad will be sorely missed. Yet, happily, his ideas seem set to go from strength to strength. When he last spoke to Matthew, he said that “I can now answer ‘yes’ to five questions I posed when I first launched the idea of Bottom of the Pyramid. Is there a real market? Is it scalable? Is there profit? Is there innovation? Is there a global opportunity?” As we mourn him, we also share his optimism.
Tags: Bottom of the Pyramid, C K Prahalad, Gates Foundation, microfinance, mobile phones
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April 17th, 2010
London is currently full of stranded social entrepreneurs, prevented by volcanic ash from returning home from this week’s Skoll World Forum on Social Entrepreneurship in Oxford. This has prompted all sorts of initiatives to make their enforced ‘volcation’ in London more bearable. The Global Impact Investing Network, for instance, is holding its ’First Annual GIIN Volcanic Ash Refugees Impact Investing Dinner’. (A free drink is offered to anyone who can pronounce the name of the guilty eruptor, Eyjafjallajokull.). The annual post-Skoll party hosted in London by trendy microfinance lender Kiva will surely now require bouncers to turn away the hordes of less cool social entrepreneurs that may now turn up because they have nothing better to do.
We don’t know what Jeff Skoll, the eBay billionaire who endows the annual event he calls the ‘Woodstock of Social Entrepreneurship’, makes of this. He may wonder why his new Skoll Global Threats Fund - mission to address urgent threats facing humanity – did not alert him to this volcanic risk ahead of time, so the forum could be rescheduled.
Actually, the volcanic disruption provides an interesting test of the power of social entrepreneurship: can all these geniuses of social change figure out an innovative way to get themselves home? To encourage them, perhaps Skoll should deploy the cutting edge techniques of philanthrocapitalism. First, to catalyse collaboration, the theme of this year’s Skoll Forum, he should endow a prize – let’s call it the Skoll Eyjafjallajokull Prize – for the best idea to get Skollers home. As much of the discussion at this year’s Forum was about the power of crowd sourcing, he should also set up an interactive discussion website, Eyjafjallajokullwiki. (In the meantime, feel free to post ideas here at philanthrocapitalism.net.) Failing any better ideas turning up, here’s our proposal for a scalable socially entrepreneurial solution: Skoll should open his cheque book and charter the QE2 and a fleet of eco-friendly Tesla sports cars to transport everyone to the nearest working airport.
Tags: Eyjafjallajokull, Global Impact Investing Network, Jeff Skoll, Kiva, Skoll World Forum, Volcanic ash
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April 6th, 2010
If government isn’t the answer to all society’s ills, how can citizens take control and find real solutions to problems as diverse as loneliness and youth crime? Well, the Big Society Network that launched in London on Thursday thinks it has the answer – half public awareness campaign, half social networking site, half thinktank, half old-fashioned mutual society, the Network wants to knit together 15 million social entrepreneurs, community activists, philanthropists, volunteers and ordinary Joes into a national do-gooding community that together can fix ‘broken Britain’.
The Network is the brainchild of ex-McKinsey consultant (they’re everywhere) and serial social entrepreneur Nat Wei and former ad man Paul Twivy, who was behind campaigns to get Brits to ‘change the world for a fiver’ and even to talk to their neighbours over a big lunch. The Network’s launch came with the personal endorsement of David Cameron, Conservative Party leader and would-be Prime Minister. (While the ‘big society’ is a Conservative slogan, Wei and Twivy – and Cameron – took great pains to say that the new Network is non-partisan. Hmmm.)
So what does the big talk of a big society mean? It’s a bit hard to tell, since the launch was all about raising the money to get the thing started. Yet it is fair to say that they are taking on a real challenge – how to mobilise Brits to start giving back more – since the tax breaks for philanthropy and exhortations to volunteer of recent years have not caused much of a change to public attitudes so far.
The power of the Big Society Network, as Twivy explained, will depend on its ability (or not) to show how thousands or millions of individual ‘micro’ actions can have a real macro impact. This, indeed, is the thrust of the mass philanthrocapitalism that we discuss in a new chapter in the paperback edition of Philanthrocapitalism. Online giving sites such as Kiva and Donorschoose, as well as Facebook causes, are opening up new opportunities for engaged giving and activism, so that many people acting together can have the same demonstrable impact and leverage as rich philanthropists. These tools are evolving and changing rapidly, making new connections and meeting new needs all the time, mobilising a new generation of givers and activists.
Indeed, one sceptical thought about the Big Society Network is that it feels a bit too top-down. Back in 1993 US Vice-President Al Gore famously set out his vision for building an ‘information superhighway’, just as the internet was taking off without the billions of dollars of public investment that he was calling for. Could the Big Society Network turn out to be an equivalent civil society superhighway that is over-taken by grass-roots networks of changemakers? If so, as with the emergence of the privately-funded internet, that would be a cause for celebration.
Tags: Al Gore, Big Society Network, Broken Britain, Conservatives, David Cameron, DonorsChoose, Facebook Causes, Kiva, McKinsey, Nat Wei, Paul Twivy
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March 25th, 2010
Over the past thirty years, successive British governments have improved the tax incentives to giving to almost US levels. Yet British givers are still much less generous than Americans (Britons give away about 0.7% of national income, Americans 1.7%). One of the proposals we made in our Philanthrocapitalist Manifesto was that offering the incentive of match funding might be a way to lever new giving, so we are excited to report on a new partnership between The Big Give and Arts and Business to test this idea.
The Big Give is the brainchild of Alec Reed, a millionaire who made his money through his eponymous employment agencies and has given a 20% share in the company to his foundation. The Big Give website was initially set up as a database of unsolicited charity requests that Reed had received, which he thought he would make available to other philanthropists. Adding a one-click function to the site so that donors large and small could give directly to the projects they liked was a natural next step. In this way, the Big Give is very much just a shopfront for charities – any registered charity can join and there’s no attempt to measure their impact or get user feedback. What is unique is its use of match funding.
The big leap came in December 2008 when Reed put up £1 million to match online donations to see if he could create some excitement about giving. The entire sum was spent in 45 minutes. In December 2009 Reed repeated the experiment but wanted to increase The Big Give’s leverage. This time he put up £1.5 million but asked for charities to match his donation two to one with gifts from their trustees and major donors to create a total pot of £4.5 million to match public donations. Charities leaped at the chance because it was a great way to get their wealthy supporters to actually put their hands in their pockets (fundraisers bemoan the sometimes very long gap between major donors expressing support and coughing up the cash) on the basis that every pound given would lever 50p from Alec Reed and another pound from the public.
This, of course, is all well and good from the Big Give’s perspective – Reed’s gift in 2009 eventually levered £3m from charities’ major donors and a further £4 million from the public – but does it actually stimulate more giving overall? Charities certainly report that the Big Give has boosted their income. WWF, for example, reports that the Big Give let it recruit 500 new donors and got existing donors who participated in the challenge to give 60% more. This anecdotal evidence is also supported by more rigorous research (subscription to NBER required, sadly) from the US, which shows that matching increases the probability that donors will give and the amount they give.
Perhaps the real test of whether matching really brings in donations is going to come this year, when Reed tries to raise £20 million. To do that he is looking to find sponsors to add to the matching pool, the first of which is Arts and Business. These are frightening times for the arts in Britain – public funding is going to be slashed and there is a fear that private and corporate giving will be weakened by the recession. To reverse this trend Arts and Business are putting up £0.5 million, which will be combined with another £0.5 million from Reed in an effort to leverage another £3 million from others.
The really interesting thing about this new partnership is that Arts and Business gets a lot of public funding (from the National Lottery as well as central government), some of which is going into this matching pot. We think that more government money could be used in this way to lever private giving. Universities, for example, are feeling the fiscal pinch as badly as the arts. There’s already a government sponsored match-funding scheme to attract donors into higher education but it’s pretty low-profile and university fundraising in Britain is still decades behind America. This needs to change urgently. Private donations are going to have take more of the strain for maintaining standards of excellence at Britain’s universities in the years. Maybe a dollop of government cash to sponsor gifts to the universities in this year’s Big Give could help to drive that change?
Correction: Just had clarification from the Big Give that Alec Reed and Arts and Business are jointly putting up £0.5 million, rather than £0.5 million each, to lever £3 million of additional giving. Apologies.
Tags: Alec Reed, Arts and Business, philanthrocapitalist manifesto, The Big Give, university funding, WWF
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March 24th, 2010
Philanthropy or capitalism? Nature or nurture? Butter or marmalade on your toast? False dichotomies make fun debating points but shed little light on important questions. So it is with Reuters blogger Felix Salmon’s recent critique of the new Financial Access at Birth (FAB) campaign as top down rather than bottom up.
FAB is a simple idea: from 11 November 2011 (11/11/11) every child born on the planet should get a bank account with $100 that they can access when they reach sixteen years of age. It is the brainchild of Bhagwan Chowdhry, a finance professor at UCLA, who argues that financial inclusion for every citizen is a powerful way to beat poverty. (Disclosure: Michael has joined the FAB campaign as one of the founding members, along with the philosopher Peter Singer and former IMF chief economist Raghuram Rajan, among others.)
Felix has no objection to the idea in principle – he just thinks that it’s impractical because the banks won’t be interested and, even if they were, the costs of putting in place the technology would be prohibitive. Better, he argues, to build financial inclusion from the bottom up: “Those schemes aren’t as ambitious, but at least if they break they don’t end up costing billions of dollars.”
Felix is right that bottom-up credit co-operatives and micro-lending schemes have a good track record in building financial inclusion but they also have a problem with scale. It will take decades for these disparate initiatives to reach the hundreds of millions who are unbanked and the financial services they offer are quite limited. Don’t the poor deserve something better sooner?
Felix is also right that the mainstream financial institutions have not yet extended their reach into the poorest communities because there is little profit to be made. But “yet” is the point. The elegance of FAB is that it creates a business opportunity, an incentive, for the banks to get into these markets. In the same way that the Gates Foundation and governments have used Advance Market Commitments to ‘pull’ private investment into medical research into vaccines against diseases that only kill poor people, so FAB aims to pull the banks into providing financial services and leverage their capital and knowledge to make it work.
Felix protests that ”the FAB campaign seems to be operating in something of a vacuum: rather than trying to coordinate closely with international development institutions like the World Bank or the Inter-American Development Bank, it’s barging ahead on its own”. Again, he is half right: there are lots of different players working on financial inclusion at the moment – official agencies like the ones he mentions, philanthrocapitalists like Pierre Omidyar, social entrepreneurs like Muhammad Yunus, and big corporates like Citigroup and FAB will only succeed if it works with these groups.
Yet Felix sounds like a typical aid bureaucrat when he sneers at FAB for not building a grand coalition at the outset. The aid world has long been dogged by too much consensus-building that leads to nothing. The biggest impact that the philanthrocapitalists have had on development is to cut through the process and focus on outcomes. (Michael has seen this from the inside having worked for more than a decade at the British aid ministry DFID.) FAB is a bold attempt to build a coalition of governments, philanthrocapitalists and for-profit institutions with a vision for global financial inclusion. It is risky but it is a risk worth taking to help all the useful work that is already taking place get to a scale where it really can transform hundreds of millions of lives.
Tags: Advance Market Commitments, Bhagwan Chowdry, DFID, FAB, Felix Salmon, Gates Foundation, Muammad Yunus, Peter Singer, Raghuram Rajan, Thomson Reuters
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March 23rd, 2010
They are getting used to making acceptance speeches at Pratham, India’s largest nonprofit working to help the 200 million children in the country who cannot read. In the past twelve months Pratham has picked up the Gold EMPI-Indian Express Indian Innovation Award and was made CNN-IBN Indian of the year in 2009, and now it has been chosen to receive the Kravis Prize in leadership at New York’s Museum of Modern Art (supported by private equity tycoon Henry Kravis and run out of Claremont McKenna College, his alma mater). Prizes are much in fashion at the moment, as a recent report by McKinsey demonstrated, but is there any more to this trend than the glitz and glamour?
Pratham itself is an impressive organisation. It has volunteers working in half the villages of India. Getting more kids into school has been one of the big pushes in the development business in recent years, galvanised by the Fast Track Initiative since 2002, which has produced impressive surges in school enrollment (including Kenya’s 84 year-old schoolboy). Yet names on the school roll are not the same as bums on seats, let alone knowledge in kids’ heads. This is the problem that Pratham is tackling by developing teaching models that actually help children to read. Former investment banker Mallika Singh, Pratham’s head of programmes, emphasises that the organisation’s goal is to leverage the investment that the Indian government has made in teachers and buildings into real outcomes.
OK, so Pratham is a good organisation – but what is the value added of the Kravis Prize? The $250,000 prize money certainly helps – Singh says that this will be invested in a leadership programme for the organisation, just the sort of thing that many donors are reluctant to fund but which can be vital to building an organisation’s capacity for future growth.
But why is a prize better than just making an unrestricted grant? Well, getting the endorsement of Nobel Prize-winning economist Amartya Sen and former World Bank chief James Wolfensohn, who sit on the prize committee, is certainly a signal to the media and donors that this is a good organisation. For smaller, less well-known recipients of the prize, like the first winner in 2006 the Rural Development Institute, this is an obvious way to draw attention to an issue that is off the radar. Yet for an organisation like Pratham, or 2007 winner BRAC, the value added does not seem so clear. (In the same vein, many of the Skoll Awards for Social Enterprise seem to go to big, well-known organisations like Teach for America, rather than unrecognised start-ups.)
But that may be the problem with conventional thinking in the social sector. Everybody loves a new idea and a start-up. What fun it is to hear and share about a new innovation, yet the real challenge is getting solutions to scale, which is much more boring. As we argued recently in Innovations magazine, we need to think about a ‘capital curve for social innovation’ that gets the right kind of funding and support to organisations at the different start-up, growth and scaling phases. That is why Marie-Josee Kravis, who chairs the Kravis Prize panel, is right when challenged that choosing Pratham is a bit boring to respond that “it is not venture capital”. The role of a prize like this one is a signal to the philanthropic market that, hopefully, will help a successful organisation to get more exposure and leverage more fundraising to reach full scale. Dull, perhaps, but important nonetheless.
Shifting reward and celebration in the social sector away from sparky innovation to boring scaling is not going to be easy but it is vital. If we look at the for-profit world, a lot of successful companies do not do much innovation at all, they are just good at copying what others do and copy it really well (perhaps with the odd tweak here and there to reduce costs or improve product quality). So how about a prize for the best copying in the nonprofit sector? Pratham’s model has lot to offer other countries. They are already starting to build links to partners in Tanzania, Kenya and Uganda. Pratham is even trying to reach into Pakistan, a country with huge educational needs. If an organisation could copy Pratham and get a volunteer into half the villages in Pakistan and get the government to start investing in education outcomes, now surely that would be worth a prize.
Tags: BRAC, Fast Track Initiative, Henry Kravis, Kravis Prize, McKinsey, Pratham, Rural Development Institute, Skoll Awards for Social Enterprise, Teach for America
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March 16th, 2010
There’s a bit of a ‘phoney war’ feeling in Britain at the moment. Whichever party (parties?) takes power after the general election that will be held some time before May 6th, the parlous state of the nation’s finances will demand a complete re-egineering of government. Yet we won’t know what our politicians have planned until they release their election manifestos, which is why interested groups of all kinds are issuing their own manifestos at the moment (as did we in January) in an effort to influence the policy wonks who are beavering away on the parties’ policy platforms. Will the politicians rise to the challenge of a serious debate about new ways of funding social change?
Today sees the launch of the New Philanthropy Capital’s ‘Manifesto for Social Impact’, which rightly highlights that a task for a new government is making sure that taxpayers and donors get more bangs for their buck when supporting charities. We would certainly endorse their view that the Government’s Office of the Third Sector (OTS) ”has focused on helping charities to do more of what they already do, rather than to improve what they do.” Our view is that OTS has been so captured by its constituency that it should be scrapped (the OTS unsurprisingly disagreed), yet NPC see hope of reform by focusing its role more on building the capacity of charities to measure and report impact. Not only will this improve performance, they argue, it will also save money: by NPC’s calculations charities spend £600 million a year on reporting to government, which could be cut by a quarter if government created standardised frameworks rather than getting charities to produce their own measures. Creating better reporting frameworks would not just save money, NPC argue, but would also help to make philanthropy more effective like the Foundation Center’s Glasspockets initiative in the United States.
The NPC manifesto is workmanlike rather than visionary but there are some useful practical ideas here. In contrast, the manifesto from the National Council of Voluntary Organisations (NCVO) is full of big talk but not a lot of substance. ‘We believe in the good society”, runs the title of this document, “What do you believe in?” Hmmm, all believers in a bad society please stand up. No one? OK, glad we have got that cleared up. So how do NCVO propose building this good society? Well they have some nice quotes from Winston Churchill, Helen Keller, Cicero, Gandalf etc, all telling us to be good and give (we made that last one up - you get the point) and exhortations that government should “focus on wider activities that promote individual and community well-being” and “offer an appropriate mix of funding”. Oh and a national community volunteering day.
The clear message from the NCVO manifesto is that voluntary sector is pretty happy with the status quo, having received some large dollops of government cash over the last twelve and a half years. Since the voluntary sector is more traditionally aligned with the Labour Party than the Conservatives, it is no surprise that there is some concern about what a Conservative government would actually do and a focus on defending gains rather than setting old new directions. (Although it does seem that Stephen Bubb, the head of NCVO’s great rival ACEVO, is happy to hobnob with anyone important – we hope the ACEVO manifesto is as amusing as his blog.)
So far, the Conservatives have done little to allay these fears, with few policy announcements on what they have planned for the voluntary sector apart from some vague words about smaller community groups being a good thing. True, they have some nice rhetoric about a ‘big society’ where citizens are empowered and give back but there’s precious little meat on this soundbite. Labour, by contrast, is stuck with steady-as-she-goes when it comes to what to do about charities. Why talk about reform and alienate a natural constituency?
Yet Britain needs a serious debate about how the voluntary sector, philanthropists and government can work together to save money and achieve real social impact. Philanthrocapitalism is not a party-political idea but new approaches to supporting social innovation need to be publicly debated. By shying away from a real discussion about how public and private capital can work together, the politicians are missing an opportunity to build a vision and consensus about how our society will tackle its most pressing problems. We can only hope that there will be some big, bold new ideas in their manifestos.
Tags: ACEVO, general election, NCVO, New Philanthropy Capital, philanthrocapitalist manifesto
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March 11th, 2010
When Philanthrocapitalism was first published in September 2008, some of our critics thought that the economic meltdown would mean the end of superwealth and supergiving. We argued then that the wealth would certainly bounce back, since the rich would be able to weather the storm more easily than the rest of us, and that mega-giving would continue despite the downturn.
