What’s Wrong With Profit?

Monday, November 13, 2006

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.

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.

Continue reading “What’s Wrong With Profit?

Source: The New York Times (link opens in a new window)