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UKCOVER CMYK Cyan Magenta Yellow Black The business of giving A survey of wealth and philanthropy February 25th 2006 Republication, copying or redistribution by any means is expressly prohibited without the prior written permission of The Economist C B M R Y G K W C B M R Y G K W The Economist February 25th 2006 A survey of wealth and philanthropy 1 The business of giving Also in this section To have, not to hold The rise of the new philanthropist. Page 3 The birth of philanthrocapitalism The leading new philanthropists see them- selves as social investors. Page 6 The good company Is corporate philanthropy worthwhile? Page 7 The rise of the social entrepreneur Whatever he may be. Page 9 Virtue’s intermediaries A host of new businesses is trying to make the philanthropic market work better. Page 12 Philanthropy is ourishing as the number of super-rich people keeps Faith, hope and philanthropy growing. But the new donors are becoming much more businesslike about the way their money is used, says Matthew Bishop What the new breed of donors can doand what it can’t. Page 14 IVING away money has never been so turning to philanthropyand of those that Gfashionable among the rich and fam- do, many continue to give in unimagina- ous. Bill Gates, today’s pre-eminent phi- tive ways, say to support an institution lanthropist, has already handed over an such as their alma mater. But the extra unprecedented $31 billion to the Bill and wealth is creating huge new opportunities. Melinda Gates Foundation, mostly to This is a historic moment in the evolution tackle the health problems of the world’s of philanthropy, says Katherine Fulton, poor. Its generosity has earned the couple co-author of a recent report on the indus- Time magazine’s nomination as 2005’s try, Looking out for the Future. If only people of the year, along with Bono, an 5-10% of the new billionaires are imagina- activist rock star. tive in their giving, they will transform phi- The next generation of technology lanthropy over the next 20 years. leaders are already embracing the same For now, it does look as though every- ethos. Pierre Omidyar, the founder of one, from Michael Bloomberg, the billion- eBay, and Je Skoll, the auction site’s rst aire mayor of New York, to hedge-fund ty- chief executive, are each putting their bil- coons and lm stars, is opening their lions to work to make the world a better wallet for a good cause. In Manhattan place. And when the founders of Google, these days, a table for ten at the best chari- Sergey Brin and Larry Page, took their com- table fund-raising dinners can cost $1m. pany public, they announced that a slice of Celebrities are increasingly putting their the search engine’s equity and prots own money into good works, as well as Acknowledgments would go to Google.org, a philanthropic playing their time-honoured role of using In addition to those mentioned in the survey, the author arm that they hope will one day eclipse their fame to raise money from others. The would like to thank, in no particular order, Emily Stonor, Google itself in overall world impact by lm star Angelina Jolie, for example, has Adam Waldman, Lynn Taliento, Alex Nicholls, Frances Cairncross, Pamela Hartigan, Jamie Drummond, Dambisa ambitiously applying innovation and sig- backed up her public advocacy of the Moyo, Jamie Cooper-Hohn, Luc Tayart de Borms, Jim nicant resources to the largest of the cause of refugees with substantial gifts to Barker, Mike Green, Caroline Hartnell, Alliance magazine, world’s problems. refugee organisations. Mark Evans, Lord Bhatia, Martina Gmur, David Giunta, Doug Bauer, Sylvia Mathews, Mark Campanale and Felicity The new enthusiasm for philanthropy The media, which used to take little no- von Peter. is in large part a consequence of the rapid tice of charitable donations, now eagerly wealth-creation of recent years, and of its rank the super-rich by their municence A list of sources can be found online uneven distribution. The world now and berate those they regard as tight-sted. www.economist.com/surveys boasts 691 billionaires, 388 of them self- The latest Business Week list, which ranks made, compared with 423 in 1996, accord- giving in the latest ve years, is topped by An audio interview with the author is at ing to Forbes magazine’s rich list for 2005. Intel’s co-founder, Gordon Moore, and his www.economist.com/audio Not all of these newly wealthy people are wife Betty, pushing Mr and Mrs Gates into1 2 A survey of wealth and philanthropy The Economist February 25th 2006 2 second place. Among America’s super- drew Carnegie, John D. Rockefeller, Joseph mir Putin, averse to concentrations of wealthy, it seems that only Warren Buett, Rowntree and William Wilberforce. This power outside his government, has the world’s second-richest man, still dedi- survey will argue that if the new genera- cracked