What would you do with $1 billion dollars?
Aside from upgrading your home and car and finally paying off those debts, you could make a huge effect on many of the world’s problems. From addressing problems in public-school education to helping to find a cancer cure, a billion dollars can go a long way.
Warren Buffett and Bill Gates wanted to put their own multi-billion fortunes to good use–and they thought that many other billionaires would feel the same way. So, in 2010, Buffett, the world’s third-richest man with a net worth of $45 billion, and Gates, the second-richest man, with $63 billion to his name, went public with the Giving Pledge.
The Giving Pledge aims to get the super-rich—beginning with Fortune’s list of the 400 wealthiest Americans—to pledge at least 50% of their net worth to charitable organizations during their lives or upon their deaths.
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Today, we’ll look at how this pledge will affect philanthropy in the United States, and whether so many billionaires pledging to do good has a downside.
Who Has Taken the Pledge—and Why
Since the Giving Pledge is relatively new, we haven’t seen anything close to its true impact yet. But if all of the Fortune 400 joined the Giving Pledge, philanthropic organizations would see an influx of at least $600 billion. These donations, given by only 400 people, would double the amount donated by the entire United States annually–and dramatically change the landscape for many philanthropic organizations.
So far, 92 families have committed to the pledge, which means $216 billion stands to go to charity–a number that will increase as more billionaires pledge. Buffett and Gates have been joined by Mark Zuckerberg, who has already given $100 million to Newark public schools; Charles F. Feeney, the founder of Duty Free Shops, who had previously donated $5.5 billion to his foundation, the Atlantic Philanthropies; and Jon M. Huntsman, Sr., the father of the one-time Republican presidential hopeful Jon M. Huntsman, Jr. and a prolific philanthropist who has donated more than $1 billion, primarily to the fight against cancer.
The Giving Pledge website names those who have joined the pledge and publishes their personal letters, in which they detail their philanthropic motivations as well as their chosen causes.
In the letters, many of the donors (especially those on the younger side) cite their desire to start giving back now, rather than waiting to leave money after their deaths. John D. Arnold, who made his fortune as a hedge fund manager, and his wife Lisa wrote, “We are blessed to embark on this critical endeavor at a relatively early stage in our lives and with a great sense of urgency. We will donate the majority of our wealth, time and resources to philanthropy in the coming years, and we fully intend to achieve transformative results during our lifetime. There is no more worthwhile work and no greater mission. And there is no reason for delay in making a difference.”
Donors also delve into more personal motivations. Some are frank about not wanting to spoil their children and grandchildren with an obscene amount of inherited wealth, while others recount their personal climbs to fortune from modest beginnings and how they learned the importance of charity personally.
Leon G. Cooperman, who also made his money in hedge funds, wrote, “I am the son of a plumber who practiced his trade in the South Bronx, I am the first generation American born in my family as well as the first to get a college degree. My education is largely public school based–public grade school, high school and college all in the Bronx … it was written in the Talmud that ‘A man’s worth is measured not by what he earns but by what he gives away.’ It is in this spirit that [my wife and I] enthusiastically agree to take the Giving Pledge.”
Where the Money Will Go
Glasspockets.org, a website created by the Foundation Center to bring transparency to philanthropy, has a great infographic showing the areas which stand to gain the most from the Giving Pledge: Health, education, human services, arts and culture, the environment, technology, economic development and religion are the largest sectors.
More specifically, the following donors have cited these as a few of their favored causes:
- Disparities in health care (Michele Chan and Patrick Soon-Shiong, who made his fortune as a biotech entrepreneur)
- Jewish education (Edgar M. Bronfman, the former CEO of Warner Music Group, whose father created The Seagram Company)
- Childhood obesity (Arthur M. Blank, the co-founder of The Home Depot)
- Preventing tobacco- and traffic accident-related deaths (Michael Bloomberg, the founder of Bloomberg L.P. and the current mayor of New York City)
- Public school education; human genomics, stem cell research and inflammatory bowel disease (Eli and Edythe Broad, founder of KB Home)
- HIV/AIDS, malaria, rotavirus, tuberculosis and other preventable or infectious diseases (Bill and Melinda Gates)
And the list goes on. As you can see here, the list of favored causes runs the gamut from the very specific to the broad and overarching. Thanks to the generosity of the billionaires who have taken the Giving Pledge, the charities and foundations funded or started by the donors on the list stand to make serious headway on their goals. Less than a year ago, for example, Charles F. Feeney (mentioned above) donated $350 million to build a new Cornell graduate school for technology in New York City. The school, which will be built on Roosevelt Island, is expected to help provide math and science education support for 10,000 children in New York City as well as create 20,000 construction jobs, 30,000 other jobs, 600 new, related businesses and up to $1.4 billion in tax revenue.
Are There Any Downsides to Billionaire Philanthropy?
The positives of the Giving Pledge are obvious: more money from the wealthiest of individuals goes to worthy causes that may otherwise go unfunded. However, some are cautious about the effect of the Giving Pledge.
By donating millions or billions to specific causes, billionaires have the ability to effectively set the goals or drive policy in a specific sector. For instance, Mark Zuckerberg announced in 2010 that he was donating $100 million to help fix the failing public schools in Newark, New Jersey. Since then, nearly $17 million has been spent, in part to promote school choice options and to fund three charter schools in the district.
Daily Kos writer Laura Clawson refers to this as “policy-by-billionaires“; she worries about the effect that donations like Zuckerberg’s will have on institutions in the public sphere. Though many education activists are fans of charter schools and school choice options, a growing number of studies show that charter schools are often worse than traditional schools. But because Cory Booker, the mayor of Newark who advocates for school choice, engineered the donation through his relationship with Zuckerberg, the donation is being used in part for charter school funding.
As a result, by donating $100 million to Newark’s school system, Zuckerberg has effectively set the goals and the agenda in that sphere. Voicing the concerns of those who are wary of billionaires determining policy David Callahan writes in The Huffington Post, “When deep-pocketed activists share your beliefs, they can seem like heroes. When they don’t, it is hard to believe that it is legal for wealthy individuals to have so much clout in the world’s oldest democracy, where policy outcomes are [not] supposed to reflect the ideal of one person, one vote.”
What do you think: Is the Giving Pledge positive for the United States, or will it have negative, unforeseen effects down the road?