It’s been 15 years since Bill Gates and his ex-wife Melinda French Gates, along with Warren Buffett, encouraged billionaires to give at least half their wealth to charity, either while alive or upon their death. Yet three-quarters of the original U.S. Giving Pledgers have collectively gotten far wealthier since they signed the Pledge while just 8 of 22 deceased Pledgers fulfilled their pledges.
A report recently published by the progressive Institute for Policy Studies found that for most of the billionaires who committed to give half their fortunes away, the Pledge remains “unfulfilled, unfulfillable, and not our ticket to a fairer, better future.” The Institute concluded that too many of the Pledgers have intertwined personal benefit with the philanthropic obligations they’ve assumed. Indeed, the lion’s share of their charitable contributions has gone to their own private foundations and to Donor-Advised Funds (DAFs) which can retain the funds they receive for years or even decades without actually supporting working charities.
The Institute sees serious flaws in our philanthropic incentive system. The organization argues that the rules allowing the super-wealthy to avoid taxes by funding private foundations and DAFs need to be tightened; that dollars donated to their own foundations and to DAFs need to be deployed to public charities in reasonably short order; and that those who accumulate extraordinary wealth should take on their fair share of the nation’s tax burden. Policy goals worth supporting, most taxpayers would agree.
But Chuck Collins, an author of the Institute’s report, offers another perspective: “There’s more of a blurring of the lines in [tech billionaires’] imaginations between for-profit and nonprofit. They see everything they do as a change maker, but it doesn’t have to be through the traditional philanthropic lane.”
Collins’ observation is right on the money. A growing number of tech billionaires credit their entrepreneurial efforts with driving positive social change, notably in Silicon Valley. Elon Musk, himself a signer of the Giving Pledge, has insisted that his companies “SpaceX, Tesla, Neuralink and the Boring Company are philanthropy.” Similarly, billionaire venture capitalist Mark Andressen, in his essay “The Techno-Optimist Manifesto,” claimed that “technological innovation in a market system is inherently philanthropic.” And tech billionaires Mark Zuckerberg and Laurene Powell Jobs, among others, carry out their charitable efforts through limited liability companies (LLCs), allowing them the flexibility to achieve charitable outcomes through for-profit investing and political donations.
From the mining of conflict materials to e-waste, we can’t ignore the reality that tech is riddled with environmental concerns. And technology’s impact on social issues has also been justifiably criticized. The digital divide, which exacerbates inequalities in access to digital resources, and the risk of cultural homogenization, where dominant global cultures overshadow local identities, are two significant examples.
But let’s give credit where credit is due. The power of technology is being harnessed to support environmental sustainability and combat the challenges posed by climate change and resource depletion. And technology is making education more accessible, improving healthcare delivery and rendering it more affordable, and promoting social justice and equality.
It’s not just tech billionaires whose innovative and disruptive businesses are relying on market forces to help ameliorate the social and environmental problems we face. Thousands of social entrepreneurs –- seeking both social and financial returns -- are gravitating toward the Low-profit Limited Liability Company (L3C), a specialized form of LLC that places charitable or educational missions above all other objectives. And, by law, the L3C tracks, point by point, all the IRS requirements to qualify for private foundations' “program-related investments“which can be leveraged to access capital from both traditional and impact investors in pursuit of its mission.
No wonder more and more entrepreneurial changemakers find the L3C irresistible.
-----
Marc Lane drafted Illinois’ L3C law. He is the author of The Mission-Driven Venture: Business Solutions to the World’s Most Vexing Social Problems (John Wiley & Sons, Inc.). If you would like to explore how launching a social enterprise or pursuing a creative philanthropic strategy might help you achieve your social-impact goals, feel free to reach out to Marc in confidence at mlane@marcjlane.com or 312-372-1040.