Philanthropy – Page 9 – artdiamondblog.com

Bill Gates Does Not Owe Society Anything

Bill Gates is the richest man in the world, helped create a revolutionary computer software company, and earlier this month collected an honorary degree from Harvard University. But he may not understand the vital role wealth creation plays in society.

In collecting his degree, Mr. Gates delivered a commencement address that focused not on the information age, the rise of personal computers or the relentless efficiency his software has brought to nearly every industry. Instead, he focused on his own personal philanthropy. His implicit theme was that so far what he has accomplished may have been good for him and Microsoft shareholders, but it has been no great contribution to society. He suggested that with a personal fortune of about $90 billion (including what he has transferred to his foundation) it is time for him to give something back.

I find this perspective hard to understand. By any reasonable calculation Microsoft has been a boon for society and the value of its software greatly exceeds the likely value of Mr. Gates’s philanthropic efforts.

. . .

Ironically, Mr. Gates’s inspiration to "give back" apparently comes from the world’s second richest person, Warren Buffett, who recently promised to donate much of his fortune to the Gates Foundation.

I say ironic because one can make a much better philosophical case for a give-back of Mr. Buffett’s $52 billion than for Mr. Gates’s $90 billion. Mr. Buffett’s money came mostly from being a good stock picker. Whether his fortune is the product of luck or skill, the social benefits are hard to pin down. These benefits have to derive from improving company management practices or investment decisions.

Of course, Mr. Gates is free to do what he wishes with his $90 billion. But I think he is kidding himself if he believes that the efforts of the Gates Foundation are likely to provide society anything like the past and future accomplishments of Microsoft.

For the full commentary, see:

ROBERT BARRO. "COMMENTARY; Bill Gates’s Charitable Vistas." The Wall Street Journal (Tues., June 19, 2007): A17.

(Note: ellipsis added.)

Nonprofits Often Fund Risky, but Useful, Research that is Shunned by Government

The following excerpt from a summary of a May 17th Nature article, has a message that complements what I found in a paper published a couple of years ago (see the reference at the bottom of this entry).

Do charities like the Bill & Melinda Gates Foundation produce better medical research than institutions supported by the government?

. . .

. . . , some scientists believe philanthropies make better use of that $5 billion than corporations or governments, says Nature’s Meredith Wadman. Many researchers have stories about nonprofits who rescued risky but useful projects that had been shunned by government-backed institutions. Charities can make decisions more quickly and can take bigger risks. Philanthropists also tend to closely monitor their investments and want the satisfaction of a mission accomplished.

For the full summary, see:

"Informed Reader; PHILANTHROPY; Do Charities Outdo Research By Federal-Backed Agencies?" The Wall Street Journal (May 18, 2007): B6.

(Note: ellipses added.)

The reference to the Nature article is:

Meredith Wadman. "Biomedical philanthropy: State of the donation." Nature 447, (May 17, 2007): 248 – 250.

My related paper is:

Diamond, Arthur M., Jr. "The Relative Success of Private Funders and Government Funders in Funding Important Science." The European Journal of Law and Economics 21, no. 2 (April 2006): 149-61.

Rockefeller Clan’s “Tradition of Philanthropy”

Swan Lake is part of the Rockefeller State Park Preserve created and donated by the Rockefellers. Source of photo: online version of the NYT article cited below.

(p. D1) THE tranquil hamlet of Pocantico Hills, N.Y., has been bound up with the Rockefellers for more than a century. The family’s imprint is everywhere: In the thousands of acres of nearby pastures, woodlands and lakes that John D. Rockefeller Sr. began acquiring as he created his family’s estate in the 1890s. In the august stone walls enclosing a collection of even more august mansions. And in the stunning stained-glass windows by Matisse and Chagall that grace a simple stone church.

The Rockefellers are still an active presence — David Rockefeller, who at 91 is the last of the “brothers” from the illustrious third generation, spends weekends at his farm, Hudson Pines, and still rides in his horse-drawn carriage over the graceful carriage roads designed by his father and grandfather. A number of other Rockefellers — including Happy, the widow of David’s brother Nelson, the former governor and vice president — have houses on the family land as well.

Much of the Rockefeller family’s business and pleasure in and around Pocantico Hills is, not surprisingly, out of view. But the tradition of philanthropy that has defined the clan as much as its vast fortune also operates there. The result is a sense of shared bounty.

