World's Richest Man: 'Charity Doesn't Solve Anything'

http://blogs.wsj.com/wealth/2010/10/15/worlds-richest-man-charity-doesnt-solve-anything/

by grellas • 16 years ago

191 155 16 years ago

blogs.wsj.com

zachster• 16 years ago

The "teach a man to fish" argument has been around for a few millennium. But saying that philanthropy ends in giving away fish seems to me like an excuse for people to abandon charity altogether. Isn't Kiva still a form of philanthropy, even though it's just a loan? Charity cannot be about cementing poverty by creating dependence, but can work if it's a reallocation of resources (outside the free market) that results in more balanced partners.

ryanmickle• 16 years ago

One might argue that most job creation is hardly "teaching men to fish."

wolfrom• 16 years ago

It seems strange that someone with the business acumen to become the world's richest man would not look on the inefficient and broken charity and aid systems as an opportunity to create a better solution. There won't be good new jobs in places where there isn't reliable electricity or clean drinking water.

Like most aging industries, the "making the world better" industry is definitely in need of some disruption. We see newer entrepreneurs talking about this space more and more, so I wonder how long it will be before the richest entrepreneurs start looking at new ways of solving these problems.

araneae2• 16 years ago

The article mentioned that he donated to the Gates foundation, which in fact uses capitalist principles to help third world countries.

brudgers3• 16 years ago

Here are the Gates Foundation guiding principles: http://www.gatesfoundation.org/about/Pages/guiding-principle...

I don't see anything capitalist in them.

Nor in "All Lives have equal value."

pchristensen• 16 years ago

Not a huge fan of Slim based on what I've heard, but I mostly agree with him on this. Makes me wonder though, what he's doing holding on to tens of billions in wealth if he could be building businesses and creating jobs for the poor instead. It makes it sound like "Business is better than charity, but I'd rather just be rich"

asolove• 16 years ago

Are his billions in cash, or is his net value based on stock holdings, private investments, etc.?

DevX1012• 16 years ago

Does it matter?

huherto3• 16 years ago

I would assume his net value is mostly invested in public and private companies.

MikeCapone• 16 years ago

I suspect that a large fraction of his money is invested in various businesses and not just under a mattress, so maybe that's his way of helping.

mcknz• 16 years ago

Rich in irony as well -- Slim's purchase of Telmex, the state-controlled telephone monopoly, meant that he could stifle competition and charge exorbitant rates. That's pretty much as far as you can get from encouraging employment for the poor.

slay2k• 16 years ago

Not to mention the purchase was allegedly laden with government kickbacks and various forms of corruption.

jacobolus2• 16 years ago

“Purchase” is a pretty rich description, too. Slim paid an obscenely low price for Telmex – it was making $1.1 billion yearly profit, and Slim’s company paid less than $900 million for a 10% stake, which money came from loans Slim got on letters of credit (i.e. it wasn’t even his own money). Telmex was and is a near monopoly, with the kinds of monopolistic pricing that goes along with that.

Basically, Slim’s fortune is made on a corrupt business deal with the corrupt president of the time (Salinas) who he was buddy-buddy with, followed by gouging the Mexican citizenry on phone bills for the last 2 decades. (Salinas’s PRI party made out well too, as Slim gave lots of money back to them over the subsequent years.)

I really don’t think he’s in any position to talk about charity.

_delirium2• 16 years ago

I can buy the argument that just shoveling huge amounts of aid to people doesn't fix anything long-term. But it's not solely a decision between that and no charity. He mentions employment, which often benefits from having a stock of not-yet-exploited research to commercialize (SV firms do a lot of innovation, but they also do a lot of commercialization of stuff for which the early-stage R&D was done in academia, at government research labs, etc.).

Charities funding research, and especially insisting that the research be published in some open-access and not-patent-encumbered form, can provide that raw material that new companies need. Charity-funded medical research can also directly produce treatments that improve conditions in a region long-term. And, although it runs into a bunch of political controversy, same for charity-funded research on things like new crop varieties.

byrneseyeview• 16 years ago

they also do a lot of commercialization of stuff for which the early-stage R&D was done in academia, at government research labs, etc.

So they turn it from something of theoretical value to something that actually improves people's lives--to the point that they're willing to part with money to have it? That seems to add a lot more utility on the margin. Of course, it wouldn't mean anything if there weren't inventions to subsidize.

_delirium2• 16 years ago

Yeah, I'm not arguing that commercialization isn't useful; it's the main way theoretically valuable ideas get actually produced. But I think it can be very helpful to innovative industries to have this big stock of theoretically-valuable ideas waiting to be mined for commercialization. Otherwise you either only get incremental advances, or you need big firms with their own R&D groups (like Microsoft Research). You can also have startups based on blue-skies research in some areas (especially pharma), but investors in most areas are pretty wary of funding a startup that has too much basic research in their critical path, due to the high risk.

stretchwithme• 16 years ago

Where you find widespread poverty, you also find an absence of both the rule of law and freedom from expropriation. And you people trying to get to places that have those things.

The vast majority of people are inherently capable of meeting their own needs, figuring out the needs of others and trading with them for mutual benefit...if they are allowed to do so.

notahacker• 16 years ago

I'm bemused by him implying that charity doesn't create employment or foster entrepreneurism amongst the poor.

It surely can't be seriously argued that wealth is better channelled through a single person's business empire representing nearly half of the country's stock exchange and 90% of its telecoms provision...

bryanh• 16 years ago

I agree, a job is much better than a handout. Regardless, infrastructure and education are two things that do help people create jobs and exit poverty.

