Tech Billionaires

Reshaping Philanthropy in a Quest for a Better World

Lewis D. Solomon, Lewis Solomon

• Publisher: Routledge
• Year: 2017
• eBook ISBN: 9781351486811
• Edition: 1
• Topic: Sciences sociales
• Subtopic: Sociologie

In the first decade of the twenty-first century a new wave of thinking has emerged from tech billionaires that may shape the way private capital gets invested to tackle social problems. These entrepreneurs broke the business mold in the 1980s and 1990s and are now trying to break the traditional pattern of philanthropy pioneered by Andrew Carnegie and John D. Rockefeller, Sr. some one hundred years ago. Combining billions of dollars of their personal capital with new ideas, cutting-edge businesslike techniques, media and marketing savvy, the tech benefactors profiled in this book are attacking some of the globe's most intractable societal problems. In trying to make a difference in the world, these new philanthropists, dubbed "philanthrocapitalists" by rhe author seek to break down traditional barriers dividing business, charity, and government. As a result of the rapid wealth creation in recent years, the world now boasts 1,125 billionaires, many of whom are self-made, according to the Forbes' 2008 list, including Bill Gates, Pierre Omidyar, Jeffrey Skoll, Stepehn Case, Sergey Brin, Larry Page, and more. Their massive wealth has created new philanthropic challenges. Imaginative giving by the new billionaires is beginning to transform philanthropy in terms of timing, involvement, strategy, and tactics. How this development impacts society as a whole is the subject of Lewis Solomon's book. As the author notes, the traditional categories of business and philanthropy may no longer serve to meet the challenge of social problems. In the twenty-first century the tools and resources used to solve societal problems will be far more varied and mixed than previously. We now see interesting partnerships and new ways of thinking. The divide between profit and social good will narrow. If successful in using their money in innovative ways, government or for-profit business could scale up the catalytic efforts of the new philanthropists. This volume is a proactive, innovative guide to a new era, not just a new technique of monetary support.

1

Introduction

Over the last decade a new wave of thinking has emerged from tech billionaires that could shape the way private capital gets invested to tackle social problems. These entrepreneurs broke the business mold in the 1980s and 1990s and are now trying to break the traditional pattern of philanthropy pioneered by Andrew Carnegie and John D. Rockefeller Sr., some one hundred years ago. Combining billions of dollars of their personal capital with new ideas, cutting-edge businesslike techniques, media and marketing savvy, the tech benefactors profiled in this book are attacking some of the globe’s most intractable societal problems. In trying to make a difference in the world, these new philanthropists dubbed philanthrocapitalists, seek to break down the traditional barriers dividing business, charity, and government.

Beyond their blockbuster donations, they have something different in mind than traditional giving. Through their innovative approaches, they are changing the structure of philanthropy, by combining market-based techniques, even profit-making ones, with their charitable notions.

As a result of the rapid wealth creation in recent years, the world now boasts 1,125 billionaires, some sixty percent of whom are self-made, according to Forbes’ 2008 list.¹ Their massive wealth has created new philanthropic challenges. Imaginative giving by the new billionaires is beginning to transform philanthropy in terms of: timing; involvement; strategy; and tactics.

Timing of Gifts. The new billionaires, particularly those who made their fortunes in technology, are giving while living. They are handing over the bulk of their fortunes during their lifetime, not making promises to be fulfilled by bequests on their death. They are sharing their wealth at midlife, rather than in their wills, thereby heralding a new style of giving, so that they can take part in achieving their goals and helping solve the worst problems plaguing society.

When billionaire Jeffrey S. Skoll, the former president of eBay, was fifteen, his father came home one day and announced to the family that he was seriously ill with cancer. What bothered his father the most was not the thought of dying, but that he had not done the things he wanted to do with his life. “That had a huge impact on me,” Skoll recalled. Al-though his father survived the health crisis, Skoll indicated, “I realize time is fleeting. I didn’t want to wait till it was too late to do something with my life.”²

The tech billionaires profiled in this book are giving away vast portions of their wealth while they are still able to oversee where the money goes and how it is used. They seek to make certain their gifts effectively fund causes they have chosen, rather than trusting future foundation heads (or trustees), who may stray from their designated missions.

Involvement. The tech billionaires are fully engaged philanthropists. They want to be directly involved in how their money is spent. They run their philanthropic endeavors in the same hands-on way they ran their businesses. Seeing themselves as investors, they want to apply the best elements of the for-profit world to their giving so as to maximize its social return, at least as each one sees it.

The new philanthropists seek to employ the same smarts and diligence that made them rich. They are finding new ways to increase the efficiency of their giving and measure returns. They bring with them businesslike rigor, MBAs-metrics, an emphasis on scalability, tough evaluation techniques, and willingness to take risks but stop funding projects that are not performing as they had hoped. Many work as hard at giving their money away as they did at making it.

