The Charitable-Industrial Complex

  A Post from James V. Toscano

In a provocative op-ed piece in Saturday’s New York Times. Peter Buffett, Warren Buffett’s son, takes on the present system of philanthropy with deep insight, passion and some outrage.

Buffett focuses on the growing inequality in the society, with the consequent increase in philanthropy by the rich, and the corresponding rise in the number of nonprofits to help “solve” the problems created by the inequality.

He points out:

“As more lives and communities are destroyed by the system that creates vast amounts of wealth for the few, the more heroic it sounds to “give back.” It’s what I would call “conscience laundering” — feeling better about accumulating more than any one person could possibly need to live on by sprinkling a little around as an act of charity.”

Conscience Laundering

This “conscience laundering” also preserves the existing system of inequality. Buffett’s answer is a new “operating code” based on a deep and broad societal commitment to humanism.

Philanthropy then should be the source of risk capital to try out new ideas and systems that actually create more widespread distribution of those human and humane values which enhance life, not “ material stuff” but quality of life for many.

Philanthropy as a source of risk capital rather than return on investment? What does this mean when it is operationalized?

Buffett gives the example that it’s when no 13 year old girl gets sold for sex. There are many other examples he could use. The variables are safety and sufficiency. Safety for one’s person, home and community. Sufficiency to provide shelter, food, protection, medical care, education, opportunity, comfort in old age and a long list of other basics, without the uber-materialism of current society.

Where Do We Start?

Where do we start? Many of the advanced-thinkers, still in the current “code,” would say training more people for jobs, keeping more and more kids in school through college, investing in minority small business, all of which will, in fact, help level the playing field a bit. All of these ideas are good and should continue.

Others go in a different direction, a more traditional direction and talk about restoration of the American family and value system, a family with two parents living in a stable, abuse-and neglect-free healthy environment, rather than the growing trend toward single mother families. David Brooks might even include the concept of “sin” as a stand-in for religious and humanitarian values, building blocks in the next phase in the lessening of poverty and other inequalities. These concepts also add to the equation.

But is this enough? What about right now, rather than waiting for the kindergartener to graduate from MIT? Let’s assume all of the above happens. Then what? There are no simple remedies, but there are a variety of measures, seemingly very difficult, which might help now.

A New Operating Code

Some might say the way to spread equality is through vastly increased income and estate tax redistributions. This will only lead to dysfunction. Others favor printing more money and letting inflation do the job.  This is ultimately destructive.

One answer is the creation of new wealth, real wealth, and not the redistribution or tinkering with existing wealth. Let the current rich do what they will with their money, including their philanthropies. History teaches us that total wealth is not fixed, that it really has no limit, especially in open societies that encourage risk, experimentation, and innovation–one with level playing fields for many rather than few.

To accomplish this objective, we need to develop societal strategies, including philanthropic strategies, for the creation of  new pools of resources by individuals, groups, and combinations of institutions with novel ideas that will solve problems, create new and important products or services, cure disease, or establish a new, more humane lifestyle.

Tools of Wealth Creation

If resources are infinite, then the need is for the tools of wealth creation.

Certainly, physical resources are definitely limited, but intellectual resources, digital resources, data resources and a variety of others are, indeed, unlimited.

There are, among the “unequal” those with original ideas, ambition, willingness to learn and work hard, and the drive to take risk and to succeed.

Joining these core entrepreneurs are  highly educated mentors and partners, understanding not only math and science, but the arts and humanities, with know-how and imagination to nurture new concepts and ideas and a willingness to share.

The final requirements are what I’ll call “seeds” and the place to incubate these seeds. The seeds are the new, innovative ideas combined with the resources to incubate them. Incubators include grants, loans and expertise. Just think about what could happen if, for example, Foundations used portions of their endowments for incubation loans. And this doesn’t include all of the many other sources of incubation capital and resources.

Social Wealth Incubators

Let’s establish some social wealth incubators, capitalize and staff them, open doors, do the due diligence necessary within the risk environment and welcome all comers.

As an example, let’s assemble such an incubator for increasing wealth in a downtown area. Let’s capitalize and staff it, so that grants and loans are available for projects that will make the core area more viable, enable innovators to capitalize on their ideas and hard work tutored by mentors, create jobs for many and trained on the spot, and provide a return on the incubator’s investment as well as to the overall community. Such is the creation of new wealth.

Will it be risky? Of course it will. But it may be one of many ways to break the cycle, the condition which Buffet criticizes, which will ultimately lead to more and more social distress, perhaps upheaval. Bring on many more ideas for this new operating code.

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