The newly published annual billionaires list in Forbes magazine confirms the first of those predictions. The super-rich are bouncing back faster than the global economy – the world’s billionaire count has jumped from 783 in 2009 to 1,011 now. The philanthrocapitalists have also continued giving, as demonstrated not least by Bill Gates’s recent $10 billion pledge at Davos.
The big “news” from this year’s Forbes list, however, is that the richest person in the world today is neither Bill Gates (number one on the list for most of the past decade) nor Warren Buffett (his partner in philanthropy, who once knocked Gates off the top slot) but the Mexican telecoms tycoon Carlos Slim. This is not such a huge surprise, since Slim has been catching up with Gates and Buffett over the past few years – though given the fact that estimating the wealth of the superrich is more art than science and Forbes found less than a 1% difference between the fortunes of Slim and Gates, it may be no coincidence that the magazine’s choice as top dog happened to be the one likeliest to generate the most headlines. (How boring if Gates had been the richest yet again.)
That said, the Forbes ranking provides a great opportunity to test the new number one against the ‘good billionaire guide’ that we set out in the book.
The first rule for a good billionaire is to earn your money fairly in competitive markets (some think that Gates falls foul of that rule since Microsoft has had a few run-ins with the antitrust authorities, although one could argue that since Microsoft was forced to pay some substantial fines as a result it has paid its dues ). Critics have certainly slammed Slim for his iron grip on the Mexican telecoms markets, which he won when they were privatised (his BBC biography says that he controls 90% of the country’s landlines).
The second rule is the billionaires should pay their taxes. We do not have any evidence to go on with this one. Mexico is known as the major economy with the lowest rate of tax revenues relative to GDP. But we have no information regarding Slim’s own contributions, and whether he bucks that trend. If you know, please do tell us.
The third rule is that billionaires should be disproportionately generous, to reflect their substantial wealth, and the fourth, that they should be thoughtful about giving in a way that maximises its positive impact. The good news is that when we wrote the book, Slim had just pledged to give away $10 billion, which is not Gates-like or Buffett-like generosity, but is a decent showing. He has also appeared alongside Shakira as a show of support for her philanthropic work in Latin America, to which he has given an unspecified amount of money (almost certainly small change to him). However, we have heard very little about his philanthropy since. It may be that Slim is giving it away in secret but, on the whole, we think that well-known philanthrocapitalists should be talking about their giving – to encourage others and to be transparent.
Slim has certainly spoken sceptically about philanthropy in the past and has argued that “poverty is not fought with donations, charity or even public spending, but that you fight it with health, education and jobs.” This argument seems rather feeble to us. Yes, investing his money can create jobs and wealth but that’s not the whole answer to the world’s ills – his philanthropy could have a massive impact on poverty.
Our advice Carlos, for what it’s worth, is to give giving a chance. In fact, we even predicted you would in our start of the year forecast for philanthrocapitalism in 2010. If you’re too busy for now making money then why not let someone else spend it, say by matching the Gates donation for vaccines, or, perhaps even better, adding to the endowment of some other foundations working in global health to create a bit of competition for Gates. Go on, you might even enjoy it.
Tags: Bill Gates, Carlos Slim, Forbes, Good billionaire guide, Shakira, Warren Buffett
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March 2nd, 2010
Our old sparring partner Michael Edwards has been banging the drum against philanthrocapitalism again. We actually agree on more than Michael admits – particularly that philanthrocapitalism needs transparency and accountability to succeed. And he is willing to give some grudging credit to Bill Gates for his recent pledge of $10 billion to develop vaccines against diseases that kill the poor. Yet Michael is still in Cloud Cuckoo Land when he presents his alternatives to philanthrocapitalism.
“Investing in new vaccines against malaria is great, but there’s no vaccine against poverty, inequality, violence or corruption,” Michael complains. He bemoans the focus on the easiest, most immediate problems. Instead he wants to “pour the generosity of the rich and famous into national development funds under democratic control.” (As well as backing the fundamentally flawed Robin Hood Tax).
This is all good, crowd-pleasing stuff for Michael’s supporters who don’t like capitalism but it is inaccurate and empty. Inaccurate, because philanthrocapitalists are working not just on vaccines but also on the fundamental issues of citizen empowerment, democracy, transparency, accountability, peace-building and anti-corruption that are so dear to his heart. (He even approvingly cites a report from the Center for Global Development, which relies heavily on funding from philanthrocapitalists, including its co-founder Ed Scott, who also partnered with Bill Gates and George Soros to seed-finance Bono’s campaigning organisation.) Empty, because he fails to acknowledge the flaws in the government and NGO-led aid model that he champions – the system that has manifestly failed over the last fifty years.
Tackling poverty needs more than warm words about the importance of civil society. It needs innovation and implementation. We are optimistic about philanthrocapitalism (which, in contrast to Michael’s caricature of it as all about the rich and business, is often manifested in partnerships betwen the wealthy, government, business and social entrpreneurs and non-profits) because we think it can deliver in those areas, bringing new ideas, testing them, and making them work in a way that has not been possible in the past. Philanthrocapitalism needs challenge to succeed, but that challenge should be based on evidence not tired old polemics.
Michael likes to describe philanthrocapitalism as “Just Another Emperor” sporting non-existent new clothes, but increasingly the evidence suggests it is he who is naked.
Tags: Aid, Bill Gates, Bono, Center for Global Development, Ed Scott, George Soros, Michael Edwards, Robin Hood tax, The Guardian
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March 1st, 2010
“The ‘oh, woe is me’ thing, we’ve just got to get over that. The world has changed. It’s happened.” So said Beth Frerking at a social entrepreneurship conference organised by students at Harvard Business School on February 27th-28th. The “it” in question is the shock to the news media caused by the combination of economic recession, the decline in classified print advertising and the rise of the internet, among other things. Frerking is a senior editor at Politico, one of three recently started entrepreneurial news organisations that were showcased at the conference.
The conference, with the theme of “Redefining Service for the 21st Century”, featured numerous panel discussions plus keynotes by Kiva’s Premal Shah; Goodwill Ambassador Lia Kebede; Sonal Shah, the head of the White House Office of Social Innovation; and (in conversation with Matthew) pioneering philanthrocapitalist, and now special UN envoy on malaria, Ray Chambers, who said that the world is on track to have “zero deaths from malaria by 2015″ – which, if it comes to pass, will be truly amazing. The conference was extremely well attended: encouragingly, MBA students show no sign of losing their enthusiasm for social entrepreneurship.
It was good to see news recognised as a good that social entrepreneurs ought to be involved in providing. The three were a full-on for-profit entity, Politico; one, Global Post, that hopes one day to be profitable, but has been seed financed to the tune of $9m by investors who are believed to understand that they may never see a financial return on their money; and ProPublica, an investigative journalism organisation launched in 2008 and philanthropically funded by Herbert and Marion Sandler (whose fortune came from selling sub-prime mortgages, among other things -which they got out of just before the market crashed).
All three media outlets say they are doing well. According to Philip Balboni, a veteran journalist who launched Global Post in January 2009, there was initially lots of scepticism about the potential for an online publication dedicated to international news. A Harvard Business School professor, no less, predicted the Global Post would fail because ‘Americans don’t care about international news’. So far, he told the students, it has had 4m unique visitors, from 232 countries, and now has around 750,000 unique visitors a month. Balboni says he expects to be getting 1m unique visitors a month by the end of this year, on track for his goal of 2m-3m within a ‘few years’. As for the goal of profitability, it has struck partnerships with old media organisations such as CBS, PBS and the Times of India, syndicates its content to 30 other publications, and has received advertsing dollars from companies including Siemens, Bank of America, Liberty Mutual, Intel, Verizon and Singapore Airlines. Around 70% of its revenues are from advertising, and nearly 30% from syndication – with so far only a modest contribution from readers signing up to pay (though a relaunch of the membership strategy in April is intended to improve on this by offering unnamed special benefits to loyal readers). Balboni is hopeful that Global Post will be profitable by 2012.
Politico is already more or less profitable, Frerking acknowledged, thanks to its constant supply of political information, significant and trivial, to Washington DC insiders and those obsessed with what they are up to. In three years since it was launched by an established media holding company, its website has grown to 3.5m unique visitors a month, according to Nielson (and 7m-8m according to its own internal estimates), and its staff has grown from 50 to around 120. Intriguingly, given all the talk that ‘print is dead’, Politico prints and gives away within DC 35,000 copies of a tabloid version of its content every day that Congress is in session; this print edition accounts for around 60% of its revenues, thanks to what Frerking calls “advocacy advertising” (including full pages from Goldman Sachs, health insurers and so forth).
ProPublica, which we write about in the book, also claims to be making progress in its mission to fill a growing gap in investigative reporting caused by the increasingly difficult economics of the news business. Investigative journalism is expensive per story, and risky – in that the story may never be delivered. According to managing editor Stephen Engelberg, there have been a growing number of articles that deliver on its mission of generating “stories that create change”. One notable success has been uncovering a scandal over shooting by the New Orleans police in the aftermath of Hurricane Katrina. As yet, however, no revenue stream has been found, so ProPublica remains reliant on philanthropy, and is busily trying to find other donors to reduce its dependence on the Sandlers.
The difficulties of the news business has prompted growing talk that philanthropy or even government subsidy will be needed to ensure that society is properly informed. Watching how these three new organisations fare in the next few years – and all of the panelists are optimistic that ultimately a viable method of charging for content will be found – will provide important evidence on whether social entrepreneurs can come up with business models for news that work, whether they will be self-sustaining or if philanthropy will be needed – and if it is, whether that giving will be forthcoming. This week’s scoop? Some optimism may be in order.
Tags: Global Post, Harvard Business School, Kiva, malaria, Politico, ProPublica, Ray Chambers, White House Office of Social Innovation
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February 16th, 2010
Invoking the name of Robin Hood (Britain’s famous bandit who, according to the legend, ”robbed from the rich to give to the poor”) aid lobby groups, celebrities and philanthrocapitalists such as film maker Richard Curtis, have launched a high-profile campaign for a new tax on banks to fill the gaping hole in the public finances. Not only will this tax give the bankers the bashing that the public is crying out for, they claim, it will also provide hundreds of billions of pounds a year to fight poverty and climate change. “Not complicated. Just brilliant” is the slogan. If only that were true.
Certainly, the idea is elegantly simple: a small 0.05% tax on the banks’ speculative shifting of capital around the world will free up huge sums of money for the fight against poverty and climate change. And the only people who will have to pay will be the banks – which will thus be unable to pay their employees such obscenely large bonuses. What’s not to love? It’s like free money, only better, given the added feel-good element of banker bashing! No wonder people are signing up in droves – a poll on the campaign website says that supporters outnumber opponents ten to one.
The campaign for the Robin Hood Tax reunites the dream team that successfully bullied the G8 into big aid pledges in 2005 – Bono’s lobbying organisation, One, the British Government (which first tried floating the tax idea to the G20, which was unenthusiastic, before turning to lobbying), with endorsements from philanthrocapitalists such as Warren Buffett and George Soros.
Yet, a ’tiny’ tax that yields such huge sums sounds suspiciously like turning lead into gold, or some other fiscal alchemy.
So who will actually pick up the bill for this new tax? The banks, say the campaigners, by eating into their profits. ‘Good’, we hear you say. Except that the banks, in all probability, will just pass the costs on to consumers, so we will pay the tax, not the banks. And, on the other hand, if profits did fall, that would hit bank shareholders, who include many ordinary citizens, through their (already diminished) pension funds.
The tax would also make it more expensive for banks to move money around. Again, a good thing, you might think: when the idea for this tax was first floated in the 1970s by the Nobel Prize winning economist James Tobin, he saw it less as a fundraising tool and more as a way to ‘throw sand in the wheels’ of financial speculation. That is why Joseph Stiglitz, another Nobel Prize winning economist is supporting the tax. Yet no evidence is presented by the Robin Hood advocates that their tax will make the financial system safer and, while it is faddish to see flows of capital as merely negative speculation, there is a decent case to be made that the free movement of capital is an essential part of the global economy. Taxing these transactions, without clear evidence that it can be done safely, risks throwing sand in the wheels of global prosperity, which would be bad for all of us, especially those on the fringes of the financial system – the poor. The potential risks and costs need to be debated properly, not wished away.
The One/Make Poverty History campaign of 2005 was, as we describe in the book, a great example of high-leverage philanthropy, as philanthrocapitalists allied themselves with celanthropists and activist campaigning groups to champion more public spending on aid. In doing so, it gave ordinary people an opportunity show that they wanted more of their taxes spent on helping the poor (and, by extension, less on other things like schools, roads and guns). It improved the public decision making process. The Robin Hood campaign, by contrast, is encouraging people to vote for a free lunch - the one thing that economics has proved does not exist. Not complicated. Not brilliant. Not honest.
Tags: banks, Bill Gates, Bono, British government, G20, G8, George Soros, James Tobin, Joseph Stiglitz, Make Poverty History, One, Richard Curtis, Robin Hood tax, Warren Buffett
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February 2nd, 2010
There was much soul-searching at the World Economic Forum in Davos last week. Matthew, who was there covering the event for the Economist, was struck by the mixture of gloom and optimism: gloom, because the recovery of the world economy is still fragile at best; optimism, because there is a will to build a better economic system. One of the big opportunities, said WEF founder Klaus Schwab in his closing remarks, is putting values back into capitalism.
This is one of the central themes in our new book The Road from Ruin, which has just been published in America. In it we set out an agenda to build a more stable and sustainable capitalism than the one that collapsed so spectacularly in September 2008. As well as reform of the financial system and the architecture of global governance, we argue that building a better capitalism demands more fundamental changes in how we run businesses. (You can read the introduction to the book here.)
Before the crisis, there was a widely-held assumption that chasing ever-increasing quarterly profits was the best way for business to serve shareholders and society as a whole. The crisis proved this to be false. Business leaders need to think more about the long term. They need to recognise that capitalism does not exist in a vacuum – it cannot survive if our societies are unhealthy and our environment is unsustainable.
In one chapter, ‘The Age of Philanthrocapitalism’, we look at reforms to corporate governance, executive values, pension fund strategies, and even the way we measure success, that would together help build a better capitalism. ”Today it is easy to be cynical about capitalism”, we write. “Nevertheless, over the past decade, for every blinkered banker chasing short-term profit, there has probably been a social entrepreneur, an ethical investor, or a philanthropist trying to find a more sustainable way of making money. If business leaders, shareholders, and consumers want a better capitalism, now may be the best time to remake the system.”
Tags: Davos, Klaus Schwab, Road From Ruin, The Economist, World Economic Forum
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January 29th, 2010
David Cameron is widely expected to become Britain’s next prime minister. Plenty of people in the world of international development worry that a Conservative British government will be less committed to international aid than the current Labour government. So the surprise appearance that Cameron made last night at an event at the World Economic Forum in Davos may have been particularly significant.
He turned up at a dinner discussion, moderated by Matthew, for many of the leading figures in the campaign to eradicate malaria, including the head of the Global Fund, Jeffrey Sachs – the economic guru behind the Millennium Development Goals, Bob Orr – an assistant secretary general of the United Nations - the head of the London office of the Bill & Melinda Gates Foundation, Jimmy Wales – the founder of Wikipedia – Jamie Drummond – a co-founder of Bono’s campaigning organisation One - as well as French former soccer star Emmanuel Petit.
Cameron’s appearance was brief but emphatic. He said that however financially broke Britain is, his government would honour its pledge to allocate 0.7% of GDP to international aid. Malaria is particularly important, as it is a disease against which massive progress can be made over the next 3-5 years. It is crucial that this progress happens, said Cameron, so that it can be used to prove to the British public that, particularly on health, aid works.
He left to loud applause. Sachs promptly said that he believed Cameron – who had told him the same thing two years before. The consensus in the room was that the Conservative leader was being sincere. Certainly, if he is not, he picked a particular bad audience to lie to. On the other hand, his willingness to be so unequivocal in making what he called ‘one of our few clear cut proposals on anything’ before such a powerful group may earn him some influential public support from people who would not seem to be natural Conservative sympathisers. Interesting.
Tags: David Cameron, Jeffrey Sachs, malaria, Millennium Development Goals, World Economic Forum
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January 27th, 2010
We have had the impressive spontaneous outpouring of generosity in response to the crisis in Haiti and the fine words about building back the small Caribbean nation better than it was before. The question now is ‘how’? That is going to be one of the hot topics for the leading brains of government, business and the social sector gathered at the World Economic Forum in Davos – can they crack it?
The challenge is enormous. Haiti is an isolated outpost of sub-Saharan-style poverty in the Caribbean – it ranked just above Sudan in the United Nation’s ranking of ‘human development’ last year – and has had a long history of political instability and social unrest that persistent interventions by the United States and United Nations have barely kept a lid on. There have also been many pledges to rescue Haiti in the past, which have come to nothing.
There are, however, some grounds for optimism. In mid-2009 Haiti finally benefitted from a World Bank-led debt reduction deal. Preferential access to the US market offers the potential to build an economy based on trade with North America. A development strategy led by the Clinton Global Initiative, according to former President Clinton, was going well before the earthquake, and is a reason to hope, he says. And then there are all the pledges of further aid that are coming. There is also likely to be an unprecedented high-level leadership coalition on Haiti bringing under one umbrella the World Economic Forum, the Clinton Global Initiative and the United Nations. The challenge in each case is making it work.
State-building has been one of the hot topics in development in recent years. The British economist Paul Collier, in particular, has popularised the idea that the bottom billion of the world’s poor would benefit most from being freed from civil war and dictatorship. Collier has argued, and been criticised for, championing strong intervention, with military force if necessary, by the governments of the rich world to fix the problems of ‘failed states’. It is in the spirit of Collier that some voices have called for a temporary protectorship for Haiti – with the Economist championing putting Bill Clinton in charge, to be succeeded within a year by Brazilian president Lula – to get reconstruction going quickly unshackled by Haitian politics. Clinton says he would only run such an effort in partnership with a local Haitian leader, such as the prime minister.
Security and stability for the people of Haiti should certainly be a priority. Yet the track record of international protectorates after crises has not been great - in Bosnia and Kosovo as much as in Iraq and Afghanistan. The aid industry has burned a lot of money in these countries for few returns, with much of the assistance leaking out in bureaucracy, corruption and lavish payments to western consultants and contractors.
One way to break the cycle of expensive aid stagnation would be for a massive effort from philanthropcapitalists in the area they know best – wealth creation. Could a Marshall Plan led by the Bill & Melinda Gates Foundation (to apply its thinking around agiculture and supply chains), backed by multinationals such as Coca-Cola, Wal-Mart and Nike, kick start the Haitian economy and tackle chronic food shortages? Then add to that a grand coalition of Omidyar Networks, Grameen, Endeavor and others to promote enterprise – and maybe Haiti could start to work its way out of poverty.
