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Today I was inspired by my good friend Corey sending me a text message related to the latest news that Mark Zuckerberg, the founder of facebook, had decided to become a part of “The Giving Pledge.” For those who are not aware of what the giving pledge is I will sum it up briefly for you: it’s a group of extremely wealthy people, formed by Warren Buffet and Bill Gates, in which everyone in the group agrees to give the majority of their wealth to charity by the end of their lives or at their death.
While the concept is noble, I’d like to look at the economics of a hypothetical question: What if each one of those billionaires, most of whom got their money by starting a business, used their money to start or fund other businesses; specifically a mission driven business?
Let’s say that one of these billionaires decided to not donate 15 billion dollars, but to start a privately held pharmaceutical company with the funds. I’m not talking about funding research, I’m talking about starting a for profit company built to compete with the likes of Novartis or Pfizer. By the company being privately held, it doesn’t have to appease shareholders but instead it can keep an altruistic mission, and that could be to reinvest ALL profits into curing cancer not just the vague “cancer research.” At the same time this new company stimulates the economy (and increases the tax base) by hiring an entirely new staff. By introducing a new competitor it helps push the cost of our every day drugs down, thereby reducing the amount the government needs to fund prescription assistance programs (allowing us to pay down the US deficit, or even continue our generous foreign aid program). Putting 15 billion dollars into funding something like this ensures greater than just a 15 billion dollar donation, it ensures employment, it ensures a vision is kept, and in the end it has the ability to have far more of a positive impact on the world through countless years of research, development, AND sales. (Note: I’m aware that this isn’t possible overnight, mainly due to strenuous FDA regulations, but what if?…)
What if instead of a pharmaceutical company, someone set up a $10 billion dollar venture fund with offices around the world for businesses aiming to make a change, with the stipulation that at least $100 million (or some arbitrary number) a year had to be invested in new companies trying to make a positive change? Encouraging investing in companies like TOMs shoes, where for every shoe you buy a pair gets donated to a child in a 3rd world country. Investing in a company like Adaptive Eyewear, the company that is creating glasses for 3rd world countries where the prescription of the lens can be changed by the person wearing it; they are LITERALLY giving sight to people who would otherwise not have it (watch this video on them). What if they took that fund and invested in small businesses throughout Africa? Spurring entrepreneurship and encouraging organic growth within the continent instead of constant reliance on foreign aid that is taken by corrupt politicians.
The bottom line is that the majority of people on the list have succeeded because of capitalism. They have the money they have because of capitalism, and they know the good that capitalism can bring to a country and to the world. They ARE the definitions of capitalists, and they know what it takes to fulfill a vision. They ought to also know that a business, set up with a good mission and vision, with hundreds or thousands of employees working towards the vision can do an immense amount of good for the world, probably more good than donations can…
What if?…
Have any other ideas? Share them below, I’d love to hear them.
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4 Comments at "The Giving Pledge"
I think “The Giving Pledge” is way too political. These billionaires have their wealth because of their ability to innovate and build businesses yet they feel inclined to “pledge” it all away. Giving any entity 100′s of millions of dollars can create a perfect situation for fraud, greed and embezzlement. I like the idea of creating private businesses where they can take on a new problem or cause without having to deal with the short-term mindset of a shareholder. It can have a multiplier effect that has the opportunity to benefit everyone. They could create the next Apple, Microsoft, Alcon, or Pfizer which can change how the world does business. Wouldn’t you want to be known as the person who found a cure for cancer, or found a way to create sustainable renewable fuel (safely), or any number of technologies that will change the future we still don’t know about?
Innovate. Create a new tax base. Employ 1000′s of people who are happy to have a job which then donate to their respective cause.
The problem may be that some of these ‘Forbes 100 Richest People” pledging feel as though their wealth was at the detriment of society. That is false. They each have an orchard; you have to give away the fruit, but not the trees.
I whole heartily agree. Most Non-For-Profit status companies make more than the wages at your for-profit companies. Organizations like the Cancer society does not really do much in the way of curing cancer vs simply educating people on cancer. Most the money that comes in goes back out in advertising. Seeing that people are pretty well educated on cancer now, I think its about time that the money get funneled in to other causes. Such as the mom who gets cancer looses work and therefore the family looses the income they depended on thus loosing their house. A years worth of recovery time perhaps? A telecommunications job that the mom can now do from her bed? A nanny to help her take care of the kids? Anyone of those would be more helpful than just another commercial. Although non-profit is a noble idea, for profit usually has the biggest impact on the world.
Just stumbled onto your blog and it’s great! I will definitely be joining the mailing list.
Sounds like you have begun to describe social businesses as explained and promoted by Noble prize winner Mohammed Yunus. They are for profit business that exist to serve a social aim. All money beyond initial investment is funneled back into the company, not the owners pockets. The success of social businesses are not measured by how much $$$ they generate for their shareholders but by their social impact, the number of good jobs they provide and by their sustainability (non-profit funding can be yanked anytime). There is generally no charity element, or they would not be too sustainable. I think the establishment of more social businesses would be wonderful way to funnel some of those giving pledge in way that won’t wear out when the money is gone. Nice blog, Daniel.
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