Philanthrocapitalism: How Giving Can Save the World

By Matthew Bishop, Michael Green and Bill Clinton

For philanthropists of the past, charity was often a matter of simply giving money away. For the philanthrocapitalists-the new generation of billionaires who are reshaping the way they give-it's like business. Largely trained in the corporate world, these "social investors" are using big-business-style strategies and expecting results and accountability to match. Bill Gates, the world's richest man, is leading the way: he has promised his entire fortune to finding a cure for the diseases that kill millions of children in the poorest countries in the world.
In Philanthrocapitalism, Matthew Bishop and Michael Green examine this new movement and its implications. Proceeding from interviews with some of the most powerful people on the planet-including Gates, Bill Clinton, Warren Buffett, Oprah Winfrey, and Bono, among others-they show how a web of wealthy, motivated donors has set out to change the world.

• Language: English
• Publisher: Bloomsbury Publishing
• Release date: Jun 1, 2010
• ISBN: 9781608192434

Matthew Bishop

Matthew Bishop, senior editor, The Economist Group, is an award-winning journalist and longtime writer. His roles at The Economist, which he joined as Economics Correspondent, have included Business Editor, Wall Street Editor, Globalisation Editor and New York Bureau Chief. He is the author of several books, including Philanthrocapitalism: How Giving Can Save the World (described as 'important' by President Bill Clinton) and The Road from Ruin, which set out an agenda for the reform of capitalism after the 2008 crash. He is a member of the World Economic Forum's Global Agenda Council on Global Governance. He was the Official Report author of the Taskforce on Social Impact Investment established by the governments of the G8, and a member of the Advisors Group of the UN International Year of Microcredit. He co-founded and advises the #givingtuesday campaign and the Social Progress Index. He is on Twitter as @mattbish

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PHILANTHROCAPITALISM

HOW GIVING CAN SAVE

THE WORLD

MATTHEW BISHOP & MICHAEL GREEN

Contents

Foreword by President Bill Clinton

Preface

1. The Age of Philanthrocapitalism

2. Carnegie’s Children

3. The Spirit of Philanthrocapitalism

4. Billanthropy

5. Investors for Good

6. The Vision Thing

7. Philanthropreneurship the eBay Way

8. Picassos, Genomes, and Ivory Towers

9. The Return of the Living Dead

10. The Good Company

11. Enter the Celanthropist

12. Virtue’s Middlemen

13. We Are All Philanthrocapitalists Now

14. The Age of Plutocracy?

15. The Gospel of Wealth 2.0

Acknowledgments

Source Notes

Foreword

In Philanthrocapitalism, Matthew Bishop and Michael Green show the remarkable extent to which private wealth can advance public good by applying entrepreneurial skills, speed, and score-keeping to our most persistent challenges.

In politics, most debates focus on two questions: What are you going to do? and How much money are you going to spend on it? Too little attention is given to what is often the most important question: How are you going to do it?

Bishop and Green document the relentless focus of the best social entrepreneurs on the How questions: How to keep HIV/AIDS and malaria from killing people? How to empower and educate the poor? How to reverse childhood obesity in the United States? How to fight climate change and increase economic opportunity? How to get other people working on these problems? How to turn good intentions into positive changes? How to do it faster and at lower cost than government alone can?

I often say my foundation is in the How business: We’re helping deliver AIDS medicines to adults and children, more than 2 million of them in the developing world, by changing the business model from high margin–low volume to high volume–low margin. We’re helping forty of the largest cities in the world reduce their greenhouse gas emissions by providing new technologies at volume discounts and offering new financing options. We’re supporting the efforts of thousands of schools to create healthier learning environments by reducing the caloric content of beverages and snack foods in vending machines and offering low cost, high impact options for improving the fitness of students and staff. We’re using the same business-oriented approach to ensure money is spent efficiently and effectively to increase economic opportunity in Latin America, Africa, and U.S. cities.

You can see the same approach taking hold throughout the world. Nobel Peace Prize–winner Muhammad Yunus pioneered with the Grameen Bank microcredit loans, which have helped lift more than 100 million people out of poverty across the world. The Gates Foundation has used it to save countless lives from malaria, to search for better ways to prevent HIV/AIDS, and to improve education in poor communities in the United States.