Mass philanthrocapitalism could also be harnessed to get ordinary donations working harder. Kiva and GlobalGiving will surely operate in Haiti, so why not also a donorschoose for schools in Haiti? Could this type of platform help to lever the contribution of one of Haiti’s biggest exports – its people? The Haitian diaspora remits more than $1 billion back home each year. So why not create a network of Mexican-style hometown associations to get some of that money working to build schools, hospitals and bridges? Slice off a piece of the official aid budget to match those contributions and use a donorschoose or Kiva style of interface to connect people to what they are funding and we might get something interesting.
An even more radical idea would be to take up Paul Romer’s idea of charter cities, that might be run by experienced leaders from abroad and compete to be the most successful places to live. The mind boggles (not entirely positively) at the thought of breaking Haiti into a number of charter protectorates and letting competition rip between different leaders – Bill Clinton could take one, Tony Blair another, one perhaps to the former President of Mozambique Joaquim Chissano. And why restrict it to former leaders of countries? Maybe Bill Gates and Muhammad Yunus could be tempted into government for a while? Or might Michael Bloomberg run New York and Port-au-Prince at the same time?
Moving on from the world of fantasy, there is a germ of an idea here – rather than putting recontruction into the hands of bureaucratic planners from the United Nations or the World Bank, why not have some competition? Although this is a terrible tragedy, it is also an opportunity for creative thinking – for doing things much better than before. This has been probably the biggest contribution that the philanthrocapitalists have made to global development – new ideas that challenge orthodoxies and conventional wisdoms.
Tags: Charter cities, Coca-Cola, Davos, Haiti, Marshall Plan, Nike, Omidyar Networks, Paul Collier, Paul Farmer, Sudan, United Nations, Wal-Mart, World Economic Forum
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January 26th, 2010
Bill Gates has come over all chatty. On Monday he released his second annual letter about his philanthropy, on the back of his recent debut on twitter (where he is ‘following’ Matthew) and new thinking-aloud blog the Gates Notes.
We argue in the book that philanthrocapitalists need to be transparent about their work if they are to be legitimate. Gates has come in for a lot more challenge and criticism in the last year – some in the global health sphere still think he is too focused on technology and his work on education reform in America is drawing fire from teaching unions – so this is a welcome response.
The messages of the letter were clear. Gates celebrates the potential of philanthropy to drive innovation by backing high-risk initiatives that might take 15 years to come to fruition, from an anti-malaria vaccine to a new framework for assessing teachers’ performance. He also dedicates a long section of the letter to “Rich Countries’ Aid Generosity”. Despite being the world’s biggest private donor, Gates’ philosophy is very much that he will only succeed if his giving can lever the much larger sums available to governments. In his letter he throws his weight behind President Obama’s plan to double America’s aid, while blasting Italy as “uniquely stingy” and expressing “huge disappointment” that Italian Prime Minister Sergio Berlusconi turned down his personal appeal for more aid spending.
The big gap in the letter, as Matthew explains in an article for The Economist, is the lack of discussion (except on aid) of the political obstacles confronting his work. For next year’s letter, perhaps?
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January 24th, 2010
Some time in the next few months, and by May at the latest, the British public will go to the polls to choose a new government. Whichever of the political leaders gets to see the Queen and take/retake up residence in 10 Downing Street, the Prime Minister will have plenty of tough decisions to make. At home, the economy needs reviving and social problems need tackling. Internationally, Britain has an important leadership role to play on security, development and tackling climate change. A new government will have to face these challenges with diminished resources, since drastic public expenditure cuts are inevitable.
The party policy wonks are working on their proposals at the moment, which will be presented to the nation as their parties’ manifestos. Yet none of the parties has really embraced philanthrocapitalism as part of the solution to the nation’s and the world’s problems. That’s why we have produced our own manifesto setting out our blueprint for philanthrocapitalism to change public services and British society for the better. We are not running for elected office. This is not a partisan document. Indeed, philanthrocapitalism is not a partisan issue. It is an opportunity that Britain’s leaders should be seizing. That’s why we are asking you, our readers to go to our Facebook site and ‘like’ this post to show your support. And if you don’t like what we say, leave us a comment. These are important issues that Britain needs to debate – help us to put philanthrocapitalism on the politicians’ agenda.
THE PHILANTHROCAPITALIST MANIFESTO
By May of this year one of our political leaders is going to have to do radical surgery on our public services. The last decade has been a gilded era for the government sector as a raft of public spending commitments from health and education to international development have been hailed as the solution to social problems. But those times are over.
Even awash with money, government has struggled to address deep-rooted challenges like child poverty and violent crime. In today’s post-crisis fiscal wasteland spending more is simply not an option. Yet nor is abandoning the young, the poor, the elderly and the vulnerable. Britain needs to find new, more effective ways to tackle the social challenges of the 21st century.
Britain has a rich charitable and philanthropic tradition and continues to lead the world in many areas of voluntary action. All the major political parties acknowledge that the voluntary and charitable sector has a crucial role to play in finding solutions to social problems. But we should not be complacent. While there is much good in the charity sector, there is also much need for change in the way many charities are funded and managed. This is where our politicians and voluntary sector champions need to show leadership in proportion to the crisis our country now faces. So far, no one has come up with a comprehensive plan to reform the voluntary sector and use philanthropy and the power of business to remake the way our country is run.
Thirty years of market reform has been good for Britain’s rich and our society has become more unequal. Yet populist bashing of the rich is a blind alley. Instead we need to rewrite the social contract between the rich and the rest. The winners of capitalism have a responsibility to the rest of society, not just to pay their taxes but to give back with their money and their skills. By doing so, they can be a dynamic, entrepreneurial source of innovation in our society and so build a more sustainable environment for wealth creation.
The corporate world, too, is starting to realise that business can ‘do well by doing good’. The financial crisis has demonstrated that narrow-minded focus on short-term profits is bad for shareholders as well as society. Business needs to take a longer-term perspective on success, recognising that capitalism will only thrive if it sustains the society and the environment in which it operates. Before the crisis, some corporate leaders had started to lead the way towards a more responsible capitalism. After the crisis, the need is more pressing than ever.
No sector is under more scrutiny than finance. The crisis has given momentum to new thinking which says that finance should seek out social and environmental rewards, as well as profits. This social investment movement is gathering pace among mainstream as well as explicitly ethical investors, which opens up the possibility of levering the massive resources of the capital markets to do good.
We are also at the dawn of an era of mass philanthrocapitalism. In the same way that the internet has transformed the way we shop and the way we do business, it is starting to revolutionise the way we give. Kiva.org, Globalgiving, Donorschoose and Facebook Causes are taking the giving world by storm because they give even small donors the chance to see how their money is being used.
Britain’s economic crisis is an opportunity to take this movement further, to encourage more giving and to use philanthropy and social entrepreneurship to reinvent our public services. Adjustments to the tax incentives for giving may help at the margin but what Britain really needs is leadership to shift the way we think about the roles of public and private actors in social innovation.
This philanthrocapitalism revolution has already started in America. The Obama Administration and pioneering local politicians, like Mayor Michael Bloomberg in New York, have started to pilot new ways for government and philanthropy to work in partnership. Britain needs to follow their lead.
Philanthrocapitalism is not a party-political issue. It is an opportunity to create a new partnership of philanthropists, businesses and social entrepreneurs with government to build a better Britain for the 21st Century. This manifesto sets out a plan to achieve three goals: more giving; more social investment; better philanthropy. We call on government, business leaders, the voluntary sector and donors to adopt this programme.
More Giving
The decision to give is a private one yet government can encourage giving with incentives and leadership. Similarly, corporate leaders can make giving a core value of their companies and an integral part of our business culture. Over the past 25 years successive governments have put in place measures to improve the tax incentives for giving. There are some useful changes that could be made at the margins to encourage philanthropy, such as charitable remainder trusts, or, more importantly, to streamline the unnecessarily bureaucratic Gift Aid process – persistently low levels of take-up show this is broken. We need more active incentives for philanthropy.
Government funding to voluntary organisations has doubled under this Government to more than £10 billion a year, making much of the voluntary sector dependent on government grants and contracts. In these difficult economic times government should be looking for new funding mechanisms that crowd in rather than crowd out voluntary contributions. Early evidence suggests that “match funding” for universities, where the government tops up private gifts, has started to draw new donations to a sector that is crying out for resources and reform in equal measure. Match funding would be a way for government to encourage giving and direct those gifts towards issues where public expenditure cuts are likely to be the most severe and where philanthropic capital would add the most value, such as higher education, the arts and international development. A proportion of all government spending should be earmarked for match-funding partnerships with philanthropists.
Match funding is also a mechanism for stimulating giving from the wider public and as a way to democratise the way government and the lottery channel money to charities. We recommend that these match funds should be targeted on stimulating online giving in the UK through sites like Globalgiving, Localgiving, Kiva, the Big Give as well as new entrants to the market. 10% of all lottery funding and 1% of government funding for the voluntary sector should be ring-fenced for matching donations through online giving sites.
Giving rightly enjoys generous tax benefits yet these benefits should come with a responsibility to serve the public interest. At present, charitable foundations have considerable latitude in how much of their endowment they pay out each year and how they invest their money. For forty years American foundations have been required to pay out at least 5% of their assets each year to ensure that the taxpayers today who are subsidising giving get something back, rather than allowing those benefits to accrue to future taxpayers. The payout rule also encourages foundations to adopt less conservative investment strategies to grow their endowments faster, so they have more to give. Few British foundations pay out 5% of their assets each year. Some pay out practically nothing. Philanthropic foundations need to work harder for the public good, so should be required to pay out at least 5% of their assets each year.
Business is responsible for about 5% of charitable giving in Britain. We think it could do more, even though the recession is putting pressure on corporate philanthropy budgets. Enlightened businesses understand that giving back is not a cost to their PR budget line but an investment in the long-term sustainability of their business. Now is a moment for our business leaders to step up and show the way by getting more companies to give. We call on the CBI to make it a norm for British businesses to give 1% of profits to charity.
Business can also promote giving by putting more effort into payroll giving, which is an easy way for workers to take advantage of the tax subsidy to giving. Only 3% of British workers participate in payroll giving schemes, compared to 35% of American workers,and little more than £100 million goes through this mechanism. Business should be taking the lead in extending this scheme to all PAYE taxpayers and promoting giving to their employees with incentives like match funding. We call on business to ensure that all employees can participate in a payroll giving scheme and to commit to a target of trebling payroll giving in the next three years.
Giving is not just about money but also time and skills. The charity sector is crying out for trustees and advisers with managerial and financial skills. Initiatives such as Pro Bono Economics, which matches trained economists with charities that need help to measure the impact of their projects, are a welcome start. Opportunities to give back in this way are also becoming an increasingly important part of recruitment and retention strategies for companies. Government should do more to encourage this type of high-impact volunteering by offering tax incentives to companies that offer 1% of their employees’ time for voluntary work. Retired workers also have valuable skills that they could give back, and firms could do more to encourage and help them to do so. Pass a Serve Britain Act to incentivise volunteering, particularly among the highly skilled and experienced.
More Social Investment
We applaud the government for launching the Social Investment Task Force that reported in 2000. The major parties have rightly committed to the establishment of a Social Investment Bank using unclaimed bank deposits and we welcome the commitment in the pre-budget statement to pilot the Social Impact Bond, that improve greatly on existing private finance initiatives by incentivising improved social outcomes rather than merely lower costs. We urge government to accelerate the implementation of these initiatives and widen the pilot programme for Social Impact Bonds.
So far much of the work on social investment has focused on debt instruments. We now need to think about building a market for social equity risk capital as well. We call on the government to reconvene the Social Investment Task Force with a remit to make proposals to develop a social equity market, including a Social Stock Exchange.
The 2000 Social Investment Task Force focused on domestic investment in social progress. There are even greater opportunities to harness the capital markets in the fight against poverty and disease overseas and climate change, where public funding will be constrained in future years. The Commonwealth Development Corporation (CDC) is still too risk averse, focusing on projects with financial returns rather than high-impact social and environmental investments, and has failed to innovate. Private firms and philanthropies, by contrast, have moved ahead with initiatives like the Global Impact Investing Network and the Aspen Network for Development Enterprise. It is time for government to catch up. We call on government to establish a Development Investment Task Force to explore the potential of this market and identify concrete initiatives that government can support through CDC or other mechanisms.
Foundations should be leading the social investment movement through active ‘mission-related investment’ of their endowments. A few, such as the Tudor Trust and Esmee Fairbairn Foundation, are leading the way but most foundations still think of their endowments as a source of investment income to fund grantmaking rather than a strategic asset that can be used for social benefit. American foundations like FB Heron are showing the way. The Charity Commission should be doing more to change foundation thinking, through its guidance on best practice (CC14). The proposed 5% payout rule for foundations could also be structured to give credit for social investments to encourage the use of endowments as a pool of social investment capital. We call on the government to use tax and other incentives to promote mission-related investment by foundations.
But this is just a start. The financial crisis is an opportunity for the mainstream financial sector – and pension funds, in particular – to do a better job of investing for long term value, as well as to show that it understands its wider responsibilities to society. We look to pension funds, which should be the long-term investors in our society thinking about the impact of their decisions on the shape of the world in 20 or 30 years time, to lead the social investment movement in the financial sector. We call on the major pension funds to show their commitment to long term thinking by signing up to the Global Impact Investment Network and supporting its work to develop agreed reporting standards on social investments.
We urge government and business to take this opportunity to make Britain’s financial sector a world leader in social investment.
Better Giving
Giving cannot and should not simply replace public funding, it should add value as ‘social risk capital’ free from the constraints on public expenditure. Government’s biggest problem when it comes to social innovation is risk aversion. Ministers and civil servants will not take on innovative initiatives which could be ridiculed in the popular press and where there is a risk of failure that could result in a critical grilling by the Public Accounts Committee. From education to counter-terrorism, government programmes will tend to play it safe. Nor are there any prizes for long term thinking beyond the three year public spending horizon. These problems are fundamental to government and cannot be fixed by yet another public service delivery reform initiative.
Rather, we should look to private initiative and social enterprise to test and pilot new ideas about how to tackle social problems, which government can take to scale once proven. This has been a central pillar of Michael Bloomberg’s time in office in New York. He has used philanthropic capital to fund initiatives that would not get through City Hall, which, once proven to be effective, are now financed from the public budget. To adopt this model in Britain, each government department should be required to identify key policy and delivery areas where it is looking for solutions and build a partnership with philanthropists and social investors to test new ideas in these areas.
Government’s commitment to take these ideas to scale, if proven to be successful, should be an incentive for donors to step up. It will also be a challenge to philanthropists and social entrepreneurs to look for transformational initiatives, rather than creating isolated pockets of excellence that never reach scale. Government departments should be required to report on their partnership strategies as part of their Public Service Agreements with the Treasury.
This will require a substantially different way of working from government departments, which have largely used voluntary organisations as contractors to deliver public services, rather than an engine of innovation. The Office of the Third Sector, which leads on government’s relationship with the voluntary sector, has been captured by the vested interests of the sector and has failed to challenge conventional wisdoms or engage with philanthropy in a meaningful way. The Office of the Third Sector should be scrapped and replaced with an Office of Social Innovation (OSI) focused on outcomes across government rather than serving the interests of a sector.
Local government is ideally placed to build partnerships with local businesses and philanthropists, building on the emerging community foundation sector and working in partnership with the regional development agencies. The Mayor of London’s Charitable Fund is a welcome initiative in this area, using the convening power of a political leader to bring funders together to work coherently across different tiers of government. A proportion of funding for local government should be ring-fenced for match-funding with philanthropists and social investors. These funds should be allocated on a competitive basis, with bids assessed on the basis of expected impact and with a sliding scale of matching so that deprived communities are more likely to benefit.
Match funding programmes like these will remain a small proportion of total public funding to the voluntary sector. The mainstream government funding for the voluntary sector needs to change as well. There is too little accountability for what public money channelled through the voluntary sector achieves. Too often it is a matter of faith rather than fact that charities are effective in delivering services. The public, too, has little information about real impact to guide their charitable donations. For example, the Department for International Development (DFID) gives more than £100 million a year to a select group of partner charities, without much accountability for what that money achieves, masking a huge divergence in the charities’ performance. By strengthening and publishing its performance assessments, DFID would be providing a service to help the public know which charities run the best humanitarian programmes, the best development projects and the best policy work. Government should take a lead in creating evidence-based performance frameworks for public money spent through charities, with quality assurance by the Office of Social Innovation.
Making public funding for voluntary organisations more performance-oriented and improving the information available to the public about performance will help to drive an improvement in the effectiveness of the charitable sector. The Charity Commission is already taking on some of these performance challenges through its work on compliance with the public benefit test for charities and by improving charity reporting. Change needs to happen faster.
The Charity Commission should be charged with measuring and reporting on the efficiency and effectiveness of the charitable sector on an annual basis and tasked with driving year on year improvements in the performance of the sector.
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January 15th, 2010
“Let us suppose that the great empire of China, with all its myriads of inhabitants, was suddenly swallowed up by an earthquake, and let us consider how a man of humanity in Europe, who had no sort of connection with that part of the world, would be affected upon receiving intelligence of this dreadful calamity. He would, I imagine, first of all, express very strongly his sorrow for the misfortune of that unhappy people, he would make many melancholy reflections upon the precariousness of human life, and the vanity of all the labours of man, which could thus be annihilated in a moment… And when all this fine philosophy was over, when all these humane sentiments had been once fairly expressed, he would pursue his business or his pleasure, take his repose or his diversion, with the same ease and tranquillity, as if no such accident had happened. The most frivolous disaster which could befall himself would occasion a more real disturbance.”
Those words, written by the great British economist Adam Smith, seem strikingly wide of the mark at the moment, as millions of people around the world respond with generosity to the terrible misfortune that has befallen the people of Haiti. Twitter and Facebook are churning with tips on how to give and to whom to give. Governments, businesses and individuals the world over are all opening their wallets to help.
Although sometimes caricatured as a champion of selfishness for extolling the power of the ‘invisible hand’ of the market, Smith’s quote comes from his lesser-known work, The Theory of Moral Sentiments, in which he argued that it is our sympathy for others that motivates our good deeds. In the world without telephones and televisions that existed when he was writing, catastrophes on the other side of the world were abstract stories; today, we can see the suffering of others and do something about it. For that reason, Smith would not have been surprised by the way the public has responded to this latest crisis, and would have celebrated this as progress for humankind.
Smith would also have noted with pleasure that a massive earthquake in China in 2008 led to a dramatic change in attitudes to giving there, where the government had previously been hostile to philanthropy. Yet he might also have worried that the economy’s invisible heart led to philanthropic funds being misallocated by the surge of sympathy after high profile disasters, which often attract more money and in-kind gifts than can be used effectively on the ground, at the expense of less compelling but more effective uses of the donations.
