Friday, October 16, 2015

Will philanthrocapitalists and hyperagents really change the world?

"As philanthropy enters a second golden age, real social change is getting lost in the hype of market-based giving," writes Linsey McGoey in Fortune.

The first 'golden age' was the 19th century, the time of Andrew Carnegie and John D Rockefeller Sr., McGoey reminds us. According to her, "From Carnegie’s spending on public libraries to Rockefeller’s investment in biomedical advances, their giving helped to shift charity from the dispensing of alms in a largely unsystematic manner to a business in itself, overseen by paid philanthropic advisors".

One trend in the ‘second golden age’ that is significant, she suggests,  is 'philanthrocapitalism'. This she summarizes as "a more muscular philanthropy that seeks to combine profits with poverty alleviation".  She is not entirely accurate. Matthew Bishop and Michael Green, who coined the term, described the concept succinctly as "philanthropy led by the world's wealth creators... applying business techniques and ways of thinking to their philanthropy".

Paul Schervish, cited several times by Bishop and Green, is the scholar who has, more than any other, studied the philanthropy of US wealth creators. He described one of the characteristics wealthy philanthropists' as 'hyperagency'. Hyperagency means “… being able to construct a self in a world that transcends the established institutional limits and, in fact creates the limits for others”.

Schervish also points out that these hyperagents are the 'producers' of philanthropy in a market where the currency is not money but emotions, and the producers are not troubled by competition.

Another trend in the second golden age, according to McGoey is the effective altruism movement, championed by Peter Singer. Singer has declared Warren Buffett and Bill and Melinda Gates  “the most effective altruists in history.”

McGoey's concern is that the hype around the second golden age is ignoring questions about its effectiveness. "Its progress," she says "often seems to be measured and underpinned by self-sustaining feedback loops". Giving in the US has remained stubbornly around 2% of GDP. 

Foundations are a growth industry in the US yet extreme poverty , meanwhile, continues to rise.

"Today’s philanthrocapitalists see a world full of big problems that they, and perhaps only they, can and must put right," Bishop and  Green wrote. 

Another commentator, Michael Edwards, sets that notion to rights in 'Small Change: Why Business Won't Save the World', his rebuttal of Bishop and Green’s book. Edwards believes that “business thinking and social transformation operate on entirely different logics”.

Finally, McGoey points to an alarming paradox from the first golden age which, hopefully, is not destined to be emulated in the second. She quotes from David Nasaw, Carnegie’s biographer, “Carnegie … became, if anything, more ruthless in pursuit of profits once he had determined that those profits would be distributed during his lifetime.” Then she juxtaposes this tweet from Martin Shkreli, “I donated a total of $5,000,000 to various causes recently. Looking forward to telling you all about it.”  Shkreli is the former hedge fund trader, who was vilified for raising the price of Daraprim - a drug that fights parasitic infections in AIDS and other immune-supressed patients - by 5,000%

Friday, October 9, 2015

Indian Giving


Ninety percent of what is written about philanthropy is based on info from the USA. Yet, philanthropy is but an infant in North America.
 
The JN Tata Endowment  pre-dates the Carnegie Foundation. There are suggestions that that Rockefeller’s philanthropy was influenced by Swami Vivekananda. In any case, philanthropy in the US did not really take root until the early 20th century.

In Europe, philanthropy is in its childhood. Philanthropy came to Europe from Arabia, in the 11th Century. Ancient philanthropy however, traces its roots back to Islamic and Hindu scriptures. The Laws of Manu (first century CE) are among the earliest quoted by scholars, writing about philanthropy.

Yet, today, if you talk to people in the West of ‘Indian’ philanthropy their faces tell a story, even before they open their mouths: "Indian philanthropy… What, is there philanthropy in India?"
In the course of the last two years I have been interviewing around 30 major philanthropists India.

There is no doubt in my mind that, "There is much philanthropy in India".  Nor do I agree with those pundits who bemoan the failure of India's billionaires at philanthropy. Comparisons are odious and, frankly, comparative data simply does not exist. In fact, what is needed is more study, more constructive debate and more enthusiasm for the philanthropy of the wealthy that definitely does exist in India today. I suggest that there are four broad sources of philanthropy currently in India.