Charity != giving people money.

cynest• 16 years ago

That, and stopping widespread debilitating diseases.

flatline• 16 years ago

It's a sort of chicken-and-egg question as to which must come first but generally, if infrastructure and education are there, public health will follow. On the other hand if most of the populace can't read or write, if there is a constant lack of resources and perpetual warfare, the people who you are healing will most likely end up in an early grave anyway. Employment will help with all of these things, since happily employed (and educated) people don't typically start rebellions, are capable of building lasting infrastructure and making use of outside aid.

johnrob2• 16 years ago

Charity does equal giving people money. If you're not giving people money, then you're making an investment.

jokermatt999• 16 years ago

Let's not get caught up in semantics here. You could just as easily consider giving people money in the name of charity an investment because you're investing in their better future. Can we taboo the words "charity" and "investment" and talk about what the actual acts are?

yters3• 16 years ago

If the people are responsible enough to use it correctly.

See this not happening in Afghanistan, where their acceptance of drugs and all other sorts of questionable behavior has left their populace lazy and subject to strongmen and corruption.

As a side note, I'm quite sure America will not become Afghanistan if we legalize drugs and pederasty. Why, I can't really say...

8ren• 16 years ago

microcredit seems hopeful: http://en.wikipedia.org/wiki/Grameen_Bank

While the love of profit can be evil, if a business is actually creating value (eg. a windmill saves the labour of hand-milling flour; division of labour; technology in general, including methods of organizing labour), there's an opportunity for the bigger pie thereby created to benefit everyone.

Just shifting money around (which includes theft as well as charity) doesn't help except in temporary emergencies.

ESchmidtSeesYou6• 16 years ago

I used to be big on microcredit, until I realized it isn't actually profitable (as is claimed).

The vast majority of funding for microcredit organizations comes from government. It's still charity, even if it can often be fairly efficient charity.

awakeasleep• 16 years ago

I think about this in regards to Mr. Gates.

He amassed such a huge fortune by building walls around his software, limiting people's potential in a way.

Was it necessary? Did proprietary software need to happen to spur innovation? What about his uncompetitive practices?

I end up wondering what the balance of 'good' would be in the world if instead of taking everything he could, he had allowed others to grow and shared his source more. We wouldn't have the Gates foundation's fight against malaria, but we might have a more innovative and open global computing culture, and who knows what that would have meant.

CamperBob4• 16 years ago

Did proprietary software need to happen to spur innovation?

To the extent that the Wintel monopoly resulted in lower hardware costs, it's hard to see any intellectually honest Linux or BSD user arguing otherwise.

You would not be able to buy 3+ GFLOPS systems with gigabytes of RAM and terabytes of mass storage for less than $1000 without the kind of mass standardization that, history suggests, can emerge only from monopolistic behavior.

jongraehl• 16 years ago

You think we would have worse computer hardware now (for the price) if Microsoft had been less successful? Why do you think that? I don't believe that without MS/Intel we'd have only a bunch of Apple-model hardware manufacturers.

brc• 16 years ago

I find it hard to argue that, without Bill Gates, we wouldn't have ended up with a monopoly of some type in hardware/OS. Certainly Microsoft won the race, but it's not like every other player on the scene at the time wasn't trying to do the same thing.

Every single PC maker/OS developer knew that winning the bulk of the market was the key to success. Thus, they were all following similar strategies. I just think it's unlikely, if there was no Gates, that we wouldn't have all ended up on the same platform anyway, and some other company would have had a monopoly.

ESchmidtSeesYou6• 16 years ago

Oh, really? You're actually making the opposite argument: divided technical leadership is what drove most progress in personal computing. Unless you yearn for the days of the IBM mainframe...

The Economics of the Microsoft Case, by perhaps the best technology economist there is, Timothy Bresnahan of Stanford:

http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.24.7...

jakarta4• 16 years ago

I don't place a lot of value on Carlos Slim's advice. His vast fortune has basically been a result of his ability to practice regulatory arbitrage and own a monopoly (and stifle competition) in Mexico, a country with a highly inefficient governance system.

If the political system over there ever became really functional, his empire would be broken apart and much of his wealth would contract.

maxawaytoolong2• 16 years ago

"... and own a monopoly"

Like Bill Gates and Microsoft, who were actually convicted as monopolists?

After working in aid in Africa, I have to say I agree more with the Mexican monopolist than the American one.

jshen5• 16 years ago

except one could say that mexico represents Slim's philosophy and America (and most industrialized countries) more closely represent Buffet's/Gate's philosophies.

I think it's clear which philosophy has the better outcome for people in general.

jakarta4• 16 years ago

That's the point. Bill Gates was convicted of being a monopolist and checks were put on what his company could and could not do. That does not happen in Mexico.

In more extreme cases, look at John D. Rockefeller's Standard Oil. Rockefeller used to be the wealthiest person in the world (according to some, if you inflation adjust his money, he may have been the wealthiest person in the last 200 years). His company was broken into parts in order to promote competition. Same goes for the Bell Telecom companies in America, they were also all broken up. We have checks in place to curb the anti-competitive forces of certain companies.

sprout• 16 years ago

Wow, that's a load of non-sequiturs. Monopoly is a side effect of the massive corruption plaguing Mexico. Microsoft doesn't even come close.

