What is philanthrocapitalism?
There are a couple of definitions. First, a micro-level definition: it is a new way of doing philanthropy, which mirrors the way that business is done in the for-profit capitalist world. Entrepreneurs don’t just want to write cheques. They want to be hands on, bringing innovative ideas to scale by investing their time and energy.
Second, philanthrocapitalism describes at the macro level the ways in which capitalism itself can be philanthropic, working for the good of mankind. It is not just that, at its best, capitalism drives innovation which tends to benefit everyone, sooner or later, through new products, higher quality and lower prices. The winners of capitalism increasingly see giving back as an integral part of being wealthy. More and more business leaders, particularly following the financial crisis, are realising that they need to think long term and play a part in tackling global challenges like climate change.
Why is this happening now?
Part of the explanation is the surge in entrepreneurial wealth in the last thirty years. Self-made billionaires tend to be more willing to give their money away than those who inherit their fortunes. Entrepreneurs are also, by nature, problem-solvers and relish the challenge of taking on tough issues: for Bill Gates, it is malaria and other infectious diseases, for George Soros it is political change.
There’s also a growing recognition that big global problems cannot be left to government alone. Philanthrocapitalists can do the risky, innovative things that government cannot, to find new solutions to problems.
Hasn’t the financial crisis put an end to this?
The rich, along with the rest of us, have been hit by the financial crisis. But they are here to stay, and overall have come through the crisis better than everyone else. The crisis has also encouraged at least some of the rich to give more – Bill Gates, for one, increased his giving to $4 billion in 2009 even though the value of his foundation’s assets fell by nearly a quarter – because they have seen the need increasing.
The crisis has also blown away the idea that the only measure of success in business is short term profit maximisation. Corporate bosses are now waking up to the idea that they need to think big and long term if their company is to achieve success that is sustainable.
But not all rich people are as generous as Bill Gates are they?
No, they are not, but the numbers are growing. Gates himself thinks only ten or fifteen percent of the superwealthy are serious about giving at the moment but he is optimistic that this number will grow to seventy percent. We argue in the book that there should be an expectation that the rich will give, as part of a new social contract.
You have changed the subtitle of the book from “How the rich can save the world” to “how giving can save the world”. Why?
Although the book focuses on wealthy donors, it is not just or even mostly about the rich. Instead, it uses the rich as a lens to look at how society is changing the way it solves its biggest problems, by bringing together business, nonprofits, governments, social entrepreneurs and philanthropists in innovative partnerships. Giving has a crucial role to play, not least as the risk capital that catalyzes many of these partnerships – but it is not the rich alone who will save the world, it is the willingness of us all to give back.
How do we know if the philanthrocapitalists are actually doing any good with their giving?
One of the reasons we are excited about philanthrocapitalism is because so many of today’s leading givers are taking impact seriously. Philanthropy has not always done that in the past. Nor, indeed, have governments or nonprofits. A lot of energy is going into developing ways of measuring impact. Good philanthropy is about risk-taking and there will be failures as well as successes; we really want the philanthrocapitalists to be open and transparent about both.
Successful social change is not the same as making money – are the techniques of business really the right way to take on social problems?
Philanthrocapitalism is as diverse as capitalism itself, so the philanthrocapitalists are using lots of different techniques. Some are using very data-driven, measurement-based approaches, others take big visionary bets, others are very focused on building relationships. Good philanthropy certainly requires the humility to learn from others, but so does good business.
Some critics say that whatever the rich give back through their philanthropy, it cannot make up for the exploitative way in which they have made their money. Wouldn’t it be better just to tax the rich more heavily?
This is why we proposed a ‘good billionaire guide’ – the rich should be judged on the basis of how they have made their money, whether they pay their taxes and by their giving. Undoubtedly, some wealth, particularly in the developing world, has been earned by sharp practices or exploiting monopoly power. On the other hand, the philanthrocapitalists we describe in the book have earned their fortunes by respecting the rules of the game.
Taxing the rich heavily also has a big downside, we believe: philanthrocapitalists can often use their money in smarter ways that achieve more impact than government spending.
America has a strong philanthropic tradition. Is philanthrocapitalism just an American phenomenon?
America has certainly led the way over the past century, because giving has been part of the social contract, whereas other countries, for example, in Europe, have gone for high tax, big government solutions, at least until recently. However, as entrepreneurial wealth creation has spread globally in the last thirty years, so philanthrocapitalism is spreading to Britain and Europe, where new donors are starting to appear. Philanthrocapitalism is also starting to take off in the emerging economies of Latin America, India, and even China.
Doesn’t philanthrocapitalism transfer power away from democratically elected governments and civil society organisations to the rich and powerful?
We think that philanthrocapitalism has the potential to enrich rather than weaken our democracy. A lot of donors are using their giving to stimulate and influence public debate to get our politicians to think long term. That is why Jeff Skoll funded ‘An Inconvenient Truth’, Al Gore’s film about climate change, and Bill Gates and George Soros funded the One campaign for more aid to Africa, led by Bono. On balance we think this is a good thing for democracy, but it is a process that needs scrutiny and debate.
The new edition of the book talks about ‘mass philanthrocapitalism’ – what is that?
We have added a new chapter to the paperback edition of the book to expand on our discussion of the new web-based giving communities such as kiva.org, globalgiving, facebookcauses and donorschoose. By directly connecting donors with causes these new intermediaries are offering all of us greater control over the impact of our giving that is changing the nature of everyday philanthropy.