Philanthrocapitalism

In their new book, Philanthrocapitalism: How the Rich Can Save the World, Matthew Bishop and Michael Green describe how super-rich "philanthrocapitalists" like Bill Gates are shaking up the world of giving with their businesslike methods. The discussion continues on their blog as well.

Much philanthrocapitalism is not all that different from the philanthropy practiced by foundations that have been around for a while -- no surprise when you realize that John D. Rockefeller, Andrew Carnegie, David Packard, and Bill Hewlett were the philanthrocapitalists of their times. But Bishop and Green describe some good practices by these new kids on the block.

As businesspeople, philanthrocapitalists appreciate the importance of supporting great organizations with strong, motivated leaders. Like venture capitalists, they help their grantees scale up by providing coaching, networking, and technical assistance. And they are more likely than many foundations to provide general operating support -- a great approach when the donor's goals align with the organization's work.

Philanthrocapitalists recognize the importance of leverage. Some leverage their dollars by moving beyond traditional grants. They may make program-related investments or start hybrid organizations, like Google.org, that have the flexibility to support business ventures as well as nonprofits. Celebrity philanthropists like Bill Clinton -- who Bishop and Green include in the clan -- are also finding new ways to leverage nonfinancial assets like networks to bring together donors and people who need funding.

Some philanthrocapitalists look for the same high-risk, high-return opportunities in their giving as they did with their for-profit businesses. Their willingness to take risks could be essential for tackling irreversible, life-threatening problems like climate change.

Of course, new and old philanthropists alike face the challenge in measuring the impact of their work. While the business world has common measures of success -- ultimately profit -- assessing efforts to reduce poverty or mitigate climate change is domain-specific and far more difficult. But if successful business entrepreneurs import their demands for results -- and for transparency -- into the nonprofit sector, this could have a transformative effect.

Next time I'll look at a vehement critic of philanthrocapitalism. Meanwhile, you can read Bishop and Green's engaging book to get a sense of the energy and commitment behind the philanthrocapitalists' new ideas.

I'm taking next week off from the blog to visit family in Singapore, where capitalism is strong but the "philanthro" part less so. Best holiday wishes to you and your families.

Paul