The new trend in long-term, futuristic bets by some of the biggest U.S. philanthropists is drawing scrutiny by critics who say those enormous financial commitments need more transparency and measurable goals.
“These large gifts represent an exercise of power to help shape the future,” says Robert Reich, a Stanford University professor. “It’s an expression of private power and deserves our collective scrutiny as a consequence, not automatic gratitude.”
Reich, the author of Just Giving: Why Philanthropy Is Failing Democracy and How It Can Do Better, raised questions in particular about two of the most significant gifts announced in 2018.
Jeff and Mackenzie Bezos (No. 1 on the Chronicle’s Philanthropy 50 list of the biggest donors last year) announced a $2 billion Day One Fund to support the homeless and create preschools. Reich argues that the Amazon founder should be more transparent about how he will structure his philanthropy, the timeline for distributing the funds, and which charities are eligible to apply.
“He seems to have made some quick decisions,” Reich says, “but it’s difficult to find out what is going on.”
Reich also took issue with Michael Bloomberg’s $1.8 billion pledge to the Johns Hopkins University, Bloomberg’s alma mater, for financial aid for low- and middle-income students. Bloomberg saw the gift as a way to spur other donors and lawmakers to make a stronger commitment to financial aid for students.
However, Reich suggested the gift could have the opposite effect.
“How does that extraordinary amount of money push the country closer to the policy goal — other than fixing the problem at one university?” Reich says. “State legislators might look at this gift and say to a state university, ‘Find your own billions.’ "
Bloomberg’s gift won’t be reflected in the Philanthropy 50 until next year because of the Chronicle’s methodology for counting gifts. Contributions from Bloomberg Philanthropies includes Bloomberg’s personal donations but also grants awarded through his family foundation and Bloomberg LP, which the Chronicle does not count. Nevertheless, Bloomberg landed the No. 2 spot on the list because of other gifts he made last year.
Who Gets Left Out
Reich’s new book and another prominent recent work, Winners Take All, by Anand Giridharadas, bemoan the growing concentration of philanthropic power in the hands of the ultrarich. “Our society is increasingly dependent on the whims of big philanthropists,” Reich says. “It leaves ordinary citizens out of the decision-making process.”
The total big donors gave was $7.8 billion, a sharp drop from the 14.7 billion donated in 2017. The causes philanthropists supported are evolving, with more wealthy Americans looking for ways to shape the world’s uncertain future.
Others worry that even those doing charity work will be left out. The philanthropic plutocracy is flawed by its “zealous belief in the private sector’s unique ability to transform society,” wrote journalist Abigail Higgins, a former United Nations and World Bank researcher and consultant, in a review of Giridharadas’s book.
But Phil Buchanan, president of the Center for Effective Philanthropy, worries that the climate has shifted too far toward criticism. Two decades ago, he notes, the tone was the opposite, and many of the ultrarich were being criticized for postponing charitable giving. “I don’t believe that the motivations of all big philanthropists are nefarious,” says Buchanan. “Many are acting out of a deep and genuine desire to do good for others and our planet.”
Nontraditional Giving
Meanwhile, the Laura and John Arnold Foundation joined the growing ranks of big donors who are moving away from traditional forms of philanthropy.
The retired hedge-fund manager and his wife (No. 8 on the Philanthropy 50) announced in January that they were creating an LLC to oversee their philanthropy. The structure allows for-profit investments in addition to grants, plus a bigger push into advocacy work. Similar organizations established by billionaires recently include the Emerson Collective, the Chan Zuckerberg Initiative, and the Omidyar Network. Proponents of the structure say it allows billionaires to support the best organizations driving social change, regardless of how those groups are structured under the tax code.
The organizations are also seeking greater flexibility to influence policy makers. The Arnold Foundation, now an arm of Arnold Ventures, cited the potential to influence government policies and spending through political advocacy as its primary reason for the change.
“It’s a recognition that the kind of issues they want to address require greater resources than what philanthropy can provide,” says Richard Marker, co-principal at Wise Philanthropy, an advisory and education firm.
Critics note that tax laws allow LLCs to be far more secretive than traditional forms of philanthropy. But proponents say new methods are needed to address problems that have existed for decades such as gun violence, spiraling health-care costs, and unsustainable public pensions — problems that can easily go on longer than the traditional grant cycle that lasts just two to four years.
“We’re learning how to balance that tension,” says Kelli Rhee, president of Arnold Ventures. “We recognize that our commitments need to be very long term in the fields in which we work.”
