Mark Zuckerberg and other billionaires make philanthropy entrepreneurial

Mark Zuckerberg and his wife’s pledge to give away 99 percent of their Facebook shares is indicative of how some of the world’s richest members are thinking about the role and utility of their wealth differently.

Mark Zuckerberg/AP
In this photo provided by Mark Zuckerberg, Max Chan Zuckerberg is held by her parents, Mr. Zuckerberg and Priscilla Chan. The Facebook CEO and his wife announced the birth of their daughter as well as plans to donate most of their wealth to a new organization that will tackle a broad range of the world's ills.

Facebook founder and CEO Mark Zuckerberg’s announcement Tuesday that he and his wife, Priscilla Chan, will give away 99 percent of their company shares over their lifetimes was met with widespread praise. For one thing, it indicated how quickly Mr. Zuckerberg, in his early 30s, is ceding some of his time to charitable efforts. Bill Gates and Michael Bloomberg, among others, pointed to Zuckerberg as a potential model for other would-be philanthropists.

But the pledge, while unique, is also symptomatic of a line of thinking about wealth and giving that is gaining ground. Namely, a small but growing contingent of America’s ultra-rich are not only committing the bulk of their wealth to philanthropic causes, but also pooling their talents and networks to find innovative ways to address a range of complicated social issues.

The move to pool resources stands in contrast to the approach of giving millions, carte blanche, to established charitable foundations. The shift, experts say, stems from a variety of factors, but boils down to some of the world’s richest members thinking about the role and utility of their wealth differently – and more broadly.

“There is more emphasis on leaving the world in a healthier state for this generation of billionaire donors,” Melanie Ulle, CEO of Philanthropy Expert, a consulting firm that advises on the charitable efforts of major corporations, writes via e-mail. “There is less emphasis on ensuring a personal legacy. Systemically, it is certainly a smarter investment to commit to the health and livelihood of the planet rather than the bank accounts of their progeny.”

The billionaire you know

Zuckerberg’s commitment comes a few years after he became one of the first signers of the Giving Pledge, an initiative started by Mr. Gates and Warren Buffett in 2010 that challenges the world’s billionaires to promise to give away at least half of their fortunes. Mr. Buffett and Gates are the two richest men in America, and they say they’ve recruited 187 billionaires to their cause to date.

If the public nature of such commitments seems more widespread, it’s because many billionaires themselves, especially in the United States, are more public figures than they were in previous decades. They run tech companies that are household names, own popular sports teams, and, at least in Zuckerberg’s case, share intimate details of their private lives online.

Also, there are a lot more of them. The world had a record 1,826 billionaires in 2015, 290 of whom were new billionaires this year, according to Forbes.

That combination of ever-greater wealth at the top and visibility means greater scrutiny in terms of where that money goes. Something like the Giving Pledge “puts giving in the spotlight and prompts other people to give,” says Eileen Heisman, president and CEO of National Philanthropic Trust, whose home office is near Philadelphia. 

Giving as entrepreneurship

Additionally, Ms. Heisman says, the Giving Pledge has given rise to coalitions of wealthy individuals targeting specific issues. “That’s probably not the intention that Buffett and Gates had initially, but there’s power in having some of the best thinkers in the world working together and looking at social problems as a group.”

On Monday, for instance, Gates announced the launch of the Breakthrough Energy Coalition, teaming big names like Zuckerberg and Amazon’s Jeff Bezos with other billionaires interested in clean energy investment, including venture capitalist John Doerr, to fund early-stage research in clean energy.

Such efforts also speak to the entrepreneurial nature of this particular breed of philanthropy, and a blurring of the lines between straight philanthropy and corporate interest. Zuckerberg and Ms. Chan will make their contributions through a limited liability company, or an LLC, rather than through a 501(c)(3) charitable trust. This gives the flexibility to do things that pure charities can’t, such as make for-profit investments and political donations and refocus investments when and where Zuckerberg sees fit.

Plus, “it means he doesn’t get the big tax deduction that he would for a charitable donation,” Heisman says, which means that the money is still in the economy. Laurene Powell Jobs, Steve Jobs’s widow, also makes her donations through a charitable LLC.

Such an approach isn’t without criticism. “Most of the new generation of tech philanthropists believe that one can ‘do well while doing good,’ ” Erica Kohl-Arenas, an assistant professor of nonprofit management at the New School in New York, writes in an e-mail. “In other words, they are very transparent about wanting to make money on their philanthropic investments, [but] most of them hope to do so while also ... advancing current capitalist systems that create the problems that they aim to serve.”

“This is and has always been the grand paradox of philanthropy,” she continues. “Can one truly address poverty, inequality, environmental and labor abuses while maintaining systems of production that produce inequality? For foundations that fund community based approaches to solving these problems it raises the question of whether working class organizing can be aided through the surplus of capital.”

Indeed, one of Zuckerberg’s earliest charitable efforts, a $100 million donation to the impoverished public school system in Newark, N.J., is considered a failure that threw money at a problem without addressing the underlying causes – something Zuckerberg himself has publicly acknowledged. But other efforts, including the Gates Foundation’s 15 years of work to improve public health in poor regions of Africa, have had tangible success.

Heisman says it’s still too early to tell how much the efforts of people like Zuckerberg, Gates, and Buffett will ultimately move the needle, but the increased transparency could be a help.

“The coalition of private funders are going to be much more visible about their track record,” she says. “We have a more data-driven society, and they will want to showcase what they have achieved, and what they have learned.”

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