Why Philanthropy Must Have These 400-Type Entrepreneurs
This story appears in the October 8, 2012 issue of Forbes.
COMMERCE AND philanthropy are considered to be polar opposites. They’re not; they are two sides of the same coin. Both are about meeting the needs of people. To succeed in either sector requires entrepreneurial innovation and energy. Hence, the seeming paradox of the U.S.: The most commercial nation ever birthed is also the most philanthropic.
Movies, TV shows and novels love to portray businesspeople as a villainous, grasping and murderous lot out to cheat customers, pollute the air and water and make everyone else’s lives more miserable. What gets overlooked in that shop worn caricature is that in a true free market people succeed only by offering a service or product that somebody else wants and is willing to pay for, just as the most effective philanthropy is carried out by individuals who know that dreams and good intentions are only the start, that charity doesn’t involve simply giving someone a handout, patting yourself on the back and then walking away.
In June FORBES held The Forbes 400 Summit on Philanthropy. The idea for this get-together came from FORBES’ editor, Randall Lane. The thought was to spark ideas among those creators of wealth who want their charitable activities to achieve real and lasting results. A name on a building is not this group’s goal. They tackle or want to tackle tough issues. What came through is that the philanthropy that achieves the best results involves as much inspiration and perspiration as is found in Silicon Valley and other hotbeds of entrepreneurial activity.
There’s no one-size-fits-all, which is why Bill Gates emphasized the need for a “diversity of philanthropy.” The philanthropists that attended our summit are an exceptionally creative group.
What we saw that day was part of a unique tradition. America has a rich history of philanthropic innovations and breakthroughs:
Steel magnate Andrew Carnegie, whose wealth, proportionately, puts him in the Warren Buffett and Bill Gates league, built numerous libraries around the country. But even Carnegie’s wealth couldn’t meet the nation’s needs. Instead, he built his libraries with an eye to encouraging countless communities to follow his example, erecting more such centres of knowledge.
John D. Rockefeller was, in real terms, probably the richest man this nation has ever produced, but he and his heirs were also extraordinary philanthropists. One example: Their granting fellowships to scientists for breakthrough research became the model for the National Science Foundation.
In Denver in the 1880s a woman and four cross-denominational leaders met to ponder how resources could be pooled for local needs. This ultimately led to such organizations as the United Way. Even people of meagre incomes could become part of a philanthropic endeavour.
A century ago Margaret Olivia Slocum Sage created the Russell Sage Foundation to carry out work in areas that wouldn’t immediately win public sympathy, such as prison reform and surveying the working conditions of labourers in cities like Pittsburgh, the steel manufacturing centre of the world.
Today a new round of such innovation is clearly under way. Jon Bon Jovi talked to summit participants about his impressive charitable activities, through which he is constantly learning. “We have what we now call a purpose restaurant. I think this model is very, very unique,” one he’d first heard about on a TV broadcast. “We started in a church basement. But there was a stigma attached to that so we moved down the same street to a soup kitchen, with a whole another set of stigmas attached to that. It looked very institutional. But then we found our retail space. [It’s now] a beautiful restaurant, where you’re served a three-course meal, complete with silver, linens and everything. The idea is quite simple. We bring people in who can afford to pay, and if you cannot pay, you volunteer. If you don’t want to volunteer in the restaurant we’ll take you to the soup kitchen or the medical clinic. What we’re trying to do is empower people. They feel a part of something. I’m not about entitlements. It’s about one soul at a time, and that has a ripple effect.”
What Bill Gates and his wife, Melinda, are doing in the areas of vaccines overseas (see p. 50) and in K-12 education in the U.S. is nothing short of phenomenal. FORBES once described Gates as a man who “methodically tackles an abstract problem.” At one time he bought into the idea that overpopulation was a critical factor in the endemic poverty in Africa and other parts of the world. But when Gates examined the situation more closely, he discovered that one reason people have lots of children is because of high infant mortality rates. Dramatically improve those mortality tables and fertility rates drop. So Bill and Melinda decided to focus on vaccines.
The Gates approached the challenge in a very entrepreneurial way, blasting through barriers or rapidly outflanking them. One big and obvious problem, of course, was cost. Instead of trying to reform the ever more cumbersome approval procedures of the FDA and its counterparts in the rest of the developed world, which needlessly delay the introduction of new medicines and increase their initial costs horrifically, Gates went to the pharmaceutical companies and came up with incentives for them to become involved–and not by pleading that they increase their budgets for charitable contributions.
“In some cases we guaranteed purchases of drugs,” he told the June gathering. This kept manufacturing costs down. “We co-funded for research. [Sometimes] we had to take on all of the early research. [When] they reached a certain stage of proof concept, we were able to bring in the private sector.” In the case of the hepatitis B vaccine, the cost dropped 99%, making it eminently affordable.
The Gates also worked with governments to get donor nations to focus on “aid that can make a big difference.” In other words, countries shouldn’t just write a check and hope for the best; they should focus on real things that can be measured by real results.
Bill Gates and his wife were also catalysts for a program called the Global Alliance for Vaccines & Immunisation, which provides vaccine funding for very poor children. Their research efforts are bearing fruit: for instance, a new vaccine for meningitis. The lives of millions of children have been saved. Gates hopes in a few years to have a vaccine for malaria, which remains a huge killer in poorer nations.
The Gates Foundation works on the dissemination of agricultural loans and tools to improve output. These efforts are enabling thousands of subsistence farmers to improve yields, which generates more work. The end result is, of course, a growing commercial economy. Bill and Melinda Gates are interested in sustainability, and they’re achieving it.
On the education front Gates became an early convert to charter schools, particularly the Knowledge Is Power Program (KIPP). Kids enter these institutions by lottery, and the results have been astounding. Based on 20 years of data, only 10% of kids from what Gates calls “dropout factories” (inner city schools) end up getting a four-year college education. Of those kids who apply to charter schools but don’t win the lottery, only 18% get four years of college. For those attending charter schools, the rate is 95%.
One of the most stirring presentations came from Maggie Doyne of the Blink Now Foundation. Talk about hearing of a problem and doing something about it: Six years ago, at age 19, Maggie used her savings to build a home for orphaned children in war-torn Nepal.
Alexis de Tocqueville, a French aristocrat, visited this country in the 1830s and wrote his observations in the classic Democracy in America. One of the things that struck Tocqueville about America was what he called voluntary associations–people voluntarily coming together for a shared purpose covering a whole host of things, from the professional, philanthropic or educational to health, sports or whatever. Tocqueville had never seen anything like this in Europe, which had a medieval tradition of people waiting to be told to do something or needing to be given permission beforehand. In the U.S. people got together and accomplished things. This conference underscored the creative, can-do spirit that so impressed Tocqueville.