Let's Dial Down our Enthusiasm over the Billionare Giving Pledge

http://www.huffingtonpost.com/aaron-dorfman/the-giving-pledge_b_796159.html

by dcaldwell • 16 years ago

16 26 16 years ago

dcaldwell• 16 years ago

Here are a couple other reasons why I don't think the Giving Pledge will have an enormous impact on philanthropy or nonprofits in general.

First, not every billionaire is going to make the pledge. I double that it will be more than a third of them. So, instead of the $15 billion given annually as the article suggest, it will probably be more like $5 billion.

Secondly, since 1957 giving to non-profits has increased all but about 3 years (2 of those being the last.) Some estimates say that in the next 5-10 years, annual giving will be at around $400 billion instead of the current $300 billion. So, the $5 billion in giving from the Giving Pledge will be a much smaller percentage of total giving than it currently would be.

I certainly applaud the generosity of these individuals and families but we need to maintain perspective. If we could get the average American to increase their giving by 1%, we would probably have a greater impact on total giving.

nlwhittemore• 16 years ago

There are a bunch of fine reasons to be low-to-medium excited about the Giving Pledge instead of totally amped, but Dorfman's argument - that they might not spend it that well- is a pretty stupid one.

First, Gates and Buffett are, in two very different ways, reinventing the rules of how to spend it: Gates by going all in and running his foundation full time, Buffett by saying "forget having my name on things" and giving it to the person he thinks can spend it best.

Zuckerberg is already in this category of smarter giving with his $100mm Newark gift. And there's lots of good reasons to think that the era of the $billion ballet gift is over.

Second, Dorfman runs a center that works to make philanthropy better, but for some reason, instead of being a leading voice in the best strategies for spending it effectively, he's become the leading voice in shitting all over the commitments. Smart. Not.

@dcaldwell's points about the significantly higher amount of annual philanthropy that comes from individuals of average means than from the ultra wealthy is a much better reason to have tempered excitement.

For my money, the most exciting part of this is the precedent that Moskovitz and Zuckerberg are setting to start this incredibly early in their lives. That means we get not only hundreds of millions and billions of dollars, but at least part of their time and attention for decades and decades.

masterponomo• 16 years ago

Um...you're welcome?

torme• 16 years ago

I'd say that having anyone pledge to donate anything is something to be immensely enthusiastic about.

lionhearted3• 16 years ago

I'll say it -

This guy is a fucking jerk.

When confronted with something that conflicts with his worldview that the rich are bad, he cooks up a bunch of caveats and concerns so he can keep his current worldview.

Many of his arguments aren't even right -

> Wealthy donors don't tend to prioritize lower-income communities, communities of color or other marginalized groups as beneficiaries of their giving.

You mean, like, eradicating Malaria in Africa [1] or funding the USA's worst performing school districts [2]?

Jerks like this have been beating the "the rich are evil and don't care about poor people drum" for so long that they can't adapt now. What's this? In addition to building world changing companies, they're also giving the wealth they got personally to charity? Well, it's still not so good, because you know the rich are evil and don't care about poor people.

I'll say it - he's a jerk. When confronted with effective pragmatic people moving into his backwards-poorly-managed idealistic space, he complains and slings mud and adds doubt.

Screw him. We need less people doing stuff that he's doing, and more people doing entrepreneurship, taking strong pragmatic action to fix problems, and giving voluntarily.

[1] http://www.gatesfoundation.org/topics/Pages/malaria.aspx

[2] http://techcrunch.com/2010/09/24/techcrunch-interview-with-m...

tptacek3• 16 years ago

He acknowledged all your points in his article (really, go read it again), and he didn't call you a jerk.

lionhearted3• 16 years ago

> He acknolwedged all your points in his article, and he didn't call you a jerk.

He acknowledged that charity-as-is is currently failing, largely thanks to poor leadership by people like him?

He acknowledged that he dislikes wealthy people as an almost fundamental belief (as opposed to just having it be an undertone of the article)?