In general, we are all better at responding to human suffering caused by dramatic, telegenic emergencies than to the much greater loss of life from ongoing hunger, disease and conflict. Charity fundraisers know that they need to grab the public’s heart with powerful images, so they tend to exploit these emergencies to raise more money. This raises a difficult question: does how our natural human sympathy works in this modern, multi-media age skew our moral compass?
There is a real danger of images of suffering becoming a sort of “poverty porn”, argues Ethiopia-based aid blogger Owen Barder in a recent post. His immediate target was child sponsorship, a particularly popular form of fundraising to help kids in developing countries. “Why should children be forced to write letters describing their lives in return for money to eat or have an education?” he demanded. Asking poor children to write letters to sponsors is, in Owen’s view, one of many examples of poverty porn, which demeans the beneficiaries and distracts donors from what really matters.
While Owen’s indignation is understandable, we think it is misplaced in its other-worldliness. Rejecting emotional appeals for sympathy would probably mean less giving, rather than better giving. The real question for philanthrocapitalists – even at heartbreaking moments like today, as the pictures from Haiti move us to give – is how to ensure that appeals to the heart do good and don’t do harm.
At least in Haiti there is no question that the shocking images are real. In Victorian Britain there was great controversy when the child welfare pioneer Thomas Barnardo was forced to admit that his highly successful marketing images of children ‘before’ and ‘after’ they had entered his care were faked. We tell Barnardo’s story in the new chapter of the paperback edition of the book (which comes out in Britain this week) in our discussion of the mass philanthrocapitalism of online giving sites. The online microfinance site kiva.org has recently been under attack, in the same way as Barnardo was, for misleading its donors. This has largely been a storm in a teacup although it has helpfully forced Kiva to explain better what it does. Yet even with these changes, do Kiva and other online giving sites that connect donors to individual recipients cross the line into philanthroporn?
Kiva’s defence is probably the most straightforward. Even the most successful corporations in the rich world have to pitch for financing from banks, the bond market or the stock market. Kiva’s clients may be poor businesspeople in poor countries but they are businesspeople and pitching for money is part of business, so it is hard to see any abuse here.
Donorschoose is a more difficult case, since the beneficiaries of these online donations to classroom projects are American schoolchildren. In this case, however, feedback to the donor is required from the teacher who has bid for the money, not the pupils. True, donorschoose does have a facility for the children themselves to post messages to the donors and it is just about conceiveable that an unscrupulous teacher could force his pupils to produce degrading or obsequious messages. If that were the case, however, it is pretty likely that one of the kids or their parents would blow the whistle – that is the power of the internet.
Giving to development causes may be different because poor African children don’t have the same options to speak up for themselves as poor American children. Though this is starting to change. One of the leaders in mass philanthrocapitalism, globalgiving.org, has started to experiment with handing out phones with cameras to the communities that benefit from their projects. We are not there yet, but the truly exciting potential of online giving is the possibility of harnessing the spread of mobile phones in the developing world to allow the beneficiaries of charity to finally make themselves heard and start a conversation with donors about what works.
Effective giving needs the head and the heart. As all our hearts go out to the people of Haiti, we offer three thoughts about how to give. First, give money. This may sound obvious, but aid agencies are swamped at this time with offers of food, clothing and other goods. Even when these goods are needed, it is far more cost effective for charities to buy and ship exactly what they need than sorting out gifts in kind. Second, give it to an organisation with a track record of effective action. Thanks to the internet, it has never been easier to find out who those organisations are. Third, why not match fund what you have given to Haiti with a gift through kiva or globalgiving to someone suffering just as much, but less dramatically, elsewhere in the world?
Tags: Adam Smith, Barnardo's, China, DonorsChoose, globalgiving, Haiti, Kiva, Owen Barder
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December 31st, 2009
2009 showed that the philanthrocapitalism revolution is here to stay, as mega-giving by the likes of Bill Gates and the mass philanthrocapitalism of organisations like kiva.org and donorschoose surged ahead despite the economic downturn. So what does 2010 hold in store?
Gazing into our crystal ball, we see philanthrocapitalism continuing to surge ahead as givers and governments realise that philanthropy is going to be the driver of much of the social innovation that tackles the symptoms and causes of our current economic mess. This surge in activity will be increasingly controversial, as philanthrocapitalists take on more challenges that are inherently political, at home and overseas. So, recognising that most of these forecasts will be wrong (though we can only hope!), here are our specific predictions for the year ahead.
1) A wave of mega-gifts from a new cohort of American philanthrocapitalists. In the United States, the IT sector has created scores of billionaires, some of whom have got the giving bug but there are still plenty who haven’t, yet. We think Apple founder Steve Jobs is ripe to join the movement: the icon of cool is starting to get some bad press for his lack of generosity (something that happened to both Bill Gates and Warren Buffett shortly before they made their first big gifts); he is a cancer survivor, which as well as giving him a sense of his own mortality, is also an experience that has motivated the giving of a number of other wealthy donors such as Michael Milken and Lance Armstrong; most of all, he is a born problem-solver, so would probably love it.
An outside bet for a new tech philanthrocapitalist is Microsoft CEO Steve Balmer – yes he’s still busy with his day job and has no time for philanthropy but why not follow Warren Buffett’s example and hand a slice of his fortune to someone he trusts to give it away.
2) New giving by American billionaires will be outstripped by donors from emerging markets. 2010’s biggest donor will probably be a Chinese billionaire that none of us has yet heard of. Or maybe one of India’s super-rich, steel magnate Lakshmi Mittal perhaps, will leap to the top of the giving tables. Perhaps Mexican telecoms tycoon Carlos Slim will start to do something really substantial with the $10 billion he has already pledged to give away. We’re not sure where exactly it’s coming from but something big is going to come from the emerging markets. It would be great to see a new wave of philanthrocapitalists in Africa. Sudanese mobile phone guru Mo Ibrahim is looking a bit lonely at the moment, so here’s hoping that the super-rich of Africa decide that it’s time to do their part – 2010 would be a great opportunity for South Africa’s billionaires as the eyes of the world will be on their country due to the soccer World Cup.
3) Malaria will be the cause of the year, centred on the World Cup in South Africa. The Malaria No More campaign, backed by Bill Gates and a bunch of corporate sponors including Rupert Murdoch’s Newscorp, has been gathering momentum in 2009 and its publicity is due to peak around the global media event of the year in the summer of 2010. With the world focused on Africa, political leaders and the continent’s super-rich will be under pressure to show that they are committed to the fight to stop this preventable disease that kills a million people a year.
4) Football may be the big sporting event of the the year but the big celebrity philanthropist of 2010 will be a golfer, as Tiger Woods redeems his reputation by spending far more time with his foundation – which is already quite impressive, but could be far bigger. His private life may be a mess but Tiger is certainly a fighter, so we expect him to come back in 2010 with some big giving to rescue his reputation.
5) On the theme of redemption, we’re expecting a bumper year of giving from the financial sector. Goldman Sachs made a good, but far too small, start in late 2009 by pledging half a billion dollars to help small businesses in America. But far more is needed if the reputation of bankers as a force for good is to have any chance of being restored. The public outcry over financiers’ pay isn’t going to go away and the bankers need to show that they’re doing their bit, corporately and personally, to take on the challenges of the economic crisis.
6) 2010 is the year when for-profit philanthropy and social investing goes to scale. 2009 saw the creation of Global Impact Investing Network, bringing together philanthropists, ethical banks and mainstream banks to push the cause of social investing. 2010 will see the flotation of Indian microfinance company SKS, a landmark in the development of ‘bottom of the pyramid’ businesses that serve the needs of the poorest and turn a profit for investors. More philanthropists are likely to focus on how to take the lessons of microfinance and apply them to supplying other services demanded by the poor. Watch this space.
7) Another major celebrity will join the list of those known as much for their commitment to giving as for what made them famous in the first place. In the book we profile Bono, Angelina Jolie, Shakira and Chinese film star Jet Li as examples of effective “celanthropists”, who are allying their celebrity with professional philanthropic support organisations in partnership with mega donors, big business and even governments. Our top tip to go big in 2010? Matt Damon, who lately has been spending a lot of time getting to grip with the details of what is going to be one of the biggest issues facing the planet in the coming decades, access to water.
Mass philanthrocapitalism will go from strength to strength. Kiva.org will get over its recent difficulties and sites like GlobalGiving will find new ways to enrich the donor experience to stimulate giving. But the big story in 2010 will be Facebook Causes as millions of people use their social networks as a force for good by, say, ‘giving’ their birthdays – celebrating another year by getting their friends to donate to charity rather than buying them a new pair of socks.
9) Philanthropy will start to take on tougher foreign policy challenges in 2010, increasingly in partnership with government. Afghanistan and Pakistan are top of Secretary of State Hillary Clinton’s ‘to do’ list next year but have so far received little attention from philanthrocapitalists. In 2009 this started to change as the State Department hooked up with social media gurus to think about how to use the internet to take on extremism in the Middle East. Afghanistan and Pakistan are crying out for aid that actually gets kids educated, supplies villages with water, gives people jobs, empowers women – the list goes on. Here’s a cause that’s ripe for innovation from the philanthrocapitalists.
10) Getting involved in the ‘war on terror’ is going to be controversial but so will much of the best philanthropy in 2010. From Bill Gates’s efforts to reform America’s schools that are annoying the teaching unions to George Soros’s new initiatives to remake economics, philanthrocapitalists will increasingly court controversy. But if it helps create a better world, that is the sort of controversy worth having.
Happy new year!
Tags: Angelina Jolie, Bill Gates, Bono, Carlos Slim, DonorsChoose, George Soros, GIIN, Global Impact Investing Network, globalgiving, Goldman Sachs, hillary Clinton, Jet Li, Kiva, Lakshmi Mittal, Lance Armstrong, Malaria No More, Matt Damon, Michael Milken, Mo Ibrahim, Rupert Murdoch, Shakira, SKS Microfinance, Steve Balmer, Steve Jobs, Tiger Woods, Warren Buffett, World Cup
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December 19th, 2009
There is still time to enter our competition to win a copy of the book, signed by Bill Gates, AND lunch with Matthew in New York or London, courtesy of the The Economist.
It’s free to enter. Just go here and click ‘Enter Sweepstakes’. Competition closes on Monday evening. Please tell your friends, and join our fansite while you are at it. Good luck!
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December 17th, 2009
“Keep it simple”: that was the advice of Scott Harrison, the founder of Charity: Water, when asked for his advice to a social entrepreneur with an idea for doing good. Harrison was on a panel with Lauren Bush, founder of FEEDprojects (and the niece/granddaughter of two American presidents), and Charles Best, of DonorsChoose, moderated by Matthew and hosted by Janera. As Harrison pointed out, “You can say what each of these organisations does in one sentence; some organisations you listen to for ten minutes and still don’t get what they do. Charity: Water raises money to dig wells in developing countries. FEED sells bags to raise money to feed children. DonorsChoose raises money to help teachers do classroom projects in America’s public schools.”
He had a point – the simplicity of their mission has certainly helped each of these relatively young philanthrocapitalistic organisations grow at a rapid pace. The same is true of another favourite of ours – which we profile with DonorsChoose in a new chapter in the paperback of Philanthrocapitalism – the microfinance lending site, Kiva.
Harrison has applied a marketing instinct honed as a nightclub party organiser to raising money. A particularly effective idea was to ask friends to make donations rather than give him gifts on his birthday – starting by requesting a dollar in donation for each year of his life. The mybirthday campaign has caught on fast, with celebrities now competing to raise the most – the sort of healthy competition the world needs right now. A particularly fierce battle is taking place between new Silicon Valley venture capital, in the form of Sean Parker, and old Silicon Valley, aka Ron Conway, to raise the most for their respective birthdays. Parker, who co-founded Napster and later co-founded Causes on Facebook with Joe Green, is one of a growing number of people who are giving up their birthday gifts via the Causes application, which has put behind it some initial sluggishness and started raising some serious money.
Though their mission may be simple, in true philanthrocapitalistic style, though in different ways, the three organisations represented on the panel are innovative and surprisingly complex in how they set about trying to maximise their leverage. One example is their use of cutting edge technology. Charity: Water has spread through astute electronic viral marketing, friends telling friends, applying peer pressure and so on. It also posts pictures of completed wells and their location using Googleearth, so people can see the direct impact of their giving. DonorsChoose takes that even further, with direct feedback from teachers and thank you letters from students, as well as clever software that identifies and shows first the projects most likely to appeal to a particular donor.
Both DonorsChoose and FEED have formed innovative partnerships with some big for-profit companies. (Indeed, like a growing number of philanthrocapitalistic organisations, FEED is itself a for-profit company, though Bush says most of the profits are given away via the UN Food Programme’s school lunches initiative – which cleverly both feeds children and gets them to attend school in the process.) Prices for FEED bags – $20 feeds one child for a year – range from $60 online to $195 in the super-swanky retailer, Bergdorf Goodman. One of FEED’s latest partnerships is with bookseller Barnes & Noble, in tandem with the terrific library-building non-profit Room to Read (featured in our book). Buying bags at Barnes & Noble not only feeds children but also gives them books – which is also helping to catalyse local childrens’ books industries in some developing countries.
DonorsChoose has tapped into two trends – attempts to make corporate philanthropy more effective and the growth of customer loyalty programmes – through partnerships with firms such as retailer Crate & Barrel, which use some of their foundation dollars to give money to loyal customers to donate via DonorsChoose. These customers seem to feel that giving them the chance to be virtuous is a better reward than a discount in the store, and DonorsChoose benefits not just from the corporate donation, but also from the fact that once people visit the site they tend to get hooked on the satisfaction of giving directly to projects which they can see are making a difference.
Indeed, DonorsChoose took this insight a step further at the Janera event by giving everyone who turned up a card with $25 to give away on its site. Giving potential donors money is an unusual fundraising strategy, but it seems to work. The idea was inspired by the comedian Stephen Colbert, a DonorsChoose board member, who gives every guest on his Colbert Report a $100 DonorsChoose voucher.
The three social entrepreneurs had other advice for those who would follow in their footsteps. The first is simply to start, and figure things out as you go along. Another is to keep at it even if no one else gets it. The third, judging by their actions, is to set crazily ambitious goals. DonorsChoose has already raised $50m for classroom projects. FEED says it has delivered over 50m meals. Charity: Water says it is providing clean water to 1m people. Yet these achievements seem to have made them raise the bar still higher. Harrison says his goal is to provide clean water to 1 billion people within ten years, and that his organisation’s success so far represents only one-tenth of one percent of its target. We wish them all a great 2010.
Tags: Barnes & Noble, Bergdorf Goodman, Charity: Water, Charles Best, Colbert Report, Crate & Barrel, DonorsChoose, Facebook Causes, FEEDProjects, Janera, Joe Green, Kiva, Lauren Bush, Napster, Ron Conway, Room to Read, Scott Harrison, Sean Parker, Stephen Colbert, UN Food Programme
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December 10th, 2009
It was good to see Barron’s magazine’s cover feature about the world’s 25 best givers, which rightly observed that “the name of the game in philanthropy this year is to make your dollars go far – very far.” The article, prepared in partnership with the excellent Trevor and Maggie Nielson at Global Philanthropy Group, focuses on the big question at the heart of philanthrocapitalism: how do you achieve the greatest impact through giving? But its judgements are entirely subjective – and the wackiness of a few of its calls underscore how important it is that rigorous measures of social impact are developed soon.
Credit where credit’s due, Barron’s put eBay founder Pierre Omidyar and his wife, Pam, at the top of the list, in his case a welcome rehabilitation for a donor who has had some wobbles institutionalising his philanthropy but has now moved on to really apply the principles of philanthrocapitalism to his do-gooding. Nor do we object to Barron’s decision to pick ‘usual suspects’, many of them featured in our book, such as Bill Gates (number 7 on the list), George Soros (19), Eli Broad (4) and Bill Clinton (13), all of whose philanthropy has broken new ground in 2009. Yet, with no disrespect, it is hard to say that 2009 has been a big year for Sir Richard Branson’s (10) giving. Similarly, the Tribeca Film festival (14) is a great event but does an impact of “5,000 teens danced at one outdoor screening in Manhattan”, really count as world-changing?
So, today, we would like to honour five philanthrocapitalists who should have been on the Barron’s list – the Philanthrocapitalism Forgotten Five:
1) Mo Ibrahim: the Nobel Peace Prize committee couldn’t think of anyone to honour this year, so they gave it to a guy they hope will achieve something – Barack Obama. (See our comments on how Obama should have responded to that decision.) No such timidity from Sudanese telecoms tycoon Ibrahim when he couldn’t find a suitable recipient for his annual prize for the best African leader. His foundation didn’t just refuse to make an award, they also explained why. Take that Thabo Mbeki! Bad politics is behind so many of the development challenges in Africa – Ibrahim’s effort to create a debate about political leadership is real smart, strategic philanthropy.
2) Jet Li: the once curiously American habit of giving is going global and film star Li is leading the charge in China. His One campaign is working to make giving an integral part of Chinese society for the first time by getting those who have benefited from the country’s spectacular economic growth to start giving back to help others less fortunate than themselves. Bill Gates thinks that emerging economic powers like China could become the new big players in philanthropy – Jet Li is making this happen.
3) Global Impact Investing Network (GIIN): it isn’t a person and it isn’t just about giving but GIIN, which was launched in September 2009, is looking to have impact that would dwarf all the giving in the world. This network of foundations, like Rockefeller, and banks, from the socially minded Shorebank to the red in tooth and balance sheet Citigroup, is trying to get more of the money sloshing around the world’s capital markets to be invested in projects that do social and environmental good. As they say, if just 2% of the world’s capital were used in this way that would be $500 billion. Now that would be impact.
4) Jerry Hirsch – the philanthropist behind the Lodestar Foundation (slogan: “seeking happiness through philanthropy”), which this year awarded its first “collaboration prize” for the best non-profit collaborations in the US. Hirsch, who sees his mission as encouraging effective philanthropy, understands the need to leverage money by addressing the inefficiencies in the non-profit world, one of the greatest of which is the “not invented here syndrome” that leads many non-profits to go it alone rather than collaborate, let alone merge (as many of them should). The first winners were a YMCA that merged with a Jewish Community Centre in Toledo, Ohio, and three museums in Dallas that merged. This is a vital trend to encourage in a year when, more than ever, “the name of the game is to make your dollars go far – very far”.
