Business as Philanthropy: Gates, Buffett, and Transformative Change

Bill GatesBill Gates and Warren Buffett recently pledged to join 40 of America’s wealthiest people in donating at least half of their riches to charity. For Gates and Buffett alone, such a pledge will translate into at least $115 billion in charity.

This sounds wonderful on the surface, but philanthropist Kimberly O. Dennis is a bit skeptical. In last week’s Wall Street Journal, Dennis argued that “the wealthy may help humanity more as businessmen and women than as philanthropists.”

As Dennis explains:

What are the chances, after all, that the two forces behind the Giving Pledge will contribute anywhere near as much to the betterment of society through their charity as they have through their business pursuits? In building Microsoft, Bill Gates changed the way the world creates and shares knowledge. Warren Buffett’s investments have birthed and grown innumerable profitable enterprises, making capital markets work more efficiently and enriching many in the process.

In the end, Dennis’ criticism seems to serve as a simple reminder of which approach is most promising when it comes to bringing about transformative change.

While businesses may do more for the public good than they’re given credit for, philanthropies may do less. Think about it for a moment: Can you point to a single charitable accomplishment that has been as transformative as, say, the cell phone or the birth-control pill?

On this last question there is bound to be disagreement, particularly because we all view value differently. For one person the birth control pill is extremely important. For another, feeding one hungry mouth is more worthwhile.

But if we just stick to some of the “mainstream” stuff, I think we can all see what Dennis is pointing to. For example, Andrew Carnegie’s contribution of 1,679 libraries certainly provides a great image of effective, philanthropic success (in my opinion). John D. Rockefeller’s success in scientific research provides another.

But are we really to say that Carnegie’s steel innovations and Rockefeller’s oil pipelines were less “transformative” than their construction of city libraries and ivory towers? Which efforts provided more jobs? Which efforts allowed families to travel easier, buy goods cheaper, and spend more time with each other?

Don’t get me wrong. I’m not saying philanthropy is bad, or even that it should be avoided, but I do think it’s important to recognize that charity is not necessarily better than business.

Both Gates and Buffett have certainly done their fair share of innovating and investing on behalf of society, but when such large amounts of cash are moving out of the “business world,” we should all take note of the unseen industries and livelihoods that are being sacrificed as a result.

What are your thoughts?

(Note: The image above is provided by batmoo / / CC BY-SA 2.0)

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  • Remnant Culture

    Gates and Buffett have pledged half of their wealth to charity, but is this such a good idea? #tcot #tlot

  • Anon

    If Bill Gates believes that his money is best used for charity, then in other words he believes charity will provide greater marginal utility than any other use, assuming he's rational (which is pretty safe). Part of economics is maximizing utility. Ergo, if Bill Gates is doing this of his own free will, it's likely the best use of his money. Trying to argue that he could use it “better” or in a more “transformative” way by using it in business seems to arbitrarily assume that his philanthropic efforts are somehow less productive than a business effort. It's my understanding that the Gates Foundation is very careful to use its money in places that are likely to give significant benefit. Maybe not “transformative”, but still beneficial, at least in Mr. Gates' opinion. And, as you say, we all view value differently. That's why there are markets, and since charities still have to (somewhat) operate within the markets, they internalize at least some of the differences in value through pricing.

    Also, why are you so focused on “transformative change”? Lots of human achievements were built slowly over time. That's just as beneficial in the long run as the occasional huge achievement. In fact, without groundwork, huge achievements can't be made. If you want to focus on “transformative change,” I'd like to know why that's the most important place to focus.

    As I type this and think more, maybe the issue I have with how the article comes across is focused around your statement that “I’m not saying philanthropy is bad, or even that it should be avoided, but I do think it’s important to recognize that charity is not necessarily better than business.” I agree with your *words*, but I don't think that's the point the article is actually making. The point that comes across is that you're arguing charity is *less* effective than business, whether or not that was your intent. And, while true in many cases, it's certainly not always the case. What I read in your article is a bias against charity, rather than an honest assessment of the relative merits of charity and business.

    As with your article on Prop 8, I can see some glimmers of a good article showing, but to be honest I'm again a little disappointed. You have a great way of thinking about things, where I often disagree but can very clearly understand and respect your logic and point of view, but articles like this one aren't letting that come through as much as it should. You've got the depth of thought and analysis necessary to create an interesting discussion – however, it's hard to remember that depth when reading an article like this where it feels like you're handpicking facts/ideas to fit a foregone conclusion rather than assembling facts and building a conclusion from them.