As for aid in Africa, that's a specific charity you worked with in Africa. There are people who do good work there. Dismissing aid because people are bad at it is like dismissing software development because people are bad at it. One way or another it's necessary.

damoncali• 16 years ago

Where is being a monopolist a crime?

makmanalp3• 16 years ago

This is ad hominem if I've ever seen it. Especially in corrupt societies, I feel like jobs would fare much better than donations by: 1) Increasing economic activity which is required for growth 2) Making sure the money goes to where it's supposed to, and used the way it's supposed to. (Remember the stolen OLPCs? Donations don't always make it to the destination if they're juicy targets.)

jakarta4• 16 years ago

A number of countries experimented with shock treatment capitalism as a means of quickly bringing their economies up to speed.

Take Russia or Bolivia as examples of what can go wrong. In each case, they quickly freed up their economy and tried to privatize everything. The problem was, they had no real legal system in place to properly check that activity. Key national industries went into the hands of just a few wealthy people (see Russia's Oligarch's). In Bolivia, after shock treatment, there was a rise in unemployment, a fall in industrial output, and a fall in per capita GDP.

At my university (50k students) I started the first micro-credit organization and we've made over 100 loans to entrepreneurs in developing nations -- so I am not against capitalism or anything like that.

But I've studied economic development enough to know that you have to take a multi-pronged approach to promoting development. It's not just about going full-free market or full donations/state involvement. It's requires a mix.

nonce91329713• 16 years ago

Historically many fortunes were built because of special privilege from the King.

Ignoring for a moment the anti-competitive claims against Microsoft, consider that that fortune already hinges on the special privilege of intellectual property law, which is backed in full force by the US justice system. Not all countries have this protection. Microsoft does not do anywhere near as well in countries without it. Does this protection ultimately help US citizens.....that point is up for debate, but it exists, and businesses exist to capitalize on it. Is it something that should be expected? For now, yes, but two hundred years from now, my guess is that intellectual property rights will have eroded, and we will view Gates's fortune as a fortune built using special privilege, just like oil fortunes were built before regulations against monopolies, and just like many shipping fortunes were built before that with special privilege from princes.

Special fortunes typically need something special in the first place. Carlos Slim is not that much different from Bill Gates. Bill Gates spent a little bit of time as a heroic startup guy, but he spent the majority of his career doing much the same stuff that Carlos Slim does. If copyright law changed, as many MP3 sharers wish it would, his fortune would deflate as much as Slim's.

Andrew_Quentin3• 16 years ago

You mean it would be best that others could copy the ideas of inventors so that inventors die poor rather than breakthrough pioneers who have given this world the digital age, or at least have contributed towards it significantly, be rewarded appropriately?

sbov• 16 years ago

This may be your point, but you could take your argument and twist it to any law, or lack of law, in any country. All business, big or small, hinge on some sort of special privilege. IP law isn't special in this regard.

bobbin_cygna• 16 years ago

... So What?

"The only way to fight poverty is with employment"

"Trillions of dollars have been given to charity in the last 50 years, and they don’t solve anything"

"There is a saying that we should leave a better country to our children. But it’s more important to leave better children to our country"

That's what he said. It may be really wrong, stupid, or right. What matters is "is he right?".

jamn• 16 years ago

Even though Telmex (his landline company) was acquired from the state, and therefore was a monopoly from the start, Slim faced a monopoly by Iusacell on the wireless phone industry, which he managed to break and manage to get Telcel (his wireless company) to become a monopoly basically by making people want to switch.

Slim's story includes several investments on different industries, including specialty shops (Sanborn's) which he has managed to completely turn around from near-bankrupcy to huge commercial success.

I am not making a claim that his wealth from Telmex didn't contribute to his success, but implying he just managed to get where he is because Mexico's regulatory bodies are useless is a huge understatement to his ability in an industry where several key players (Like AT&T, Nextel, Telefonica Movistar, and others have failed).

jorgeortiz85• 16 years ago

You can't think of any ways Telmex could leverage its landline monopoly into advantages in the wireless sector? Or use an existing monopoly to prevent new competitors from gaining traction, no matter how well-funded?

Telmex charges exorbitant fees for any call that needs to connect to one of their customers. Given that they own 90% of the market, it's impossible to run a telephone company without letting your customers call Telmex customers. If you have to pay Telmex's fees, there's no way your prices to customers will be competitive.

huherto3• 16 years ago

You are attacking the person. Not his arguments.

Most people assume that just because he became so rich in a developing country he must have done it thru corruption. Carlos Slim is an engineer, he teached algebra and linear programming at the national university. Before buying telmex he was already very successfull in many areas( real state, industrial, financial, comercial and mining). Many people say that he was so rich because president Salinas helped him, but Salinas left 16 years ago and his businesses have flourshed in many areas and in many countries. Why can`t Mexico have somebody as talented as Warren Buffet?

lzw13• 16 years ago

Why can't Mexico have somebody as talented as Warren Buffet? It is because Americans are prejudiced. (note this may not be true of HN readers, I'm speaking of the broader american culture.)

They don't believe they are prejudiced, they don't know they are prejudiced, but they believe what they are taught to believe. And they believe that mexican is full of corrupt people with little motivation. this isn't racism... it is the image of mexico we are sold by politicians ("all drugs come from mexico" "mexican immigrants just want to use our welfare programs") and the media.

I'm not sure if they view all spanish speaking countries as corrupt and full of people who need to be "Saved" by american imperialist "enlightened socialism" or if mexico is a special case.