The public has long been allowed to enjoy the Rockefellers’ 55 miles of carriage roads, which also function as hiking trails, and the opportunity to experience Rockefeller country grew with the creation of the Rockefeller State Park Preserve. Its 1,384 acres are used for hiking, horseback riding and carriage driving. . . .

. . .

(p. D5) A visitor can hike quiet trails evoking the family’s legacy, with names like Peggy’s Way and Brothers’ Path, and then have lunch in a smartly rustic cafe at Stone Barns — or an elegant dinner at Blue Hill. And while tours of Union Church of Pocantico Hills, with its Chagall and Matisse windows, will not resume until early April, anyone can attend Sunday morning services at 9 and 11. (But be discreet: the pastor, the Rev. Dr. F. Paul DeHoff, noted on the phone that services were for worship, not window viewing.)

. . .

The rose window over the altar was dedicated on Mother’s Day 1956 in memory of Abby Aldrich Rockefeller, John D. Jr.’s wife. Mrs. Rockefeller, a co-founder of the Museum of Modern Art, collected contemporary art, including works by Matisse. The head of the museum at the time suggested Matisse, then in his 80s, for the memorial window, and approached the artist on the family’s behalf.

Matisse accepted the commission, which turned out to be his last. The paper cutouts he used to design the blue, green and yellow window were in his bedroom when he died.

A much larger window at the rear of the church, by Marc Chagall, celebrates the life of John D. Rockefeller Jr., who died in 1960. The window tells the biblical story of the good Samaritan in brilliant blues and greens, echoing Matisse’s window.

Unlike Matisse, Chagall traveled to Pocantico Hills to see the church. At the dedication, Chagall broached the subject of the lackluster nave windows. He received a commission to redo all eight, including one in memory of Nelson Rockefeller’s son, Michael, who died in New Guinea in 1961.

If the memorial windows represent an extraordinary gift of culture in an unlikely nook of Westchester, the family’s present of the state park preserve was equally significant — a chunk of green space one and a half times the size of Central Park.

A good winter hike in the preserve is along Eagle Hill Trail, a steep ascent that offers panoramic views of the Hudson, farmland and Kykuit. Another scenic walk is on Brothers’ Path, which runs next to Swan Lake near the visitors’ center. Brothers’ Path connects to Brook Trail, which crosses a half-frozen stream: water bubbles beneath thin sheets of ice and the dazzling snow frames dark pools of water.

For the full story, see:

LISA W. FODERARO. "Spending a Day at the Rockefellers’." The New York Times (Fri., February 23, 2007): D1 & D6.

(Note: ellipses added.)

Upper left is a carriage road in Rockefeller country; upper right is a Marck Chagall window in Union Church; lower left is a map of Rockefeller country. Source of photos and map: online version of the NYT article cited above.

To Help Poor: “Allow Entrepreneurs to Flourish”

Of the three "views" discussed in Wessel’s original commentary, the following excerpt just includes the one that I share:

With the billions of dollars they are spending, Bill Gates, Warren Buffett, Bill Clinton and Bono are likely to make progress in their quest to prevent treatable diseases from killing millions of people. Nearly all of these people live or will live in poor countries.

That worries economist Simon Johnson. He doesn’t doubt the moral imperative to fight disease. Still, he wonders: "Do we really know how to help the poor people — the increasing number of poor people? Do we really know how to help them out of poverty?"

Such questions haunt academics, governments, international institutions and global do-gooders. They are impressed with China’s rapid modernization, though puzzled that it has done so well without following standard precepts. They are disappointed and puzzled that Latin America nations haven’t done better, especially because so many did take the advice of the experts. They are depressed and puzzled by the continued widespread misery in Africa.

With intellectual humility, Mr. Johnson, a professor at Massachusetts Institute of Technology’s Sloan School of Management, faced a roomful of peers at the annual meeting of the American Economics Association last weekend and said, "Public health had the germ theory of disease. Economics has made great progress, but it’s still waiting for its ‘germ theory of disease.’" That probably overstates the challenges remaining to public-health warriors — avian flu, AIDS/HIV, malaria and all — but not the shortcomings of economic understanding of what poor countries should do to achieve sustained growth.

. . .

