Friendly Fire

“Philanthrocapitalism and Davos Make Me Sick,” emotes Rodney Schwartz on the Catalyst blog. In a video he goes even further, complaining that we created as ghastly a word as philanthrocapitalism without even having the excuse of being American (which he seems to be). Which is fair enough.

He goes on to make two serious points, neither of which really stand up. First, he dislikes us describing former politicians Bill Clinton and Tony Blair as “philanthrocapitalists”. Schwartz says he has no time for politicians in general, whilst blaming economic policies pursued enthusiastically by Clinton and Blair for the current mess. Well, maybe. But post-government, both Clinton and Blair have enthusiastically embraced philanthropy of the impact-oriented variety we champion in the book. Strictly speaking, as neither is a rich man, both Blair and Clinton are “celanthropists”, celebrity philanthropists, whose primary contribution comes from their brand and convening power: people take their calls. It is too soon to know whether Blair will prove a talented philanthrocapitalist, though there is no obvious reason why not, but as we document in the book, Clinton has undoubtedly been effective.

Second, Schwartz objects to the importance we give “leverage” – the idea that philanthrocapitalists need to achieve extra impact by using their relatively small sums of money to enlist partners who are far better funded. Schwartz complains that we focus only on leveraging government budgets. In fact, we see opportunities to leverage corporate and non-profit budgets, too. Besides, curiously, Schwartz is actually a big fan of the vigorous support for social investment provided by the British Labour government which, lest we forget, was headed for 10 years by Schwartz’s bogeyman Blair. Go figure.

Odder still, Schwartz says we have written a “very good book” – which is not surprising, as he is a card carrying philanthrocapitalist, who invests in for-profit social businesses, with a goal of doing well by doing good.

Friendly fire may also be the best description of recent criticism we have received from Phil Buchanan of the Center for Effective Philanthropy. We wrote an enthusiastic chapter about the contribution made in the for-profit world by intermediaries and professional advisors, and described some of the philanthropic intermediaries and advisors which we hope can play a similar role in the business of giving. Although we noted that none of these for-profit intermediaries and advisors, which include management consultants, money managers and investment banks, are perfect, and that they work best where they promote transparency and accountability, in a recent article Phil decided to dismiss this chapter as “Lehman Brothers to the rescue”.

As a schoolboy debating point, we grant that this is an excellent line. As a serious response to our argument, however, it is sadly lacking. We set out a long list of philanthrocapitalistic intermediaries and advisors, ranging from New Philanthropy Capital to McKinsey and Bridgespan, to Buchanan’s own Center for Effective Philanthropy. What does Buchanan think of these institutions, and the role they play? Does he think they improve the effectiveness of the philanthropic and non-profit world? It would be interesting to know.

Instead, Buchanan complains mystifyingly about “organizations that would not agree with the authors’ characterization of them as ‘philanthrocapitalist.’ I should know: the Center for Effective Philanthropy is one of them.” The Center for Effective Philanthropy is as clear an example of a philanthrocapitalistic intermediary as we can find: its goal is to improve the effectiveness of philanthropy by gathering information from those receiving grants from philanthropists, and relaying that information back to the philanthropists so they can improve their performance.

Curiously, Buchanan continues by quoting – presumably against us – Warren Buffett, saying that “In business, you look for the easy things to do. In philanthropy, you take on important problems, and it is a tougher game.” We feature this quote in the book, and devote a large part of the book to exploring why solving society’s big problems is a tougher game than business, and how to win that game.

He also quotes – again, seemingly with the goal of dismissing our arguments – Jim Collins, the management guru author of “Good to Great”, who has written about the dangers of simplistically importing business thinking into the non-profit sector. We agree: our argument is about the need to apply sophisticated business thinking, and we write at length about the dangers of business people entering the non-profit sector arrogantly and without proper understanding of the complexities of the problems they are addressing.

Buchanan may have missed all this, but Collins did not: he actually endorsed our book, which he described as “Important. Well-written. Timely. Here in this wonderful book, Matthew Bishop and Michael Green shine a light on sparkling examples of effective philanthropy, and how some of the most accomplished people are trying to solve the world’s most intractable problems. A superb portrait of a vital new force shaping the world today, Philanthrocapitalism deserves to be widely read.” Modesty prevents us from saying whether Collins is right – but he is certainly not against us.