As Michael Bloomberg prepared to step down as mayor of New York City, after twelve years on the job, he said that among his goals after leaving office was to start running outside again, which hadn’t been practical with a security detail while mayor. He also said he wanted to “sleep in a bit.” Bloomberg had spent years waking up at six a.m. and working till ten p.m. or eleven p.m. at night. Just after leaving office, in January 2014, he and his partner, Diana Taylor, headed off to Hawaii and New Zealand for a two-week vacation—his first real vacation in over a decade.
Later, as Bloomberg settled into his post-mayoral life, it became clear that he wouldn’t be relaxing much. Bloomberg soon plunged back into the day-to-day management of his massive media company, Bloomberg L.P. In less than a year, the CEO of the company, Daniel Doctoroff, would be gone as Bloomberg reasserted his control.
Bloomberg also turned to philanthropy in a bigger way after he left office. Even as he amassed great wealth, starting in the 1980s, Bloomberg had always planned to give away most of that money. He lived extravagantly, to be sure, owning a private jet and some thirteen properties around the world by 2013—which included estates in London, Bermuda, the Hamptons, and Westchester County—but he gave on an equally large level.
Bloomberg had no interest in an older model of philanthropy, whereby business titans waited to the end of their lives or left the job to their heirs. Instead, he believed in giving as much as he could while still alive, a logic he pushed to other donors.
Bloomberg once recalled how, in the 1990s, he talked to a wealthy benefactor who planned to leave Johns Hopkins University $50 million upon his death. “But I asked him: Why wait? Why deny financial aid to this generation? Why deny a possible cure for a disease to this generation?” The donor changed his mind, giving all the money immediately. Over many years, Bloomberg himself channeled some $1 billion to Johns Hopkins, his alma mater. In a 2010 public statement about his giving intentions, Bloomberg had written “that the reality of great wealth is that you can’t spend it and you can’t take it with you.”
Bloomberg’s fortune is vast indeed. When he started his media company, which came to dominate the market for financial data, he covered many of the start-up costs himself, drawing on a large severance package he had gotten from his former Wall Street employer, Salomon Brothers. Later, Bloomberg bought back stakes in his company from other early investors. As a result, he ended up owning 88 percent of a company that now has nineteen thousand employees and $9 billion in annual revenue. During his years as mayor, the value of the company had grown steadily. Bloomberg was worth just under $5 billion as he took office in 2002. By the time he left, that figure had soared to $33 billion. Within two years of leaving City Hall, his wealth had climbed higher still, to over $40 billion.
That kind of money isn’t easy to give away. For example, if Bloomberg gave as much annually as did the legendary Rockefeller Foundation, it would take him almost three centuries to dispose of his fortune. To make any dent in giving away his wealth, Bloomberg has to give on the level of Bill Gates or George Soros, who rank among the world’s top mega-donors.
Bloomberg had been an active philanthropist before becoming mayor, and he started giving more once at City Hall. Among other things, he gave many millions to nonprofit groups around the city—giving that some saw as a naked effort to co-opt critics and bolster his power. Bloomberg offered a more benign explanation: he was simply using private funds to pay for priorities that the city couldn’t afford. Regardless, never before had a major public official in the United States so adroitly used philanthropy to advance his agenda—just as Bloomberg set a new record for spending his own money to get elected in the first place.
Bloomberg also quietly built up the infrastructure for his philanthropy during his years in government. He bought a $45 million Beaux-Arts mansion on 78th and Madison Avenue in 2006 to house his foundation, and in 2010, he appointed his longtime aide Patricia Harris as CEO of Bloomberg Philanthropies, a job she took on even while still working at City Hall. Harris led the push to organize and staff the foundation over subsequent years—getting ready for much bigger giving to come.
In 2013, his last year in office, Bloomberg quietly gave away around $450 million—an amount nearly as great as the Ford Foundation’s annual grantmaking. Big chunks of that money went to finance a global version of the “nanny” agenda that Bloomberg had pursued as mayor. He put up millions of dollars for a worldwide push against smoking, as well as an effort to reduce traffic deaths in poorer countries. Bloomberg also gave big to combat climate change. In 2011, he had given the Sierra Club its biggest gift ever—$50 million to try to shut down coal-fired power plants around the United States.
After he left City Hall, Bloomberg moved even more aggressively with his philanthropy. Within a month, he announced a $53 million commitment to fight overfishing and reform fishing practices. That issue might sound obscure to most people, but not to Bloomberg. As he said in making his gift: “While billions of people depend on fish for food or income, only 13 percent of the world’s fisheries are safe from being over-fished, presenting serious environmental and public health challenges. Data shows the world’s severely threatened fish populations can rebound if fishing is properly managed.”