They talk fondly of Venezuela, because Venezuela has a strong leader who is a clear leftist and has done photo ops with Oliver Stone and other prominant leftists. (nevermind that he appears to be the most corrupt leader in the western hemisphere.)

Americans' world perceptions are shaped by media. And media doesn't allow for the possibility that people everywhere are essentially the same, with cultural differences. So, americans think that the Nazis had to come to power in Germany because germans are genetically fascist people, for instance.

I say this, not as an outsider criticizing americans. But as an american who has studied how the nazis came to power, and how ideology is used to shape americans perceptions of other people, as an academic subject.

lukifer• 16 years ago

Seems to me that charitable investment in education does every bit as much good as building job-creating business.

Lendal• 16 years ago

Silly argument. Both are needed.

It doesn't do any good to teach a man to fish if he dies of starvation while waiting for the fish to bite.

On the other hand a failure in employment only leads to higher demand for charity. So they're both equally important.

ESchmidtSeesYou6• 16 years ago

This is basically correct, but it still depends on one's values.

Who do you value more, the current generation or future generations? Essentially the perpetual argument over the standard discounting problem.

jacoblyles• 16 years ago

It is pretty clear that the growth in living standards over the last 100 years has a lot more to owe to the accumulation of capital goods than the working of charity. It's true that charity can alleviate short-term suffering, but Mr. Slim's assertion has a lot of historical support to it.

But charity probably does a lot more for the giver. I imagine giving $10 billion makes you feel about as good as making the $10 billion in the first place. Society will certainly admire you more.

duck2• 16 years ago

I imagine giving $10 billion makes you feel about as good as making the $10 billion in the first place.

I would hope it would make most people feel better... a lot better.

JeffL• 16 years ago

Why? Anyone who has or inherits $10 billion can give it away. It takes nearly no skill. Only a very, very few people in the history of history can make $10 billion.

dennisgorelik• 16 years ago

I like Carlos Slim's approach to charity. He still use it time to time on relatively small scale when it's an efficient too. But he focuses his effort on doing business. That's the best way businessmen can contribute to society.

sbaqai• 16 years ago

Charity is most needed for problems that have no other natural source of funding. If the government/private sector can solve certain problems, then charities are perhaps not the best vehicle for solving those particular problems.

Buffett and Gates specifically focus on the former. Trying to reduce extreme poverty, provide healthcare, and educational opportunities. They also believe every life is of equal value. So the challenge then becomes helping the most people per dollar invested.

Some of the most well developed medical technologies/ solutions exists because their's a lot of wealthy people with those problems. A lot of male baldness and not so much malaria.

Malaria is a treatable disease. Millions die because they don't have access to care. You can't say these people would be better off employed, as if their health is not a factor in their economic output. Hence, the goal of trying to eliminate malaria is a valid philanthropic activity.

Buffett also donated through one of his children's foundations, to help solve/minimize the potential for a nuclear event. His view is pretty grim: the information is already out there, getting into more hands, and so the probability approaches 1 that an event will occur at some point in the future. What other natural funding exists for trying to solve this? It might be futile, it might be incredibly hard, but you need smart capable people working on this.

Furthermore, helping the rest of the world become a little bit more prosperous might reduce hostility, and violence that desperate people can be induced into. While businesses have had a great history of introducing wealth into the world, its always done with a profit motive. Where there is no profit potential, there is no interest of a business to be involved. A lot of these problems don't have those profit potentials. Hence, charity works in these areas.

blahblahblah• 16 years ago

Another important point regarding disease, in general, and especially malaria is that disease often leaves survivors with permanent physical disabilities and/or neurological deficits. I think a lot of people in the U.S. and Europe have this mistaken notion that malaria is like a bad case of influenza, mononucleosis, pneumonia, or some other common disease that we are familiar with. We think that the person gets really sick and feels awful and it could even be life-threatening, but that as long as you survive it, you fully recover. That simply isn't true.

Malaria primarily affects children and many survivors have severe permanent disabilities because of it (seizure disorders, deficits caused by stroke, psychiatric problems, etc.). And malaria is just one of many serious diseases in the developing world (tuberculosis, schistosomiasis, dengue fever, HIV/AIDS, hepatitis, etc.). If you acquire a severe disability before you're even old enough to enter the workforce, how does creating jobs help you? Creating jobs alone is insufficient to address the problems of Africa. You have to concomitantly address the heavy burden of disease if you are to have any chance of solving the economic woes of Africa.

MrFlibble2• 16 years ago

I have a friend who was well off and was very much against handouts for most people. He would go on about people needing to get a job, pull themselves up and how not finding work was a lazy man's excuse. Then he lost his job, house, car, dog and health in less than a year and even had to move back in with his parents.

Amazing how his opinions have changed now that he is the one who despite his best efforts is struggling to just barely get by. He still feels you should make your own way, but now realizes it can be much harder than it sounds.

The "go get a low paying job" safety net is not what it once was. People these days really need to get creative and find new ways to generate income.

zacharypinter3• 16 years ago

It's a tough issue. I rarely oblige anybody asking me for money on the streets. If they ask for food, I don't mind buying them a meal, but just giving out money doesn't sit well with me.

If I could give somebody $50 or $100 and know that it would be used to make their life better, I'd do it without hesitation.

Might be an interesting field for a non-profit organization?

MrFlibble2• 16 years ago

I'm with you on the food thing, being hungry truly sucks. There's a cafe I frequent that gives me a discount and I have bought many a hungry person a meal there. A nice addition is since the staff are friends the person is treated like a normal customer (though one guy kept hitting on one of the waitresses to the point of it not being funny anymore).

alexitosrv• 16 years ago

A couple of months ago I was there: a failed project, no job, no money flowing in by almost 5 months, and albeit of being moderately competent by several measures, I was struggling too as you say. My view of the world has changed a lot because of that period, but the things just are in that way. I still strongly believe that you must find your way up in the ladder, but things are not easy. In the meanwhile I did my best to try alternative strategies. At the end, thanks to God I was able to find a great job at a German company which happened to have a research center in my country, and the things are recovering.

I saw the tip of the iceberg, and it was scary.

mayutana• 16 years ago

I believe that money spent on education is money well spent. Building schools and etc, not only help to educate the young generation, but also provide jobs. An educated young man will be able to not only help himself, but his family and his surroundings.

narrator• 16 years ago

I think the perfect model is the one Mohammed Unis advocates: so called "social entrepreneurship". The business makes a profit but it has a set of shareholders who control all voting rights who are interested in having the business do things that are not only motivated by profit.

In a way, Google is a bit like this. Sergei and Larry setup the company in such a way that they have far more voting rights than the non-founders and thus use Google to pursue aims that are more social, for instance developing new energy technology or cars that drive themselves, etc.

TGJ• 16 years ago

The US decided to do some charity work and supply Haiti with rice after the earthquake. Now the rice market is collapsing in Haiti.

http://www.bbc.co.uk/news/world-latin-america-11472874

Andrew_Quentin3• 16 years ago

well the US could have given pasta!

hugh3• 16 years ago

Demonstrating the main problem with charity: as soon as people start getting good intentions, they shut their brains off. They care about throwing money at a problem, not making sure that the money is spent in a way that doesn't make the problem even worse.

This is where the Gates Foundation really shines: they don't just give away huge sums of money, they carefully research how to spend it.

kenjackson• 16 years ago

Wait a second... my reading of the story is not that we're giving rice to Haiti for free, but that the rice we're selling to Haiti is cheap because we're subsidizing US farmers.

I just don't want us confusing charity to Haiti (which apparently isn't happening from the US government yet) and subsidizing US farmers who can then underbid foreign farmers. Two very different stories.

brudgers3• 16 years ago

The subsidies which destroyed the rice market predate the earthquake. As does the story.

Here's the same sort of story from Al-Jazeera in 2008.

http://english.aljazeera.net/programmes/insideusa/2008/07/20...

Here's the same information in a report from 2004: http://www1.american.edu/TED/haitirice.htm

Here's a copy of a Washington Post article from 2000 (original behind paywall) http://www.hartford-hwp.com/archives/43a/217.html

The story is getting traction today for the same reason as the one about Sims...journalistic sloppiness.

pessimizer3• 16 years ago

He's right, and it shouldn't. That's what governments and collective decision-making are for. Private individuals shouldn't be depended on to do anything but further their own interests, even in the charity sphere. They spend money for PR purposes, to strengthen personal connections, or simply because they enjoy the environment it puts them in. The major cause of misery in the world is the lust for power and influence over other people, and money epitomises that.

What people need is security in employment and compensation, and protection against unavoidable risk, like fire and sickness. Without exploiting the weakness and insecurity of workers, you can't really amass the kind of cash this guy has, so I'm not sure about the quality of the jobs he's creating if he can skim that much value off of the top. The profit margin on fairness is a lot lower than the profit margin on slave wages, monopoly, and legislative arbitrage.

That's not to say that he couldn't, though. If he created a lot of good jobs for people with fair wages, and charged fair prices, that's a massive good and can't be denied. He won't, though, because when things are done fairly, there's not a lot of profit to be made. Sorry, rant over:)

orangecat2• 16 years ago

Private individuals shouldn't be depended on to do anything but further their own interests

Except for politicians, they'll be noble.

If he created a lot of good jobs for people with fair wages, and charged fair prices, that's a massive good and can't be denied. He won't, though, because when things are done fairly, there's not a lot of profit to be made.

Utterly unfounded. Counterexamples that come immediately to mind are Steve Jobs and Larry Page and Sergey Brin.

pessimizer3• 16 years ago

Politicians shouldn't be depended on to do anything but further their own interests. That's why we introduced democracy, in order to get their interests as closely aligned to the public interest as possible. Nobles are a different story altogether.

>Utterly unfounded. Counterexamples that come immediately to mind are Steve Jobs and Larry Page and Sergey Brin.

I'm not sure how your personal idols refute my ideas of fairness.

scythe2• 16 years ago

I think you need to look more specifically at what exactly the Gates Foundation does if you want to answer the questiona at the end of the article. They're known for fighting disease, primarily; disease in third-world countries is a major barrier to industrial expansion into these countries. Further, charity has achieved at least one major victory: the eradication of smallpox, perhaps the greatest achievement in human history, so I'd say it's contributed at least a little -- and the Gates Foundation has some good precedent for their goals.

zacharypinter3• 16 years ago

With Bill Gates you at least know that there's an extremely intelligent person at the top, looking to solve real problems (assuming he's past the phase of donating Windows machines to schools).

