The Great Give Away
Resource type: News
Sunday Times |
When you have as much money as Bill Gates, you have to work damn hard to get rid of it. At least if you want to disposeof it wisely. So in May the Microsoft founder, whose fortune is estimated at $53 billion (¤40 billion), was in India, checking out projects that his charitable foundation is funding for new vaccines and more productive farming methods. In June he was in Nigeria monitoring the progress of a programme to eradicate polio. Last month he was in Vienna for an international conference on Aids his foundation is funding the development of a pill or gel to reduce the risk of HIV infection. And last Friday Gates was in California for a “techonomy” conference, a meeting of planet-sized brains about how innovation can save the world. Amid all that Gates, along with Warren Buffett, the billionaire investor, has also found time to rustle up a few more dimes for charity.
Last week the two men revealed that they have persuaded 40 of America’s richest individuals to sign up to the Giving Pledge, an extraordinary scheme that could transform the nature of philanthropy. In adopting the pledge, the billionaires have publicly agreed to give away “the majority” of their wealth during their lifetime or relatively soon after their death. Gates and his wife Melinda have already assigned “the vast majority” of their assets to their charitable foundation, which has committed almost $23 billion to grants since its inception in 1994. Buffett, 79, has promised that “more than 99%” of his fortune, estimated at $47 billion, will go to philanthropy “during my lifetime or at death”. George Lucas, the film-maker behind Star Wars, is worth $3 billion and says he is “dedicating the majority of my wealth to improving education. It is the key to the survival of the human race”. Pierre and Pam Omidyar, whose fortune from eBay, the auction website, is estimated at $5.2 billion, wrote in their Giving Pledge letter: “We have more money than our family will ever need. There’s no need to hold onto it when it can be put to use today.”
America and Britain have noble traditions of philanthropy dating back to fortunes made in Victorian times. Think John D Rockefeller. Think Sir Henry Wellcome, founder of the Wellcome Trust. However, the initiative proposed by Gates and Buffett is of a different magnitude. They have no desire to create charities that act almost like dynasties, doling out small proportions of their wealth each year in perpetuity. Instead, they want to spend and solve problems on an epic scale within ambitious time frames. One expert on philanthropy said: “It potentially defines a real change in the way big-scale philanthropy gets done.”
Similar moves are evident in Britain. This year Albert Gubay, who made a £480m (577m) fortune from supermarkets and gyms, pledged to give all but £10m to charity and religious causes. Lord Sainsbury has already given £275m of his family fortune to charity. Can Gates and Buffett pull off a transformation in giving? Will more of the world’s billionaires follow their lead? Gates built his fortune from almost nothing after quitting Harvard University in 1975 to start a computer software company with his schoolfriend Paul Allen. The success of Microsoft made him, until recently, the richest man in the world. Two years ago he stepped back from the firm to devote himself to philanthropy. He has brought to it the same incisiveness and drive that made Microsoft so successful. The foundation he set up with Melinda concentrates on three areas: global health problems, innovations to spur global development and education in America. It sets bold targets and demands results. Already, for example, his focus on providing insecticidecoated bed nets has reduced incidences of malaria in Africa “substantially”. His long-term goal is to produce a vaccine. Gates met a like-minded billionaire in Buffett, who decided there was nobody better to spend his money on good causes than the Microsoft founder. So in 2006 Buffett, rather than create his own charitable enterprise, promised his wealth to the Gates Foundation. He has already handed over $6.4 billion. Then Buffett suggested they try to spur a new approach to giving among other billionaires.
In March 2009 he, Gates and David Rockefeller wrote to a number of billionaires inviting them to pitch up at 3pm on May 5 in New York for a chat about giving, followed by dinner. Among those who took up the invitation were the media moguls Michael Bloomberg, Ted Turner and Oprah Winfrey and the financier George Soros. Further discreet meetings of the super-rich followed, including dinners in California, London and others in India and China. The idea of the Giving Pledge was taking shape. Some tight wads gave Gates and Buffett the brush-off. Others preferred to keep their donations private. But among those who have signed up are Bloomberg, worth $18 billion, Ronald Perelman, the investor, worth $11 billion, and Larry Ellison, the software magnate, who is the world’s sixth richest individual with $28 billion. Ellison revealed that he has already given hundreds of millions of dollars to medical research and education and that he plans to give away 95% of his wealth. He added: “Until now I have done this giving quietly because I have long believed that charitable giving is a personal and private matter. So why am I going public now? Warren Buffett personally asked me to write this letter because he said I would be ‘setting an example’ and ‘influencing others’ to give.” That is a key point, according to Martin Brookes, chief executive of New Philanthropy Capital, a firm in London that advises on charitable giving. “The Giving Pledge is very significant,” he said. “It’s not just the vast sums, it’s the public manner of it. “One of the things we have argued for in the UK is that people, particularly rich people, should make their giving very public and provide a role model for others.
