Partnerships In The Philanthrocapitalist World

By:Meghan Pelley Issue: Conscious Capitalism Section: Jewel Of Collaboration

An Interview with Matthew Bishop

Partnership In Philanthrocapitalism: How the Rich Can Save the World, the Economist's New York bureau chief, Matthew Bishop, and London-based economist Michael Green investigate a seemingly new trend in philanthropy, with the "new money" billionaires behind it.

Bishop and Green refer to this new trend as philanthrocapitalism, and to those who practice it as philanthrocapitalists.

Philanthrocapitalists, in contrast to many old money philanthropists, give with an expectation that their giving will yield certain and measurable social returns.

As the authors explain, “one key ingredient of philanthrocapitalism is the responsibility and willingness of economic winners to give on a large scale, another is that they apply to their giving the same talents, knowledge, and intellectual vigor that made them rich in the first place.”

I recently spoke with Matthew Bishop, and asked him to expand on his observations of successful philanthrocapitalists.

In Philanthrocapitalism you describe a new generation of billionaires - game changers - who are literally restructuring the practice of philanthropy. Tell me more about these philanthrocapitalists and what they have in common? What accounts for their unusual success?

One commonality that these game changers share is that they have all been successful in business. The reason for their success is that they are good strategic thinkers and innovative problem solvers. They approach giving with an attitude of how do we really make a difference, they understand the system and they look for tipping points and bottlenecks.

Additionally, they have a lot of ambition. They’ve been successful in business and they see an opportunity to be successful in philanthropy as well.

Larry Page, one of the Google founders, built a huge global company in just ten years. He believes he can solve the problem of developing clean energy at low prices – an agenda that would be daunting to most of us.

Game changers are used to dealing with problems on a global scale. Someone like Bill Gates is used to operating at a global level and dealing with huge challenges and executing them.

Also the fact that they all have a large amount of money at their disposal would be an obvious similarity. However, Gates’ fortune is small compared to governments and large corporations. More importantly than the money though, game changers are distinguished by their ability to invest dollars effectively. They are results driven and they don’t like giving for its own sake.

How do these game changers differ from one another?

There are many differences in terms of the motivations and what they want to achieve. The causes that inspire them are all different. They might derive inspiration from religion as Domino’s Pizza founder Thomas Monaghan did or simply from imagining new possibilities as Bill Gates did after reading a World Bank report on investing in health in the developing world.

Some of the game changers come from a very entrepreneurial background. Richard Branson for example has a good instinct about where things are going next in the market. He tackles blue-sky initiatives, such as his self-declared war on climate change. Similarly, CNN founder Ted Turner pledged $1 billion to the U.N. because he believed it was the right thing to do. Others are more financially oriented and data driven. They want to see precise metrics to measure how their social investments are faring.

At ICOSA we celebrate collaborative effort. It is, we believe, the key to success in business and life. What role does collaboration play in philanthrocapitalism? Is collaborative effort a central feature of the movement?

Every philanthrocapitalist who wants to achieve change at scale has to find clever ways of using money to team with partners to achieve greater scale. Leverage is the motto of all philanthrocapitalists, not leverage in the sense that it was related to the 2008 financial meltdown, rather the necessity of getting more bang for their buck in order to succeed. To put their money to work most effectively, philanthrocapitalists must find partners and collaborators.

Again, Bill Gates is a good example of this. He has committed himself to give away $3 to $4 billion annually. He believes he can’t achieve the goals he set to effect change on daunting problems such as the American education system and diseases including HIV/AIDS, diarrhea, tuberculosis and malaria on his own. Realistically his foundation is tiny compared to governments or large drug companies.

One of his goals is to eradicate malaria, which currently kills an estimated 1 million people per year. A huge collaboration he has brought together includes Fox News, the NBA, Rupert Murdoch, Bono, the World Bank, the UK government, Big 8 agencies, the Church by Rick Warren and the President of Rwanda, Paul Kagame. Managing the breadth of this collaboration is challenging even for someone like Gates as a businessman, however he realizes that partnerships are more effective than if a government or his foundation would be tackling this issue alone.