  • annie

    This post has sparked a few thoughts about the concept of “transformative change”. As material realities progress, material choices and comforts are bound to increase. This does indeed transform many “external” aspects of societies, and it is possible for these changes to occur through either business enterprises or through philanthropy. One aspect of philanthropy that has not been mentioned is the INTERNAL effect that is has upon those who choose to participate in it. The choice to give of one's hard-earned labors has a transformative effect upon the GIVER – and changes that person from the INSIDE OUT, in ways that are bound to affect other aspects of the person's life. These transformative changes may ripple out in a variety of ways, positively influencing other realities within the giver's sphere. (Business enterprise would have a transformative internal effect also, but it would be somewhat different. For example, I would guess that the choice to invest oneself in a business venture would have positive internal benefits in the area of creativity, etc.) We all have choices to make about how to “invest” our resources of time/money/talent. These choices will affect the external world around us. They will also have profound effects upon us on the INSIDE, and become part of the fabric of “who we are”. I see the potential for positive internal transformation resulting from either endeavor. Whether it is “philanthropy” or “business”, the important thing is that a unique human being is reaching into the reservoir inside them and “giving” something from that to make the world a better place. Because human beings are flawed, there are bound to be imperfections in either approach to “transforming” the external world. But the simple act of giving from a heart of sincere love has a “transformative” result in and of itself – a result whose benefits are worthy in themselves. (Just a post-script here: Bill Gates would be my idea of someone whose business efforts have had a very positive transformative effect on the world around him. But in choosing now to engage in philanthropy, he is allowing himself the opportunity to develop INWARDLY in ways that will bring a different type of joy and growth to his life. These are intangible benefits that usually result in tangible transformations as they progress.)

  • Remnant Culture

    Thank you for the critique. I agree with your first two paragraphs, so you may be right that it may be a flaw in my construction of the article. I probably should have added a bit more to clarify.

    My goal was indeed to simply get (most) people thinking about the the issue differently, as I assume Dennis' goal is. It may seem I'm “handpicking facts” because I'm interested in illuminating one angle, but again, I don't think the other angle is *wrong* so I should've provided some more clarification.

    “Transformative change” is indeed a term that could apply to many things, and hopefully I can return to this concept sometime as to how it relates to charity. In the meantime, another commenter (“Annie”) seems to have provided some good thoughts on how charity can result in *internal* transformative change (again, not that it can't result in “external” change).

    Thanks again for the critique. It's rare that a writer can get such constructive comments. :)

  • Julia

    I agree with this post and love Annie's comment below! However, another reason I think philanthropy is important and can't be completely replaced by business is that in the business realm, the dollar has the power. Largely, decisions are made based on where the money is or from where the money is coming. Sometimes this is not in the best interest of society, communities, individuals, or causes. Sometimes it's even a conflict of interest. Take the homeless for example. There is little money to be made there, so how do you make a business to solve that problem? (Because of the high rates of mental illness, substance abuse, lack of skills, etc., the solution is not as simple as providing jobs.) Yet, it would be inhumane to simply ignore the issue. If you compare the invention of the cell phone to your local shelter, the cell phone sure is more fun and is arguably more “impressive.” Even though I agree with this post, it's a bit cold to pit business against philanthropy, especially when philanthropy shrivels away without business.

  • Remnant Culture

    I don't think we need to “pit business against philanthropy” either, and I wasn't trying to do so in this post. I do, however, think the prevailing mindset is to elevate philanthropy *above* business. Certainly not everyone sees it this way, but the goal of this post was simply as a reminder of the trade-offs.

    Being that the goal of the post was to point toward the merits of business, I didn't get into much as regards to the merits of charity/philanthropy. I've done this in the past (for a recent example, see my post this week on “status-free zones”), but for now, I'll just throw out a few reactions:

    Your point about the homeless is well taken. Indeed, there are plenty of people that business will not serve or will under-serve, depending on how we see the value. That said, I do think the *future* (and even the present) of business can and will see many (not all) of the drastically disadvantaged as a market of their own. Muhammad Yunus did this particularly well with microfinance in Bangladesh. Rather than see impoverished women as an object of charity, he looked at the causes of their disadvantage and found a way to profit it from it. Yunus does, however, see profit in a pretty radical, NON-profit way, but the point still holds. This won't apply to those who don't *want* help (e.g. many of the homeless), so even in such an age, there will still be plenty of room for charity. As Jesus said, “The poor you will always have with you.” (Mark 14:7)

    Lastly, just a quick point on the cell phone. It may be tempting to think of an invention like the cell phone as *merely* “fun” and “impressive” but it has had an enormous effect on individual life and social mobility — as much of the “communications revolution” has. It is inventions like these — and the lower prices of other essential items — that have kept many from needing “shelters.” Indeed, the cell phone is a great example, primarily because it has allowed many in the Third World to build their businesses where poor infrastructure would have hindered them otherwise. I allude to many of these items here:

    It's a minor point, but I just wanted to emphasize that inventing such products and allowing for their widespread availability is key for assisting (particularly) the lower classes. Even liberal development economists like Jeffrey Sachs (I'm not a fan) talk about “getting tools to folks on the ground.” Business is the best, most efficient way to do that, in my opinion.

    But again, this does not diminish the need for charity where appropriate.

  • Julia

    Hurray! We agree! :)

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  • Nick Such

    @pyromanfo Orig tweet was intentionally contrarian view. These guys explain it better: