This offering was greeted with enthusiasm in some quarters, such as the World Economic Forum in Davos, yet also encountered some scepticism, both on the grounds that the idea is not particularly novel and that it may not mean anything. So it was with interest that we read a feature in the current edition of the always excellent Stanford Social Innovation Review in which Mr Kramer engaged in what was billed as a “candid” discussion of shared value with the representatives of ten major global corporations.

Do businesses recognise shared value as the next big idea? Well, the corporate folk gathered by Mr Kramer seemed to be lapping it up. Executives from a diverse range of businesses from money transfer giant Western Union to IT powerhouse Cisco happily described how their do-gooding slotted into the shared value worldview. And why not? It’s always nice to be part of the newest big idea.

Yet amid this love-in for shared value there was one jarring note. “I’m probably the only person at the table who’s not part of a corporate affairs organization or a foundation”, observed Beth Schmitt, the director of recycling for North America at metals behemoth Alcoa. Well spotted. That shared value, which is supposed to be at the heart of the business and at odds with traditional CSR, was being celebrated largely by CSR and PR people rather than core business executives strikes us as somewhat contradictory. 

This matters because tough questions do need to be asked about the role of business in society. Take the iconic mega-bank Goldman Sachs, for example, which hosted the roundtable discussion and showcased its 10,000 women project and 10,000 businesses initiative (for which Mr Porter co-chairs the advisory board, alongside Warren Buffett ad Goldman CEO Lloyd Blankfein) at the meeting. These are, in our view, good examples of smart, high-leverage corporate philanthropy. Yet, as we argued recently, such projects remain at the margin of Goldman’s business and do nothing to address bigger questions about whether Goldman’s core activity is actually socially useful.

Was the selection of participants at the roundtable actually a tacit admission that even those firms which most fervently champion shared value are really not doing much that wouldn’t qualify as traditional CSR?

“The vast majority of acivity in this area [CSR] is seen as separate from the business,” Mr Porter told a meeting of the Committee for Encouraging Corporate Philanthropy last year, as he mused on why so much corporate giving achieves so little impact: “I firmly believe that now we have to raise the bar”. We agree. But if shared value is going to be about anything more than the status quo, there need to be different people at the table.

Of course, this being Felix, the only evidence to support the charge of coddling that he presents is that, in his view, CEOs will agree with what we say. Yes, some do – because there are CEOs out there, like Indra Nooyi of PepsiCo and Paul Polman of Unilever, who do seem to be trying sincerely to rethink how their business runs. Yet there are many who don’t, as we have pointed out, because it is easier to restrict your corporate do-gooding to some PR-driven philanthropy, or to hide behind Milton Friedman’s dictum that the role of business is to maximise profits.

Felix goes on that when we say that a better capitalism is not about CEOs alone we are letting them off the hook. Not at all. We are trying to move the debate on from one about good and bad CEOs to look at fundamental issues about the incentives in the whole system. One of the commenters on his post puts it rather well, discussing the issue of CEO compensation:

“As long as compensation is based on the performance of each company and the measures of performance are financial, sales, profit, stock price etc etc or some mixture of these numbers, and the time frame is short term, mostly single year performance, all the discussion of “long term”, “enlightened self interest”, is so much crap.”

Indeed. That is why, in ‘The Road From Ruin‘, we argue for corporate governance reform, changes in the rules guiding institutional investors, new ways of measuring corporate and national economic success, and greater public engagement with how companies are run. These are arguments that Felix, sadly, will neither support nor even engage with.

There is, however, one accurate charge in Felix’s article – that (alas, some years ago now) Matthew was honoured as a Young Global Leader by the World Economic Forum. Why this matters and, indeed, is a central plank of his argument is unclear. (It presumably isn’t a criticism, as his colleague and editor-in-chief of the digital arm of Thomson Reuters, Chrystia Freeland, is also a Young Global Leader, and Felix himself attended this year’s World Economic Forum in Davos – at least, when he wasn’t swilling fine wine or skiving off skiing.) Yet maybe this makes sense in Felixworld, where it’s all about personalities rather than ideas.

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.

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.”

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.

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.