I think that's the largest point: just giving out money to causes is typically a poor way to make a difference. However, if you intelligently spend that money (whether it be by empowering people through job creation or eradicating diseases) then you have a chance of making a lasting impact.

rottencupcakes• 16 years ago

> assuming he's past the phase of donating Windows machines to schools

Why do you feel the need to throw that jab in there? Windows is the more prevalent computing platform in the world. Stepping aside from our nerd world for a second, you could argue he would be doing them a disservice trying to ship them Linux or something that wouldn't be compatible with the most popular software in the world.

yters3• 16 years ago

Now this is purely hearsay, but I've heard it said the creator of the smallpox vaccine regretted what he'd done because the amount of polio it produced greatly outnumbered the lives it saved.

It was on the internet so it must be true!

scythe2• 16 years ago

Edward Jenner introduced the variola vaccine in the late 1700s. Polio didn't even become a major problem until after his death!

>In developed countries during the late 19th and early 20th centuries, improvements were made in community sanitation, including better sewage disposal and clean water supplies. These changes drastically increased the proportion of children and adults at risk of paralytic polio infection, by reducing childhood exposure and immunity to the disease.

(Edward Jenner died in 1823)

borism• 16 years ago

First time I hear a claim that charity is responsible for smallpox eradication.

Sure, charities did help a lot, but it took Worldwide coordinated effort by WHO with primary donors being UN member states to achieve full eradication.

ankimal• 16 years ago

Whats that old saying? "Dont give a man a fish, teach him how to fish."

Unfortunately, some people cant even afford fishing equipment. So a mix of both is very important. Why throw tonnes of money? Throw some jobs with that too.

theprodigy• 16 years ago

carlos is correct. An example of this is how America deals with developing countries that they are trying to rebuild.

Countries that are addicted to American "financial" aid don't go anywhere, but countries that create an environment, enforcable rule sets and standards that attracts foregin direct investment from businesses around the world prosper and raise their standard of living.

Charity is a bandaide and not a solution. Constant free aid kills inniative, inntiative creates economic prosperity, wealth, etc.

sportsTAKES• 16 years ago

Is anyone familiar with Tom's Shoes? http://www.toms.com/

The gist of their company is that for every pair of shoes they sell, they give a pair away to children in impoversihed countries. Seems like a really nice thing to do.

That said, I've always thought they would be better off helping would-be entrepreneurs in those countries to make and sell shoes of their own. IE, perhaps they could use their resources to help people in those countries learn how to make the shoes, provide some assistance in sourcing the materials, etc.

As it is today, if someone in those areas where they give shoes away has any aspiration of making shoes, they have no chance because they won't ever be able to compete with someone coming in and giving away free shoes.

When the kid who received the new pair of free shoes inevitably needs another pair, there is infrastructure in place for him to get those new shoes, rather than waiting for Tom's to show up again with more free shoes.

I'm not knocking Tom's because I think their intentions are simply to help people. But I do think they're missing the target - I think that is what Senor Slim is referring to.

zbruhnke• 16 years ago

I would love to jump in and criticize the guy for his comments, but we all live in a welfare state. How many success stories have you heard of people on Welfare that came up with an idea, successfully turned it into a business and are now living happily ever after? I presume not many.

My point here is that most people are not Bill Gates, Steve jobs, Warren Buffet or Mr. Slim. Simply put most people if given money do not spend it wisely and often find themselves in similar situations within short periods of time because they feel entitled to something being given to them.

Now this is not to say that there are exceptions to that rule, I truly believe there are. I think the bill and Melinda Gates foundation has done tremendous work, as have other organizations like the scoff Tiger Woods organization. But these examples focus on the betterment of communities and are not the benevolent "Robin Hood" type charities which indeed exist to this day (some with very little practical accomplishment) While one commenter was right that the Rockefeller's donated VERY significant amounts of their money to charity I think they have an important oversight. the Rockefellers ruled the world through their "charity" essentially having every company and political pundit in their back pocket. What Gates and Buffet do with their charitable contributions are significantly more benevolent than most figures of the past. Though again there are some exceptions (Corneilus Vanderbilt comes to mind) to that rule as well.

Then again we all have opinions, and that is just mine. :)

So without dragging this on too much what i am meaning to say is maybe we're all right. And by Mr. Slim donating fair amounts to the Gates foundation he may even be saying he agrees, in the end the truth is that even the most intelligent and business savvy people in the world have radically different views on this, its my opinion that we need both of those views and types of people for society's continued evolution

kloncks• 16 years ago

I'll agree with the common sentiment that Carlos Slim's general advice is worthless.

But, I think he's on to something here. From the article:

It is the 21st century billionaire version of the old adage, “give a man a fish and he eats for a day, teach him to fish and he eats for a lifetime

I think all he's saying is that one can't throw money at problems and expect them to be fixed. That's an opinion I'll agree with.

If we want to spend money and give to charities, that's valid...but if we're really looking for long-term fixes (see: ending poverty, world hunger, etc) then that's not the way to go about it. We'd need to really create a system behind the charities; when you give money, that should go into investing for the future and creating future solutions to fix problems, rather than simply repairing something in the now and here.

Look at natural disasters. A typhoon occurs and the world pitches in and sends hundreds of millions to the troubled country. That's fine. But what we tend to forget a month after the hurricane is that the reason the countries got hit so hard might just be because of poor infrastructure or inadequate technology or systems. Those things still stay in place long after the world sends money; if they tragically get hit again, nothing has changed and the world will (yet again) be expected to simply send more money.

My favorite example of "throwing money at a problem" is something that happened a few years ago:

Some clothing company (Gap, I think, but I'm not 100% sure) had a huge surplus one year that they decided to give away to some village/s in an impoverished South Asian country. All they did was take their extra clothes [money] and throw it at the problem of horrible poverty in the place.

