GAVI is the best example yet of philanthrocapitalism delivering real large-scale impact. Launched at the World Economic Forum in Davos in January 2000, it is a pioneering partnership between private philanthropy, NGOs, business, multilateral agencies and governments.

The pledging conference was co-hosted by the Bill & Melinda Gates Foundation and the governments of Britain and Liberia. It was preceeded by news that pharmaceutical companies have agreed to supply at a significantly reduced cost a range of life-saving vaccines, including a two-thirds price reduction on the rotavirus vaccine, which combats the leading cause of diarrhoea deaths. At it, governments collectively more than doubled their previous commitments and new donor governments said they will give for the first time, including Japan and Brazil. GAVI’s largest corporate donor, La Caixa Foundation, extended its financial commitment and new donors Anglo American plc and British hedge fund philanthropy Absolute Return for Kids (ARK) made their first pledges.

GAVI’s ability to attract additional funds at a time when budgets, particularly of govenments, are under severe pressure, is evidence both of a degree of political courage (not least by Britain’s ruling coalition, which is putting up over a quarter of the new money) at a time of scepticism about the value of international aid and, above all, of the fact that this is one aid policy that really works. As David Cameron, Britain’s prime minister, pointed out, “GAVI was one of the very top performers in our root-and-branch review of the agencies that deliver British aid because it demonstrates tangible results.” That said, even more money is needed if this opportunity to save lives is to be fully grasped, as even all the new funding will not be sufficient to prevent many premature deaths.

As we note in our book, the creation of GAVI was an important innovation by the philanthrocapitalism movement, not least because it showed that private actors could drive change in government and multilateral policies. Bill Gates told us that “GAVI was our first toe in the water – when we said, OK, it’s not just us spending our money wisely and bringing in smart people that do things; it’s us as one of the convenors of UN agencies which will help developing governments to create an initiative.”

Admittedly, the first round of GAVI financing taught Mr Gates a lot about the realities of using private money to leverage government funds: his foundation’s first $750m grant over five years to launch GAVI did not initially attract anything like the amount of government money that was expected. Now, his foundation does not commit unless its partners also put their money on the table at the same time.

This week’s announcement of the additional $4.3 billion for GAVI, to be deployed by 2015, suggests that this harder-nosed approach to partnership – in which this time the Gates Foundation is attracting an extra $3.3 billion from others in leverage on its $1 billion gift – is paying off, and should be the model for other such philanthrocapitalistic partnerships. Certainly, the children of the developing world will be better for it.

“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.

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.

“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.”

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!

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!

Kutcher, the “other half” of Demi Moore, is now the leading celanthropist when it comes to using the new media to promote a cause. (Point of information for those who think philanthrocapitalism is an ugly word: “celanthropist” was coined by Time magazine, whilst the winner is surely celebrity-baby’s Twitterlebrity.) However, if Oprah starts to “tweet” on a regular basis, she will soon overtake him.

Ray Chambers, the billionaire philanthrocapitalist who helped found Malaria No More, was excited about the potential of Twitter and other interactive technologies to help change the world, when he
spoke on April 17th at Georgetown University’s well-attended and strikingly upbeat Global Forum on “Profit, Policy and Philanthropy: The Keys to Global Development” (at which Matthew also spoke).

Malaria No More is fast emerging as one of the most innovative and effective partnerships in the world of philanthrocapitalism, with a coalition spanning News Corp to the Bill & Melinda Gates Foundation, the World Bank, British Prime Minister Gordon Brown and best-selling purpose-driven evangelical minister Rick Warren to, well, Ashton Kutcher. Read Matthew’s account of the entertaining goings-on at its first White house Summit here.

Whatever happens to the economy, we expect doing good to be transformed over the next few years by interactive technologies. Among other things, this will enable all donors – not just the super rich – to have greater confidence that their money is having an impact. It will also enable one of the most frequently ignored groups to have more of a voice – the needy people who philanthropy, large and small, is trying to help. We are big fans of internet-based organisations such as Kiva.org, DonorsChoose.org and globalgiving.com - but we also think they are only the beginning of what will be a revolutionary change. For a good read on the potential, we recommend “Causewired” by Tom Watson.

For anyone bemused by Twitter, check out this naughty Stephen Colbert moment as well as this how-to video on youtube. Matthew will start to “tweet” more frequently under the alias @mattbish. Help him beat Oprah to the two million mark by signing up to “follow” him here.