

Let's Dial Down our Enthusiasm over the Billionare Giving Pledge - dcaldwell
http://www.huffingtonpost.com/aaron-dorfman/the-giving-pledge_b_796159.html

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nlwhittemore
There are a bunch of fine reasons to be low-to-medium excited about the Giving
Pledge instead of totally amped, but Dorfman's argument - that they might not
spend it that well- is a pretty stupid one.

First, Gates and Buffett are, in two very different ways, reinventing the
rules of how to spend it: Gates by going all in and running his foundation
full time, Buffett by saying "forget having my name on things" and giving it
to the person he thinks can spend it best.

Zuckerberg is already in this category of smarter giving with his $100mm
Newark gift. And there's lots of good reasons to think that the era of the
$billion ballet gift is over.

Second, Dorfman runs a center that works to make philanthropy better, but for
some reason, instead of being a leading voice in the best strategies for
spending it effectively, he's become the leading voice in shitting all over
the commitments. Smart. Not.

@dcaldwell's points about the significantly higher amount of annual
philanthropy that comes from individuals of average means than from the ultra
wealthy is a much better reason to have tempered excitement.

For my money, the most exciting part of this is the precedent that Moskovitz
and Zuckerberg are setting to start this incredibly early in their lives. That
means we get not only hundreds of millions and billions of dollars, but at
least part of their time and attention for decades and decades.

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dcaldwell
Here are a couple other reasons why I don't think the Giving Pledge will have
an enormous impact on philanthropy or nonprofits in general.

First, not every billionaire is going to make the pledge. I double that it
will be more than a third of them. So, instead of the $15 billion given
annually as the article suggest, it will probably be more like $5 billion.

Secondly, since 1957 giving to non-profits has increased all but about 3 years
(2 of those being the last.) Some estimates say that in the next 5-10 years,
annual giving will be at around $400 billion instead of the current $300
billion. So, the $5 billion in giving from the Giving Pledge will be a much
smaller percentage of total giving than it currently would be.

I certainly applaud the generosity of these individuals and families but we
need to maintain perspective. If we could get the average American to increase
their giving by 1%, we would probably have a greater impact on total giving.

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torme
I'd say that having _anyone_ pledge to donate _anything_ is something to be
immensely enthusiastic about.

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kirinkalia
Having recently worked in the nonprofit world (and for one that received Gates
Foundation money), it's important to note that Gates shook up the philanthropy
world when he started his foundation and again when Buffett committed to
giving his billions to the Gates Foundation. Lots of smaller foundations began
asking themselves why they were working in certain areas and if they could be
as effective as Gates with Gates in that same space (e.g., malaria
prevention).

Gates is not asking billionaires to do what he did, but he should have --
really get involved with the issues you care about and spend that money
smartly to make a lasting impact.

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lionhearted
I'll say it -

This guy is a fucking jerk.

When confronted with something that conflicts with his worldview that the rich
are bad, he cooks up a bunch of caveats and concerns so he can keep his
current worldview.

Many of his arguments aren't even right -

> Wealthy donors don't tend to prioritize lower-income communities,
> communities of color or other marginalized groups as beneficiaries of their
> giving.

You mean, like, eradicating Malaria in Africa [1] or funding the USA's worst
performing school districts [2]?

Jerks like this have been beating the "the rich are evil and don't care about
poor people drum" for so long that they can't adapt now. What's this? In
addition to building world changing companies, they're also giving the wealth
they got personally to charity? Well, it's still not so good, because you know
the rich are evil and don't care about poor people.

I'll say it - he's a jerk. When confronted with effective pragmatic people
moving into his backwards-poorly-managed idealistic space, he complains and
slings mud and adds doubt.

Screw him. We need less people doing stuff that he's doing, and more people
doing entrepreneurship, taking strong pragmatic action to fix problems, and
giving voluntarily.

