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The 'Giving Pledge' and Social Change

June 17, 2010

Giving_pledge Yesterday's announcement that Bill and Melinda Gates and Warren Buffett are joining forces to encourage the nation's billionaires to give significantly more of their wealth to charity is a bit of welcome news in an otherwise soggy and somber June.

As first revealed in Fortune magazine, the Gateses and Buffett are the driving forces behind something called the Giving Pledge, an effort "to invite the wealthiest individuals and families in America to commit to giving the majority of their wealth to philanthropic causes and charitable organizations either during their lifetime or after their death" (emphasis added).

According to the Web site set up to support the effort, each person who chooses to pledge will make a public statement to that effect and will publicly explain his or her decision to pledge. Pledges will be non-binding -- "moral commitments" rather than legal contracts -- and once a year those who have taken the pledge will meet "to share ideas and learn from each other." The idea is to catalyze a movement of high-net-worth individuals initially -- and others, eventually -- who see philanthropy as a dynamic platform for addressing society's most pressing problems.

What might this mean, in dollar terms, if the idea gains traction? According to Carol Loomis's article in Fortune, the net worth in 2009 of the Forbes 400 -- the effort's initial target audience -- was $1.2 trillion. If everyone on the list gave away 50 percent of their net worth during their lifetimes or at death, that would be $600 billion -- or roughly twice the amount that individuals and private foundations give to charity in a single year. Some of that wealth -- maybe even most -- would end up in private foundations and be paid out at roughly 5 percent to 6 percent annually, meaning the short-term impact of the "captured" funds might be less than a number like $600 billion would suggest. But it's still a big number.

The likelihood that some of the pledged funds would end up in endowments established in perpetuity surely was on the minds of the Gateses and Buffett when they first started to discuss the idea with each other in the spring of 2009. Bill and Melinda had already announced that they had a plan to "spend down" their foundation -- the largest in the world -- within fifty years of their deaths. And from the day in 2006 when he announced he was leaving 99 percent of his wealth to five philanthropies (the Gates Foundation being the largest of those) during his lifetime, Buffett had become perhaps the most visible proponent of the idea of "giving while living." Indeed, he has reiterated publicly that the proceeds from his Berkshire Hathaway shares "will be expended for philanthropic purposes by ten years after my estate is settled" and that "nothing will go to endowments." Clearly, the Gateses and Buffett -- like Andrew Carnegie and John D. Rockefeller a hundred years ago -- hope to inspire others, by their example, to give generously, thoughtfully, and while still alive.

Regardless of your position on the issue, most would agree that yesterday's announcement was a good thing. Less is often more, but in the case of giving -- of any kind -- more is always more. As Matthew Bishop, U.S. bureau chief for The Economist and co-author of Philanthrocapitalism: How the Rich Can Save the World, noted in a blog post, only 15 percent "of the wealthy who could be giving away substantial amounts of money are doing so, though [Bill Gates] believes that this [could] eventually rise to around 70 percent." Indeed, Bishop, an unabashed supporter of the idea that "high-profile business leaders and entrepreneurs, the wealth creators, becoming philanthropists and then applying their head for business to their charitable giving" will be the most important drivers of social change over the next decade, hailed yesterday's announcement as marking "philanthrocapitalism's coming of age as a movement, with the Gateses and Buffett as its activist leaders." I'm not so sure, for reasons I'll explain in a moment.

Others, like Assetmap founder and Change.org blogger Nathaniel Whittemore, were more skeptical. In a thought-provoking post, Whittemore hailed the Gateses and Buffett for stepping up and providing leadership to their peers. As he put it: "Getting every person of the [Forbes 400] to not only think about philanthropy but have very distinct examples of leaders who are, literally, putting their money where their mouth is, could mark a huge shift in the philanthropy of the rich."

Then, after a nod to the importance of directing the influx of new dollars "to high impact problems and organizations that can leverage their wealth, connections, and ideas," Whittemore urged his readers not to confuse philanthropy (or philanthrocapitalism) with social entrepreneurship (his passion). Indeed, Whittemore confessed to being concerned that the high-profile announcement by the Gateses and Buffett would serve to focus the conversations of those of us who work in or cover philanthropy on "giving back" rather than on the conversation Whittemore thinks we should be having -- i.e., about the very nature of wealth creation and social change.

It's a fair point, and I share his concerns. Because at the end of the day, whether foundations and individual Americans are giving $300 billion a year to charitable causes and organizations, $400 billion, or even $600 billion, progress -- real progress -- on the vexing social and environmental problems that confront us will only occur if the impetus for change comes from below as well as above. If nothing else, that's the lesson we should have learned from the last sixty years of social change movements.

So I applaud Bill and Melinda and Warren for continuing to "walk the talk." And I hope they inspire many others -- rich and not-so-rich -- to follow in their footsteps.

For the rest of us, thanks to the Internet, the steady devolution of power away from long-entrenched gatekeepers, and a profound democratizing bias in American society, we have never been more empowered to work for the changes in society we'd like to see.

What are we waiting for?

-- Mitch Nauffts

Comments

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Posted by Bradford Smith  |   June 17, 2010 at 06:49 PM

worth watching the Charlie Rose interview with Bill, Melinda and Warren http://www.charlierose.com/ for insight into the thinking and feeling behind this initiative.

Posted by Kulwant Singh   |   June 18, 2010 at 03:34 AM

In this way we create a new shape of EARTH which have no hunger , watershortage, Poormanship , child labour,prostitution, Corruptiong, BAD Politics ,and above all of it TERRORISM and WAR .
Kulwant Singh ,Chandigarh , India.

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