The old business families, the Tatas, Bajajas, Birlas and Godrejs, to name some, undoubtedly play an important part in India's philanthropy - as they have done for at least three generations.
Major Indian philanthropy, has emerged from Indians who have made their fortunes through the IT sector; the professional sector, notably financial services; and others, who have successfully grown businesses in emerging sectors, post 1991.

The categories of philanthropy through which these flow, in my view, can be described as institution building; risk taking; 'new’ or 'venture' philanthropy; and major gifts.

Examples of institution building are the founding of hospitals and universities. This is a practice that goes back centuries. Though it predated the British, they encouraged this by awarding titles to prominent philanthropists. To this era belongs the tradition of attaching family names to institutions such as colleges, schools and hospitals. Whilst names may not be as well known today as they were then, second and third generations of these philanthropic families of the colonial era continue to oversee family philanthropic trusts Today’s exemplars of institution building are those founding eponymous universities, such as Infosys founder's, Azim Premji University or Shiv Nadar University. Biocon Founder, Kirin Mazumdar-Shaw has her name attached to the Cancer Center her philanthropy funds.

Risk taking philanthropy is exemplified by organisations founded by individual philanthropists such as the Screwvala’s Swades Foundation, with its unique 360 degree approach; or Padmini Solami's Salaam Bombay Foundation with its creative approach to empower slum kids. These are philanthropists who are applying innovation and entrepreneurial acumen to grass roots challenges.

Venture philanthropy - sometimes irreverently referred to as ‘philanthropy for bankers’ - is philanthropy which emulates financial investment or venture capital structures. It places emphasis on measuring impact and return on investment. A notable example is Ashish Dhawan’s Central Square Foundation, in education.

Major gift donations are made to established organizations such as schools, universities and hospitals, and existing NGOs. Major gifts may support causes close to the giver’s heart, such as alma mater, arts, crafts, historic monuments, or endangered animals.

Today's younger major gift philanthropists tend to differ from earlier more traditional donors by actively overseeing and contributing time to the NGOs they support. 

The practice of any of these categories of philanthropy is not exclusive to one or other of types of philanthropist. Members of business families are involved in both traditional and risk taking philanthropy. Many who have made their wealth through financial services favor philanthropy which emulates investment or venture capital structures.  However, others follow the major gift route.

There are noteworthy differences between philanthropy in India and that of the West. First, and most significant, is that a large amount of philanthropy is dedicated to fundamental, grassroots challenges – education, health, economic uplift - often after some firsthand investigation by philanthropists themselves of the issues to be combated.

American commentators frequently point out that there, much philanthropy is directed at causes from which philanthropists and their families directly benefit. This, so-called ‘consumption philanthropy’ is given to universities, schools and arts institutions the philanthropists and their families attend. This seems true of only a small fraction of philanthropy in India.

In the West, especially in the United States, many philanthropists see themselves as offering an alternative, better solution and a substitute for government funding. They are dismissive of and reluctant to deal with government.  The rationale for enjoying a tax deduction on their donations is that they are saving the government money and doing a better job.

Indian philanthropists seem to follow a much more pragmatic path. They recognize the importance of collaborating with and enhancing government programs. Collaboration, including with other philanthropists and NGOs, is common amongst India’s major philanthropic names.

Tax, in contrast to the West and especially given the absence of estate duties in India, is of little or no incentive to donors.

Most are candid that their primary motivation is their recognition of the enormous gap that exists between their great fortune and the lot of those at the bottom of the pyramid.

It is commonly assumed that much giving in India is religiously motivated. While some whom I interviewed follow religious practices, others claim to be spiritual rather than religious. Few make significant donations to church, mosque or temple.

Added to all the above, there is the philanthropy of the middle class and the poor - pointing to a wider-spread story of charity and philanthropy. The Charities Aid Foundation (CAF India) 2012 India Giving report told of a clear majority (84%)of Indians who had given money to a good cause in the previous year.

Indian philanthropy is significant, different and worth celebrating. It is not without its faults and challenges, though not dwelt on here. Ways need to be found to give it more oxygen and light. The media and academia have an important role to play in this endeavour.

[An edited version of this piece was published as 'The art of giving, the Indian way'  in Live Mint on 2 October 2015]