[1] <http://www.gatesfoundation.org/topics/Pages/malaria.aspx>

[2] [http://techcrunch.com/2010/09/24/techcrunch-interview-
with-m...](http://techcrunch.com/2010/09/24/techcrunch-interview-with-mark-
zuckerberg-on-100-million-education-donation/)

~~~
lubos
Let me play devil's advocate.

Let's say you are bill gates. You own assets worth of 50 billion dollars.
Assuming there is no capital gain or loss and that your return on investment
is 5%, you should be making 2.5 billion USD annually. Half of that would
normally need to be paid as income tax to government. That's around 1 billion
dollars every year.

So what you do? You get the best financial advisors and they'll tell you...
"move your assets into your own private foundation". this way you won't need
to pay tax on your income although to retain tax exempt status, you will need
to give away every year at least 5% of your assets. so you will end up paying
your "taxes" anyway but it will make you look awesome because now you are
doing _charity_ instead of just paying federal income tax like the rest of us.

And this is exactly what bill gates has been doing all these years. His
foundation is worth 35 billion dollars and he is giving away exactly 5% every
year. Up until now they gave away 24 billion dollars (around 1.5 billion a
year).

I think it makes sense to avoid paying income tax and decide to spend your
money elsewhere at your discretion.

so let's not pretend these billionaires are better than rest of us.

~~~
gnaritas
> Assuming that there is no capital gain or loss and that your return on
> investment is 5%

That doesn't seem to make sense, as a return on an investment is a capital
gain.

> Half of that would normally need to be paid as income tax to government.

How exactly do you figure that? You don't pay income taxes on investments, you
pay a flat 15% capital gains tax on investment income. I don't see how you
think he'd lose half to taxes, it'd be far far less than half.

Beyond that, giving away 5% of 35 billion (total wealth) costs a lot more than
paying 15% of 2.5 billion (investment income that year), so it's not saving
him money on taxes which would only be in the range of 350 million a year
given your example.

Choosing to spend a billion and a half a year on charity to avoid paying 350
million in taxes doesn't make much sense as a motivation. So I highly doubt
that's why he's doing it.

~~~
lubos
income from dividends or when your money sits in the bank earning interest is
not capital gain. capital gain is when you buy shares, real-estate etc and
market price of these assets increases while they are on your balance sheet.
then it's unrealized capital gain and you don't pay any tax on it until you
sell it and make it realized capital gain. for simplicity reasons to explain
my point, I didn't want to overcomplicate it with capital gains and losses.

~~~
gnaritas
Yes, but dividends are basically taxed at the same rate or slightly higher 20%
as capital gains; they aren't taxed as earned income using the progressive
bracket system. So while they aren't technically capital gains, my point
stands.

~~~
lubos
In 1994 when Bill Gates started his private foundation, income from dividends
was taxed like regular income.

You're right it's 15% right now but don't forget there is new tax law coming
into effect pretty much in two weeks that will tax dividends again like
regular income.

~~~
gnaritas
I wasn't aware the new law did that, but I'm pleased to hear it. Now if only
they'd do the same with capital gains.

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grandalf
The cotton gin ended slavery. Any Billionaire who chooses to give money to
charity is opting out of the quest for new innovations that will let people
willingly free others from the bonds that hold them in poverty.

Imagine if Whitney had instead donated the capital he used to invent the
cotton gin to the local orphanage.

I think it's an interesting commentary on the perception of capitalism that
the world's richest view themselves as having been one-hit-wonders unlikely
ever to eclipse their initial accomplishment with their own sweat and
insight...

Instead, I'd prefer that these people follow in the steps of Gates himself,
who has delved into asking the question of what the big problems are and how
they're most effectively solved. His TED talk about power generation was
incredibly inspiring, and assuming his wealth is $50B, he's not rich enough to
self-fund it beyond the second stage.

~~~
notahacker
Whitney _should_ have donated the capital he used to invent the cotton gin
unsuccessfully defend his IP to the local orphanage.

Attributed to the Eli Whitney Museum site by Wikipedia: _"Whitney (who died in
1825) could not have foreseen the ways in which his invention would change
society for the worse. The most significant of these was the growth of
slavery. While it was true that the cotton gin reduced the labor of removing
seeds, it did not reduce the need for slaves to grow and pick the cotton. In
fact, the opposite occurred. Cotton growing became so profitable for the
planters that it greatly increased their demand for both land and slave labor.
In 1790 there were six slave states; in 1860 there were 15. From 1790 until
Congress banned the importation of slaves from Africa in 1808, Southerners
imported 80,000 Africans. By 1860 approximately one in three Southerners was a
slave"_

So whilst there are many inventions driven by capitalist investment that have
had a far more benign or positive impact on society than your unfortunate
choice of example, I think it's fair to say that profit-driven innovation by
the already wealthy is far from certain to liberate people from the bonds that
hold them in poverty _even if it succeeds_. I also think it's absurd to
suggest that charitable giving can't foster innovation. Imagine if the local
orphanage had given some smart, self-sufficient kids a good education focused
on entrepreneurial values...

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masterponomo
Um...you're welcome?

