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Philanthrocapitalism Unbound: Q&A With Matthew Bishop

December 11, 2008

Bishop_lgMatthew Bishop is New York Bureau chief of The Economist magazine and co-author (along with Michael Green) of Philanthrocapitalism: How the Rich Can Save the World. Last month, I sat down with Bishop in a midtown conference room to talk about the book, the definition and significance of philanthrocapitalism, the growing concentration of wealth in the United States, and the role of philanthropy in a democratic society. Here's an excerpt from our conversation:

Philanthropy News Digest: You applaud philanthrocapitalists for taking a systems-thinking approach to problem solving. But what evidence do we have that systems-thinking yields results when applied to a social context?

Matthew Bishop: One of the things that has happened over the past twenty years is that a lot of talent in society has migrated to the business sector -- talent that in the past would have gone into politics or law or medicine. Of course, money is a powerful inducement. But people also want to do work that feels cutting-edge, to solve problems and make a difference. They want to create the next Google, the next amazing new technology; they feel that with hard work and a little luck they can shape the course of whole economies. And that feels great, that's exciting.

But the idea that all this talent is turning its attention to addressing big social problems raises, for me, a couple of questions. First, anyone coming from the business world into the social sector has to navigate significant cultural differences. For example, people in the business world too often are maniacal about control. There's this arrogance, especially among executives, that they know best and that people in the nonprofit sector don't know what they're talking about. Similarly, on the nonprofit side, you have people who resent wealthy capitalists who have made a boatload of money for themselves and are now coming in and telling them what to do. We hear these stories all the time. So, there's quite a lot of disrespect on both sides of the divide, which is a bad place from which to start.

What is encouraging is that the most effective of the philanthrocapitalists have not only demonstrated their commitment to the social sector, a number of them have had a kind of epiphany and realize that they need to be more humble and listen more. In fact, that's something the new economy encourages; it's the whole venture capital thing about not really being a success until you've failed at least once. At the same time, the people on the receiving end of the money are more aware that there's a lot of money out there waiting to be tapped, that there's a quid pro quo attached to it, and that they're going to have to get used to the idea of participation, beyond a check, from the person providing the funding. Again, people are starting to figure out how to make it work.

The other concern I hear a lot is that, initially at least, philanthrocapitalists are looking at social sector work as a profit opportunity. Now, there may be profitable business models out there and ways to make social enterprises more sustainable. That's just going to be the case in some situations. But in other situations, that whole agenda is completely inappropriate. What we'd like to see, instead, is business people applying business approaches to social problems, approaches that allocate capital efficiently and strive to generate impact, that emphasize investment in capacity and sustainability and don't skimp on overhead. Revenue should always be secondary.

PND: You spend a lot of time in the book talking about Bill Gates, Warren Buffett, and the Bill and Melinda Gates Foundation, the largest philanthropy in the United States and one of the largest in the world. The Gates Foundation has four trustees: Bill and Melinda Gates, Bill Gates, Sr., and Warren Buffett. Are you concerned by the concentration of so much wealth in a single tax-exempt institution controlled by just four people?

MB: First, let me just say that Bill Gates and Warren Buffett do not have to give their money away. They could spend it or leave it to their children or move it offshore. So, it's a good thing, in my view, that they've chosen to invest it philanthropically, and clearly their motivations for doing so are good ones. They feel extremely fortunate, they want to give back to society and make a difference, they want to solve problems, and they don't have any interest in undermining the democratic process.

That said, there are two aspects of the Gates-Buffett merger that merit discussion. To your point about the growing concentration of wealth in American society, there is a real question about whether would it have been better for Buffett to have given his money to another foundation, or to have created his own foundation, in the interest of competition. There is a feeling in some quarters that the Gates Foundation could become monopolistic in some areas. Not in the sense of having a massive amount of capital to allocate, because clearly the money that governments are able to spend will dwarf even the $3 billion that the Gates Foundation plans to spend every year, but monopolistic in the sense that anyone who has got a bright idea in, say, the global health arena may feel that they have to go to Gates or try to keep Gates happy. So, yes, there's a question about whether it would be better to have two big foundations in the global public health arena competing for ideas and human capital rather than one giant one....

To read the interview, click here.

-- Mitch Nauffts

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