I’ve tried to increase the momentum and impact of those in philanthrocapitalism through the Clinton Global Initiative (CGI). Since 2005, we’ve invited philanthropists, political leaders, business executives, leaders of nongovernmental organizations, college presidents and students, and citizen activists from around the world to meet in New York at the opening of the U.N. They discuss the big how questions, develop their own answers, and make specific commitments to implement them. To date, members have made more than 1,400 commitments valued at $46 billion that have already improved the lives of more than 200 million people in 150 countries. CGI is, in many ways, the laboratory in which the authors’ ideas about philanthrocapitalism are tested.

At its best, philanthrocapitalism reinforces and amplifies the time, money, skills, and gifts given every year by people who are not rich, and it informs and enhances government policies. As Bishop and Green clearly demonstrate, the twenty-first century has given people with wealth unprecedented opportunities, and commensurate responsibilities, to advance the public good.

This is an important book. Our interdependent world is too unequal, unstable, and, because of climate change, unsustainable. We have to transform it into one of shared responsibilities, shared opportunities, and a shared sense of community. Bishop and Green show us how to do it.

President Bill Clinton

2009

Preface

superrich Friends was how Good Morning America, a popular network TV show, headlined its report of a secret gathering of billionaires in May 2009 in New York. The meeting had been arranged by Bill Gates and Warren Buffett, the two wealthiest businessmen on the planet, along with David Rockefeller, who hosted it in Rockefeller University, which had been endowed over a century earlier by his tycoon grandfather, John D. Rockefeller. Oprah Winfrey, the billionaire African-American daytime talk show host, was there. So were hedge-fund tycoons George Soros and Julian Robertson, secretive Irish-American duty free magnate Chuck Feeney, media mogul Ted Turner, and the city’s billionaire mayor, Michael Bloomberg.

The meeting provided ample evidence that, despite the financial crisis that had struck in 2008, wiping out trillions of dollars of wealth around the world, the superrich were alive and well. Collectively, those who attended were worth $125 billion. It also confirmed that the movement led by these superrich that had been growing fast during the good times before the crisis, a movement we call philanthrocapitalism that is focused on tackling the world’s toughest problems through effective giving, was continuing full-steam ahead. Between them the superrich Friends had already given away $70 billion, and they planned to give much more. No wonder Good Morning America cartooned them in superhero-style capes and tights.

The main purpose of the meeting was for the leaders of philanthrocapitalism to share what they had learned about how to be effective givers, and to brainstorm about how philanthropy should meet the new challenges posed by the economic meltdown that had begun the previous year. Top of the agenda was how they could encourage more giving by Preface others—their fellow tycoons and the general public. (Making future meetings public, rather than trying to keep them secret, would surely help inspire others to give.)

This book is about the renaissance of giving and philanthropy, led by the world’s most successful wealth creators. Philanthrocapitalism describes how they give, by applying business techniques and ways of thinking to their philanthropy. It also describes the growing recognition by the leaders of capitalism that giving back much of their fortune to improve society is as much a part of the system as making the money in the first place.

The first edition of Philanthrocapitalism was published days after Lehman Brothers, an investment bank, went bust in September 2008, as capitalism itself teetered on the brink of collapse. During the crisis, many people predicted that the philanthropy boom in the previous decade would come to an abrupt end, as wealth—and generosity along with it—disappeared. The secret meeting of the leading philanthrocapitalists in May 2009 proved those doomsayers wrong.

The world has changed since the financial meltdown of September 2008, but in ways that make the ideas in Philanthrocapitalism more relevant than ever. According to the annual rich list compiled by Forbes magazine, the collapse of stock and other asset prices reduced the global number of billionaires by over 300, nearly one third, from 2008 to 2009. The average charitable foundation saw its assets shrink by at least one quarter. Yet the world still has plenty of superrich people. Indeed, overall, the superrich are likely to emerge from the crisis in better financial shape than anyone else. The reservoir of wealth to fund philanthrocapitalism is still there.

Rather than accepting that giving must follow the downward cycle of the economy as a whole, the superrich Friends were looking for ways to buck the trend. Bill Gates has led the way. Even though his foundation’s assets fell, he increased its giving in 2009 to nearly $4 billion, to causes such as ending deaths from malaria and improving maternal health in the developing world and raising the quality of education in America’s schools. He is continuing to urge his fellow tycoons to commit to giving with the same enthusiasm that he has done.