5) You: the rise of mass philanthrocapitalism has been the biggest trend of 2009. At the end of October online microfinance site Kiva.org announced that it had broken the $100 million barrier, just five years since it started, and is on track to $1 billion in the next five years. That is unheard of growth for the nonprofit sector. Donorschoose, globalgiving, Facebook causes – the list goes on – the internet is mobilising and empowering givers like never before. Yes, Kiva faced a bit of a backlash towards the end of the year, with accusations that it was misleading its members. These criticisms were rather overdone, although Kiva’s speedy response has improved how it works, and also signalled how quickly expectations and ambitions are changing. You don’t have to give and just hope that you’re doing good these days – internet giving has empowered you to know where your money is going. Use it!
Well, there ends our retrospective of 2009. Watch out for our predictions for philanthrocapitalism in 2010, coming soon.
Comment from Trevor Neilson of Global Philanthropy Group:
Thanks Matthew and Michael for weighing in. The goal of the Barron’s ranking was to begin a lively, global debate about outcomes in philanthropy. We feel that philanthropic impact is more important than philanthropic process – and yet most reporting on philanthropy does not address the impact it achieves. As noted in the Barron’s piece, the process of ranking philanthropists is extremely difficult and by its nature requires a great deal of subjective decision making, primarily because quantitative analysis is difficult across issue areas that do not share common metrics. We welcome everyone’s criticism of the list and hope that you and other leading thinkers will offer your own lists of the most effective philanthropists.
Tags: Barron's, Bill & Melinda Gates Foundation, Bill Clinton, DonorsChoose, Eli Broad, Facebook Causes, George Soros, Global Philanthropy Group, globalgiving, Jerry Hirsch, Jet Li, Kiva, Lodestar Foundation, Mo Ibrahim, One Foundation, Pam Omidyar, Pierre Omidyar, Richard Branson, Thabo mbeki, Trevor Neilson, Tribeca Film Festival
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December 4th, 2009
“Philanthrocapitalism and facial hair”, tweeted Ian Wilhelm of the Chronicle of Philanthropy, in response to Matthew’s (@mattbish) tweet that he is helping to judge moustaches at tonight’s Movember party at Capitale in New York. It may seem unlikely, but Movember, which, as Rachel Sklar puts it, involves “your gentlemen friends sprouting wantonly on their upper lips” each November to raise money for prostate cancer research, is actually a terrific case study of the power of philanthrocapitalism.
Movember began in Melbourne, Australia, in 2003 when Adam Garone and a few friends fancied growing moustaches, but did not want to suffer the inevitable mockery from their mates, so added a fundraising element. It is now probably the world’s largest non-government source of funds for research into prostate cancer, and is spreading unsightly facial hair across the globe, from neighbouring New Zealand to America, Britain and beyond.
Its success is a reminder that small scale giving by all of us can raise the sort of sums that can make a real difference – mass philanthrocapitalism as we call it in the paperback. It also highlights a couple of important trends: one is the growth of partnerships between mass charity, celanthropists and super-rich philanthropists. Movember has formed partnerships with Lance Armstrong’s Livestrong Foundation and with Michael Milken, the once-disgraced “junk bond king” who since his brush with death from prostate cancer in the early 1990s has masterminded through his foundation one of the most successful philanthrocapitalist assaults on a deadly disease ever seen. Garone says Milken takes a close interest in how Movember is getting on, and has been a great source of advice.
Movember is also an example of how smart philanthropy can tackle some of the huge inefficiencies in the non-profit world. Garone says that as Movember spread around the world it noticed that there was very little communication between scientists engaged in prostate cancer research in one country with their peers in other countries. As a result, there was much unnecessary duplication, and missed opportunities from failing to learn quickly about breakthroughs made abroad. Movember is the driving force behind a conference planned next year at which all the scientists it funds around the world will meet together to talk about their work – which could greatly increase their productivity in the fight against prostate cancer. Being an Australian organisation may have made it easier to make this happen, Garone says – as if Milken had called for such a global meeting, there might have been resentment at yet another example of American imperialism.
This is Movember’s most successful year yet, and deservedly so. Garone’s greatest worry, he confesses, is that the moustache might one day become the height of fashion, so that nobody would be inclined to give money to get someone to grow one. Happily, as tonight’s display of ludicrous face furniture is likely to make hilariously clear, there seems little chance of that!
Tags: Adam Garone, Chronicle of Philanthropy, Ian Wilhelm, Lance Armstrong, Livestrong, Michael Milken, Moustache, Movember, Prostate cancer, Prostate Cancer Foundation, Rachel Sklar
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December 1st, 2009
One year after the collapse of Bernie Madoff’s Ponzi scheme wrought havoc in the world of philanthropy, especially Jewish philanthropy, it is great to read an optimistic book about what philanthropy can achieve by a leading Jewish donor. “Where the soul meets a business plan” is the philanthrocapitalistic subtitle of The Art of Giving by Charles Bronfman, of the Seagram distilling dynasty, and Jeffrey Solomon, who runs Bronfman’s foundation.
Targeted at wealthy donors, the book offers a guide to approaching philanthropy that is packed with homely, practical advice drawing on the lessons of the two men’s several decades of experience. From teasing out the donor’s passion, to deciding whether to set up a permanent legacy or spend out, this is a must-read for anyone getting into major giving.
The Art of Giving is not a book of grand policy statements or high controversy. However, as stalwarts of the New York Jewish philanthropy scene, their comments on the Madoff scandal, which cost many foundations dear when their investments with the con man disappeared in a puff of smoke, are particularly insightful. The Bronfman Foundation, they recount, had been approached to invest with Madoff, whose money management business had offered spectacular returns on paper, until it crashed. They declined to invest because, as they say, the returns Madoff was offering “defied reason” and the lack of transparency about the firm triggered alarm bells. “Word-of-mouth and social connections cannot replace proper investigation and tough questions” is their withering judgement on those foundation trustees who failed to do the same rigorous due dilligence.
“Prudence is the watchword with nonprofit investment policy”, the authors counsel. The (irrational?) exuberance of recent years about spectacular endowment growth allowed foundations to believe that they could have their cake and eat it – having lots of money to give away while protecting the real value of the endowment to keep giving in perpetuity. In less confident economic times, perhaps donors need to make the choice between today’s needs and tomorrow’s rather than assuming they can meet both. Given the depth of the crisis and the slump in giving, now might be the right time for others to follow another of Bronfman’s examples, by commiting to spend down their endowment, rather than give away only the legally required minimum of 5% a year. Bronfman expects to have spent everything in his foundation by 2016, which, he says, seemed a long way off when he and his late wife Andrea decided to do it back in 1986, but seems rather close at hand now.
Tags: Bernie Madoff, Charles Bronfman, Jeffrey Solomon, Jewish philanthropy, The Art of Giving
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November 25th, 2009
“In Philanthrocapitalism, Matthew Bishop and Michael Green show the remarkable extent to which private wealth can advance public good by applying entrepreneurial skills, speed, and score-keeping to our most persistent challenges,” writes former President Bill Clinton in the foreword to the new paperback edition of Philanthrocaptalism. We are honoured, and grateful to him. In the rest of the foreword he explains why he has become such an enthusiastic fan of our book:
“In politics, most debates focus on two questions: What are you going to do? and How much money are you going to spend on it? Too little attention is given to what is often the most important question: How are you going to do it?
Bishop and Green document the relentless focus of the best social entrepreneurs on the How questions: How to keep HIV/AIDS and malaria from killing people? How to empower and educate the poor? How to reverse childhood obesity in the United States? How to fight climate change and increase economic opportunity? How to get other people working on these problems? How to turn good intentions into positive changes? How to do it faster and at lower cost than government alone can?
I often say my foundation is in the “How” business: We’re helping deliver AIDS medicines to adults and children, more than 2 million of them in the developing world, by changing the business model from high margin-low volume to high volume-low margin. We’re helping forty of the largest cities in the world reduce their greenhouse gas emissions by providing new technologies at volume discounts and offering new financing options. We’re supporting the efforts of thousands of schools to create healthier learning environments by reducing the caloric content of beverages and snack foods in vending machines and offering low cost, high impact options for improving the fitness of students and staff.
We’re using the same business-oriented approach to ensure money is spent efficiently and effectively to increase economic opportunity in Latin America, Africa, and U.S. cities. You can see the same approach taking hold throughout the world. Nobel Peace Prize-winner Muhammad Yunus pioneered with the Grameen Bank’s microcredit loans, which have helped lift more than IOO million people out of poverty across the world. The Gates Foundation has used it to save countless lives from malaria, to search for better ways to prevent HIV/AIDS, and to improve education in poor communities in the United States.
I’ve tried to increase the momentum and impact of those in philanthrocapitalism through the Clinton Global Initiative (CGI). Since 2005, we’ve invited philanthropists, political leaders, business executives, leaders of nongovernmental organizations, college presidents and students, and citizen activists from around the world to meet in New York at the opening of the U.N. They discuss the big how questions, develop their own answers, and make specific commitments to implement them. To date, members have made more than 1,400 commitments valued at $46 billion that have already improved the lives of more than 200 million people in 150 countries. CGI is, in many ways, the laboratory in which the authors’ ideas about philanthrocapitalism are tested.
At its best, philanthrocapitalism reinforces and amplifies the time, money, skills, and gifts given every year by people who are not rich, and it informs and enhances government policies. As Bishop and Green clearly demonstrate, the twenty-first century has given people with wealth unprecedented opportunities, and commensurate responsibilities, to advance the public good.
This is an important book. Our interdependent world is too unequal, unstable, and, because of climate change, unsustainable. We have to transform it into one of shared responsibilities, shared opportunities, and a shared sense of community. Bishop and Green show us how to do it.”
Tags: Bill & Melinda Gates Foundation, Bill Clinton, Clinton Foundation, Clinton Global Initiative, Grameen Bank, Muhammad Yunus
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November 14th, 2009
Now here’s an interesting idea as we go into giving season – an Oxford University philosopher has pledged to give £1 million to charity over his lifetime and wants you to do the same. Not really headline news in a world of billion-dollar mega-gifts you might think, but there are two interesting things about Dr Toby Ord: he isn’t rich and he’s only 30.
Like his fellow philosopher Peter Singer, author of The Life You Can Save, Dr Ord reasons that the money he might spend on a fancier car or bigger house would be better spent saving thousands of lives (giving to the most cost-effective charities is an important part of the formula, he cautions).
The interesting twist is that Dr Ord has married Singer’s ethics to the behavioural economics of Richard Thaler, author of the bestseller Nudge. One of Thaler’s most successful experiments in social psychology was a scheme to tackle an analogous problem, our reluctance to save. Participants in one of Thaler’s experiments weren’t asked to start saving more straight away; instead they pre-committed a growing part of any future pay increases they received to their retirement savings plan. This ‘Save MoreTomorrow’ scheme worked better at increasing personal saving than other exhortations to save because it recognised that people find it harder to put aside money they have already got than to save money they might have in the future. Perhaps the same will be true of giving.
Dr Ord is already giving away 10% of his modest salary and says he will donate everything he earns above £20,000 ($33,000) a year for the rest of his career. This is a pretty high bar in terms of asceticism, but the principle is an important one – ethically and economically. Will Dr Ord stick to his pledge? Well, he can count on some crucial support: his wife was the first member of the Giving What We Can campaign that he set up to promote the idea.
Tags: Givingwhatwecan.org, Nudge, Peter Singer, Richard Thaler, The Life You Can Save, Toby Ord
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November 13th, 2009
So, we are philanthropy’s “dangerous and destructive” assailants, accuses Phil Buchanan in his recent blog at Philanthropy Central, a new site from the Sanford School of Public Policy at Duke University. It seems that celebrating the wave of successful entrepreneurs and big corporations that are getting into giving back, what we call philanthrocapitalism, is a threat to “the nonprofit sector’s distinctive identity and purpose” – according to Phil.
We are used to the accusation that nonprofits should not be turned into businesses, or the claim that the failings of capitalism in the last couple
of years mean that the business sector has nothing to teach nonprofits. But that usually comes from people who have not read our book, or thought much about about the issues. Neither of which is true of Phil, whose Center for Effective Philanthropy does a great job in getting foundations to up their game. Indeed, CEP is one of the philanthrocapitalist intermediaries that we celebrate in the book.
Philanthrocapitalism is about two trends: one is about how the new entrants in the philanthropic marketplace – from Bill Gates to Kiva.org – are bringing competition, innovation and new ideas about how to do good. For the successful philanthrocapitalists this is about applying the same attention to impact as they did to profit in their businesses, which means learning and adapting, not imposing models that don’t work.
The other trend is the way that the wealthy and corporate leaders are realising that successful capitalism is about more than quarterly profit figures. They understand that capitalism does not exist in a vacuum, that capitalism cannot turn a blind eye to the wider social and environmental problems of our world. Which means they are increasingly paying attention to, learning from, and partnering with nonprofits and government. As President Bill Clinton says in the foreword to the new paperback edition of the book, this is about transforming the world into one of “shared responsibilities, shared opportunities, and a shared sense of community”. Perhaps the saddest thing about the financial crisis is that so many on Wall Street have opted for denial and decided that they can go back to business as usual. Since Philanthrocapitalism was first published, the day after Lehman Brothers went down, we have argued that this is an opportunity for capitalism to think about its values, not just in terms of giving away a share of its proceeds but also in how it makes money in the first place.
Unlike capitalism, the government and the nonprofit world are not exposed to the same risk of catastrophic collapse. This means that the opportunities to learn and change must come from new ideas and new players. That is why we are excited about the potential of philanthrocapitalism to help government and the nonprofit sector to become even more effective.
In the same article Phil also attacks Uncharitable, Dan Pallotta’s book, which we disagree with because it argues for abolishing the idea of charity yet is a great read and an important contribution to the debate. We should not expect everyone to agree but we should all welcome the opportunity that the debate presents rather than defensively dismissing other points of view. With tax dollars and donations likely to be in scarce supply for the next few years, as we struggle with the consequences of the financial crisis, denial is not an option.
Circling the wagons just delays the journey. Hitch up the horses, Phil and let’s get moving again.
Tags: Bill Gates, Center for Effective Philanthropy, Dan Pallotta, Duke University, Kiva, Philanthropy Central, Uncharitable
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November 12th, 2009
When governments start chopping back on public budgets, in an effort to get the national debt down to manageable proportions once the immediate economic crisis has passed, isn’t there a risk that it’s the innovative, risky projects that will be first to go? If so, who is going to fill the gap? That was the question posed today by British social action pioneer David Robinson at the Chain Reaction conference that he organised to bring together social innovators, in the shadows of the capitalist citadels of London’s Canary Wharf.
Michael, who was speaking at the conference and worked in government for many years (he confessed to being “a recovering bureaucrat”), agreed that this was a big risk - politics makes it hard for government to invest in initiatives which are risky and where the payoff is longer than the electoral cycle (or the average ministerial attention span). Rather than trying to get government to do what does not come naturally, we think there is a real opportunity to address these problems through partnerships with philanthrocapitalists, who should be looking to seed and test new ideas. If backed by rigorous analysis to ensure that they really work, these pilots can then be scaled by government when proven. Yet this will take a big change in the way the British government works with private donors.
A man who may have a key role in figuring out how to do this, if the Conservatives win the general election that is due in less than a year, is shadow minister of the third sector, Nick Hurd, who was speaking on the same panel. ”There is a problem with money,” he said “which is that the government doesn’t have any!” Nick wants to harness the power of the voluntary sector to do more to tackle social problems like recidivism, ending “the fallacy that government has all the solutions.” He pointed out that 70% of government funding to NGOs goes to organisations with an annual turnover of £1 million and seems to want to direct more funding to smaller community groups.
There is certainly a case for shaking up public funding of NGOs in Britain, which is prone to go to the usual suspects. But it is not as simple as small NGOs good, big NGOs bad. Shaks Ghosh from the Private Equity Foundation gave a frank assessment that “most charities are sub-scale and try to do too much”, which is why her organisation picks a few, high-performing NGOs that they support with money and expertise. Funding to help organisations to scale is just as important as supporting smaller pilots. (Critics who might dismiss Shaks’ comments as typical philanthrocapitalist sneering at the charity world should note that she is a respected leader in the nonprofit sector.)
It was clear from the discussion that, although there is a lot of innovation around social financing in Britain, there is still work to be done to figure out the respective roles of government, NGOs and philanthrocapitalists. Britain is starting to move on from the old idea that the responsibilities of the winners in society are defined through the tax system alone. The politicans need to lead the debate about the role that giving should play in the new social contract between the rich and the rest of society.
Tags: Chain Reaction, Conservative Party, Private Equity Foundation
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November 11th, 2009
So the long wait for Barack Obama to nominate America’s international development czar is over. Congratulations to Raj Shah, who should breeze through the confirmation process to become head of US AID, having already been approved for his current post in the Department of Agriculture. Shah, who is just 36, takes on this crucial job at a time when international aid policy is the subject of more intense debate than ever before. Although some people regard him as very much a second choice – they would have preferred a visionary such as Paul Farmer - there are several reasons why there may be no one better suited than Shah to make the most of this opportunity.
The Obama administration is currently undertaking at least two fundamental reviews of international development policy, one from a national security prespective, the other led by the State Department, of which USAID is a part. There had been rumours that, having originally talked about turning USAID into a stand alone division of government separate from the diplomatic wing of foreign policy, much like Britain’s Department for International Development, Team Obama was leaning towards scrapping USAID altogether. Shah’s nomination lays that idea to rest, and now he will be looked to for big ideas on how to improve the effectiveness of international aid.
USAID’s record is under attack from all sides, from those such as Bill Easterly and Dambisa Moyo, who have argued powerfully that aid harms the world’s poorest countries by breeding corruption and dependency, to the likes of Senator John Kerry, who want aid to play a bigger role in winning the “battle of hearts and minds” in places where America’s enemies currently flourish. Shah’s task will be to develop an aid policy that works on both fronts.
Shah is no Paul Farmer, who is widely regarded as a saint for his pioneering work on providing health care for the extreme poor in places such as Haiti and Rwanda. Yet running US AID is no place for a saint (which is not to cast any aspersions on the character of Shah!). There are real questions about the ability to scale up Farmer’s high-touch, resource intensive approach to health. Shah, by contrast, was until recently in a senior role at the Gates Foundation where, among other things, he was immersed in practical questions about how to improve food supply chains so that small farmers in poor countries can earn a decent living. Hopefully that will have taught him that job creation so poor people can help themselves should be at the heart of aid policy – and few people will understand better than him the practical requirements of such an aid regime.
Hopefully that will be only one of the lessons he brings from his years in one of the power centres of philanthrocapitalism, the Gates Foundation, where he was one of the more creative thinkers. Indeed, he is one half of a philanthrocapitalist power couple occupying two key jobs in the Obama administration: his wife, another Gates alumnus, has a leading role in driving innovation in the Department of Education, where partnerships with philanthropists are crucial to achieving the goal of dramtically improving the quality of education in America’s schools. The power of the Bill Gates Empire continues to grow…
One thing Shah should do is contact his old boss to form an advisory group made up of philanthropists who are focused on international development, to give them a formal role in the shaping of US government policy. Currently, both government and private aid initiatives are far too uncoordinated, and suffer badly from that. Shah should also read the excellent recent paper by Owen Bader on creating a market for aid, that we reported on recently.
