The new philanthropy
By Scott Sumner
Tyler Cowen recently announced a new initiative called Emergent Ventures, which got me thinking about recent trends in philanthropy. Before discussing this project, let’s think a bit about how we’d expect philanthropy to change over time.
1. The super rich give an especially large amount to charity. For instance, Bill Gates has announced that he eventually intends to give away almost all of his roughly $100 billion fortune, and others like Warren Buffett are following suit.
2. The ranks of the very richest are increasingly dominated by tech entrepreneurs.
3. Tech entrepreneurs often have different personality characteristics that the wealthy of previous centuries.
Put these observations together and you’d expect high-end philanthropy to increasingly reflect the perspective of the tech entrepreneurs.
So what makes these guys different? I’d point to two factors, one obvious and one more subtle:
1. They are often extremely smart. It’s always been true that wealthier people were smarter than average, but this gap has widened with the tech industry. The president of GM during the 1950s was probably smart; these new business leaders are often extremely smart.
2. I suspect that, on average, these new tech entrepreneurs are also a bit more utilitarian and a bit less tribal than business leaders of the past. In the past, rising up through the ranks of GM might have required more of the skills you need in field such as politics and the military.
I doubt whether people like Zuckerberg, Musk, Jobs, etc., would have risen through the ranks of GM to become CEO. Tech is a field where even very small firms can suddenly “blow up” and become extremely valuable. Thus one doesn’t need all the people skills that have traditionally allowed certain males (and they are mostly men) to become extremely successful in a field that involved managing a large organization. People skills always help in life, but the key in tech is having a great idea.
Critics of the new billionaires might regard them as “nerdy”, whereas fans might see them as more “rational” or “scientific”. But however you characterize their personalities, they are likely to have unconventional views on donating money.
A traditional rich businessperson might think in more tribal terms, donating money to build a big university building, for a new wing of the local hospital, or to the local church. The tech billionaire might think, “Hmm, how can I save the most lives for $100 billion?” He might then consult experts, and soon after that his foundation might begin sending millions of mosquito nets to Africa to prevent malaria.
A recent article in The Atlantic alludes to this trend:
For more than a century, the Boys & Girls Club of America has had a pretty simple mission: providing somewhere for kids to go after school so they stay out of trouble. A 1982 PSA put it simply: “It’s a place to go besides the streets,” a man sings, as a video plays of (mostly black) boys running into a club.
But in 2018, that message isn’t enough to attract local money to the Boys & Girls Clubs of the Peninsula, which serves Silicon Valley, where the biggest donors tend to favor causes that use novel solutions to “disrupt” poverty, or that can employ data to show just how many problems their money solves. Many are fans of effective altruism, a philanthropy philosophy that espouses “evidence and careful analysis to find the very best causes to work on” rather than “just doing what feels right.”
(While I’m sympathetic to the effective altruism approach, people like David Brooks have pointed to possible downsides.)
What seems clear to me is that for better or worse we are in a new era of philanthropy, and it is at least partly driven by changes in the personality type of our richest citizens.
Emergent Ventures is a Mercatus Center initiative, launched with a $1 million grant from the Thiel Foundation. Here’s how Tyler describes the project:
We want to jumpstart high-reward ideas—moonshots in many cases—that advance prosperity, opportunity, liberty, and well-being. We welcome the unusual and the unorthodox.
Our goal is positive social change, but we do not mind if you make a profit from your project. (Indeed, a quick path to revenue self-sufficiency is a feature not a bug!)
Projects will either be fellowships or grants: fellowships involve time in residence at the Mercatus Center in Northern Virginia; grants are one-time or slightly staggered payments to support a project.
We encourage you to think big, but we also will consider very small grants or short fellowships if they might change the trajectory of your life. We encourage applications from all ages and all parts of the world.
In one respect, Peter Thiel does not fit my description of the new billionaires. He attracted a lot of attention for supporting Donald Trump, whose views seem more tribal than utilitarian. However, in many other respects Thiel does fit the template. He’s a very bright person who likes to think outside the box, and is interested in novel ideas for solving problems. He’s not the type of person who would be content to simply write a check to the local church or boys and girls club.
Because these tech entrepreneurs are very bright, they are going to be interested in finding other extremely bright people to advance their ideas. Just as the “new economy” favors business people with a high IQ, the new philanthropy favors very bright social entrepreneurs with new and creative solutions to public policy concerns. Indeed this “smart people seeking out smart people” concept probably applies pretty much across the board. The GM CEO of the 1950s might have enjoyed a good steak and potato dinner (and Donald Trump famously likes hamburgers.) The tech elite probably prefers a cutting edge restaurant with all sorts of dietary innovations that most of us have never even heard of. Again, here is The Atlantic:
The San Francisco Bay Area has rapidly become the richest region in the country—the Census Bureau said last year that median household income was $96,777. It’s a place where $100,000 Teslas are commonplace, “raw water” goes for $37 a jug, and injecting clients with the plasma of youth —a gag on the television show Silicon Valley—is being tried by real companies for just $8,000 a pop.
Not quite sure what “raw water” is, but it sounds really complicated. 🙂
I work for Mercatus, so I probably can’t offer an unbiased opinion. I honestly don’t know how well this venture will work, but it seems like one of those things that are worth a shot, with potential benefits that are many times greater than the costs.
PS. I’ve had a bit of experience in this area. Before I joined Mercatus, I raised funds for two experimental NGDP futures markets. About 15 people donated money, most notably tech entrepreneurs like Ken Duda and Gabe Newell. Even if blogs had existed back in the 1950s, I doubt whether the president of GM would have been reading a Bentley College professor’s views on what’s wrong with monetary policy.
BTW, I am not claiming that my ideas are valid just because some very smart Silicon Valley types are interested, just that (wrong or right) they are the sorts of ideas that are more likely to be noticed by smart people—like the readers of this blog.