How billionaires are fixing philanthropy

Steve Forbes
June 16
Steve Forbes is Chairman of Forbes Media, Inc., Editor-in-Chief of Forbes Magazine, and co-author of the recently published book 'Money, How the Destruction of the Dollar Threatens the Global Economy ­and What We Can Do About It.'

Imagine a child, suffering from malaria in Tanzania.  A couple of years ago, philanthropists would have donated medicine or money for treatment. Today, they’re working to cure the disease for good.

It’s just one example of the titanic shift that’s occurred in the world of giving. More than ever, individuals are funding solutions, not stopgaps. What sparked such a sharp shift? The free markets.

The past two decades have spawned a new wave of billionaires who’ve have taken up the banner of social justice, sparking a golden age of philanthropy not seen since the days of Rockefeller, Carnegie and Morgan. A study at Boston College found the 0.22 percent of families with incomes of $1 million or more contributed about 13 percent of charitable giving in the United States. Since the early 1980s, the number of grant-giving foundations has spiked from about 22,000 to some 65,000 today.

This new crop of philanthropists made their millions through business sense, entrepreneurship, and capitalism. And now, they’ve turned those same tools to helping others. The result is a shift toward low-cost, high impact solutions that address the root of social ills.

Look at Bill Gates, who helped pioneer “catalytic philanthropy” – the use of free markets and capitalistic principles to address issues that otherwise go largely unaddressed. Instead of just giving money, this approach takes a vested position, fueling ideas that work, discarding those that don’t and expecting a tangible return on investment measured in social impact.

Such systematic problem-solving has transformed the paradigm of non-profit work: It has ushered in social change and helped produce public policy tools on a scale never before seen. Unlike non-profit organizations, philanthropists aren’t limited by organizational or competitive constraints, and they have ability to orchestrate efforts between groups and even with governments.

That sort of thinking makes sense. Big issues require big resources – and often big risks. Today’s challenges require individuals willing to invest capital and leadership without the expectation of personal gain, but instead with a focus on public welfare. It’s a rare occurrence when those interests align. When they do, we shouldn’t pan them, we should applaud them.

Take for example, the Gates Foundation’s work with Common Core Standards, a program aimed at strengthening the U.S. education system through high proficiency requirements. As the Washington Post explained:

The Bill and Melinda Gates Foundation didn’t just bankroll the development of what became known as the Common Core State Standards. With more than $200 million, the foundation also built political support across the country, persuading state governments to make systemic and costly changes.

Bill Gates was de facto organizer, providing the money and structure for states to work together on common standards in a way that avoided the usual collision between states’ rights and national interests that had undercut every previous effort, dating from the Eisenhower administration.

Agree or disagree with the program, one has to commend Gates for initiating a national dialogue and publicly providing real information to address this important issue.

Yet, in recent months, Gates has become the de facto target of groups unsatisfied with the implementation of Common Core. Diane Ravitch, an outspoken opponent of the program, accused Gates of an “education coup,” and called for a congressional investigation. It’s one thing to criticize public policy; it’s another to go after those working to give lawmakers policy tools.

Of his work, Gates said, “At the end of the day, I don’t think wanting education to be better is a right-wing or left-wing thing.” That’s true of all kinds of causes, and it delineates the difference between government and philanthropy. It’s lawmakers’ responsibility to decide policy; it’s entrepreneurs’ to help create real world solutions.

The reality is that today philanthropy is meeting the needs that government and the private sector have not.

In 2010, the Gates Foundation and Warren Buffett launched the Giving Pledge, a commitment among the world’s wealthiest individuals to dedicate a bulk of their wealth to philanthropy. Today, over 125 individuals and families have signed on. This has helped fuel a market whose dividends don’t fund stockholders, but rather causes.

At Forbes, we recognize the sum of those efforts is stronger than its parts – which is why every year we host the 400 Philanthropy Summit, a gathering of the world’s most powerful people to discuss how to leverage resources to address the world’s most pressing problems.

Most Americans share the desire to help our fellow man, and today everyday individuals can do so as never before. We should defend those who are willing to take such risk, not attack them.

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