In their giving, the tech billionaires often strive to be partners, not mere patrons. Finding one or more issues of great personal significance, the new philanthropists may place large “bets” on a limited number of projects they regard as effective and introduce performance measurement techniques to assess their success, including agreed-on timelines, specific benchmarks, and mandatory impact reports. Rather than handing over their money to others to spend, they are involved in key funding decisions, bringing a pragmatic business approach to their giving. With their hands-on approach, they work with grantees to help them achieve their aims by providing continuing advice on a variety of management-oriented topics, including strategy, organizational development, and performance. In short, the new philanthropists want to apply the best elements of the for-profit world to their giving. They also see their task as forging alliances and building networks with government and business as well as other donor-foundations and nonprofit recipients.

Following the path of Carnegie and Rockefeller, for some philanthropy becomes a second career. They bring to it the same discipline and talent they used to accumulate their fortunes. Their demands for measurable results, efficiency, and greater openness and disclosure will reverberate throughout the nonprofit world.

Strategy. In bringing discipline and organization to the field, the tech billionaires try to match their philanthropic capital with a desire to meet urgent social needs. They want to mobilize and deploy private resources to improve our world. They want to attack problems of human suffering now, rather than later.

They seek to use their wealth to battle vexing societal ills from disease to poverty to global warming. They generally want to avoid hoarding their assets to create financial dynasties. Tales of offspring who became dilettante loafers terrify many.

Because some of the world’s most pressing problems are far beyond America’s borders, they funnel money to projects overseas. They work globally, strive to build programs, not edifices, and often focus on those absolutely the worst off.

Using their capital strategically, they want to maximize and leverage their giving. They know that however large their personal fortunes, they are dwarfed by the resources at the disposal of the public sector and the for-profit marketplace. To make a difference, they must concentrate their resources on problems not adequately dealt with by government or private businesses. In trying to help find solutions to some of the world’s most intractable problems, they can take risks to find new solutions that innovative governments and for-profit firms can then adopt on a larger scale.

Tactics. The modern philanthropist speaks about social investments. The language is entrepreneurial, sprinkled with references to metrics, scalability, accountability, and leverage, emphasizing the importance of being strategic and achieving an impact. They come at a time when the idea of entrepreneurial solutions to social problems is gaining momentum.

By pioneering in the development of a hybrid philanthropy model, blending giving to nonprofit organizations and investing in for-profit businesses, the tech billionaires, who reaped the benefits of capitalism, led by Pierre M. Omidyar, the founder of eBay, Stephen M. Case, the former CEO of America Online and ex-chairman of AOL Time Warner, and Sergey Brin and Larry Page, the cofounders of Google, believe it can be applied in the service of charity. Thus, they are impatient with longstanding lines drawn between business and philanthropy by legal, regulatory, and tax regimes.

They often search for both nonprofit entities and for-profit social purpose businesses, the latter combining both enterprise and social good. They seek to integrate the private sector, which is oriented to making money and the social sector, which is focused on serving society. According to Case, “We can and should integrate these concepts and these missions. Instead of all the organizations tending toward the extremes, the most dynamic, innovative zone would be somewhere in the middle, with businesses that are not only for-profit and social-service groups with their own earned income all contributing to positive, durable, meaningful social change.”³

Looking beyond the traditional approaches of private foundations as the exclusive vehicle for philanthropic initiatives, Omidyar, Skoll, Case, Brin, and Page are impatient individuals. They have accumulated vast wealth and are motivated to solve the immense, seemingly interdependent global problems of poverty, disease, and environmental degradation. Wanting to implement a high-impact strategy,⁴ they are troubled by the inadequate efforts of the national and transnational public sector to ameliorate these problems. They are pioneering in the development of new partnerships between and among the nonprofit, for-profit, and public sectors. With the existence of massive pools of wealth, they exemplify the effort to put their assets to work to meet social needs and solve societal problems, but with a hybridization of means. These innovators often use a market orientation with the objective to generate a social benefit.

A great rivalry exists among the new philanthropists, perhaps more now intense than even the competition among for-profit businesses. Billionaires try to outdo each other not only in how much they give away, but also how effective they can be in tackling social problems, through a variety of means. They are striving to develop a compassionate capitalism of doing well, by doing good. However, compared with the resources of the public and private sectors, their philanthropic capital and their annual grants are still tiny.

Overview of the Book

After discussing the rise of the grant-giving megafoundations pioneered by Carnegie and Rockefeller in Chapter 2, chapter three focuses on the wealthiest and most prominent tech billionaire, William H. (Bill) Gates Jr. In 1999, Gates and his wife merged two existing family foundations, creating the Bill & Melinda Gates Foundation, the world’s largest private foundation. The Gateses, now joined by billionaire-investor extraordinaire Warren E. Buffett, have followed a more traditional path delineated by Carnegie and Rockefeller, thinking big and focusing on clear goals. Using its massive resources and embracing risk, but not knowing how the projects it funds will turn out, the Gates Foundation seeks a long-term cure for, not just the treatment of the symptoms of, social ills, including K-12 public education in the United States and public health in the world’s poorest nations. Looking for gaps in giving as well as areas of public and private sector inactivity, in the field of, for example, global health inequities, the foundation focuses on trying to solve problems where no one else has previously stepped in. Bill Gates has also used his personal leadership and presence to call attention to issues of significance to him.

