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New-Breed Philanthropists: The Rise of Philanthrocapitalism

Posted by Sam Sloma, Financial Planner

Whichever way you look at it, 2016 has been a year of surprising outcomes. As an ex-footballer myself, if you’d have told me five seasons ago that Leicester City would win The Premier League in 2016, I’d have thought you were, at best, wildly optimistic, and at worst, totally crazy. But win it they did, and it wasn’t the only surprise of the year. Politically, we’re still coming to terms with Britain’s vote to leave the EU and the global reverberations of a Donald Trump win in the US will be felt for some time to come.

Some of these events have had a large scale social and political impact (not least to the good people of Leicester!), but when not just one but a series of surprising events happen in such a short space of time it can be easy to feel out of step with the world you thought you knew. In general, people respond to this sort of thing in one of two ways: they fight or hide from the change, or they work out how to adapt to it and take control.

I always knew that my career would be comparatively short as a footballer, because that’s the nature of the game. So when I stopped playing and the time came for me to change my life I was ready for the challenge and I took control by embarking on a new career. After the events of 2016, it certainly feels like the world has changed but there’s no reason to think we can’t still take control. In our society we are more connected with what’s going on in the world than ever before.

The invention and advance of social media has given a platform and an instant connection with those in power, both as individuals and in our numbers. The world is becoming far more socially aware, fuelling a collective growth in social responsibility. And this is a responsibility that’s being felt up and down the entire social spectrum. Those dissatisfied with what they see from politicians are working out what they can do to help. One of the most interesting examples of this is a new breed of philanthropists who are investing in global change on an unprecedented level.

Enter the Philanthrocapitalists

In the past, philanthropy was a matter of simply signing a cheque at a fundraising gala. However, in their book ‘Philanthrocapitalism – how the rich can save the world’, Matthew Bishop and Michael Green define philanthrocapitalists as:

“The new generation of billionaires who are reshaping the way they give - it's like another business. Largely trained in the corporate world, these "social investors" are using big-business-style strategies and expecting results and accountability to match.”

By employing the strategies of their day job, philanthrocapitalists are reshaping the entire culture of philanthropy and, in seeking greater accountability and firm results, they’re taking full responsibility for their social contribution.

On the day that Bill Gates announced he was setting up a foundation to give away huge chunks of his personal fortune, he changed philanthropic giving forever. The Bill & Melinda Gates Foundation was established in 2000, with the aim of ‘improving the quality of life for individuals around the world’. In 2015, the Gates Foundation awarded direct grants totalling $4.2 billion, and has so far paid out $36.7 billion in total funding over its lifespan, supporting work in more than 100 countries internationally. These vast sums are employed to increase opportunity through education, tackle poverty and to support the global fight against diseases like HIV, malaria, polio and tuberculosis.

Mark Zuckerberg and his wife Priscilla Chan made headlines last year when they pledged to donate 99% of their $45 billion Facebook stock over their lifetimes. Zuckerberg said the funding would bring scientists and engineers together, build tools and technology needed to help fight disease and also grow the movement to fund science. The tech billionaire said fifty times more is spent on treating people who are ill than on finding cures. "We can do better than that," the Chan Zuckerberg Initiative mission statement states:

“We want every child to grow up in a better world, our hopes for the future centre on two ideas: advancing human potential and promoting equality. We'll focus first on personalised learning, curing disease, connecting people and building strong communities. We will make long-term investments over 25, 50 or even 100 years because our greatest challenges require time to solve.”

These are noble aims and acts of breath-taking generosity which most would agree to be a good thing for our global society. A desire to eradicate some of the world’s worst diseases and to create a global level playing field of opportunity is to be commended. However, while these foundations are supposed to be non-political bodies, can donating on this scale skew the democratic and policy-making process? Is it even possible to tackle big global problems like poverty, disease and under-privilege without acquiring some political influence?

Bishop and Green would suggest the way to look at it is that philanthrocapitalists are in a unique and unprecedented position: “They do not face elections every few years, like politicians, or suffer the tyranny of shareholder demands for ever-increasing quarterly profits, like CEOs... Nor do they have to devote vast amounts of time and resources to raising money, like most heads of non-government organisations. (NGOs). That frees them to think long-term, to go against conventional wisdom, to take up ideas too risky for government, to deploy substantial resources quickly when the situation demands it - above all, to try something new.”

In a globalised world in which traditional human problems like disease, poverty and inequality have no respect for country boundaries, national governments can struggle to respond fully to the social and economic challenges. Perhaps philanthrocapitalists with their ability to mobilise huge sums of money globally without the need of a democratic mandate are best placed to provide the solutions.

Crucially, they’re seeing a problem and they’re doing something about it, taking control and working out how they can do their bit to effect a change. Admittedly, they have access to resources and wealth that most of us don’t enjoy but the example they set can be a template for the rest of us to follow.

In the past 18 months First Wealth have begun to work with Tzedek, a charity that aims to tackle poverty in the world’s poorest areas by teaching people skills that will help them make a living, thus enabling and empowering them to feed themselves and their families. Our team were recently challenged to live on £1 for a day to include all meals as this is what the world’s poor are forced to do!

Whilst First Wealth works with high-net-worth clients to create lifestyle and financial plans, we always try to include philanthropic gifting and socially-conscious investing. Not everyone can be a philanthrocapitalist, but many people can and do help those in need.

If you would like to consider how to become a more socially-active investor, please get in touch on 020 7467 2700 or email us at: hello@firstwealth.co.uk.

This document is Marketing Material for a retail audience and does not constitute advice or recommendations. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested

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