Nor is the resilience of giving limited to the superrich. A survey of 140 leading global firms by the Committee Encouraging Corporate Philanthropy found that over half of them had increased their giving during 2008, a quarter by more than 10 percent. Despite the start of what was generally regarded as the worst economic crisis since the 1930s, overall giving by Americans of all incomes fell by just 2 percent in 2008, to what was still the second highest total ever, $307 billion, according to the annual Giving USA report.

The failure of the financial markets and headline-grabbing fraud scandals such as those involving Bernie Madoff and Allen Stanford, both of whom were high-profile philanthropists (though not among those featured in Philanthrocapitalism), have rightly raised the level of public skepticism both about the legitimacy of wealth created on Wall Street and the merits of some of finance’s best-known givers.

There are important lessons to be learned here. One is the need to apply rigorously the Good Billionaire’s Guide that we set out in the concluding chapter of this book. It should not be enough to win public approval for a wealthy person simply to write a large check and take part in a photo opportunity or be feted for his good works at a black-tie dinner. Tough questions should be asked about whether the wealth was created legitimately (a test Madoff clearly failed), whether a reasonable amount of taxes have been paid on it, and whether the giving is done in a thoughtful way designed to make a genuine difference. Another sad lesson of the Madoff affair is the need for philanthropists and charities to be businesslike in how they invest their money. Many of them lost their shirts because they trusted Madoff with their cash without doing the sort of basic due diligence that would certainly have raised several red flags.

The financial crisis has also increased the awareness among philanthropists, foundations and Nonprofits alike that they need to make sure every dollar they have is used as effectively as possible. Increasingly, ideas we argue for in Philanthrocapitalism are being put into practice. Today, more than ever, philanthropists are being focused and strategic, targeting resources on where they make the biggest difference, measuring impact more effectively, finding partners to work with, and encouraging those Nonprofits they invest in to collaborate more and in some cases even to merge. The tough economic environment, which threatens the existence of many Nonprofits, is making them more open to the ideas of philanthrocapitalists, which holds out the possibility that one silver lining of the crisis will be changes that greatly increase the productivity of the nonprofit sector.

Aside from the financial crisis, the other big development since the first edition of Philanthrocapitalism has been the election of Barack Obama as president of the United States. Some on the right feared that the election of a liberal president in these difficult economic times would signal a drive to ever bigger government at the expense of private action. That is happening to some degree and, given the crisis, was to some extent inevitable. Yet there are also encouraging signs that the Obama administration is looking for smarter ways of governing, not least by partnering with philanthrocapitalists.

One of the most significant appointments in President Obama’s first cabinet was Arne Duncan as education secretary. As head of the school system in Chicago, he had previously worked closely with philanthrocapitalists to introduce charter schools, a policy he soon pledged to continue nationwide. One reason why Obama understands the power of philanthropy to drive reform is that he once worked under the umbrella of the Annenberg Challenge, a half-billion-dollar effort by media tycoon Walter Annenberg to improve America’s schools in the 1990s. The Annenberg Challenge has gone down as something of a missed opportunity, although it is credited with success in driving reform in Chicago, where Obama was the organizer who built a platform for change for—you guessed it—Arne Duncan.

Obama has said that he wants to spread this partnership approach throughout government. He has created a new Office for Social Innovation within the White House, headed by an executive from the philanthropic wing of Internet search firm Google, to lead his administration’s collaboration with the philanthropic and nonprofit sector. His secretary of state, Hillary Clinton, has announced a Global Partnerships Initiative to support her smart power strategy for America’s foreign policy, starting with a partnership with philanthropists to build peace in the Middle East. Her enthusiasm for working with philanthrocapitalists is hardly surprising, given that her husband, former President Bill Clinton, has established himself as arguably the world’s leading philanthropic dealmaker, through his Clinton Global Initiative meetings (although Obama required him to curtail some of his philanthropic activities abroad to counter perceived conflicts of interest with his wife’s role as America’s top diplomat).

No country has gone as far as America in making philanthropy part of the solution to pressing social problems. Yet philanthrocapitalism is continuing to spread throughout the world. In February 2009, for example, the British government appointed its first philanthropy ambassador, technology tycoon Stephanie Shirley, to help build a culture of giving and especially to encourage innovative approaches to philanthropy.