Research shows there are quite strong peer effects.” In other words, if one person is seen to give, others will, too. Few like to be publicly labelled Scrooge. Brookes also identifies the limited life span of the Gates Foundation as an important development. The foundation has stated that it will aim to have liquidated itself within 50 years of Gates’s death. While Gates is only 54 and could live many more years, he clearly does not envisage his foundation persisting through the generations. “In a lot of respects I think that is a good thing,” said Brookes. “It creates pressure on the organisation and a real desire to have an impact. It’s saying, ‘We are going to spend this money, we are not going to create any sort of dynasty’.”
In Britain the outlook is rather different, although there are some generous donors. As well as Sainsbury and Gubay, other notable philanthropists include Christopher Cooper-Hohn and Arpad Busson, both hedge fund financiers. Overall, the culture of giving is much weaker there than in America. “Sadly, it is true that rich people in the UK are not as generous as in the US,” said Brookes. “And, actually, rich people in the UK are not even as generous as poor people, if you measure it by the proportion of income that they give.” Part of the disparity is down to the extensive welfare state that Britain has compared with America and to the bigger tax breaks given to donors in the States. David Emerson, chief executive of the Association of Charitable Foundations, said: “In a sense, philanthropy is part of the social services in America. It’s not quite the same context. “But it’s also a different culture.
Britain doesn’t have public recognition of philanthropists, or even philanthropists wanting to have that recognition. Culturally, we are not comfortable with it.” Critics say there are good reasons to remain wary of overpraising philanthropy. For a start, it is not always beneficial and it can have unintended consequences. A reclusive billionaire called Bidzina Ivanishvili, who made a fortune in Russia, has apparently spent millions helping impoverished locals after returning to his native Georgia. But he discovered that paying their electricity bills merely led to them leaving the lights on all the time. Some also complain that he is creating a culture of dependency among the poor rather than providing any long-term solution to their deprivation.
In America, Pablo Eisenberg, a senior fellow at the Center for Public & Nonprofit Leadership at Georgetown University, Washington, argues that much philanthropy fails to address the most urgent needs. By some estimates only between 5% and 15% of money from charitable foundations goes to help the poor and disadvantaged minorities. Instead, huge sums are lavished on colleges, the arts and sport. One problem with “philanthro-capitalism” is that donors who take a close interest in where their money goes may tend to pick issues of personal interest rather than those that most urgently need help. The level of existing giving indicates that Gates and Buffett have a long way to go in encouraging Americans to give away the majority of their wealth. Figures from the US Internal Revenue Service suggest that the 400 biggest taxpayers in 2007 gave only about 10% of their income to charity. Nor do people seem to give much more when they die, judging by a study of 38,000 estates in 2008. It indicated that about 12% of the total value of the estates was left to charity. Even in the boom decade to 2006, before the credit crunch, there was no evidence that the rich became more generous, according to The Economist. Nevertheless, in Gates, Buffett and Ellison three of the richest men in the world plus the others who have signed the Giving Pledge, there is a powerful signal. Nor do such individuals like to fail in their goals.
If anyone can encourage the wealthy to give their money to good causes, it is those who have been most successful in making vast fortunes in the first place. Other great givers, Andrew Carnegie born in 1835, the Scottish-American began his working life aged 13 in a Pennsylvania bobbin factory. By 24, he was earning $1,500 (1,128) a year, more than $200,000 in today’s currency. In the 1870s, he founded the Carnegie Steel Company and used the wealth it brought him to fund his philanthropic interests in scientific research, peace and education. He is said to have given away $350m almost 90% of his fortune. Chuck Feeney, an Irish-American born in 1931, Feeney made his fortune as a co-founder of the Duty Free Shoppers Group then spent his last decades secretly giving it all away. Ireland has received more than $1.2 billion from his organisation, Atlantic Philanthropies. Declan Ryan, a son of the late Tony Ryan, a co-founder of Ryanair, Declan Ryan secretly donated 27m over five years to worthy causes through his One Foundation, which is believed to be worth more than 100m. Thirty-five non-profit organisations in Ireland and Vietnam have benefited from Ryan’s brand of “active philanthropy”.
This article originally appeared on the Sunday Times, 8 Aug. 2010. Access online is by subscription only.