Gazing on the feast of creativity and wealth arrayed in Silicon Valley, there's a temptation, to which I occasionally succumb, to imagine that we have entered the gates of an earthly paradise. For a bracing antidote to this sort of techno-cheer, consider the tale of the United Way of Santa Clara County, the social welfare agency located in California's technology boomtown.
If you missed the wire stories, the United Way there nearly went bust last month. The agency announced May 6 that it had exhausted its reserves and would have a shortfall of $11 million for the fiscal year beginning July 1. The board fired the executive director, Eleanor Jacobs, and warned local antipoverty agencies that money might be cut off.
It's a disturbing image -- this drought of charity amid the torrential shower of new wealth created by the computer industry. And it illustrates a fact of American life, which we see in Washington and New York every bit as much as in Silicon Valley -- namely, the gap between the fantastic wealth being generated by the U.S. economy and the miserly way we're using it. These are the good years. Why are we putting so little back?
Fortunately, some techno-zillionaires stepped in to rescue the Silicon Valley charity. Led by a $5 million gift from Micosoft CEO Bill Gates, these donors gave more than $14 million, and last Friday the United Way of Santa Clara County announced that it was mailing out new checks to local homeless shelters and other needy agencies. So in that sense, the story has a happy ending.
But how did Silicon Valley's charitable organization get in such a mess in the first place? That story has been recounted in some recent articles in the San Jose Mercury News, and it turns out to be a tale worthy of a modern Charles Dickens.
The key problem, it turns out, was that United Way executives were seduced by the lifestyle of the techno-elite. They had a solvent organization, which raised roughly $18 million of the $20 million it collected each year through the usual payroll donations and matches. The average donor gave $175 annually.
But Jacobs, the executive director who took over in 1995, wasn't satisfied. Just being the United Way was boring and old-fashioned.
Jacobs had bigger plans. She had written her own self-help book, called "Ten Pearls of Wisdom." (Sample: "If you can dream it, you can do it.") And she wanted to go after the Valley's major donors. She expanded the staff from 52 to 77. And to compete in the dog-eat-dog world of Big Charity, she decided she needed to hire expensive advisers and throw fancy parties.
So Jacobs retained a consultant, the ex-chief of staff for former San Francisco mayor Frank Jordan. According to Pete Carey of the San Jose Mercury News, the consultant recommended that the United Way hire a $135-an-hour protocol specialist to plan hot parties that would attract the new rich. As it happened, this protocol specialist had also worked for former mayor Jordan as his protocol adviser; she was paid about $231,000 over roughly three years, according to the Mercury News.
The advisers organized special events for $10,000-plus donors, who were given special recognition as members of the United Way's Alexis de Tocqueville Society. An elegant dinner for these big givers was held a year ago at San Francisco's Fairmont Hotel. The Mercury News noted that the hotel's own tablecloths weren't nice enough for this crowd; the party organizers rented fine linen ones instead.
Jacobs and her consultants also tried to woo young professionals by creating a new group called "Next Way" and hosting an elegant party April 10. According to United Way records cited by the Mercury News, the affair cost $20,000 -- including $8,950 for the band, $6,000 for food and $1,700 for wine. The 700 invitations alone cost $3,100. Sadly, just 166 people showed up.
Amazingly, this spendthrift party was thrown just as the United Way of Santa Clara County was heading toward financial disaster. The problem was high overhead. The Santa Clara chapter had spent 20.2 percent of its budget on overhead in fiscal 1997, more than eight other United Way chapters surveyed by the Mercury News.
As the financial problems mounted this spring, Jacobs had to lay off nearly half the work force. Incredibly, she tried to pay out over $1 million in severance -- this at a time when the organization was preparing to renege on promised donations -- until the board stepped in and stopped the golden handshakes.
The bailout from Gates and other wealthy donors was generous, and people in the Valley were patting themselves on the back last week. But to me, this tale illustrates an unattractive truth about our new culture of affluence.
Just doing good isn't enough any more. Helping the less fortunate, simply out of a sense of obligation and for the pleasure of doing good, doesn't cut it. A phrase you're not likely to hear often from America's new rich is: "There, but for the grace of God, go I." That sort of humility doesn't fit with the new stress on individual effort and entrepreneurship.
The fund-raisers seem to understand the new ethic all too well. If today's newly rich are going to give money away, they damn well want to get a good party out of it. With linen tablecloths, please.