The most exciting development, however, has been the spread of philanthropy to China, led by the film star Jet Li. Having survived the Asian tsunami in December 2004, Li—best-known around the world for his roles in blockbusters such as The Mummy: Tomb of the Dragon Emperor—decided to dedicate himself to giving. After two years spent studying philanthropic best practice in America and elsewhere, including getting advice from Bill Gates, he launched his One Foundation in 2007. He believes that giving should be an integral part of the 21st Century beliefs of China and indeed the world.

Following the massive loss of life in the earthquake that hit China in May 2008, many of China’s new rich felt a responsibility (encouraged for the first time by the government) to give, and Li enlisted them, business leaders, and celebrities to join his campaign to encourage the country’s emerging middle-class to give one yuan (15 American cents) a month. He has made this easy by deploying state-of-the-art mobile phone and Internet technology; the tagline on the One foundation’s website says 1 person + 1 dollar + 1 month = 1 big family. Already over 1 million Chinese have given via One.

Jet Li’s efforts to promote a giving culture in China reflect the way that, around the world, the philanthrocapitalism revolution is starting to transform mass philanthropy by people with tens or hundreds of dollars to give away, rather than the billions of the superrich Friends. In the first edition of the book, we mentioned the growth of new social network-based giving platforms such as Kiva.org and Global Giving that democratize some of the key aspects of philanthrocapitalism by making available to everyone the sort of transparency, evidence of impact, and direct engagement between donors and those they are trying to help that used only to be available to the wealthy. This popular philanthrocapitalism has developed so rapidly in the past twelve months that we have added a new chapter to describe it.

Together, these developments make us optimistic that, despite the economic crisis, philanthrocapitalism remains a vital force with the potential to transform how society solves its toughest problems.

Matthew Bishop and Michael Green

New York, June 2009

CHAPTER 1

The Age of

Philanthrocapitalism

SHORTLY BEFORE LUNCHTIME ON JUNE 26, 2006, the then second-richest man in the world stepped onto a stage in the New York Public Library to be greeted by a standing ovation from several hundred of the wealthiest and most powerful people in the city. After saying a few words, Warren Buffett, whose record of brilliant investment decisions had earned him the nickname Sage of Omaha, reached into his jacket pocket, took out a pen, and with a flourish began to sign five letters, each one promising a part of his fortune. The first three letters are easy to sign. I just sign Dad, he joked, before handing a billion-dollar letter starting Dear Suze to his only daughter. The next letter he gave to his elder son; the third, to his second son; the fourth, to a representative of his late wife, Susan, who had died two years earlier.

So far, these letters had promised to give away a combined $6 billion or so. Finally, he held only the fifth letter, alone worth an estimated $31 billion. He signed it and handed it to the wife of the only man on the planet who was then richer than himself, Bill Gates, the cofounder of Microsoft, the world’s biggest software firm. Then the two tycoons smiled and shook hands as the crowd cheered wildly.

Not one of these gifts was for the personal benefit of those accepting the letters. Buffett had long made it clear that his children should expect to receive far smaller sums for themselves in his will. Rather, each gift was for the charitable foundation that the grateful recipient had established. At a combined total estimated at $37 billion, Buffett’s philanthropic donation was the largest ever. It beat even the $31 billion that Gates had by then given to the foundation that bears his name and that of his wife (although Gates had already said that most of his remaining fortune—estimated at over $50 billion—would go the same beneficent way). By 2009, the Bill & Melinda Gates Foundation plans to give away nearly $4 billion of that endowment every year, unprecedented in the history of philanthropy.

Buffett and Gates are leading a revival and reinvention of an old tradition that has the potential to solve many of the biggest problems facing humanity today. Making the announcement in the New York Public Library was a deliberate nod to that tradition. The striking marble beaux arts building had been paid for more than a century before by a previous generation of great American philanthropists. But modern philanthropy was invented several centuries before that, in Europe, at the same time as the emergence of what we now call capitalism. The Buffetts and Gateses of this first golden age of philanthropy were the merchants of Tudor England and Renaissance Europe, who helped the poor in growing trading cities like London, Florence, and Bruges. Next, in the eighteenth century, philanthropy was embraced by the inventors of the joint stock company and the original hedge-fund-like speculators such as Thomas Guy, who sold at the top of the South Sea Bubble and used his profits to found Guy’s Hospital in London. This was also the age of the enlightened financiers who backed crusading activists such as William Wilberforce, destroyer of the slave trade. In the nineteenth century, philanthropy became a way of life for Britain’s newly wealthy Victorians, as reflected in the novels of Charles Dickens.