In particular, there is a huge opportunity for Shah to increase the impact of aid and of philanthrocapitalism by investing in measuring properly the impact of all this money being deployed abroad, and of publicising this data so everyone can get a much better idea of what really works. Here there is potential for partnering with the Hewlett Foundation’s promising 3ie initiative, for example.
One bold move would be to invite proposals from philanthropists and businesses to improve the effectiveness of US aid spending, and to commit to implementing at least the best five ideas. Another would be to set aside part of the aid budget for scaling up successful philanthrocapitalistic initiatives in the developing world. He might even set a leverage target, for how much of the aid budget must be deployed in partnership with private funds.
Two recent initiatives to encourage for-profit approaches to development could also be accelerated with some help from USAID. One is GIIN, the Global Impact Investing Network. Another is ANDE, the Aspen Network of Development Entrepreneurs.
Last, but by no means least, there is a huge opportunity is to deepen the public’s commitment to international aid and at the same time tap into the wisdom of crowds, supporting the small donations of ordinary Americans by announcing that a certain percentage of the aid budget will be available to match gifts through innovative internet sites such as Kiva.org and GlobalGiving.
We have no idea what Shah thinks of any of these ideas: the last time Matthew spoke to him was in January, before he left the Gates Foundation. But we do know he is a fan of Philanthrocapitalism, as he signed up to our facebook fansite. We are excited to see what he can do with this important new role. Watch this space!
Tags: 3ie, ANDE, Bill & Melinda Gates Foundation, Bill Easterly, Dambisa Moyo, GIIN, globalgiving, Hewlett Foundation, Kiva, Owen Barder, Raj Shah, US AID
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November 10th, 2009
Which has more power to change the world – millions of dollars of donations or thousands of facebook fans?
Michael spoke yesterday at the Legatum Institute’s Next Generation Philanthropy Forum, held at the Foundling Museum in London (which celebrates one of the greatest achievements of the golden age of joint stock philanthropy in the 18th century). Two and a half centuries ago, the Foundling Hospital used the state-of-the-art communication tools of the day – paintings by Hogarth and music by Handel – to drum up support to save the lives of abandoned children in London, so it was a fitting venue for a discussion of the way that the Internet and mobile phone are changing philanthropy.
In the new paperback edition of Philanthrocapitalism, we have added a chapter expanding on our discussion of the ‘mass philanthrocapitalism’ of sites like Kiva. While a huge part of its success has been to mobilise millions of dollars to help poor entrepreneurs in the developing world (a subject of some controversy currently, which we will return to in a future posting), Kiva CEO Premal Shah tells us that the ability to mobilise Kiva supporters to lobby government has the potential for what he calls ‘crazy impact’.
We were reminded of this comment at the Legatum event when Ben Keesey, the CEO of Invisible Children, talked about how its campaign to raise awareness about the plight of children caught in the conflict with the Lord’s Resistance Army led by the brutal Joseph Kony in Northern Uganda had led in two directions: fundraising to build schools and lobbying the US government to do more to end the fighting. Ben didn’t say which he saw as more important, but we are struck by the power of its campaign to mobilise hundreds of thousands of mainly young people in America to lobby political leaders about what might otherwise be a forgotten war.
The capacity of the mobile phone to provide real time information about conflicts was also brilliantly demonstrated by Julia Rotich of Ushahidi. Created in response to the violence that followed the rigged Kenyan elections of 2007, Ushahidi (the Swahili word for testimony) allows ordinary people to text information that is then used to create a map of what is really happening on the ground. The organisation is proud that this is an initiative created by Africans, and is now available as an open source technology that has already been used in other African countries to track supplies of essential drugs, and to monitor elections in Mexico and India. (Could this technology, we wonder, be used to add the perspective of ordinary people to the annual assessments of the quality of government in Africa run by the Mo Ibrahim Foundation?)
Dare we hope that a genocide like the one that happened in Rwanda fifteen years ago would be impossible today because orgnisations like Ushahidi, Invisible Children and Kiva would ensure that political leaders in the rich world would have to intervene? Now that would be the best kind of crazy impact.
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November 6th, 2009
We all know that Americans are the most generous givers. But are they really?
A new report about family foundation philanthropy in the US, UK, Germany and Italy, by the recently established research centre on charitable giving at London’s Cass Business School, is a welcome contribution to the rather thin field of international comparisons of philanthropy. Yes, say the authors, the top 100 US family foundations blow the others out of the water when it comes to total giving – splashing three times as much as their British counterparts.
When compared as a percentage of national income, however, the top 100 US foundations fare less well: accounting for only 0.05% of America’s Gross Domestic Product compared to 0.1% of GDP in the UK and 0.03% in Germany. (Italian family foundation philanthropy seems to be tiny, totalling barely $100 million. In other words, a single American philanthropist, like Eli Broad, is giving away more money each year than the top 100 Italian family foundations!)
The report also provides evidence of the revival of philanthropy in Britain, showing a 10% surge in giving in the most recent year measured (compared to 8.2% in the US if you ignore a distortingly massive gift by Warren Buffett to the Bill and Melinda Gates Foundation).
Yet let there be no British triumphalism. Overall, Americans are significantly more generous than any other developed nation, which suggests that the giving culture is more deeply embedded across donors great and small. British giving, it seems, is disproportionately dependent on those top 100 foundations. (And the British figures are also pumped up the nearly $1 billion a year given away by the Wellcome Trust, founded by an American).
British foundations are also less generous when you look at their assets. Again, comparing the top 100 US and UK foundations, the value of the British foundations’ assets is half that of their American counterparts, whilst their giving is only a third as big. As we have argued before, British policymakers should perhaps borrow the US rule that foundations should pay out at least 5% of the value of their endowment each year.
One big flaw with the report is that it relies largely on data from 2006-07, before the economic crisis. This is not to blame the authors, who have done the field a great service by pulling together this comparative data. This is their second annual report, we hope that this series will continue so we can see how the story evolves. Hopefully next a year some of the Italian super-rich will have stepped up to the plate.
Tags: Alliance Magazine, Bill and Melinda Gates Foundation, Cass Business School, Warren Buffett, Wellcome Trust
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October 30th, 2009
Another chance to WIN an advance copy of the new paperback. Billionaire businessman Mike Bloomberg is expected to win a third term as Mayor of New York on Tuesday, having spent an estimated $85 million of his own fortune on the campaign (on top of nearly as big amounts on his previous campaigns).
Bloomberg says he is spending money in this way because of his commitment to public service, and that using his own money frees him from the compromise and potential corruption that afflicts other politicians who have to raise money to fund their campaigns. He is no Silvio Berlusconi-style self-serving plutocrat.
What do you think – is this an act of philanthropy or plutocracy? Go to our Facebook fansite and enter our latest competition. We’ll choose a winner on election day, this Tuesday. Entries in by midnight on Monday, please. Good luck!
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October 26th, 2009
“Will the Gates Foundation or Kiva.org have a greater impact on poverty?” That was the question up for debate on our Facebook fansite in a competition for a signed advance copy of the new paperback.
Opinions were evenly divided. People like Kiva’s focus on supporting entrepreneurs through microfinance and the way it empowers ordinary donors, but they also worry about whether Kiva can really reach scale and question whether there really is a bottleneck in capital for microcredit. In contrast, the Gates Foundation was appreciated for the leverage it brings through its scale, even if it intervenes more indirectly than Kiva does. Yet there were serious concerns that such a huge organisation could get bureaucratic and fall into the same traps as government donors.
We were struck that the answers were not just tub-thumping for one side or the other. Many respondents pointed to the new challenges facing these organisations, such as how can Kiva start to lever the power of its social network beyond a simple donor-recipeint model into advocacy and more, or whether the Gates Foundation needs to move on from the traditional grant-making model. These are exactly the problems that the leaders of these organisations are grappling with at the moment.
In the end, the Gates Foundation carried the day by a single vote (although, as a number of people pointed out, our either/or question was a little bit “apples and oranges”). Deciding on a winner of our competition was just as close. In the end we chose Makenna Held, who made the point most eloquently that the greatest need is for sustainable solutions to poverty. ”The idea of ‘patient capital’ and market-based solutions are best candidates to create large scale impact” she argued. We think that this is going to be one of the most exciting areas of growth in philanthrocapitalism in the coming years, as it is a necessity for development as government aid budgets are squeezed, and a necessity for capitalism, as it tries to rediscover its soul.
Congratulations to Makenna and thanks to all the entrants. The popular debate about Kiva, Gates, and the philanthrocapitalism revolution in general is too often cast in black and white terms. As our contest showed, the important discussion is about what works.
Tags: Gates Foundation, Kiva
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October 25th, 2009
Warren Buffett invites to Maui a group of his fellow elderly super rich, including Ted Turner, George Soros, Bill Gates Senior (father of the Microsoft billionaire), Bill Cosby, Barry Diller, and Yoko Ono. They decide to launch a movement using their money and connections to clean up America – not least by masterminding a campaign to vote out all the corrupt incumbent politicians in Washington DC.
At first, this is a stealth effort – starting with what seem to be isolated acts by wealthy individuals, such as Turner’s new campaign, “Billionaires Against Bullshit”. But on July 4th, the group goes public, as they launch their initiative to undo the negative influence of corporate money in America’s capital through a sort of “reverse Gresham’s law” in which good money drives out bad.
This story is told in the new book by veteran American activist and sometime presidential candidate, Ralph Nader. He describes “Only the Super Rich Can Save Us” not as a novel but rather, an exercise in “practical Utopianism” in the tradition of English politician and philosopher, Sir Thomas More.
This is not, as Nader’s leftwing credentials might lead you to expect, a satire. He is serious, believing that the biggest obstacle to the political change he has sought throughout his career is money, of which a group of super rich people old enough to be focused on their legacy might be the perfect source. Nader has been able to make this case in person, as he has called all his leading characters to tell them he has written fictional versions of them. Most, he says, seemed happy enough, including Buffett, who he met for breakfast in Omaha a few weeks ago.
There are many similarities between Nader’s book and ours, as Matthew discussed with him the other day on stage at New York’s 92nd Street Y. We also include our own piece of practical Utopianism in our concluding chapter, by describing the junior Bill Gates celebrating his 70th birthday on October 25th 2025 aboard Richard Branson’s luxurious eco-friendly space mansion. After Paul Hewson, the secretary general of the United Nations formerly known as Bono, sings, Gates announces the eradication of malaria from the earth.
To be honest, we believe our Utopia is far likelier to be achieved than Nader’s. But we do share a belief that the super rich and their money can be a powerful force for good – and that currently they are not making the most of that opportunity, not least because of a reluctance to get too deeply into the political process (with the notable exceptions of Soros, who likes to describe himself as a “political philanthropist”, and Michael Bloomberg, who is about to buy himself a third term as mayor of New York and still aspires to occupy the White House). As we have argued many times, changing government policy is a crucial way in which philanthrocapitalists can leverage their relatively small amounts of money, as Gates is starting to discover, although, as he is also discovering, this can be controversial.
Our strongest point of disagreement is over the role of companies. Nader believes that companies are the primary source of corruption in the political process, capturing Washington to serve their interests rather than those of the people. We actually see signs of change at the top of a growing number of leading companies as bosses realise that being a good corporate citizen is crucial to their long-term success.
Both Nader and we use Wal-Mart, the huge retailer, as the focus of our argument – and in this respect, perhaps Nader is more open to the possibility of change than his rhetoric suggests. In his book, Wal-Mart is persuaded to abandon its lifelong opposition to trade unions. In our book, we tell the true story of how Wal-Mart converted to the cause of fighting climate change.
We have many differences with Nader on the specifics of what the super rich could (and should try to) achieve. We aren’t convinced, for example, that electing Warren Beatty as governor would be the answer to California’s many problems (though, in this idea, as in the roles he gives to Yoko Ono and Bill Cosby, Nader shares our belief in the power of celanthropy). But it is striking that someone who has spent a lifetime campaigning for social change – sometimes to great effect (as in making cars safer) – has come, through hard-earned practical experience, to share our belief that super rich “hyperagents” are essential partners for activists in building a better world.
Tags: Barry Diller, Bill Cosby, Bill Gates, Bill Gates Senior, Bono, celanthropy, Michael Bloomberg, Ralph Nader, Richard Branson, Ted Turner, Thomas More, Wal-Mart, Warren Beatty, Yoko Ono
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October 22nd, 2009
Win a pre-publication copy of Philanthrocapitalism in paperback! The first copies of the paperback have arrived hot off the presses at our offices. The book looks great – with an attractive new cover (as featured on our redesigned website), a new subtitle (How Giving Can Save the World), and lots of new material, including a foreword by Bill Clinton, a new preface explaining why philanthrocapitalism matters even more after the economic crisis, and a new chapter on “mass philanthrocapitalism” that explains why organisations like GlobalGiving, DonorsChoose, Facebook Causes and Kiva.org are potential game changers in the business of giving.
We want to give away one of our copies before publication next month, and have decided to hold a competition. Go to our new Facebook fansite, join up and simply answer this question in one sentence (or so): will the Gates Foundation or Kiva.org have a greater impact on poverty and why? Post your answer as a comment and we’ll choose a winner on Sunday. Good luck!
Tags: Bill Clinton, DonorsChoose, Facebook Causes, globalgiving, Kiva
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October 21st, 2009
Building a real partnership between donor and recipient countries based on better planning has been one of the big ideas in aid in recent years, set out in the Organisation for Economic Cooperation and Development’s Paris Declaration of 2005. The growing importance of philanthrocapitalists in development troubles some people, who fear that a flurry of new actors will disrupt this planned approach to aid.
In a fascinating new paper for the Center for Global Development, former British aid official and podcaster Owen Barder says that aid policies “rely too much on a planning paradigm”. Instead, he calls for a “collaborative market” for aid based on more decentralised decision-making. The foundation of an effective market, he points out, is information., which means better data on what donors are doing and what impact they are achieving.
Philanthrocapitalists are already working on this. The Hewlett Foundation has partnered with government aid agencies to get better results through the International Initiative on Impact Evaluation and the Gates Foundation has funded a big health evaluation programme at the University of Washington.
Even more exciting, as we discuss in the updated paperback edition of our book, is the potential of online giving platforms such as GlobalGiving to get feedback from recipients in developing countries and start to turn development into a collaborative process. Organisations such as Google.org, could potentially make a huge contribution to turning this into a reality. Philanthrocapitalists should be interested in transparency not just for reasons of effectiveness but also to build their own legitimacy – which is an essential part of the social contract that is needed to underpin rich individuals’ growing role in tackling global problems.
The biggest challenge, however, is for governments. Rather than clinging to the planning paradigm and trying to push private donors to conform to the procedures set out in the Paris Declaration, official aid agencies and developing country governments need to embrace ways of working that are adapted to the new collaborative marketplace.
All markets need rules. Barder’s thoughtful paper concludes with some imaginative ideas on how to make the market for aid more effective. Take one of the problems that the Paris Declaration was trying to solve – multiple donors competing with each other to talk to developing country governments that are already overstretched. He suggests a ‘flat tax’, of say $5 million, for all donors to pay to developing countries for the inconvenience they (undoubtedly) cause by taking up government officials’ time or poaching the best staff. Or a ’cap and trade’ regime, whereby developing countries would limit the number of donor missions allowed each year and sell off the right to visit – government and private aid agencies would then have to compete with each other for the visiting rights, and developing country governments could pick the organisations they believed would have the biggest impact. Now that would be fascinating!
Tags: Aid, Center for Global Development, globalgiving, Google.org, Owen Barder, Paris Declaration
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October 13th, 2009
“Futility” was aid champion “Sir” Bob Geldof’s verdict on what he had achieved nearly a quarter of a century after the former Boomtown Rats vocalist organised the Band Aid song that mobilised a massive public campaign to help the starving people of Ethiopia. Geldof was speaking on a panel moderated by Michael at Forum 2000, former Czech president Vaclav Havel’s annual “brains trust” gathering in Prague.
Yet this was not some sudden conversion of Bono’s brother-in-arms to the anti-aid cause. Geldof delivered a typically technicolour refutation of Dambisa Moyo’s arguments against aid and celebrated the fact that 37 million Africans had gone to school as a result of the aid commitments won at the G8 summit at Gleneagles in 2005. He is just frustrated that poverty hasn’t been eliminated already.
Geldof is not sure if he’s a philanthropist because he doesn’t have a lot of money to give away. We think he is a classic “celanthropist” – a celebrity philanthrocapitalist – because, as he admits himself, his fame gives him “access”, which he can use to do good.
The other panelists had no such doubts about their qualifications as philanthropists. Yohei Sasakawa is chairman of the Nippon Foundation (and co-founder of Forum 2000). Czech supermodel Helena Houdova runs her Sunflower Children’s Foundation. Catherine Zennstrom, a French citizen, has recently established the Zennstrom Philanthropies with her Swedish tech billionaire husband, Niklas, the co-founder of Skype. Sigrid Rausing, also Swedish, is one of Britain’s most respected philanthropists, through the work of her trust.
Notice anything about these names? Firstly, there were no Americans – which shows how philanthrocapitalism is an increasingly global phenomenon, including in Japan, which is often described as a philanthropy-free zone. Second, the majority are women, an increasingly influential force in philanthropy, we are happy to say.
As for Geldof, our verdict is that his experience, along with that of Bono, is a deeply encouraging one. They have learned a lot, realized how naive and ineffective their earliest efforts were, yet they have stuck to their mission and driven themselves to find better ways to achieve it. Along the way, they have inspired millions of people around the world to be more altruistic and given many more the chance of a better life – which, as futility goes, isn’t bad.
Tags: Aid, Band Aid, Bob Geldof, Bono, Dambisa Moyo, Dead Aid, Helena Houdova, Niklas Zennstrom, Sigrid Rausing, Vaclav Havel, Yohei Sasakawa
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October 9th, 2009
At first glance, the award of the Nobel Peace Prize to Barack Obama is absurdly premature. Beyond his fine words, it is hard to demonstrate conclusively that President Obama has yet added a net ounce of peace to the world, and although hopefully he will ultimately do so, the record of past US presidents, including well-intentioned fellows like Messrs Carter and Clinton, suggests that they do more for peace once they leave office.
Many critics of the Nobel peace prize will regard this award as further damaging the reputation of a philanthropic prize that has lost much of its credibility over the years by honouring such peacemakers as Henry Kissinger and Yasser Arafat. Even Al Gore’s win, following his climate change movie, “An Inconvenient truth”, has been cruelly lampooned as a prize for mastering the art of Powerpoint presentation.