A third view is that earlier economists focused on the wrong thing. Mr. Johnson, among others, argues that what really matters is having solid political, legal and economic institutions — courts, central banks, honest bureaucrats, private-property rights — that allow entrepreneurs to flourish. Imposing what seem to be sound economic policies on corrupt, incompetent or myopic governments is doomed. Building strong institutions is a necessary prerequisite. In this camp, there is a running side argument about which comes first: the institutions or the educated people who create them. Was the Constitution key to U.S. success, or was it Jefferson, Madison and Hamilton?

For the full commentary, see:

DAVID WESSEL. "CAPITAL; Why Economists Are Still Grasping For Cure to Global Poverty." The Wall Streeet Journal (Thurs., January 11, 2007): A7.

Gates Foundation Will Not “Rule With a Dead Hand”

Source of image: online version of WSJ article cited below.

When he was discussing with Pierre Goodrich the rules for Goodrich’s Liberty Fund, my late-lamented mentor Ben Rogge tried to convince Goodrich to set some date by which the foundation would be required to spend all of its funds. Rogge would quote Smith against the practice sometimes called ‘ruling with a dead hand’ by which the dead try to put restrictions on the living. Rogge thought the dead had a right to restrict the future use of their money; its just that he thought it would become increasingly hard for them to do so effectively, the further out into the future you go.

There were at least a couple of reasons. One of them was that as you go out into the future, it is increasingly hard to make sure that those supervising the money will remain true to the donor’s intent. Another reason was that as you go further out, and conditions change, it becomes increasingly hard to know what the donor would have wanted done. (Rogge used to jest that probably, evenually Liberty Fund would end up spending libertarian Goodrich’s money on making films promoting the beliefs of communist Anna Rosenberg.)

On this issue, it appears that Bill and Melinda find Adam Smith more persuasive, than did Pierre:

The Bill & Melinda Gates Foundation said it will spend all its assets within 50 years of the death of its last trustee, a decisive move in a continuing debate in philanthropy about whether such groups should live on forever.

. . .

The decision is expected to influence other charities to consider following suit. . . .

. . .

The Gates decision will add fuel to a debate about whether foundations should live in perpetuity, a longtime model used by the Ford and Rockefeller foundations and Carnegie Corp.

For the full story, see:

SALLY BEATTY. "Gates Foundation Sets Its Lifespan; All Assets Are to Be Spent Within 50 Years of Death of the Remaining Trustee." Wall Street Journal (Fri., December 1, 2006): A10.

Microsoft’s VX-6000 LifeCam Really Stinks

Microsoft’s VX-6000 LifeCam. Source of image: http://www.microsoft.com/presspass/images/gallery/hardware/WC6_Angle_Silver_lg.jpg

I posted this to Amazon.com, late on Thurs., Nov. 30, 2006:

I have spent a frustrating afternoon and evening trying to install the VX-6000 on a fully updated MS XP pro system. The install took forever, because every couple of minutes the install program couldn’t find a needed file (if they need it, why not put it on the install CD?). So I had to browse my system and point them to where the file was (why couldn’t they design the install program to search for the file instead of making me do it?). Finally I got a successful install, and then I was informed there was an updated version, and I needed to install that. So I went through the whole time-consuming process all over again, including the schtick about searching for the location of several files. Finally it again said I had installed the program successfully. So I rebooted my PC, and clicked on the Microsoft LifeCam icon. After cranking for awhile I get "initialization error". I try rebooting again—same error. So I type in "initialization error" in the search bar of the "help" section, and I get back "no topics found." So they sell me an expensive camera, run me ragged installing it, send me a repeated error message, and provide me no clue on what to do about it. (I guess now that Bill Gates is saving the world through philanthropy, nobody’s left minding the shop?)

The final comment is probably a bit too snide or harsh. Microsoft has always had the deserved reputation of letting some products out the door before they are ready. E.g., the first couple of versions of Windows paled in comparison to the graphical-user-interface operating system that Apple was offering at the time. And the CD that accompanied Bill Gates’ The Road Ahead would not work on what was then Microsoft’s premier operating system: Windows NT.

Maybe these kind of glitches result from a conscious operating strategy that gives employees a lot of freedom to make their own decisions. The upside can be speedy decisions, and creativity. The downside can be glitches such as the VX-6000 LifeCam. Taking the broad, professorial view, maybe overall, the upside justifies the downside. Tom Peters endorses companies accepting this trade-off rather than adopting layered, rule-bound, slow, bureaucratic decision-making. (See his: Re-imagine!)

(But did I mention that the VX-6000 LifeCam really stinks?)

