A new generation of “philanthropreneurs” has stepped forward, driven to do good and have their profit, too.
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THE PHILANTHROPRENEURS A new breed of billionaires are out to harness the marketplace as a force for doing good in the underdeveloped world. From left, Sir Richard Branson, Pierre Omidyar and Jeffrey S. Skoll.
THIS year, as never before, the line between philanthropy and business is blurring. A new generation of philanthropists has stepped forward, for the most part young billionaires who have reaped the benefits of capitalism and believe that it can be applied in the service of charity. They are “philanthropreneurs,” driven to do good and have their profit, too.
VESTED INTEREST Pierre Omidyar weaves investing and philanthropy.
Among them are eBay’s founder, Pierre Omidyar, who wants to use investment capital as well as donations to expand the microloan industry, and Stephen M. Case, the co-founder of America Online, who is investing $250 million in companies that help consumers gain control of their health care.
Young companies are involved, too: when Google announced its philanthropic effort this year, it unveiled a venture-capital fund rather than a foundation.
The approach of these philanthropreneurs reflects the culture of the business that brought them their wealth: information technology, with its ethos that everyone should have access to information. By their way of thinking, the marketplace can have the same level-the-playing-field impact, and supply the world’s poor with basic needs like food, sanitation and shelter.
“More and more people are asking who else is going to finance doing good if government isn’t,” said Alan Abramson, director of the nonprofit sector and philanthropy program at the Aspen Institute, a public policy think tank in Washington. “These guys have firsthand knowledge of the market’s power, and they’re asking themselves why they can’t make money and tackle some of the problems once addressed primarily by government at the same time.”
It sounds simple, but the idea of such hybrid philanthropy is upsetting long-held conventions. These new philanthropists view the current foundation model, built on the fortunes of earlier industrial titans like Carnegie and Rockefeller, as hidebound and often ineffective. They have an urge to change the world, and argue that in some cases only the speed of capitalism is fast enough.
“We need to be open to bigger, bolder reform because the hard truth is Philanthropy 1.0 hasn’t worked well enough,” Mr. Case told a group of foundation executives in January. “If you’ll forgive the computer metaphors, our system needs an upgrade.”
An upgrade had been in the works courtesy of Bill Gates, the Microsoft chairman, who had already leveraged the power of the information technology industry in creating the Bill and Melinda Gates Foundation, with its tens of billions of dollars in assets from him and, more recently, from the investor Warren E. Buffett. The Gates Foundation has led the way in focusing on problems of the underdeveloped world, like disease. But its impact is as much from its size as its way of doing business: it is mostly a traditional philanthropy, writ large.
What the philanthropreneurs have in mind is something different, and it is producing some confusion, as evidenced by an exchange in September on “Late Show With David Letterman” between Mr. Letterman and Ted Turner, the founder of CNN and a man who knows something about melding business and philanthropy.
Mr. Letterman asked his guest about a plan announced earlier that day by another philanthropreneur, Sir Richard Branson, to “donate,” as Mr. Letterman put it, $3 billion to develop greener fuels.
Mr. Turner cut him off: “It’s not a donation.”
Rather, he said, it was an investment. “He’s probably going to make more off that investment than he has in everything else,” he said.
Experts in philanthropy are not so confused, but they are not bowled over, either — at least not yet.
“I come at this from at least a wonderment of what are the advantages the melded or hybrid model brings,” said Mark Rosenman, a professor at the Union Institute and University in Cincinnati and an expert on nonprofit matters. “Though I have no problem with philanthropy and socially responsible business being joined, I do have one with a for-profit enterprise being called philanthropy.”
“I see no clear reasons to begin to develop corporate structures that need to consider themselves more closely aligned with philanthropic purposes,” Mr. Rosenman added.
He said such structures already exist, citing businesses like the Body Shop, which uses its stores and products to inform consumers about human rights and environmental issues and trades with indigenous peoples for supplies and materials.
Mr. Case points to the National Geographic Society, a nonprofit group that is sustained by sales of everything from magazines to toys.
“It has basically become a billion-dollar business set up as a nonprofit,” he said. “It doesn’t have to focus on collecting money or holding black-tie balls to raise money because its sales are sustaining its mission of educating the world about the world.”
So far, there is little criticism of the hybrid proponents, perhaps because they seem to have little interest in capitalizing on the tax benefits of their philanthropy. Google, for example, will pay taxes should its new fund produce returns, and Mr. Omidyar foregoes about $1 million in tax benefits by mixing his philanthropy with business.
Mr. Turner is a relatively old hand at ground-breaking philanthropy, having stunned the world in 1997 with a $1 billion pledge to the United Nations, the largest single pledge ever at the time. But he shares the philanthropreneurs’ impatience with the lines drawn by legal, regulatory and tax regimes between business and philanthropy.
There’s no way you can invest in polio vaccines and make money,” he said. “But developing solar panels, that has profit potential and it’s good for the environment. Certain areas of making the world better do lend themselves very comfortably to for-profit operations. Why should we be afraid of that?”
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