Billionaire John Arnold Defends His Philanthropy, Big Gifts, and Mark Zuckerberg

Brent Humphreys

Reaction to John Arnold’s philanthropy routinely includes a dose of suspicion, if not outrage. That’s in part because his business career included stints as a trader at energy giant Enron, which filed for bankruptcy in 2001 amid scandal, and later as a hedge-fund manager.

Mr. Arnold also attracts scrutiny because he uses his philanthropy to push for controversial policies, including reforms to government pension plans that critics argue will hurt workers. More recently, he and his wife, Laura, drew fire for funding a Baltimore aerial-surveillance pilot program that police launched without the knowledge of city leaders.

In 2014, Mr. Arnold wrote for The Chronicle about some very personal attacks on his philanthropy. Here, he offers an update and talks broadly about the role of big philanthropy in society. The interview, which was conducted via email, was edited for brevity and clarity.

On attacks on his pension-plan work:

Thankfully, the conversation has moved past the vitriolic personal attacks to the difficult debates about solutions. My only indignation with the criticism is that it may have caused some communities to delay making the difficult decisions that needed to be made. Public-pension debt is a problem that gets worse each day, and a few writers and activists who thought they were helping may have actually exacerbated the problem.

The lesson we learned from this experience is that we need to do a better job of communicating our interests and efforts when we get involved in controversial areas. Opponents of pension reform wanted to make me the focus of the debate so that they could avoid discussing the consequences of the issue. Our communications task was much harder.

On the Baltimore surveillance program:

The criticism came in two forms. First, there was concern that the community was not informed by its elected and appointed leaders in advance of the pilot project. I understand the criticism, but we had nothing to do with the communications plan. Our contact was only with the vendor of the surveillance system.

The second concern was the more fundamental debate about the tradeoffs related to security versus privacy. This is a conversation that needs to be had. But in order to have an informed discussion, one must know the benefits of the technology. We as a society have reached broad consensus that high-resolution security cameras in population-dense neighborhoods are an acceptable tool. People know these cameras have been directly involved in catching the perpetrators of crimes, including horrible terrorist acts, so are generally willing to accept the corresponding loss of privacy.

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I believe we need to understand the value of specific technological tools in order for people to have an open discussion about whether it makes sense to use these tools in their community.

On criticism of philanthropists and foundations:

The criticisms are likely linked to the recent backlash against so-called elites. It is natural for people who feel a level of stagnation to question the nation’s policies and policy makers. A judicious amount of skepticism about a nation’s institutions is healthy for society. And I don’t think foundations, nor any actor in these systems, should be exempt from scrutiny.

I do think the living-donor model is more apt to be criticized than the traditional, perpetual foundation. It is easier to criticize a personality than an organization. Mark Zuckerberg’s donation to Newark’s public schools was held to an impossibly high standard, largely because people like to create an image in their minds of an evilmonger. Had the same donation been made anonymously, the story today would be how the city leveraged philanthropic capital to significantly improve educational outcomes. Instead, the story was focused on the donor.

On the risks of criticism of philanthropy:

The risk is that criticism will lead to less giving. I understand the backlash when a billionaire gives a $100 million donation to Harvard or Stanford; people wonder whether that is the best use of funds. But does anyone think that is a worse outcome for society than bequeathing those funds to one’s heirs?

Every system needs a check on it. Governments are checked by voters. Private industry is checked by the capital markets. While foundations are ostensibly checked by the Internal Revenue Service and state attorneys general, the reality is these authorities usually only step in when there is a problem.

Foundations should be prepared and able to defend their work. But many controversial projects may deserve funding. Philanthropy can help governments experiment with new programs, act as a watchdog to other sectors, and fund think tanks across the political spectrum. These actions will naturally invite debate. But that does not imply these projects should not be funded, just that foundations need to be able to justify the work.