But the fortunes that Buffett and Gates are giving away dwarf those of the leading philanthropists of golden ages past, even those of Andrew Carnegie and John D. Rockefeller a century ago. Nor are Buffett and Gates, the leading examples of a fast-growing army of new philanthropists, merely doing the same old thing. The new philanthropists believe they are improving philanthropy, equipping it to tackle the new set of problems facing today’s changing world; and to be blunt, it needs improvement—much philanthropy over the centuries has been ineffective. They think they can do a better job than their predecessors. Today’s new philanthropists are trying to apply the secrets behind that money-making success to their giving. That is why we call them philanthrocapitalists.

TODAY’S PHILANTHROCAPITALISTS SEE a world full of big problems that they, and perhaps only they, can and must put right. Surely, they say, we can save the lives of millions of children who die each year in poor countries from poverty or diseases that have been eradicated in the rich world. And back home in the United States or Europe, it is we who must find ways to make our education systems work for every child, instead of failing so many students. And if these children are to have a decent life when they grow older, we must find a solution to climate change and the underlying causes of terrorism. And so on.

As evidence of the seriousness of his philanthropy, Bill Gates had made a big announcement of his own a few days before Buffett handed out his letters. At the end of June 2008, he would leave his day job at Microsoft, which he had cofounded in 1975, and start working full time at his foundation—a significant career change for a man aged only fifty-two, still at the peak of his powers, and proof that when it comes to philanthropy, he means business.

Sitting in his huge office in Microsoft’s Seattle headquarters in September 2007, Bill Gates rocks back and forth in his chair as he gets excited about what he is saying. You know, if you picked the five most interesting and important things that have happened in my time frame, I think that these two would be in the top five, if not at the top, he says, now tapping his pen to the rhythm. The personal computer, which I got a chance to participate in, has had this amazing, almost unbelievably great impact on billions of lives, so I’m very proud to be involved in that. But now he is looking to have at least as great an impact on at least as many lives through his philanthropy as he takes on some of the world’s deadliest diseases. Now I get to put more into what is sort of a new frontier—more like Microsoft at age three than at age thirty-three.

In business, the philanthrocapitalists are used to achieving success on a grand scale, to thinking big and going for it. If that approach works in making money, they reason, why wouldn’t it work when it comes to giving the stuff away?

In the United States, Gates wants to transform the entire government-funded public school system. Already, his money is starting to make a difference, and Gates believes this is just the beginning. In New York City, for example, Gates has provided money to start dozens of small schools, such as the Bronx Lab. One of four new schools sharing the former campus of the Evander Childs High School in one of New York’s poorest areas, which was closed due to its persistently low levels of educational achievement, the Bronx Lab opened its doors in 2004. A remarkable 95 percent of its first class of students graduated in 2008, compared with a typical graduation rate of under 31 percent at Evander Childs. Gates thinks this sort of success can be repeated throughout the education system, in New York and nationwide.

But what gets Gates rocking and tapping even more excitedly are the things his philanthropy could achieve outside America by ending disease and reducing poverty. More than one million people die from malaria every year, most of them children in poor countries. That is the equivalent of losing every student in the New York public school system in one year. We’re sort of crazy enough to say, ‘Let’s eliminate malaria,’ says Gates. And it is not just malaria that is on his hit list. His foundation also wants to dramatically reduce deaths from other diseases that annually kill millions of people in the developing world, such as acute diarrhea, pneumonia, tuberculosis, and HIV/AIDS. And it is funding research into fourteen grand challenges in global health, ranging from creating new vaccines to finding economically efficient ways to measure public health.

Gates is also giving hundreds of millions of dollars a year to accelerate economic development in poor countries. In 2006, he announced a partnership with one of the foundations created during an earlier golden age of philanthropy, the Rockefeller Foundation, to increase the productivity (and thus, income) of poor farmers in Africa. The Alliance for a Green Revolution in Africa aims to build on what many people believe is philanthropy’s greatest ever success: the first green revolution. Over many years the Rockefeller Foundation, guided by Norman Borlaug, funded research into how to increase crop yields in poor countries, which is reckoned to have saved over one billion lives since the 1940s. But most of those lives were in Asia, not Africa. As global food prices continue to rise beyond the reach of the poor, Gates believes something just as dramatic can now be done about that.