He goes on to make two serious points, neither of which really stand up. First, he dislikes us describing former politicians Bill Clinton and Tony Blair as “philanthrocapitalists”. Schwartz says he has no time for politicians in general, whilst blaming economic policies pursued enthusiastically by Clinton and Blair for the current mess. Well, maybe. But post-government, both Clinton and Blair have enthusiastically embraced philanthropy of the impact-oriented variety we champion in the book. Strictly speaking, as neither is a rich man, both Blair and Clinton are “celanthropists”, celebrity philanthropists, whose primary contribution comes from their brand and convening power: people take their calls. It is too soon to know whether Blair will prove a talented philanthrocapitalist, though there is no obvious reason why not, but as we document in the book, Clinton has undoubtedly been effective.

Second, Schwartz objects to the importance we give “leverage” – the idea that philanthrocapitalists need to achieve extra impact by using their relatively small sums of money to enlist partners who are far better funded. Schwartz complains that we focus only on leveraging government budgets. In fact, we see opportunities to leverage corporate and non-profit budgets, too. Besides, curiously, Schwartz is actually a big fan of the vigorous support for social investment provided by the British Labour government which, lest we forget, was headed for 10 years by Schwartz’s bogeyman Blair. Go figure.

Odder still, Schwartz says we have written a “very good book” – which is not surprising, as he is a card carrying philanthrocapitalist, who invests in for-profit social businesses, with a goal of doing well by doing good.

Friendly fire may also be the best description of recent criticism we have received from Phil Buchanan of the Center for Effective Philanthropy. We wrote an enthusiastic chapter about the contribution made in the for-profit world by intermediaries and professional advisors, and described some of the philanthropic intermediaries and advisors which we hope can play a similar role in the business of giving. Although we noted that none of these for-profit intermediaries and advisors, which include management consultants, money managers and investment banks, are perfect, and that they work best where they promote transparency and accountability, in a recent article Phil decided to dismiss this chapter as “Lehman Brothers to the rescue”.

As a schoolboy debating point, we grant that this is an excellent line. As a serious response to our argument, however, it is sadly lacking. We set out a long list of philanthrocapitalistic intermediaries and advisors, ranging from New Philanthropy Capital to McKinsey and Bridgespan, to Buchanan’s own Center for Effective Philanthropy. What does Buchanan think of these institutions, and the role they play? Does he think they improve the effectiveness of the philanthropic and non-profit world? It would be interesting to know.

Instead, Buchanan complains mystifyingly about “organizations that would not agree with the authors’ characterization of them as ‘philanthrocapitalist.’ I should know: the Center for Effective Philanthropy is one of them.” The Center for Effective Philanthropy is as clear an example of a philanthrocapitalistic intermediary as we can find: its goal is to improve the effectiveness of philanthropy by gathering information from those receiving grants from philanthropists, and relaying that information back to the philanthropists so they can improve their performance.

Curiously, Buchanan continues by quoting – presumably against us – Warren Buffett, saying that “In business, you look for the easy things to do. In philanthropy, you take on important problems, and it is a tougher game.” We feature this quote in the book, and devote a large part of the book to exploring why solving society’s big problems is a tougher game than business, and how to win that game.

He also quotes – again, seemingly with the goal of dismissing our arguments – Jim Collins, the management guru author of “Good to Great”, who has written about the dangers of simplistically importing business thinking into the non-profit sector. We agree: our argument is about the need to apply sophisticated business thinking, and we write at length about the dangers of business people entering the non-profit sector arrogantly and without proper understanding of the complexities of the problems they are addressing.

Buchanan may have missed all this, but Collins did not: he actually endorsed our book, which he described as “Important. Well-written. Timely. Here in this wonderful book, Matthew Bishop and Michael Green shine a light on sparkling examples of effective philanthropy, and how some of the most accomplished people are trying to solve the world’s most intractable problems. A superb portrait of a vital new force shaping the world today, Philanthrocapitalism deserves to be widely read.” Modesty prevents us from saying whether Collins is right – but he is certainly not against us.

Matthew outlined this proposal in two articles this week, in the Huffington Post and the Times of London. He first raised the idea during the closing global agenda plenary session at the World Economic Forum in Davos, prompted by a discussion of what business should do to reduce the risk of a social backlash. The proposal provoked quite strong reactions, both for and against.