Billions of hungry people, disappearing healthy food, and—best of all—data-driven solutions. This was Mike Bloomberg’s kind of issue.
A month later, Bloomberg put up $10 million to help prevent children from accidentally drowning in Bangladesh. And the big numbers would keep coming. In fall 2014, Bloomberg announced he was putting another $125 million into work to cut the global carnage of traffic deaths. His foundation also rolled out an initiative to support public art in U.S. cities, on top of tens of millions of dollars Bloomberg had already donated to the arts. Meanwhile, additional grants bankrolled efforts to help cities in the United States and other countries become more innovative.
There was more, too. During his first eighteen months out of office, Bloomberg doubled down on his giving to the Sierra Club to fight coal plants, expanded his global fight against smoking, and pledged $50 million to support global reproductive health and rights.
As mayor of New York, Bloomberg was famously obsessed with data, and with identifying practical ways to improve life in the city. As a philanthropist, he’s also driven by a keen pragmatism. Whereas many billionaires are drawn to the hardest problems or the trendiest causes, Bloomberg operates in a more utilitarian way when deciding where to put his biggest money—crunching the numbers to figure out how his giving can do the most good.
Neither of the two biggest causes he has invested in over the years—reducing tobacco use and improving traffic safety—register much in the glittery precincts of philanthropy, but Bloomberg has picked two real winners. Smoking kills six million people worldwide every year, which is far more than AIDS and malaria put together. That number is projected to rise to eight million by 2030. A funder who bends this curve even slightly can save untold lives, which is why Bloomberg has so far poured at least $600 million into the cause. The same goes for road safety, where the body count is also huge: 1.25 million people die annually from accidents and tens of millions are injured. His foundation estimates that some 125,000 lives will be saved as a result of Bloomberg’s investment of more than a quarter of a billion dollars in road safety activities across the world. Sounds like a bargain, right? Meanwhile, Bloomberg’s quest to shut down coal-fired power plants—a cause to which he’s now given over $130 million—is a twofer: shuttering such plants reduces carbon dioxide emissions but also lowers old-fashioned air pollution, saving lives. In early 2015, Bloomberg estimated that 5,500 lives annually were already being saved because of coal plant shutdowns in recent years.
Bloomberg is a savvy philanthropist in another way: He understands that influencing government is often the best way to get things done and focuses much of his giving on leveraging changes in public policy.
In a sweeping statement of his philanthropic strategy in early 2015, Bloomberg wrote: “Some still see philanthropy as an alternative to government. I see it as a way to embolden government.” He went on: “Governments have the authority to drive change in ways that philanthropic organizations cannot. By leveraging our resources, and forming partnerships with government, philanthropic organizations can help push those changes forward.” That mind-set, said Bloomberg, was “at the heart of everything” that his foundation did.
In 2014, Bloomberg’s annual giving totaled $462 million. The following year, it totaled $510 million. With tens of billions of dollars to give away, this gusher of donations isn’t likely to stop anytime soon.
Bloomberg has a reputation as a nonpartisan pragmatist, even as he’s taken on climate change and gun violence, and he doesn’t strike many as a scary figure. He is not feared the way that progressives fear the Koch brothers or conservatives fear George Soros. But the plain facts about Bloomberg are actually rather unnerving: One of the world’s wealthiest men has openly said that he plans to spend the bulk of his fortune to influence government policies, not just in America but around the planet.
If you don’t know much about philanthropy—and few Americans do—you may have imagined that Michael Bloomberg’s run as a power player would end when he stepped down as mayor of New York. Of course, nothing of the kind was true. He simply pivoted to pull other levers of influence. Bloomberg, who used his great wealth to buy his way into office, now turned to using that wealth to push changes that could have more impact on the lives of more people than anything he did as mayor.
Bloomberg will give away billions in coming years at the same time that any number of great fortunes are harnessed to philanthropy. And just as few Americans are following what New York’s ex-mayor is doing, neither are they paying attention to what some of the nation’s other wealthiest people are up to—or the degree to which they’re deploying their fortunes to have a say over the great issues of the day. That power, I should add, doesn’t just rest in the hands of those giving wealth away. It also is wielded by the people the givers entrust with their money, whether it’s largely unknown foundation staff like Patricia Harris—who’s been called one of the most powerful women in the world—or equally unknown heirs, like the three children of Warren Buffett, who together give away a larger sum every year than Michael Bloomberg. The philanthropic elite now emerging is not just more influential than most people realize; it’s more extensive, commanding a growing array of institutions that reach into nearly every corner of American society.