What ended up happening? It was an amazing two year fix. The clothes were so much (in quantity) that they lasted for a few years before running out. During that time, the fact that Gap sent all these free clothes made the entire industry that used to make clothes for these parts go out of business. At the end of the two years, they were in a position that's worse off than what they were a few years back. No local clothes makers; no free Gap.

"Charity doesn't solve anything" might be a bit strong. But he's on to something. Throwing money at a problem doesn't fix anything in the long-term; the way to do it is to invest in the future, not throw money at the present.

Just my (albeit a bit long) $0.02

rapind• 16 years ago

That's a very interesting point. In your clothing example, charity was a crutch that hampered the progression of local businesses.

I could see many other forms of aid having the same effect. Creating a reliance that's completely out of the control of the region. If it evaporates at any point they're stuck in a much worse situation.

I think we could go about this a little more intelligently though. Outside funds could be used to train and evolve local business, giving them the tools required to succeed on their own once the aid disappears. If we went into the situation thinking; We only have X dollars, not a constant stream, so how can we use this money in a way to produce a long term positive outcome in the region?

I guess the problem then becomes finding a non-corrupt entity who knows best how to go about it.

r0s• 16 years ago

That's an interesting point, could it extend to 'employment' too?

What I mean is, how do you set up employment that is self sustaining without wealth invested from outside? Is an industry that exists solely to support itself a house of cards, ready to collapse at the first sign of instability?

It almost looks like any investment is also "throwing money at the problem".

ESchmidtSeesYou6• 16 years ago

Microsoft brazenly, fiercely ignored antitrust law. There's endless evidence in court on their attempts to illegally block the adoption of Java and Netscape Navigator. They were found guilty in U.S. v. Microsoft. And every web developer knows how much damage IE6 did to the progress of the internet. Gates' fortune is unquestionably tainted.

That said, the majority of economists would probably more or less agree with Slim. Buffett, Gates, and Slim could amass wealth faster than pretty much anyone else on earth. Just leaving the money invested in the global economy is not a priori worse than giving it all to charity. Compound growth is obviously self-sustaining growth. The HOPE is that charity can do the same.

Giving away tens of billions of dollars is an ENORMOUS informational problem. Good luck allocating it all even the least bit efficiently. The real answer is that no one can possibly know what the best use of all that money is.

What would I do with the money? Probably put it all in a Vanguard Total Market fund, or the closest fund imitating the true world economy.

lionhearted4• 16 years ago

I disagree with him, but there's merit in what he says. Let me give you an example.

I had coffee in an NGO-operated cafe in Siem Riep, Cambodia. All profits went to running a small school for 10 kids.

I did the quick math on a napkin, and realized they were doing far worse as an NGO/charity than they would be to help people as a for-profit business.

Observe: With a 20% net profit after all expenses (which I think they had, if not higher), they'd be able to have enough of a downpayment to open a second cafe within less than a year. A year after that, they'd have 4-5 cafes opened. In three years total, they could be around 8-12 cafes.

At that point, they'd be producing 12 times as much income. They'd also be employing 12 times as many people, and working in a cafe is a really good job in Cambodia. (Air conditioning, pleasant working conditions, friendly client base, regular hours, not dangerous - unlike most Cambodian work).

But by paying it all out right away, they have much less impact. What they're doing is good, yes, but they might be being a little shortsighted if their goal is to do the greatest good. Currently, they were employing 10 people or so (plus the people who did construction, installation, painting, decoration of the cafe, etc) If they reinvested profits for 4 years, they could be employing 120 people who all get better wages and working conditions who can help their families, and they'd be generating 12 times as much in profit. At that point, if they started getting 1/10th of what they were making to charity, they'd be giving more than they are with one cafe.

Consider that. As a charity, they operate one location, employ 10 people, and educate 10 children. If they ran it as a business, in only four years they could run 12 locations, employ 120 people, and with only a fraction of their profits could educate 12 children. Plus, they'd still have the other 90% of profits to open more cafes, or other businesses, or to help more people, or to open hospitals, or whatever. I've heard similar critiques from a local Khmer businessman and an Indian engineer/restaurant owner I met there. NGO's, while well intentioned, might be stifling development in Cambodia. Maybe. At the very least, running that cafe for-profit and reinvesting profits would've produced a hell of a lot more good very quickly.

secretasiandan• 16 years ago

You haven't made an argument against an NGO operated cafe, you've made an argument against an NGO operated cafe that pays out all its earnings.

Also, assuming that they have any sort of tax or cost advantage (if only from people willing to donate time/effort), for the same amount of business they have more money to put towards their purpose, be it for investment in more cafes or for educating more students now.

lionhearted4• 16 years ago

> You haven't made an argument against an NGO operated cafe, you've made an argument against an NGO operated cafe that pays out all its earnings.

Ah, there were some unstated assumptions in my post.

1. NGO leadership are usually from a different talent pool and background than business leadership.

2. Business leadership tend to outperform NGO leadership at growing a business.

This leads to the idea that a cafe operated for charity might produce less good than a cafe operated for business, as described above. I think it was definitely true in that specific case. Whether the NGO could've run in a more expansive, business-like fashion? I don't know. I'm inclined to guess no, but I'd be open to being pleasantly surprised.

Tutorialzine• 16 years ago

I agree with you, but here is something to keep in mind:

It could be that the fact they donate all their profits to teaching children, might be sole reason why this cafe is profitable in the first place.