down on non-governmental orga- cates all his energies to making more tion of philanthropists get it right, they too nisations (NGOs) and their backers. Mikh- money rather than giving away some of can make a real dierence to the world. But ail Khodorkovsky, the former boss of Yu- what he already has. But even he says it for that to happen, philanthropy will have kos, a big oil company, was reportedly will all go to charity when he dies. to shed the amateurism that still pervades Russia’s leading philanthropist before he Nor is the fashion for giving limited to much of it and become a modern, ecient, was jailed after a show trial. America, where philanthropists have long global industry. But just as the world’s wealthy and played a particularly prominent role. In For much of the past half-century, powerful are discovering the joys of giv- Europe, too, entrepreneurs who have America seemed exceptional in its enthu- ing, students of the American model of made a lot of money are starting to hand siasm for philanthropy. Claire Gaudiani, philanthropy are becoming increasingly some of it to charitable causes. Examples in her book, The Greater Good: How Phi- critical of its aws. This is not just a private include Britain’s Dame Anita Roddick, lanthropy Drives the American Economy concern for the donors: because of Amer- founder of the Body Shop, and Arpad Bus- and Can Save Capitalism, makes a dis- ica’s huge tax breaks for charitable dona- son, a colourful French hedge-fund boss. tinction between charity, which is about tions, it is a matter for public scrutiny too. India’s new wealthy, such as Azim Premji easing symptoms of distress, and philan- The cover story of a recent issue of Stan- and Nandan Nilekani, two Bangalore tech- thropy, which is about investing in solu- ford University’s Social Innovation Review nology-rm bosses, are also becoming tions to the underlying problems. The in- is entitled A Failure of Philanthropy. It keen philanthropists; and even the new vestment approach distinguishes the most argues that those American tax breaks are rich of China and Russia are catching the signicant kind of American generosity of most benet to things like elite schools, bug. Roman Abramovich, a Russian oili- from the ‘poorhouse and soup line’ concert halls and religious groups. We garch who became famous for buying method and expresses our values of free- should stop kidding ourselves that charity Chelsea Football Club, has given away dom, the individual, and entrepreneurial- and philanthropy do much to help the many millions to improve living condi- ism, she says. In practice, though, the bor- poor, says the author, Rob Reich. tions in the Kamchatka region of Russia. derline between the two is often blurred. A series of scandals at charitable foun- And so the list goes on. Over the years, many wealthy Ameri- dationsmostly over excessive pay, jobs cans have broadly followed the blueprint for family members and other extrava- The whys and wherefores laid out by Andrew Carnegie in his 1889 es- ganceshas attracted the ire of Congress, Why are they doing it? Many people are say, Wealth. The steel tycoon believed which is threatening tough new legisla- wary of rich folk bearing gifts, suspecting that growing inequality was the inescap- tion. State attorneys-general are taking a them of having hidden business or politi- able price of the wealth-creation that greater interest, too. cal motives, or feeling guilty about how made social progress possible. To prevent Mainstream charities that rely largely they have made their pile, or simply enjoy- this inequality undoing the ties of broth- on donations from the general public have ing an ego trip fuelled by generous tax erhood that bind together the rich and also come under re. The American Red breaks. But there could also be plenty of in- poor in harmonious relationship, he ar- Cross was exposed for diverting money nocent and admirable reasons why the gued that the wealthy had a duty to devote raised for the families of victims of the rich have become so much more open- their fortunes to philanthropy. Not to do so September 11th 2001 terrorist attacks to handed. Never mind the motives: the im- was the worst sort of personal failure: The other purposes. And after the Asian tsu- portant thing is to ensure that this largesse man who dies thus rich dies disgraced. nami and Hurricane Katrina, two fund- is put to good use. As a result, a far higher proportion of raising former presidents, Bill Clinton and Done well, philanthropy can have a hospitals, libraries, universities and wel- George Bush senior, found themselves hugely benecial eectwitness the fare services in America is funded by priv- having to reassure the public that they achievements of past giants such as An- ate donations than in other rich countries, would monitor how the money was used.

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