As we write in the book, there needs to be a new social contract between the rich and everyone else. A key part of this contract should be that those who get rich do so by just means, and that they have an obligation to give back, and to do so in ways that use their talents to achieve real impact.

As Bill Gates said in Davos, although there is a shortfall in giving due to cuts by some philanthropists (though not him) who have been hit by the crisis, that shortfall could easily be made good if those wealthy people and business leaders who do not currently give seriously were to start to do so.

Gates made his case by stressing the ”carrot” that doing philanthropy is fun and fulfilling. But perhaps he should also wield the stick of the social contract. After all, Andrew Carnegie did so in the 19th Century, such as when he criticised people who failed to give their money away by the end of their life, saying “the man who dies thus rich dies discgraced.”

One of the film makers, Abby Disney, a grand niece of Walt Disney, is one of a growing band of philanthropists who are embracing the power of movies-with-a-message to change the world. (Jeff Skoll, who we write about in the book, is probably the philanthropist who has taken this furthest, not least by funding Al Gore’s “Inconvenient Truth”.) Earlier in the week, she appeared on a fascinating panel about philanthrocapitalism moderated by Matthew at Burda Media’s DLD conference in Munich, where she espoused the need to build strong non-profit organisations and attacked the narrow obsession of some philanthropists with measuring everything.

In Davos, however, her target was some big NGOs who she said “girl-wash” themselves, by talking up their enthusiasm for empowering women whilst failing to make much progress in addressing the structural problems that tend to disempower them. The women’s organisation in Liberia gained its power from being a grass-roots organisation and, Disney argued, by remaining one, refusing to accept a seat at the peace negotiations as to do so would have involved compromises that could have weakened its voice.

Hearing Tutu speak is to be reminded of why The Elders is such a great idea. He is exactly the sort of wise, experienced old person that world leaders should turn to in a crisis, and it is excellent that through the efforts of philanthrocapitalists, starting with Peter Gabriel and Richard Branson (as we discuss in the book), Tutu and his 11 fellow Elders are now properly funded so they can pursue their work in a more effective and strategic way. Following the documentary, his discussion of the problems of masculinity (especially the insecurity of men that often drives them to do bad things), in particular, was honest, self-critical and inspiring.

Tutu talked briefly about the power sharing deal just announced in Zimbabwe, which The Elders played a key role in brokering. He made it clear that many aspects of the deal made him uncomfortable, yet he urged that the international community give it every chance to succeed whilst remaining tireless in its scrutiny of the implementation of the deal and in its insistence that justice be done. Let’s hope that one day there will be an uplifting documentary to be made about Zimbabwe’s escape from hell.

At this year’s Davos, the mood is decidedly sombre, and rightly so. The slumping world economy has destroyed a large chunk of the financial worth of companies and the rich alike. Moreover, many people blame this on Davos Man and Davos Woman, who have after all been running the world as it has gone pear shape.

We hope that the economic crisis will cause business leaders and other wealthy folk, as well as the politicians rubbing shoulders with them in Davos, to take even more seriously the message of Philanthrocapitalism. If they are to lead the world out of this crisis, it is likely to require them to demonstrate their commitment to the well-being of society, not just to their narrow financial interests.

This is a message that is getting a good reception at Davos. Yesterday Matthew co-hosted a well-attended lunch to discuss “philanthrocapitalism in action”, along with Nancy Lublin of “DoSomething.com”, a non-profit that encourages social action by teens. and venture-capitalist Matt Cohler. DoSomething recently held a “non-profit IPO”, which Matthew wrote about in The Economist.

The event was lively, inspiring and well-attended. Participants included several leading philanthrocapitalists – Marc Benioff, John Studzinski, Kim Samuel Johnson, among them; social entrepeneurs such as JB Schramm, the founder of College Summit; leaders of large NGOs, including the heads of Care and Youth Aids; Jim Wallis, of the Sojourners movement; and Arianna Huffington of the Huffington Post, who blogged about the event not once but twice. “Maybe it’s a sign of the times, but there was an overflow crowd at the luncheon, causing the organizers to open two additional rooms to hold the extra attendees,” she wrote in her second post. Let’s hope she is right.