None of this will be easy. Buffett admits that his gift amounts to only one dollar each per year for the poorest half of the world population and describes philanthropy as a tougher game than business. Gates concedes that given the scale of the problems of global development, education, we will only be a small part of the solution. But there is no doubting their determination. Nor is it just the two richest men on the planet who are thinking such world-changing thoughts. The massive commitment of Gates and Buffett to philanthropy is the most dramatic evidence so far of a movement—philanthrocapitalism—that has grown hand in hand with the rise in the number of very rich people on the planet. From the early 1980s until the financial crisis of 2008, the world has enjoyed a remarkable period of prosperity that, whilst spread quite broadly, has benefited the people at the top of the pyramid considerably more than the rest of the population. According to Forbes magazine, in 2009, even after the crisis, the world had 798 billionaires, up from a mere 140 in 1986, as well as thousands of multimillionaires.

Buffett and Gates were relatively slow to join the movement. In 1997, Ted Turner, the founder of the CNN cable news channel, made headlines by giving $1 billion to support the United Nations and criticizing his fellow tycoons for being tightfisted. He called specifically on Gates and Buffett—and other people awash in money—to give the money away that you have no idea what you’re going to do with.

It remains to be seen how many of today’s newly wealthy will become serious philanthrocapitalists, but the omens seem good—not least because Buffett, Gates, and others are challenging the rest of the rich to join their movement. There is a great question of all the wealth that has been created in this era, says Gates. As he throws down the philanthropic gauntlet to his fellow tycoons, he is optimistic. This is a momentum thing; the more people that are involved, the more it draws other people in. But what proportion of the new rich will ultimately start to give back? I think it’ll be a high percentage, says Gates, more like seventy percent than fifteen percent.

The annual Capgemini/Merrill Lynch World Wealth Report noted a 20 percent surge in giving by the rich in North America in 2006. This trend is not confined to America. Led by the ranks of the ultra-wealthy, [high-net-worth individuals] are increasing the financial resources, time and thought they donate to philanthropic causes, concluded the report, which found that those wealthy individuals who engaged in philanthropy typically gave away around 7 percent of their wealth, far more than did the average citizen. Veteran fund raisers say the outlook for giving is the most upbeat in a generation, reported the house journal of the American giving business, the Chronicle of Philanthropy, in 2006.

This optimism is reinforced by various rankings of philanthropists. Since 1997, online magazine Slate has been publishing its Slate 60 ranking of the largest philanthropic donations of the year. This was inspired by Turner’s complaint that the rich are always measured in terms of what they own rather than what they give. (I think that the culture towards philanthropy has changed, says Turner. Why? Because we drew attention to it. We should have lists of givers, which is why I came up with the Slate 60. That is why rich people own sports teams—wealthy people like to get their name in the paper.) Since it began, the minimum gift needed to get on the list nearly tripled to $25 million in 2009.

A similar picture emerges from the fast-growing number of charitable foundations in America and abroad. New bequests, combined with strong investment returns on the endowments of older foundations, drove a doubling in real terms of American foundation giving from $13.8 billion in 1996 to $31.6 billion in 2006.

AS THEY APPLY their business methods to philanthropy, philanthrocapitalists are developing a new (if familiar-sounding) language to describe their businesslike approach. Their philanthropy is strategic, market conscious, impact oriented, knowledge based, often high engagement, and always driven by the goal of maximizing the leverage of the donor’s money. Seeing themselves as social investors, not traditional donors, some of them engage in venture philanthropy. As entrepreneurial philanthropreneurs, they love to back social entrepreneurs who offer innovative solutions to society’s problems. (Inevitably, some charity traditionalists dismiss all this as empty jargon.)

As well as seeking better ways to work with charitable nonprofit, nongovernmental organizations (NGOs), philanthrocapitalists are increasingly trying to find ways of harnessing the profit motive to achieve social good. This is controversial, to say the least: isn’t philanthropy supposed to be about giving away money, not making more of it? But as the philanthrocapitalists see it, if they can use their donations to create a profitable solution to a social problem, it will attract far more capital, far faster, and thus achieve a far bigger impact, far sooner, than would a solution based entirely on giving money away. Thus, their money can lever, in a good cause, some of the trillions of dollars in the for-profit business world.