Ebay’s Pierre Omidyar and Jeffrey Skoll, discussed in Chapter 4 and 5, respectively, have pioneered a culture of giving among Silicon Valley’s new money types. Seeing the traditional foundation model, as implemented by Gates on a massive scale, as too hidebound, they have brought a venture capitalist mindset to the business of philanthropy. Each in his own way is blazing a new trail.

Omidyar has sought to blur the lines between business and philanthropy. Omidyar Network serves as an innovative model for hybrid philanthropy. Including both a tax exempt arm and a taxpaying investment vehicle, it funds both nonprofit entities and for-profit social purpose businesses in an effort to create opportunities for individuals to make a difference and help people make a better life for themselves and for their communities. Few efforts blur the line between making money and doing good as do the for-profit microfinance organizations, backed by the Omidyar Network and the Tufts-Omidyar Microfinance Fund, which provide small loans to poor people starting or expanding their own businesses.

The Skoll Foundation funds projects undertaken by social entrepreneurs who apply businesslike approaches to solving social problems. Skoll sees the need for longer-term funding than foundations typically have offered, emphasizing the sustainability of supported organizations, permitting grantees more flexibility in spending funds, and partnering with recipients in thinking about how to measure success and helping in getting their message out to a wider audience. He focuses on a method, social entrepreneurship as undertaken by nonprofit organizations, not program areas, such as health or education, or narrow interests, such as healthcare for children. Skoll seeks to identify the most promising social entrepreneurs, individuals with innovative ideas that address pressing social problems and generate a public benefit, and then to amplify their impact. He also funded and led a for-profit film production venture to spread the word directly on causes he supports through filmanthropy—films with a social message.

Though his innovative, but much smaller, private foundation, which seeks to merge the distinctions between charity and the public and private sectors, Steve Case, as discussed in Chapter 6, has become a big proponent of hybrid philanthropy. More importantly, Case is a proponent of creating and building mission-driven for-profit businesses. He funded the Revolution Group LLC, which seeks to invest in companies giving consumers more choice and control over healthcare, through its web-based healthcare information service, among other endeavors.

Sergey Brin and Larry Page created Goo­gle­.or­g, the philanthropic unit of Google Inc. As analyzed in Chapter 7, the Google arm includes a traditional tax exempt foundation that makes grants to nonprofits. Goo­gle­.or­g also has the flexibility to invest in profit-making, but not necessarily profit-maximizing, ventures that also generate significant social and environmental returns. Building on Google Inc.’s information management and engineering prowess, Brin and Page are pioneering in creating a brand-enhancing, profit-making, taxpaying type of philanthropy designed to tackle systemic problems, including alleviating climate change by developing more advanced hybrid cars and finding renewable energy sources that are less expensive than coal, creating systems to predict and prevent disease pandemics, and empowering the poor with information about public services. Goo­gle­.or­g also seeks to create jobs by investing in small and medium-size businesses in the developing world.

The book concludes in Chapter 8 with a discussion of the value added by the new philanthropists. It examines their impact on older and other contemporary philanthropists, both of whom also dedicated themselves to a quest for a better world. After assessing Bill Gates’ call for a revision of capitalism, what he calls “creative capitalism,” it provides a brief overview of Muhammud Yunus’s concept of social enterprises, a hybrid business form, hopefully combining the best features of the for-profit sector with the best aspects of the nonprofit sector. Also considered are the possibilities offered by a social stock market, which may help overcome the lack of access to capital needed to build sustainable social enterprises to scale.

The transformation of philanthropy, in which the lines blur between the for-profit and nonprofit sectors, between business and philanthropy, marks the growing engagement in charitable giving by the tech billionaires profiled in this book. More generally, the tech billionaires may spur the development of hybrid business forms and the ability to link donors and investors with social purpose entities. It may be possible to both make mo...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Foreword
• 1. Introduction
• 2. Private Foundations in the United States: The Impact of Andrew Carnegie and John D. Rockefeller Sr.
• 3. Bill and Melinda Gates Foundation: Big Goals but Following the Traditional Foundation Model
• 4. Pierre Omidyar and Omidyar Network: Pioneering Hybrid Philanthropy
• 5. Jeffrey Skoll and His Philanthropic Endeavors: Funding Social Entrepreneurs and Motion Pictures
• 6. Stephen Case: The Rise and Fall of a Business Empire, then Entrepreneurship and Innovative Philanthropy
• 7. Sergey Brin, Larry Page, and Google.org: The Corporation as Philanthropist
• 8. Conclusion
• Index