No, he didn't. And you know, when you take time to write a series of articles encouraging people to "Dial Down our Enthusiasm over the Billionare Giving Pledge" - that deserves being called a jerk. He could be building the world, doing things, but no - he's slinging mud. That qualifies as jerk behavior.

Edit: He also doesn't mention the conflict of interest here - he's currently a philanthropy director who stands to lose a lot of influence, power, and prestige as a result of this. He used to be a top dog in philanthropy, and now he's slinging mud at people who are doing different, probably more effective things than him.

person_b2• 16 years ago

That's because Dorfman is not in philanthropy for the sake of helping anyone, he's about power and control. When pioneers of industry enter into his field with their own money and do a much more effective job at allocating it, it removes the need for the social and economic moochers that Dorfman represents.

Agree with you completely, people like Dorfman disgust me. I guess he forgot that Gates etc never had to give any of their money to anyone, much less their own personal effort and time.

ABrandt• 16 years ago

I do agree with you on just about every point, but to be fair the author did mention that Gates is an exception to the "don't help the poor" deal. And although Zuckerberg is a good example here, it is also one that HN is inevitably aware of. Can you think of any other charitable donations to the poor so that you might strengthen your argument?

powrtoch• 16 years ago

I've not familiar with his writings prior to this, but you seem really, really certain that he unfairly despises the rich and is unthinkingly attached to this position without regard for the evidence or the greater good in general. Personally, I didn't get that impression from this article at all, so I'm curious what makes you so certain of his state of mind. I didn't feel that the thrust of the article was to attack the rich in any way, just to point out that their good intentions might not manifest themselves as powerfully as we expect.

Regarding [1], the author explicitly mentions the Gates' as an exception to the rule. And regarding [2], I don't think a single piece of recent anecdotal evidence invalidates his organization's actual study.

Personally, I read the article as a reminder that the Giving Pledge's success is no reason to rest on our laurels, and not as an indictment of its contributors. Is it so wrong to do something good and still want to do better?

lubos3• 16 years ago

Let me play devil's advocate.

Let's say you are bill gates. You own assets worth of 50 billion dollars. Assuming there is no capital gain or loss and that your return on investment is 5%, you should be making 2.5 billion USD annually. Half of that would normally need to be paid as income tax to government. That's around 1 billion dollars every year.

So what you do? You get the best financial advisors and they'll tell you... "move your assets into your own private foundation". this way you won't need to pay tax on your income although to retain tax exempt status, you will need to give away every year at least 5% of your assets. so you will end up paying your "taxes" anyway but it will make you look awesome because now you are doing charity instead of just paying federal income tax like the rest of us.

And this is exactly what bill gates has been doing all these years. His foundation is worth 35 billion dollars and he is giving away exactly 5% every year. Up until now they gave away 24 billion dollars (around 1.5 billion a year).

I think it makes sense to avoid paying income tax and decide to spend your money elsewhere at your discretion.

so let's not pretend these billionaires are better than rest of us.

gnaritas3• 16 years ago

> Assuming that there is no capital gain or loss and that your return on investment is 5%

That doesn't seem to make sense, as a return on an investment is a capital gain.

> Half of that would normally need to be paid as income tax to government.

How exactly do you figure that? You don't pay income taxes on investments, you pay a flat 15% capital gains tax on investment income. I don't see how you think he'd lose half to taxes, it'd be far far less than half.

Beyond that, giving away 5% of 35 billion (total wealth) costs a lot more than paying 15% of 2.5 billion (investment income that year), so it's not saving him money on taxes which would only be in the range of 350 million a year given your example.

Choosing to spend a billion and a half a year on charity to avoid paying 350 million in taxes doesn't make much sense as a motivation. So I highly doubt that's why he's doing it.

anamax• 16 years ago

> You own assets worth of 50 billion dollars. Assuming there is no capital gain or loss and that your return on investment is 5%, you should be making 2.5 billion USD annually. Half of that would normally need to be paid as income tax to government. That's around 1 billion dollars every year.