If this was run as a regular business, people would not have such an incentive go there. The same goes for a non-profit which has a goal that is not plainly visible.

randomtask• 16 years ago

> I did the quick math on a napkin, and realized they were doing far worse as an NGO/charity than they would be to help people as a for-profit business.

You're making the assumption that creating jobs is better than providing access to education. This may be true in the short term, but probably not in the long term if access to education in that area is a problem. I would say that given that investment in education takes years to pay off anyway it is probably a good plan to invest sooner rather than later. However without knowing more about the specific case it's impossible to say either way.

I'm purely speculating on a hypothetical situation here, but from the point of view of the NGO it may make more sense to invest in education. Creating 120 jobs is no doubt a good thing, but if what is needed most in the area is a school, then investing in more jobs is not doing the greatest good. Creating jobs where the workforce is uneducated is not going to improve the standard of living greatly in that area over an extended period of time. Providing the means for the next generation to obtain better jobs or have the education necessary to start their own businesses might. Maybe the NGO is playing the long game?

Also if they make a success of this model, running a cafe to fund a school, and prove that they can make it work then it will probably be easier for them to get access to funds to replicate that success elsewhere. This could easily have longer term benefits than creating a small amount of jobs. Not to mention that this model doesn't have to be replicated by that NGO.

danielnicollet• 16 years ago

Just read the article and the comments and at the risk of sounding wishy washy, I just think that Carlos Slim probably didn't get good at what he does by excelling at generosity. So, frankly, I think he is the last person I will listen to when giving advice on how to practice charity. Charity and for profit economic development are not mutually exclusive, like all things, they have to be practiced with the right purpose in mind. Some people need charity to become self-reliant later. Some people need an investor.

brudgers3• 16 years ago

Efficient use of capital doesn't entail a jobs program for a billion of the worlds poor or providing them with education and healthcare for nothing in return.

The goal of capital is to create capital. Diverting capital for the purpose of job creation is charity (when done by individuals) or welfare (when done by governments).

Sims approach helps some of the unemployed, but few of the unemployable people in the world.

crpatino• 16 years ago

I sorely regret that your contribution has not received more attention!

Slim's underlying assumption is that only those people that are suitable to held a job are worth caring about, for as long they remain suitable to held such job.

I agree that social entrepreneuring and accessible seed capital investment is part of the solution, as well as employment stimulus programs. However, we cannot ignore that fact that the global tendency in the dominant incarnation of capitalism is to replace labor and expertise with capital, automation and standard processes. Pure capital generating abstract machines cannot be a solution to our labor problems.

Even more so, we need to address the fact that there is people in this world who will never be able to have a job again: the elderly, the disabled, the dispossesed. No matter how much economic growth there is in the world, they will never have direct access to that.

known• 16 years ago

I'm paying 30% income tax. Am I giving charity to Govt?

kirvyteo• 16 years ago

The last statement in the article is interesting. "Has philanthropy solved any major social problems in the past 50 years?" Can philanthropy solve social problems in the first place? It feels like charity is more effective when it is a short term issue, like meeting the needs of population hit by an earthquake. Longer and bigger social problems? Anybody know any positive examples out there?

csomar3• 16 years ago

As someone who is from a third-world country and self-educated, I can't stress enough on providing access to education.

We can create 5,000 jobs today. Simple workers with $10/hour pay. 100 years later and the country won't move. The workers don't understand the power of education, they won't teach well their children and in a third-world country, it's very unlikely they'll get a decent one.

I don't mean by education, an MBA, Ph.D... or all the buzz-words. I mean HN culture, real programmer, self motivation to work and exploit your full potential, mind openness to read and accept the other...

Comparing myself with my other peers, I'm a lot in a better condition and I feel proud of myself, doing something useful instead of spending my time on cafés and playing/watching football.

lzw13• 16 years ago

The education you're talking about doesn't exist in first world countries either. The education, from elementary school to college, is focused on "teaching" people to be good: citizens (that is, compliant with government demands), consumers, and employees. The highest virtue in schools in first world countries are athletics and popularity. The lowest virtues are learning.

If you create jobs in an area, then people have the economic power to come together and hire teachers and create a school. If an external party, such as government, creates the school, the school will be focused on the agenda of that third party.

Education isn't a commodity like cotton. Pretty much all cotton is the useful as cotton. Much of the education in first world countries is focused on keeping people down, dependent, and unquestioning.

Every decade the schools teach less, and in less detail. It is pretty scary. (I expect to be downvoted because I believe most participants on HN are college students or recent graduates who haven't had enough time out of college to get the perspective that results in these conclusions.)

csomar3• 16 years ago

I have to agree to some extent, though. But let's get back to my point: If I have a child, will I care about his education as if I was "non-educated"?

The difference is huge, I'll buy my son books, magazines, Internet access, good education to learn languages and math, the opportunity to travel... not because I'm a rich dad (may be I won't), but because I think this will evolve his mind and improve his education.

Will a 9-5(blue/white) color worker do that? It's not a question of money but a mentality. That's what I'm talking about. Change people minds and they'll create jobs for themselves.

stuntgoat• 16 years ago

Vinod Kholsa seems to agree in that regard. He is investing in profitable ventures that have great potential to solve large problems. According to a NYT article, he wants to show that for-profit businesses can be more effective at achieving goals than most non-profit organizations.

http://www.nytimes.com/2010/10/06/business/global/06khosla.h...

World's Richest Man: 'Charity Doesn't Solve Anything'

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