The Rockefeller family model of philanthropic giving has been remarkably successful. In what way has the collaborative nature and collective focus of this model contributed to its success?

John D. Rockefeller, Sr. who started the dynasty was a strategic thinker and he understood the role of institutions. He was far ahead of his time in the distribution of his wealth philanthropically. He helped spur the green revolution in Africa and Asia through the improvement of agriculture. Norman Borlaug received much of the credit for this change, but Rockefeller funded the initiative.

Looking back at the Rockefeller’s long-term strategy over several generations shows an interesting family model, one that is committed to philanthropy. In fact, one of the grand-daughters of John D. Rockefeller funds a global philanthropy circle, which teaches others about how to be philanthropists. The Rockefeller family puts philanthropy at the heart of their family. Every year they gather to share their experiences with each other; and in doing so, they hold each other accountable as a family. I reckon they are a happier family as a result of that commitment to philanthropy.

What do you think of black-tie galas? Are these events an example of what you describe as "conspicuous giving?" Do these events serve any useful purpose?

Many wealthy people have asked a lot of questions about the place of galas during the downturn. During a recession hardships come to light and these types of galas seem more wasteful than in good times; yet galas remain the most effective way to get people to commit to causes, so they continue to happen.

The peer pressure element of black-tie galas is strong. Many people reserve tables with their friends, which can often be a good recruitment vehicle for new donors. However, one change that is likely a result of the economic downturn is that the giving at these black-tie galas is less conspicuous. Galas have steered away from auctions during which people outbid each other because it’s seen as a bit too much. The Robin Hood Foundation for example uses an electronic device for making donations, keeping donations private rather than creating a conspicuous show of giving. We are also seeing goodie bags replaced by the opportunity to make donations to charities.

Ironically, a lot of great philanthropic organizations needs are being met by peoples’ vanity – not by people who have a good bone in their body, but by people who want to impress their fellow citizens. While people who are committed to doing good don’t need black-tie galas to encourage their giving, those people who otherwise wouldn’t give are encouraged to do so through these types of galas. Of course we would prefer that people are better than that, but the black-tie gala creates a vehicle to access their money too.

Describe what you believe constitutes "best practice" in corporate philanthropy? In your opinion, what firms best illustrate this practice?

Much of corporate philanthropy in the past has been arbitrary. Corporate donations were often determined by the CEO or his wife’s interest in a local or global cause. This type of arbitrary giving does some good, but it is largely unrelated to the company’s central mission. Today companies are starting to understand that they have a responsibility to be good corporate citizens and give back to the communities in which they operate. The more that giving becomes part of their corporate strategy, the more they will think it through and the greater impact their giving will have.

Effective corporate philanthropy is more than an add-on to their business, it is something central to their DNA. Coca-Cola is a great example of a company that realized it needed to incorporate good corporate citizenship into its business model to continue its long-term success. Coca-Cola used to have negative press about its water use. They realized that water sustainability was vital to their business and today they are actively working to become a net zero water consuming company. They are working to ensure that they have a sustainable water supply, which is important for their growth in developing countries.

Another corporate philanthropy success story is Nike. They used to have a terrible reputation for the way they treated workers in the developing world, but they have since changed their treatment of such workers. Nike has formed great partnerships with non-profits to promote the empowerment of women in the developing world. They believe they are helping a core segment of their future customer base by taking this stance.

Of course corporations still have a long way to go, but many of them are on the right path and it’s a matter of figuring out how to do it well. Leaders of these companies must first realize that good corporate citizenship is a long-term commitment and not a short-term PR boost. They must be able to visualize where their company will be in twenty years and determine how they can build a better world to operate in, so that the people who grow up to be major consumers will view them as companies on the side of progress and good rather than the opposite side.

Meghan C. Pelley is with Morgan Stanley Private Wealth Management in Washington, DC. She has attended the Skoll World Forum on Social Entrepreneurship at Oxford University for the past five years. Meghan has a special interest in promoting new philanthropic paradigms. She is a graduate of Georgetown University.