You're assuming that gain in wealth translates to taxable income. It doesn't (necessarily).

Suppose that you buy $100 worth of microsoft stock and the price rises so it's worth $150 a year later. You don't owe anything on that $50 increase in value. (You don't owe anything until you sell.)

However, if you put that same $100 into a bank account and received $10 in interest over the same year. You owe taxes on that $10.

I'd guess that a large fraction of BillG's investments are of the form that he doesn't pay taxes until he cashes out, either for consumption or to make different investments.

If so, BillG's taxable income can <$100M/year while his wealth is growing by $2.5B/year.

I suspect that BillG taxable income was under $5m/year during most of the years while his wealth was exploding (due to the increase in the value of his microsoft stock).

euroclydon• 16 years ago

You seem to imply the point of the foundation is to avoid paying taxes on the capital interest of great hordes of cash, or at least to have direction over what happens to a portion equivalent to the tax.

Okay... but the elephant in the room is the capital itself. Once it's transferred to the foundation, how can it be transferred back, or spent in a personal, non-charitable manner?

grandalf• 16 years ago

The cotton gin ended slavery. Any Billionaire who chooses to give money to charity is opting out of the quest for new innovations that will let people willingly free others from the bonds that hold them in poverty.

Imagine if Whitney had instead donated the capital he used to invent the cotton gin to the local orphanage.

I think it's an interesting commentary on the perception of capitalism that the world's richest view themselves as having been one-hit-wonders unlikely ever to eclipse their initial accomplishment with their own sweat and insight...

Instead, I'd prefer that these people follow in the steps of Gates himself, who has delved into asking the question of what the big problems are and how they're most effectively solved. His TED talk about power generation was incredibly inspiring, and assuming his wealth is $50B, he's not rich enough to self-fund it beyond the second stage.

klbarry• 16 years ago

I get the idea, but that's a terrible, terrible example: The cotton gin made slavery much more tenable as a business by decreasing the price of labor, and it is almost universally agreed amongst historians that it contributed unbelievably to slavery.

notahacker• 16 years ago

Whitney should have donated the capital he used to invent the cotton gin unsuccessfully defend his IP to the local orphanage.

Attributed to the Eli Whitney Museum site by Wikipedia: "Whitney (who died in 1825) could not have foreseen the ways in which his invention would change society for the worse. The most significant of these was the growth of slavery. While it was true that the cotton gin reduced the labor of removing seeds, it did not reduce the need for slaves to grow and pick the cotton. In fact, the opposite occurred. Cotton growing became so profitable for the planters that it greatly increased their demand for both land and slave labor. In 1790 there were six slave states; in 1860 there were 15. From 1790 until Congress banned the importation of slaves from Africa in 1808, Southerners imported 80,000 Africans. By 1860 approximately one in three Southerners was a slave"

So whilst there are many inventions driven by capitalist investment that have had a far more benign or positive impact on society than your unfortunate choice of example, I think it's fair to say that profit-driven innovation by the already wealthy is far from certain to liberate people from the bonds that hold them in poverty even if it succeeds. I also think it's absurd to suggest that charitable giving can't foster innovation. Imagine if the local orphanage had given some smart, self-sufficient kids a good education focused on entrepreneurial values...

kirinkalia• 16 years ago

Having recently worked in the nonprofit world (and for one that received Gates Foundation money), it's important to note that Gates shook up the philanthropy world when he started his foundation and again when Buffett committed to giving his billions to the Gates Foundation. Lots of smaller foundations began asking themselves why they were working in certain areas and if they could be as effective as Gates with Gates in that same space (e.g., malaria prevention).

Gates is not asking billionaires to do what he did, but he should have -- really get involved with the issues you care about and spend that money smartly to make a lasting impact.

Let's Dial Down our Enthusiasm over the Billionare Giving Pledge

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