At the same time as individual philanthropists are embracing the profit motive, a growing number of big for-profit businesses are catching the philanthrocapitalism bug and getting into giving—or at least trying to do good. Gates sees this as potentially the start of a system innovation in how business operates, which he calls creative capitalism.

This is very different from traditional corporate philanthropy, which has often been ineffective: giving away small sums of money typically to generate positive publicity rather than change the world. Nor is it like old-fashioned corporate social responsibility, which is too often nothing more than a cynical exercise in public relations. Indeed, the ineffectiveness of both these traditional approaches is one reason why many people view with skepticism the notion that large companies can be a force for good.

To prove the skeptics wrong, some of the world’s biggest firms are now making advancing the good of society an integral part of their business strategy. Wal-Mart, for instance, is championing environmentalism, seeing it as a profit opportunity because it will both cut costs (of packaging, for example) and allow the retailer to sell new products (long-lasting low-energy lightbulbs). Oil giant Shell is redeeming its reputation by helping to develop small businesses in Africa on the basis that job creation is the only sustainable strategy for ending poverty.

Arguably the most innovative firm of all is Google. When the Internet search and advertising company first sold shares to the public in 2004, it promised to give 1 percent of its shares, 1 percent of its profits, and 1 percent of its employees’ time to Google.org, which the firm’s thirtysomething founders, Sergey Brin and Larry Page, hope will one day eclipse Google itself in overall world impact by ambitiously applying innovation and significant resources to the largest of the world’s problems. Given the impact achieved already by Google.com, that would be something to behold.

The test of these fine words will be whether rich philanthropists and companies can walk the walk as well as they talk the talk. The road to hell is paved with good intentions. And the problems they are addressing are highly complex. Will they have the humility to listen to others who have been grappling with these problems for far longer? Will they be willing to learn from their mistakes? Will they stick at it when the going gets tough?

A FEW MILES from the proliferating skyscrapers of Bangalore, the center of India’s booming high-tech business-process outsourcing industry, is a camp of metal huts housing the families of laborers who have come from far-off villages to work on the city’s many construction sites. A bright yellow bus stops in the dirt square, and immediately it is surrounded by about thirty children, aged four to ten. Once on board, they sit—three per screen—by computers where specially developed software teaches them language and mathematical skills. The children are clearly comfortable with the computers, absorbed in their learning.

The bus is provided by the Azim Premji Foundation, which is headquartered next to the modern campus of the Indian tech firm Wipro. The company’s boss, who established the eponymous foundation in 2001, was the eighty-third-richest person on earth in 2009, according to Forbes, with an estimated fortune of $5.7 billion. A more educated child is very critical for democracy, Premji says, worrying that India’s population is growing dangerously fast. If a girl is educated up to level five or six, she is aware of the need for a smaller family. A little basic education improves knowledge of primary health care.

Just as globalization has created spectacular fortunes around the world, so the idea that the wealthy winners should engage seriously in philanthropy has gone global. Even ten years ago it was easy to regard large-scale philanthropy as a U.S. exception to the global consensus that the state, not private giving, offers the best solutions to society’s biggest problems. Today philanthropy is taking off everywhere there is entrepreneurial wealth creation. In 2007, the then third-richest man in the world announced he would give away $10 billion through his foundation. He was not from the United States, but from Mexico: telecommunications boss Carlos Slim Helú.

SHAKIRA’S HIPS DON’T lie—and Bill Clinton can’t keep his eyes off them. Nor, to be fair, can most of the audience, a strange mix of students, social activists, and billionaires, in the legendary Apollo Theater in Harlem. This particular evening, in September 2007, the Colombian pop star is singing her latest hit, Hips Don’t Lie, at a debate-cum-party, screened live on MTV, at the end of the annual meeting of the Clinton Global Initiative (CGI). Since the former president, now as much a celebrity as a politician, first held this annual giving fest in 2005, it has become a must-attend event for philanthrocapitalists eager for recognition at what the Economist has christened the Philanthropy Oscars.

At least since the Live Aid concert in 1985, celebrities and philanthropy have become