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DEVELOPMENT: Giving Takes Smart New Ways

Miren Gutierrez*

ROME, Jun 5 2006 (IPS) - Michael Karlin, co-founder of Security First, the first Internet bank, retired in 1999. He was 31.

Karlin is now doing more than making money in a successful business; he is a full-time philanthropist. “At the Mythic Imagination Institute, I am now doing basically the same things as before: leading people around the same idea, connecting people,” he says in a telephone interview from Atlanta. “The aim is to bring more creativity, passion, and empathy in the world.”

Giving away money for social causes is no longer about soup for the poor. It has moved to the world of markets and competition, it has found new creative ways to solve problems governments and profit organisations do not reach. It is now philanthrocapitalism, social entrepreneurism, social investment.

Giving is booming new business among the rich and famous.

Time magazine picked The Bill and Melinda Gates Foundation, whose endowment reached 29.1 billion dollars in February this year, and activist rock star Bono as Persons of the Year for 2005. The magazine saw them “being shrewd about doing good, rewiring politics and re-engineering justice, making mercy smarter and hope strategic, and then daring others to follow.”

The new philanthropy is all about strategy, connections and imagination.

“After years in business, we’ve discovered that the best contribution we can make to people who have ideas but lack in capacities is providing the business thinking, the financial oversight,” says Howard Rosenfeld in a telephone interview from Connecticut in the United States. Rosenfeld is a founder of the Sheirah Foundation, together with his wife Sheryl Leach, creator of the children’s TV character Barney.

One of the enterprises Sheirah Foundation supports is Chat the Planet, a weekly television series that links young people around the world via digital conferencing technology.

Networking is central to the new philanthropy. The Global Philanthropists Circle founded by Peggy Rockefeller Dulany in 2001 brings together several super-rich families from 20 countries to share ideas. Philanthropia Trinity, run by D.K. Matai, who is founder of risk management company mi2g, links entrepreneurs, foundations, banks, non-governmental organisations and advisors.

In their study ‘Looking Out for the Future, An Orientation for Twenty-First Century Philanthropists’, Katherine Fulton and Andrew Blau say developments such as new technologies and dramatic demographic shifts are combining to create a new reality for every gift and every giver.

“I think people are now more creative in how they give,” says Karlin. “People realise in large numbers that their existence is empty, and engage in more meaningful things.”

While it is not a new concept, social entrepreneurism is gaining renewed importance.. And some philanthropists are now acting more like investors allocating money to maximise their “social return” measured in terms of the so-called double bottom line (financial and social performance) or triple bottom line (financial, social plus environmental).

Jeffrey Sachs, director of the Earth Institute at Columbia University in New York, is leading a project in several villages of Africa to prove that the millennium development goals (MDGs, benchmarks created by the United Nations in 2000 to improve the lives of the poorest) can be reached.

The Media Development Loan Fund (MDLF) supported by George Soros recently launched a new financial instrument to enable investors to fund independent media organisations in developing countries. Jeff Skoll and Pierre Omidyar, the founders of eBay, are each donating billions of dollars.

“Philanthropy is all about making a positive difference in the world by devoting your resources and your time to causes you believe in,” says Skoll in an article on his website.. “I also like the idea that philanthropy can be innovative, using the latest advancements to bring results to many people, ideally on a global basis.”

Omidyar Network funds organisations such as Ashoka, which helps create change by providing social entrepreneurs with funding and connections, know-how, and resources. It also supports The Centre for Public Integrity which is a group of investigative journalists, Witness created by Gillian Caldwell who uses video and technology to document human rights abuses, and OneWorld International, a global information network.

London-based hedge funds financier Arpad Bussons’ Ark foundation has partnered with the Western Cape government in South Africa to help HIV victims, and opened a string of homes for orphans in Romania.

Even the nouveau riche of Russia are doing it. The now jailed oil magnate Mikhail Khodorkovsky provided internet training centres for teachers, created a discussion forum on democracy, and financed archaeological digs, cultural exchanges and summer camps for children.

The fast wealth generation of recent years and the growing gap between the haves and have-nots is behind the new philanthropy.

In its inaugural ranking of the world’s richest people 20 years ago, Forbes magazine discovered some 140 billionaires. In 2005, the list registers 793, worth a combined 2.6 trillion dollars (a trillion is a thousand billion). And nowhere is the total giving increasing as in the United States, leader both in absolute terms and as a proportion of its gross domestic product (GDP).

In its latest report the American Association of Fundraising Counsel says U.S. citizens increased donations to charity by 5 percent in 2004 to a record 248.5 billion dollars, more than 2 percent of the GDP. In the UK charities receive more of their income from government than they do from individual donors, says the Institute for Philanthropy in a paper published last year.

A lot of the new money comes from Silicon Valley companies like Google, eBay and Intel, says Rosenfeld. “These new philanthropists are applying the skills sets they used to build their fortunes to philanthropy. They are personally involved, and they’re using their knowledge in conjunction with money to bring in improvement at a speedier pace.”

But not every tycoon is becoming a philanthropist, and a great deal of money is still donated in unexciting ways. Alma maters, museums and concert halls are some of the favourite recipients.

Social propriety and peer pressure play a big part. Some rich people are compelled to donate to their families’ pet ventures “even if they hardly need the funding,” says Rosenfeld. Harvard University endowment, for example, reached 25 billion dollars in 2005, while its operating budget is only about 3 percent of that, according to the Wall Street Journal.

Giving to museums or auditoriums serves a function “but other types of philanthropists are choosing more pressing, critical needs: environment, health, poverty, education around the world,” says Rosenfeld.

“Some do it for genuine reasons, out of compassion and feeling; others for self-importance because they want to be worthy in the eyes of society; others do it simply for tax reasons,” says Deepak Chopra, a millionaire holistic guru involved in several foundations, and who acts a “connector,” in his own words, in the field of highflying altruism.

But all this may not always be to the good. A paper ‘A Failure of Philanthropy’ published in the Stanford Social Innovation Review in 2005 by Rob Reich says philanthropy “does such a poor job of channelling money to the needy that it would not be difficult for government to do better.”

Generous state incentives for charitable giving should not hurt the needy, he writes. “It is one thing to defend the liberty of individuals to give their money away as they please; it is quite another to provide public subsidies for it.”

One of the problems in the U.S. is that there are two types of philanthropists, Rosenfeld says. Some give only 5 percent of their endowment, and others want to give away all their assets in their lifetime. Since 1981, federal U.S. law requires foundations to spend a minimum of 5 percent of their net investment assets annually. “We belong to the second category,” he says.

In order to help decide which category one belongs to and how creative one could be, a thriving parallel sector has emerged: the business of wealth advisory. But that is another story.

Miren Gutierrez is editor-in-chief of IPS.

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