That it was endowed by a 19th century munitions tycoon, Alfred Nobel, is also widely noted by critics of the peace prize. As we report in the book, and on this blog, prizes are increasingly back in fashion among today’s philanthropists – yet what their prizes increasingly aim to do is incentivize future behaviour that the philanthropist wants rather than honour past achievements like the Nobel.
The X Prize Foundation is perhaps the best example of this new trend, with its prizes for achievements such as commercial manned space flight, rapid cheap mapping of a human gene, and building a super-fuel-efficient car. A recent study by McKinsey found that there has been a sharp increase in what the consultancy calls “inducement prizes”. Of the philanthropic prizes introduced before 1990, with a total purse of $55m, only 3% were incentivizing behaviour, whilst the rest were “recognition” prizes celebrating past achievements. Since 1990, of the new prizes announced with a combined purse of $302m, 78% have been inducement prizes.
A more positive way of looking at Obama’s award is that the Nobel judges are trying to turn the Peace prize into an inducement prize. By honouring the President’s fine words at the start of his time as the most powerful man on earth, perhaps the judges are hoping that this will encourage him to put them into practice.
If so, here is a modest proposal, Mr President. By all means travel to Oslo to give your acceptance speech on December 10th, but when you give it, tell the audience that, though you are humbled and honoured by the award, you are not willing to accept it yet. Then pledge to return to accept it properly after you leave office, but then only if the judges take another vote and decide it is still merited. That way, the prize will really mean something – which, if it is accepted unconditionally now, it really won’t.
Tags: Barack Obama, Bill Clinton, Henry Kissinger, Jimmy Carter, McKinsey, Nobel, Prizes, X Prize Foundation, Yasir Arafat
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October 2nd, 2009
Can government aid budgets survive the financial crisis and, if not, what next for the billion people living in poverty?
Michael spoke at a couple of fringe events at the British Labour Party’s annual conference in Brighton this week. Beleagured Prime Minister Gordon Brown used his main speech to make a raft of spending commitments, including a pledge to pass legislation to force future governments to spend 0.7% of national income on international aid.
In a sense this is not controversial – all of Britain’s major political parties have said that they are committed to the same goal.
Or maybe not, according to international development Minister, Gareth Thomas, who shared a platform with Michael at an event organised by the Foreign Policy Centre. Minister Thomas complained that the aid community was “sleepwalking” if it believed that the Conservative party, the most likely victors of (probably)next year’s election, will maintain aid spending.
Well, he would say that wouldn’t he? But there is also a big question about whether a government of any colour can defy fiscal gravity and keep pumping more money into aid, while making the drastic cuts at home in public expenditure necessary to restore the finances to some kind of health. And even if the Brits kept their aid promises, how many other countries would join them?
The aid world needs an urgent rethink on how to live with less money, which means that every pound or dollar of assistance must go further. Of course, philanthropic donations cannot plug the aid gap but working with philanthrocapitalists has to be part of the answer, to lever new sources of finance and make aid smarter.
First, if grant money from government is going to dry up, developing countries will have to look for private funding for investments in health, education, water and sanitation, and so on. Fortunately, as Matthew wrote recently in The Economist, there has been an explosion of interest in the idea of social investing – using capital invested to get a financial return to achieve development goals. The British Government was a pioneer in this area through the Task Force on Social Investment, chaired by private equity titan Sir Ronald Cohen, that looked at how to use these tools to address social problems at home. Sadly, the government (and the opposition) has been slow to realise the potential of social investing internationally.
This opportunity needs to be grasped now. The government should create a new Task Force on Development Investment to bring together the business leaders and philanthrocapitalists already working in this area, to see how government can work with them to get this idea to scale as quickly as possible. Some reneging on aid pledges may be inevitable. Failing to take up the opportunities available to make up for the shortfall in aid would be an unforgiveable betrayal of the poor.
Tags: Aid, Foreign Policy Centre, Gordon Brown, Labour Party
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September 28th, 2009
So, the new CEO of the Gates Foundation, Jeff Raikes, is pulling down nearly a million dollars a year, according to a report by the Chronicle of Philanthropy. This is bound to get a few people huffing and puffing, not least because Raikes is already apparently sitting on a pile of several hundred million dollars that he earned at Microsoft.
Last week, world leaders at the G20 meeting were harrumphing about bankers’ bonuses. Should they be turning their guns on highly-paid philanthrocrats?
Absolutely not.
The tendency to judge nonprofit management by the scratchiness of their hair shirts (on the basis that paying decent salaries is a ‘waste’ of precious charitable donations that should be going to the beneficiaries) is widespread. Yet this is a dangerous canard. A cheap bad leader is much worse than a well-paid good one. Better pay could, with care, attract better leaders to the non-profit sector and enable valuable donations to be better used. The art, as in the for-profit world, should be to ensure that reward follows real talent and incentivises real achievement.
According to the sources quoted by the Chronicle, Raikes did not even want a salary (his predecessor and fellow Microsoft veteran Patti Stonesifer took no money) but the Foundation decided that paying the CEO was a point of principle. Although outside philanthropy, some wealthy bosses, from Larry Ellison of Oracle to Michael Bloomberg of New York City, are now working for an annual salary of $1, the Gates Foundation is right that this is a sensible principle to establish. It would be a mistake to make a career in philanthropy the exclusive preserve of those with private means.
There is of course one obligation that Raikes does have to meet – to give in his own right (our ‘good billionaire guide’ applies equally to those with just a few hundred million in the bank), which he seems to be doing.
He should also have to perform well to earn his money – something that, as Matthew wrote when he was appointed, may be hard to judge, given that his role seems to overlap with that of the increasingly active creator of the foundation. Raikes may be the only $1m-a-year CEO on the planet who is not actually in charge!
Tags: Bill & Melinda Gates Foundation, Chronicle of Philanthropy, Jeff Raikes, Larry Ellison, Michael Bloomberg, Pay
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September 25th, 2009
Ten percent of all government aid should go to promoting social businesses, argued microfinance pioneer and Nobel Prize winner Muhammad Yunus at yesterday’s panel on innovation at the Clinton Global Initiative meeting in New York. This echoed our call for new, innovative ways to deliver aid based on partnerships between government and the private sector.
Professor Yunus’s model of a social business explicitly means a business that is not run for profit, at least in terms of dividends or capital gains for outside shareholders. His Grameen organisation in Bangladesh is already working on a number of social businesses with big multinationals, such as a partnership with French dairy product giant Danone, to produce nutritionally enhanced but still palatable yogurt, to tackle malnutrition. (Yunus delighted the audience at a later conversation with Matthew at the 92nd St Y with an account of how he first persuaded Danone to switch from plastic yoghurt pots to biodegradeable pots made from corn starch, and has now set the research team on a mission to make an edible, and nutritious, pot!)
As we discuss in the book, in the past Yunus has been critical of those who have tried to use the for-profit capital markets to scale up microfinance. At the 92nd St Y, it seemed that Yunus may have softened his hard line a bit on microfinance (charging an interest rate of cost plus 15 percent or more puts a lender into the “red zone” of exploitation, he argued, less than that may be okay even if it generates profits), but he still thinks social business should be not for profit.
We are fans of Yunus. We share his enthusiasm for his belief that mobile phones are transforming the lives of the poor, in banking (see this excellent series of articles on mobile banking in the Economist) and next, he thinks, in health care. Yet we think his definition of a social business is too narrow and potentially restricts the resources available to social entrepreneurs to take their solutions to scale. The economic crisis has given everyone good reason to be sceptical about capitalism. Yet, it was striking that some of the other speakers on the innovation plenary at the CGI (moderated by Matthew) saw real opportunities in philanthrocapitalist approaches that bring together the head and the heart.
From the business world, Jack Ma, the founder of Alibaba, China’s eBay, explained how his company has unleashed the potential of entrepreneurs and created thousands of jobs by recognising that long term profitability for the company must be based on serving its customers well and looking after its employees. From the philanthropy world, Judith Rodin of the Rockefeller Foundation announced the imminent launch of a new initiative to promote for-profit investments that help the poor. (Matthew has written an article about this.)
Also on the panel, Al Gore, the former US Vice President, made a typically impassioned appeal for action on climate change at the Copenhagen Summit at the end of the year. “Business leaders and citizens are ahead of politicians on this,” he declared. This assertion may surprise some, who see business as the problem rather than the solution. Gore did acknowledge that some business lobbies were an obstacle to a climate deal but he also saw many smart business leaders who understood that this was the only way to long term sustainable profitability.
This year’s CGI has been marked by a surge in commitments from for-profit companies, spurred in part by the economic crisis to see that “doing well by doing good” is the best business strategy for consumers, employees and shareholders. This is what Bill Gates calls “creative capitalism”, and is an increasingly powerful force in philanthrocapitalism.
Tags: Al Gore, Innovation, Jack Ma, Muhammad Yunus, Rockefeller Foundation, Social business
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September 23rd, 2009
Forget Fashion Week, New York is now in the grip of Philanthrocapitalism Week, when world leaders, corporate titans, philanthropists, social entrepreneurs and other policymakers gridlock Manhattan as they shuttle between meetings at which they (mostly) try to figure out creative solutions to some of the world’s biggest problems. We have written an article for the Washington Post today on how all this activity could produce a bold new strategy for international aid.
Matthew and Michael will be mostly walking between two events featured in the book, the Clinton Global Initiative (the “Philanthropy Oscars”) and the Global Creative Leadership Summit organised by Canadian philanthropist Louise Blouin. We will blog about these events a few times over the next few days.
The opening plenary session at the Global Creative Leadership Summit was on the future of global governance, and featured Matthew as moderator and four men who have been at the heart of tackling some of the biggest global problems – Dominique Strauss-Kahn, the managing director of the IMF; Pascal Lamy, head of the World Trade Organisation; Luis Ocampo, the chief prosecutor of the International Criminal Court; and Michael Chertoff, America’s former secretary of homeland security.
Lamy said he was reassured that the leaders of America and China seem keen to contain the effects of the recent protectionist move by the Obama administration against imports of Chinese tyres. Let’s hope so.
Chertoff thought there was an opportunity for focused global action to tackle piracy at sea, which “we are less effective at policing now than we were 200 years ago”.
Ocampo said that real progress is being made in persuading governments of the need for the international rule of law and enforcement of it.
Strauss-Kahn said the primary goal of the IMF was to promote peace and prevent war, which might have been a real possibility had the economic crisis that the IMF helped manage through unprecedented global coordination of economic policy instead turned into a depression. He said that on average a country involved in a war lost 14% of its GDP over a seven year period, and wealth was destroyed amounting to two and a half times GDP – so well worth avoiding on economic grounds as well as all the rest.
Matthew asked each of them what single change would improve their ability to solve global problems. There was general agreement that the greatest need is for the organisations of global governance to have, in Lamy’s words, “more legitimacy”. How to give them that seems a worthy challenge for philanthrocapitalists. Next stop, CGI.
Tags: Clinton Global Initiative, Dominique Strauss-Kahn, Global Creative Leadership Summit, International Criminal Court, Louise Blouin, Luis Ocampo, Michael Chertoff, Pascal Lamy
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September 18th, 2009
Much of the finance sector is “socially useless” argued Lord Turner, Britain’s top financial regulator, the other week. Many people have been especially sceptical about the social value of financial innovations, such as as derivatives (credit default swaps, for instance) and other financial engineering (such as sub-prime mortgage securitisation). Happily, the recent failure of the financial sector has inspired a movement, whose leaders include many philanthrocapitalists, to create a more socially useful finance sector. Moreover, rather than rejecting financial innovation, they are embracing it but using it in ways that will potentially drive positive social change.
The SoCap conference earlier this month was a showcase for some of the best thinking about how to put social mission at the heart of the capital markets, and (though this may be a more controversial claim) to put capital markets at the heart of social mission.
Matthew moderated a fascinating plenary involving practitioners from every part of the social capital market spectrum, ranging from classic gift philanthropy through lending (at or below market rates of interest) to unabashedly for-profit. The panelists broadly agreed that each of these different sorts of capital had a useful role to play – there is nothing inherently better or worse about any of them – but there needs to be a much better understanding of the strengths and weaknesses of each type, so that the right sort of capital is used at the right stage in the solution of any social problem.
One panelist was Jed Emerson, who has been grappling with the twin needs of profit and social mission longer than most, coining the term “blended value” to describe the triple-bottom line goals of businesses (profit, environmental sustainability, social good). He has now joined a hedge fund “fund of funds”, Uhuru, which is trying to make for profit investment using sustainability as a criteria for selecting the hedge fund managers it invests in.
Emerson put up a spirited defence of hedge funds – which are typically seen as evil by social-mission driven folk – arguing that many of them base their investments on taking a long-term view of a company’s prospects, which often makes them keener on sustainability than short-term focused investors. (However, he does not regard as socially-useful “black box” hedge funds that profit by making short-term trades based on churning vast amounts of data in search of short-term trends or anomolies to exploit.)
Emerson even made the case, persuasively, for short-selling being a force for social good, by allowing investors to drive down share prices that rise too high (perhaps because of an excessive focus on short-term factors at the expense of sustainability). He is writing a paper on the subject, which should be an interesting read. He has also written an excellent cri de couer about how we need to see this crisis as an opportunity to reform capitalism in a must-read special issue of the Federal Reserve Bank of San Francisco’s Community Development Investment Review.
Another panelist, Alvaro Rodriguez Arregui of Ignia, a bottom-of-the-pyramid investment firm, called on philanthropists in particular to take bigger risks. As we argue in Philanthrocapitalism, philanthropic capital is uniquely well-placed to take the sorts of risks that no other capital can – a theme Rodriguez elaborated by arguing that philanthropic capital should be used to develop “proof of concept” business models in new markets which traditional for-profit investors currently regard as too risky. Microfinance is the role model here, which went from charity to profit over a 30 year period, meeting the needs of many more poor people as it did so. Rodriguez thinks the same can happen in other markets serving the poor, but in less time if philanthropists and others learn from the experience of microfinance – and take bigger risks.
Rodriguez explains this in more detail in an article (with Vera Makarov) in the latest issue of Alliance magazine. This also features an editorial on “discontinuous thinking” by Matthew, who guest-edited the issue, and two other articles that focus on socially-useful finance.
The first, by Peter Blom of Triodos, a Dutch development bank, talks about the need for values to be at the heart of banking. The second, by Reuben Abraham, highlights several fascinating examples of how financial innovation is helping the poor of the developing world.
There remain big challenges, not least to create the infrastructure of law and market institutions within which impact investing can thrive. But, it is wonderfully clear, there is now a lot of intellectual power and entrepreneurial talent going into making finance more socially useful. Let’s hope it succeeds.
Tags: Social capital markets
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September 8th, 2009
Philanthropy can sometimes be controversial but it rarely provokes public protests. Yet over the summer the people of the Northern Moor Estate in Manchester took to the streets to show their displeasure at the efforts of Sarah Ferguson, the Duchess of York, to fix their ‘broken’ community.
In a TV programme, ‘The Duchess on the Estate’, the royal philanthropist visited Northern Moor several times and raised £40,000 ($67,000) to build a new community centre. She certainly tapped into a public concern about the problems of poor communities where violent crime is out of control (although one politician may have gone too far when he compared Britain’s problems to those of Baltimore as depicted in The Wire, one of our favourite TV shows).
Indignant residents took to the streets last month to show their anger at what they saw as the Duchess’s inaccurate and stigmatising portrayal of their community. Some of the criticism smacked a bit of Northern belligerence, sneering at ’soft southerners’, since there are much worse places in Manchester than Northern Moor. For others, the very idea of philanthropy as a solution to complex social problems was anathema.
In the book we write about the way that a number of royals, from Prince Charles to Queen Rania of Jordan, are stepping up as celebrity philanthropists to use their brand and convening power for good. So, is the attack on the Duchess justified or is it just the usual bashing of one of the less popular royals (the Brits have never really taken Fergie to heart)?
Sadly, it is a bit hard to tell. We have not been able to track down a website for the Duchess’s foundation where we might have found evidence of impact, which is a shame (although there is one for her international charity Children in Crisis). However, we did find that she has written book called Reinventing Yourself with the Duchess of York, which inspired us (as humble subjects of the Queen) to offer our three top tips for the Duchess on reinventing herself as a genuine philanthrocapitalist.
First, figure out how you are going to leverage change. Northern Moor’s new community centre may be a useful asset for the community but complex problems of deprivation demand changes in the way that government works. Fergie’s brand gives her access and influence to pass on what she has learned to help government to work better, which would be a real, enduring impact.
Second, evidence, evidence, evidence. Philanthropists, like royalty, may not hear what people really think about what they are doing. Philanthrocapitalists should seek independent feedback to test if what they are doing is really working.
Third, transparency is crucial. Good philanthropy should provoke criticism and debate – just look at Bill Gates and George Soros – and philanthrocapitalists should welcome it. Unlike her critics, we hope to hear more, not less, about the Duchess’s giving.
(Our thanks to proud Mancunian Alison Staples for alerting us to this story, which broke while we were away on our summer holidays.)
Tags: Duchess of York, Fergie
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August 26th, 2009
A philanthropist smoking crack with the homeless people he is supposed to be helping – how could this be good for philanthropy?
We are overjoyed to hear that a new comedy show about philanthropy, ‘The Foundation’, is coming soon to Canadian television. The premise is that an unscrupulous wide-boy (failed property developer) who has married money gets his hands on a substantial foundation, which he uses as a way to get into the best parties (which were not where he smoked crack – that was a moral lapse during a fact finding mission).
True, the central character, Michael Valmont-Selkirk, doesn’t seem to reflect what we are seeing from real-life philanthrocapitalists: he, says the press release announcing the show, ”doesn’t want to work that hard while doing it. Or really sacrifice anything. Or spend much time understanding the underlying issues”. Yet it is great news that philanthropy has reached such a level of importance that it is, once again, a suitable subject for satire. Far better to be satirised than treated in the overly-earnest-yet-glib manner of the recent American series, ‘The Philanthropist’. (Come to think of it, perhaps that was an attempt at satire, too.)
The Victorian novelist Charles Dickens was constantly ridiculing philanthropists for their foibles and hypocrisies (click here for our description of his contribution to the Victorian golden age of philanthropy). He was a great believer in effective philanthropy, even acting as an adviser to Angela Burdett-Coutts, one of Britain’s leading donors of the day, but he also believed that there should be scrutiny and challenge.
Dickens was also a great writer. We have no idea if ‘The Foundation’ is any good. But, if it can help to widen the debate, everyone who cares about effective philanthropy should welcome this new contribution to the discussion. We might even learn something. Perish the thought!
Tags: Charles Dickens, Television, The Foundation, The Philanthropist
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August 25th, 2009
The recent decision by the English Charity Commission that two private schools are not doing enough to justify their charitable status has sparked a volley of criticism in the media, with accusations that the venerable Commission has succumbed to the politics of envy and even class war.