The reference to the Peters book is:

Peters, Tom. Re-Imagine! London: DK, 2003.

African Entrepreneur Funds Prize for African Leaders Who Resist Kleptocracy

Billionaire entrepreneur Mo Ibrahim. Source of photo: online version of the NYT article cited below.

At a news conference in London on Thursday, Mo Ibrahim, a 60-year-old Sudanese-born billionaire who made his money in the cellphone business, announced that he was offering a $5 million prize for the sub-Saharan African president who on leaving office has demonstrated the greatest commitment to democracy and good governance. The money will be spread out over 10 years.

“We must face the reality,” Mr. Ibrahim said, referring to Africa’s leadership record. “Everything starts by admitting the truth: we failed. I’m not proud at all. I’m ashamed. We really need to resolve the problem and the problem, in our view, is bad leadership and bad governance.”

. . .

Unlike many projects that aim to help famine-stricken villages or far-flung AIDS clinics, this one is supposed to focus on political leadership — and the post-independence culture of autocrats and kleptocrats that spawned such figures as Mobutu Sese Seko of Zaire or Idi Amin of Uganda.

. . .

Africa’s culture of the Big Man clinging to office was built in part, Mr. Ibrahim said, on a sense among many of its leaders that, if they relinquished power voluntarily, they would face penury and powerlessness and would no longer be the font of patronage or the tenant of what he called “the hilltop palace.”

“We want them to have a life after office,” Mr. Ibrahim said.

“Your leaders here become rich after they leave office,” he said, referring to the directorships, book deals and lecture circuit tours that accrue to Western leaders. “What life is there for our people after office? Some of our leaders cannot even afford to rent an apartment” in their own capitals, he said.

For the full story, see:

ALAN COWELL "Prize to Honor Heroes in African Democracy." The New York Times (Fri., October 27, 2006): A11.

(Note: ellipses added.)

More Good Done With Standard Oil Money: Henry Flagler

The Flagler Memorial obelisk was erected in on a man-made island in 1920, when Miamians still remembered the accomplishments of Henry Flagler. Source of image: http://www.miamibeachfl.gov/newcity/depts/arce/art_public/rw_flagler_monument.asp

The Standard Oil "monopoly" is often lambasted as a sorry episode in our economic history. And yet a strong case can be made that the Standard Oil wealth was created mainly by efficiently providing consumers with a commodity they valued. In addition, mention is often made of the Rockefeller philanthropic activities. Less known, is that others who became rich from Standard Oil, also engaged in productive entrepreneurship, and philanthropy, with their wealth. One of these was Henry Flagler.

In a region that prizes showy monuments to wealth, the lone monument to the man who made it all possible has languished in isolation for decades.

A soaring concrete obelisk dedicated to Henry Flagler, the oil tycoon who hastened South Florida’s development by building a railroad all the way to Key West, it sits on a tiny man-made island in Biscayne Bay, reachable only by boat or, more typically, Jet Ski. Almost everyone here has glimpsed the Flagler Memorial, but few know what it is called, why it exists or how battered it looks up close.

”I’m telling you, it’s a beautiful work of art,” said Paul Orofino, a board member of the Environmental Coalition of Miami Beach, a nonprofit group that occasionally tidies up Monument Island, the memorial’s scruffy, overgrown home. ”It’s a tragedy that nobody pays attention to this thing.”

It is not the kind of South Florida tribute one might expect for Flagler, who extended his railroad from St. Augustine to West Palm Beach in 1894, Miami in 1896 and Key West — a segment that lasted only 23 years until a hurricane demolished it — in 1912.

Flagler was the state’s original megadeveloper, after all, creating its tourism industry by turning swampy pioneer settlements into the world’s grandest resorts. He was also, perhaps, its first huckster, advertising the nascent Miami as ”the most pleasant place south of Bar Harbor to spend the summer.”

His over-the-top winter home in Palm Beach, awash in gold, is now a museum, but most of its visitors come from out of state, said John Blades, the museum’s executive director. Mr. Blades has tried to get a statue of Flagler erected in Palm Beach, which owes its sumptuous existence to the man, but has so far failed.

”Flagler,” Mr. Blades said, ”is probably the most unappreciated titan of the Gilded Age.”

For the rest of the story of the impressive, but deteriorating, Flagler Memorial in Miami, see:

ABBY GOODNOUGH. "South Florida Journal; Unappreciated, With Memorials to Match." The New York Times (Fri., October 7, 2005): A12.

(Note: the hurricane destroyed the Key West link of the railroad in 1935.)

Henry Flagler. Source of image: http://flaglermuseum.us/html/flagler_biography.html

Hernando de Soto Creates Buzz in Clinton Hallways

Hernando de Soto and Bill Clinton at the second annual Clinton Global Initiative. Source of photo: online version of the WSJ article cited below.

. . . the buzz in the hallways centered on a topic that until recently most philanthropists all but ignored: registering poor people’s property so they could borrow against it to build businesses, pay taxes or for other purposes. Many citizens of developing countries don’t formally have title to their land, and many economists — including Peruvian economist Hernando de Soto, another conference attendee — see this as a key source of urban poverty. According to Mr. de Soto’s research, the value of unregistered land in developing countries totals over $9 trillion. Mr. Clinton told the audience that these assets "cannot be converted into collateral for loans — wealth locked-up and locked-down — keeping people in grinding poverty instead of being an asset that can lift them up." Up to 85% of urban land parcels in the developing world are unregistered, Mr. Clinton said, citing Mr. de Soto’s research.

But standing in the way of widespread land-ownership records are insufficient legal frameworks, confusing procedures and corrupt property registries. And establishing land ownership is all but impossible in communist and socialist countries, where property usually is owned by the state, said John Bryant, chief executive of Operation Hope, a nonprofit in Los Angeles that provides financial services to the poor.

For the full article, see:

SALLY BEATTY. "GIVING BACK; Helping the Poor Register Land." Wall Street Journal (Fri., September 29, 2006): W2.

(Note: ellipsis added.)

Added Evidence for Weidenbaum’s ‘Birth Dearth’

Source of book image: http://www.aei.org/books/bookID.497,filter.all/book_detail.asp

Ben Wattenberg had already been predicting a world population decline for years, when he published The Birth Dearth in 1987. Back then, scepticism was widespread. Governments and philanthropists spent billions promoting birth control to restrain population growth. Many were still convinced of the wisdom of Isaac Ehrlich, darling of the environmentalist enemies of economic growth, who had predicted disaster in his Population Bomb.

(Note that the plausibility of many environmentalist disaster scenerios is based on the assumption of continuous population growth.)

The current decline in birth rates is not a total puzzle. Nobel-prize winner Gary Becker long-ago claimed that quality of children is what economists call a ‘normal’ good, which means that families invest more in quality as their incomes rise. As families invest more in quality, they invest less in quantity.

Whatever the reasons, the evidence continues to accumulate that Wattenberg was right:

After a long decline, birthrates in European countries have reached a historic low, as potential parents increasingly opt for few or no children. European women, better educated and integrated into the labor market than ever before, say there is no time for motherhood and that children are too expensive anyway.

The result is a continent of lopsided societies where the number of elderly increasingly exceeds the number of young — a demographic pattern that is straining pension plans and depleting the work force in many countries.

For the full story, see:

ELISABETH ROSENTHAL. "European Union’s Plunging Birthrates Spread Eastward." The New York Times (Mon., September 4, 2006): A3.

Source of graphic: online version of the NYT article cited above.

Unintended Consequences of Sending Food: More on Why Africa is Poor

Millet in bowl. Source of photo: online version of the NYT article cited below.

NIAMEY, Niger, Sept. 21 – The images coming out of this impoverished, West African nation have been unrelentingly grim: hungry children with stick-thin arms and swollen bellies, mothers carrying babies hundreds of miles to look for food after a poor harvest and high prices put local staples out of reach. A few months ago, those images prompted a torrent of food aid from Western donors.

But now, after a season of good rains, Niger’s farmers are producing a bumper crop of millet, the national staple. This should be a cause for rejoicing, yet in one of the twists that mark life in the world’s poorest countries, the aid that was intended to save lives could ruin the harvest for many of Niger’s farmers by driving down prices.

The newly harvested millet and the donated food will reach market stalls at the same time, and with prices depressed, poor farming families may be forced to sell crops normally set aside for their own use and use the money to pay off debts. The effect would be a new cycle of hunger and poverty.

For the full story, see:

Burley, Natasha C. "In Place Where the Hungry Are Fed, Farmers May Starve." The New York Times (Thurs., September 22, 2005): A3.

Source of map: online version of the NYT article cited above.