The controversy is the product of the 2006 Charities Act, which tried to tighten up the definition of the ‘public benefit’ that a charity must offer in return for generous tax benefits. The Commission’s interpretation of the new rules was that Highfield Priory School and St Anselm’s School were offering too few scholarships and bursaries to claim that they were anything more benificent than private businesses.
Rather than being a radical new departure, the idea that there needs to be some regulation of the charity sector goes back more than four hundred years to the Charitable Uses Act of 1601. Fans of the Victorian novelist Anthony Trollope (us included) will also be familiar with the controversies around the perceived abuses of a (fictional) medieval trust called Hiram’s Hospital that are the basis of his novel The Warden.
In the 21st century, the Charity Commission has moved cautiously in implementing the new rules, with much consultation along the way. Yet still there has been a furore. So far, as the New Philanthropy Capital blog pointed out this week, the debate has generated more heat than light.
There is a good case for a public benefit test. In our view, the public has a right to ask for something in return for the tax subsidy to giving. This seems to strike the people who run charities as an outrageous notion – not just in Britain, but in America, where the charity lobby is fighting politically driven attempts to get them to justify how the spend their tax-advantaged dollars.
So far, these attempts have made little progress. It seems that the Commission is going to struggle to make much headway, and charities saw off recent legislative proposals in California. We also wonder if the game is worth the candle. As the NPC blogger argues, the current public benefit test doesn’t tell you much about whether a charity is any good, just that it is following the rules.
In the end, we get the charity sector we deserve. If donors don’t ask tough questions about real impact and put their money where it achieves the most, weak charities will muddle along and the growth of good charities will be stunted. That is why we think that impact-focused philanthrocapitalists, along with philanthropic intermediaries like NPC, kiva.org and globalgiving, have the potential to do more to drive a step-change in the effectiveness of charities than regulation. To that end, the less controversial initiative by the Charity Commission to get charities to improve their reporting (such as this new template for aid agencies), may achieve more than the justified but probably doomed attempt to pursue a small number of the most egregious rule-breakers.
Tags: Charity Commission, Global Giving, Kiva, New Philanthropy Capital, public benefit, Trollope
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August 20th, 2009
Women, it seems, are more likely than men to give to overseas causes, says a new study in the Journal of Consumer Research. According to the paper’s authors, Karen Page Winterich, Vikas Mittal and William T. Ross Jr., men prefer to give to causes closer to home, when offered the choice between donating to victims of Hurricane Katrina or the Asian Tsunami.
Apparently we all tend to be a bit selfish but, say the authors, while men instinctively care most about themselves, women’s nurturing instincts cause them to care more about family and friends as well (what they call the ‘in-group’ of one’s close community). However, they go on to say, a strong ‘moral identity’ encourages some of us to widen out the range of people we care about. Among men, who innately care only for themselves, those with a strong sense of moral identity tend to extend their care from just themselves to their close community (the ‘in-group’). For women, who are innately less selfish and already care about the ‘in-group’, having a strong moral identity causes them to extend their care to people beyond their community, hence their concern for people overseas, known as the ‘out-group’.
So what does this tell us about the surge in interest among donors for causes in the developing world?
Since women are still not well represented among the rankings of the mega-rich, with honourable exceptions such as Oprah Winfrey, a rise in women donors probably cannot explain the trend for higher giving to the developing world. Yet perhaps it is a consequence of a change in the relationship between rich men and their wives? Bill Gates, for one, is always keen to stress that Melinda is an equal partner in their foundation; is it her feminine influence that has lifted his gaze from US causes to eradicating diseases like malaria? Maybe. Likewise, Jamie Cooper-Hohn at CIFF – though the philanthropic seed was probably planted in her hedge-fundie husband, Chris, when he saw extreme poverty first hand whilst traveling in the Philippines as a student.
To be fair, the new study does not claim to explain the choices of super-rich philanthrocapitalists, since it is based largely on students making hypothetical choices about where to give relatively small amounts of money. However, one factor that the paper alludes to may be an influence on super-rich as well as ordinary donors: that the sense of an ‘in-group’ (Katrina victims) and an ‘out-group’ (tsunami victims) is not fixed but is shaped by our connection to those people. So, as we learn more about another group of people, we may come to see them as part of our ‘in-group’ rather than our ‘out-group’.
As we point out in the book, successful entrepreneurs in a global economy are more likely to be well travelled than, well, your average congressman. As a result, they are probably more likely to see the needs of people overseas as those of their ‘in-group’. Peer pressure and the work of lobbying organisations such as the One Campaign have probably also helped to make donors more aware and more concerned about the needs of Africa, in particular.
The authors’ advice to fundraisers for causes such as the tsunami is to ”reposition the donation group as an in-group rather than an out-group so that individuals are more likely to include the donation group in the self.” The leaders of what we call ‘mass philanthrocapitalism’ have already understood this and have developed new tools to build a connection between donor and recipient. It is this relationship that lies at the heart of the success of kiva.org, for example, where a lender in, say, London is directly connected to a micro-credit customer of his or her choice in Lusaka. Happily, the internet is making possible many more such connections.
Tags: Bill Gates, Chris Cooper-Hohn, CIFF, Gates Foundation, Hurricane Katrina, Jamie Cooper-Hohn, Kiva, Melinda Gates, One Campaign, tsunami
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August 15th, 2009
Is animal welfare a legitimate cause for philanthrocapitalists? Are those foundation trustees who don’t think so sexist? These were two big questions raised at a press conference (attended by Matthew) in New York on August 11th by the American Society for the Prevention of Cruelty to Animals (ASPCA), the Humane Society and Maddie’s Fund. The three animal welfare charities announced they are launching a lawsuit that, if they succeed, could result in billions of dollars going to improving the care of dogs – money that, they say, would be a “game changer” for animal welfare.
The heart of the issue is a familar one in philanthropic lawsuits: donor intent. In this case, the three animal welfare groups argue that Leona Helmsley, the hotel billionairess, intended a significant chunk of her $5 billion estate to go to “caring for dogs”. By significant, they seem to think 50% is a fair share. Although Helmsley mentioned dogs, alone among charitable causes, as a focus of her foundation, in February of this year a court ruled that the five trustees appointed by Helmsley are free to allocate the money as they see fit.
On the foundation’s website, the trustees have posted a statement including the following: “Did Leona Helmsley intend for this charitable trust to focus on the care and help of dogs, rather than people? Absolutely not. Have the trustees of this vast fortune acted improperly and ignored Mrs. Helmsley’s instructions? Again, absolutely not.” This view is reflected in the initial grants made by the trustees: only $1m of the first $136m has gone to dog-related causes, mostly to provide guide dogs for the blind rather than animal welfare.
Although they describe it as the “most significant financial litigation in the history of animal welfare”, and that a “blatant abuse of the estate forged this alliance,” the three animal charities say that going to court is a last resort. They made strenuous efforts to advise the trustees on how the money could be put to good use to help dogs, but the response, they say, reflected a “disdainful attitude to animal welfare”.
The fact that Helmsley left $12m to care for her pet Maltese, Trouble, did not help get serious consideration of how the money could be used. (A lawsuit reduced this to $2m, of which $100,000 a year reportedly pays for a security detail for the pampered pooch.) Yet, as the three groups pointed out, there are serious issues of dog welfare that need to be addressed, including the 2m dogs “unnecessarily euthanised” each year; the increase of animal cruelty, including illegal dog fights; and the potential for neglected dogs to spread disease. The tough economy is making matters worse, with more dog owners unable to afford to keep their pet, and donations to animal welfare groups falling. 50% of the Helmsley estate could indeed be a “game changer”.
The animal welfare groups reckon that sexism may partly explain the attitude of what they point out are “male trustees”. Around 70% of donations to animal welfare charities come from women, they point out, and Helmsley’s trustees are not the first to ignore (allegedly) a female donor’s wish to support animal charities. The three animal welfare groups say the same thing happened at the Doris Duke Charitable Foundation and the Geraldine R Dodge Foundation, which of $16.5m in recent distributions gave only $5,000 to animal welfare (according to lawyers for the three animal welfare groups). Maddie’s Fund is a notable exception to this trend, as we write in Philanthrocapitalism, having been endowed by Dave Duffield, the founder of software firm PeopleSoft, in memory of his inspirational pet miniature schnauzer, Maddie.
These are serious matters. If nothing else, the case highlights the advantages of wealthy people giving while they are alive, when they can ensure their money goes to the causes they want. Alas, giving while living (to dogs or anyone else) did not seem to be Helmsley’s thing. Nor did paying taxes, evasion which earned her a jail sentence, a notorious entry in dictionaries of quotations (”We don’t pay taxes, only the little people pay taxes”), and the nickname, “Queen of Mean”.
Tags: American Society for Prevention of Cruelty to Animals, Dogs, Doris Duke Foundation, Humane Society, Leona Helmsley, Maddie's Fund
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August 11th, 2009
George Soros is at it again, making waves with another big, controversial gift – this time of $35m to help New York’s poorest school children.
He may be the favourite bogeyman of the right, but, as this latest gift shows, Soros certainly understands philanthrocapitalism. Indeed, as we write in Philanthrocapitalism, regardless of whether or not you share his political perspective, in terms of his approach, he is in many ways the best example out there of a risk-taking giver, who shuns safe bets in favour of unlikely causes. He also has a great understanding of the limitations of private philanthropy unless it can leverage other money – especially that of big business and the government.
The latest gift is all about leverage. As “matching funds”, Soros’s gift has released a large chunk of federal government stimulus money. As a result, $175m will go to provide some 850,000 school children in New York state each with a $200 “back to school” grant to spend on books etc.
Soros’s enemies on the right have criticised these grants for undermining the incentives of poor parents to work, because families receiving them have to be on welfare or getting food stamps. This is a ludicrous allegation, however, as there is nothing in economics that suggests an explicitly one-off grant of $200 would have any effect on incentives. The bigger challenge will be to ensure that the money generates truly additional spending on books, rather than being diverted to extra beer and cigarettes for parents, though apparently various strategies will be tried to encourage the proper use of the money.
This is another timely reminder to philanthrocapitalists that there is a huge opportunity for them to use their money to leverage the far larger sums being put to work by government – especially given the Obama administration’s enthusiasm for public-philanthropic partnerships.
“Because we are in a particularly difficult period with a very severe recession,” Soros says. “Philanthropy has been badly hit by the financial crisis and so the usual donors actually are cutting back. I feel that people who can afford it should step up to the plate and actually increase their philanthropic donations.” Right-wing or left-wing, who can disagree with that?
Tags: George Soros, leverage, New York, Schools
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July 31st, 2009
“It’s the Davos for 25-year olds,” was how David Jones, the CEO of global advertising firm Euro RSCG, described the company’s new initiative launched today, the One Young World summit to be held in London in February 2010. This “global exercise in collaborative creativity” is going to bring together 1,500 delegates from around the world to come up with an agenda for change that will be put to the United Nations, G20, G8 and so on.
The summit echoes the idea of the great British economist John Maynard Keynes that “there are not many who are influenced by new theories after they are twenty-five or thirty years age, so that the ideas which civil servants and politicians and agitators apply to current events are not likely to be the newest.” Over 25s need not apply to One Young World.
According to Jones, events like the annual World Economic Forum in Davos cater to the established and already successful. One Young World wants to hear from the next generation of leaders.
A genuinely radical part of their plan is to weight participation by the population of each country, so there will be 300 delegates from China and only 13 from Britain (although they admit that it is going to be hard to get authoritarian governments like that of Burma to agree to send a delegation). Some participants will be nominated, others headhunted but, as Jones responded when Michael asked him about legitimacy, online polls will also be used to select delegates (through a dedicated youtube channel).
This initiative responds to two key trends in philanthrocapitalism. First, Euro RSCG is trying to play to its core business strength – creativity. (A bit all-encompassing for a core strength, but there you go.) Second, it is part of the company’s business strategy to do well by doing good: Euro RSCG is responding to what Jones describes as “the biggest trend in business”, social responsibility. According to its own research, consumers want companies to be ethical and are willing to vote with their wallets.
This is a trend that Jones believes has got stronger during the economic crisis, even if corporate finances mean it has been more of a slog to find corporate sponsors for the summit.
Will youth and creativity find new solutions to global problems? So far, audience research for the summit says some obvious things – young people care about poverty and climate change. It also shows that young people feel frustrated by their political leaders – plus ca change.
The interesting bit will be to see if this process does throw up genuinely new ideas. Hopefully those of us over 25 are in for a few surprises.
Tags: Davos, EuroRSG
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July 21st, 2009
“Ten jobs may not sound much in America, but in India that is ten lives transformed,” says Anagha Kulkarni. The Indian entrepreneur is speaking in Manhattan’s Central Park on July 20th, at an event honouring the women and non-profits that are taking part in the 10,000 Women initiative launched last year by Goldman Sachs.
The investment bank is paying for, yes, 10,000 women over five years, mostly from developing countries, to receive a business/management education. Typically, each woman will receive around 200 hours of tuition. Anagha Kulkarni says that, as a result of what she has learned – about human resources and cashflow management, in particular – her family-run packaging firm has been able to create the ten jobs she mentioned.
Today it is almost obligatory to be cynical about Goldman Sachs – especially now, with help from the taxpayer, it has bounced back from the financial crisis with bumper profits, rather than doing the decent thing and going bust. Articles have poured scorn on the firm, from Rolling Stone to the New Yorker. No doubt these cynics will view the 10,000 Women initiative as nothing more than a marketing ploy, putting lipstick on a pig.
What is clear is that Goldman Sachs is doing a superb job with this initiative, and that there is a lot more to it than lipstick. It has forged partnerships with leading business schools and non-profits to deliver a terrific education in many different countries, each tailored to local needs (including full-time study in some cases and weekend study in others). In the spirit of philanthrocapitalism, it is serious about measuring the effectiveness and impact of its giving. Moreover, whilst some other troubled firms slashed their giving during the financial crisis, Goldman Sachs continued full-steam ahead with this initiative.
As we write in Philanthrocapitalism, no financial institution has a deeper tradition of giving back than Goldman Sachs, whose early leaders helped support causes ranging from the National Association for the Advancement of Colored People to Albert Einstein. Cynical or not, you have to marvel at the company’s genius: if you are going to earn extraordinary amounts of profit, what better cause to associate yourself with than philanthropically investing some of that money in the most promising job creators from the under-served half of the population in the developing world? This is an initiative that certainly deserves to succeed – indeed, as we have written before, to grow far bigger – and Goldman Sachs deserves credit for making it happen.
Tags: 10000 Women, Goldman Sachs, New Yorker, Rolling Stone
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July 17th, 2009
July 18th is Nelson Mandela’s 91st birthday. It is also the first of what a new movement hopes will become an officially recognised worldwide Mandela Day – indeed, it has already been officially adopted by South Africa and ahead-of-the-curve Ireland. (We are both old enough to remember the 1980s when the naming student bars after Mr Mandela was widely denounced as the work of “lefty” radicals. How the world has changed – for the better).
The goal is to inspire people by getting them to reflect on the great man’s life and values, to remind people that, in the words of his wife, Graca Machel, that “everybody has a bit of Nelson Mandela in them – if we put our minds to it we can all do wonderful things.”
The campaign wants everyone to volunteer 67 minutes to do something good, in honour of the 67 years that Mandela has been an activist. Another theme is the number 46664, his prison identity number on Robben Island, which appears on a metal bangle being sold to raise money to support Mandela Day and the charitable Nelson Mandela Foundation.
There are actually three Mandela-related foundations. The Nelson Mandela Foundation’s mission is to promote social justice and reconciliation, including through its “Memory Programme”. The Nelson Mandela Children’s Fund tries to help children, and the Mandela Rhodes foundation supports the development of future leaders in South Africa by sending them off to be educated at Oxbridge or the Ivy League. And of course, there is The Elders, an organisation of veteran statesmen and stateswomen chosen by Mandela who work behind the scenes to solve difficult political situations.
Mandela Day itself will be marked with a rock concert in New York’s Radio City Music Hall, featuring Stevie Wonder, Alicia Keys and Aretha Franklin, among others. On July 15th, NewYork’s Grand Central Station was the venue for a gala dinner birthday celebration, which featured inspiring speeches from Bill Clinton, Graca Machel and actor Morgan Freeman, who plays Mandela in a forthcoming movie, Invictus, based on the 1995 rugby World Cup. Mandela himself was too frail to attend.
It takes a lot to spoil a celebration of Mandela’s birthday, but the organisers of the gala dinner almost achieved this with a poorly judged fund-raising auction of Mandela-related art. This only managed to highlight how beaten up, psychologically as well as financially, well-heeled Manhattanites have been in the past year or so.
The organisers were clearly nervous that the auction would be a bust. The MC for the evening, veteran disk-jockey Paul Gambacinni, reassured guests that there would be no cameras in the room when the bidding began – picking up on the nervousness that the rich have nowadays in showing that they have any spare cash, even to give away. In the current climate, conspicuous displays of wealth – even conspicuous giving – is out.
Nor was the mood lightened when slow bidding for the second item (a portrait of Mandela, bidding opening at $50,000), after the first item had attracted only one bid, prompted a lady to grab the mike and lecture her fellow guests on the deserate need of Africans for their money – a message she repeated later in the auction, with similarly minimal effect either than to make everyone shuffle their feet miserably.
The contrast with the mood at last year’s 90th birthday celebration in London’s Hyde Park, which Mandela attended, could hardly have been greater. Then, the auction raised ₤4.4m ($7m), thanks to a bidding war between Elton John and Oprah Winfrey, and a spontaneous stint as auctioneer by Will Smith. This auction raised barely one-twentieth as much, and ended with what seemed excessive strong-arm tactics being applied to Morgan Freeman, who was eventually persuaded to part with $65,000 – though the great actor at least put on a good show of being pleased he won.
In conversations at the event, the lesson for fundraisers seems to be that in the current climate – economically, politically, socially – people would prefer to give in other ways. The charity auction should be abandoned, at least until happier times return.
This should not distract us from the bigger lesson, however, of the need for each of us to get in touch with our inner Mandela, and (re)commit to building a better world.
Tags: Auctions, Graca Machel, Mandela Day, Morgan Freeman, Nelson Mandela
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July 15th, 2009
In the past week the British Government and the Conservative Opposition have each launched new policy papers on international development. Sadly, neither seems to have grasped the implications of the philanthrocapitalism revolution.
The Government’s White Paper is a worthy document covering conflict, economic growth, climate change and a host of other issues.There is a pledge to give more money to nonprofits, think a bit more about nonprofit performance and fund community groups to do ‘innovative’ work. But the paper is short on specifics. We would have welcomed a bolder statement about partnering with philanthrocapitalists and social ent