There are two parts to the story of the great power shift unfolding in U.S. society. One part is about the rising tide of philanthropic giving; the second is about the declining ability of government to solve big problems and provide public goods.
Let’s start with the new private money.
For all the philanthropy we’ve seen in recent years, it’s nothing compared to what lies ahead.
To many of today’s billionaires, mega-giving is the logical endgame to careers spent amassing such vast fortunes that philanthropy is the only real place the money can go. A similar phenomenon played out a century ago, when the historic fortunes of the early industrial age amassed by Rockefeller, Andrew Carnegie, and others were used to endow large foundations that went on to wield huge influence in America and the world. This time, though, everything is bigger—both the wealth and the clout that comes with it.
How much money are we talking about? More than you think.
Even if you’re generally aware of the crazily large fortunes piling up at the very tippy top of the income ladder in our second Gilded Age—say, because you thumb through the Forbes 400 special issue now and again—chances are that you still don’t realize just how big the fortunes at the top have become. Or how much bigger they are likely to get.
Take Bill Gates and Warren Buffett. They’re long-familiar figures, as two of the richest men in America. But if you haven’t been paying attention, you may not have noticed that both have gotten much richer over the past decade. Buffett added $25 billion to his fortune between 2005 and 2015. Gates added even more, pushing his net worth to nearly $80 billion.
And these fortunes may rise even further. While Gates still owns large amounts of Microsoft stock, he has largely deployed his fortune in private venture capital investments that could bring substantial returns as they mature in coming years. Buffett, meanwhile, has lately been making a string of bold acquisitions that could boost Berkshire Hathaway’s fabled stock even further into the stratosphere down the line.
Or consider Mark Zuckerberg. Amid the uproar over his plans to give away $45 billion in Facebook stock, almost nobody mentioned an obvious point: The actual amount could end up being far greater than that. While Facebook’s 2012 IPO was famously a disaster, its stock began a quiet upward tear in 2014, eventually soaring to over $100 a share. The smart money snickers that Facebook is overpriced and that the tech bubble will burst any day now. And maybe it will. But if the value of Facebook ever comes close to that of other top tech giants (like Google or Apple), Zuckerberg, who owns a huge stake in the company, will be far richer than he is today.
Gates, Buffett, Bloomberg, and Zuckerberg aren’t the only billionaires who’ve gotten much wealthier in the past decade—a period, by the way, when the median net worth of all U.S. households fell thanks to the housing crash. The fortunes of the wealthy have kept soaring across multiple industries and through the ups and downs of the business cycle. New-economy billionaires have gotten much richer—Larry Ellison added $40 billion to his wealth between 2005 and 2015, Jeff Bezos added $42 billion—but so have titans of the old economy. David and Charles Koch, for example, had a combined net worth of $9 billion in 2005. In 2015, that figure stood at around $85 billion, a huge gain that helps explain why the Koch brothers have had plenty of extra cash to pour into politics and philanthropy lately. Phil Knight of Nike gained $17 billion in new wealth during the decade. Sheldon Adelson, the casino mogul, doubled his wealth to $26 billion.
Much has been said about why so few people have come to have so much money, fortunes that defy comprehension and rival the GDP of some countries. A confluence of factors—globalization, technological change, and public policies favoring capital—have worked together to create this second Gilded Age, boosting the wealth of the Forbes 400 by nearly 2,000 percent since 1984. It’s a fascinating story, and an outrageous one, too. Even as the U.S. economy stopped working for most ordinary people long ago, the piles of wealth at the very top have kept growing larger and larger. America’s political class has either actively abetted this shift or nipped lamely at the juggernaut of runaway inequality.
At this point, though, the scandal of how the income chasm grew so wide is less intriguing than the question of what will become of today’s fortunes going forward.
Michael Bloomberg was exactly right when he said about great wealth that “you can’t spend it and you can’t take it with you.” This comes from a man who’s done a pretty impressive job of spending money, from sinking over $250 million into a political career to snapping up multiple estates. But when you have billions of dollars there’s no way you can dispose of more than a tiny fraction of it through even the most feverish personal excess. Nor can your heirs consume such wealth, even if you have a lot of them and they are huge spenders. Passing great fortunes to the next generation just kicks the question down the line of what will eventually come of that wealth. One day, it will have to be consumed in some fashion.
Philanthropy is an obvious solution here. For the richest of the rich, it may feel like the only solution.
Of course, philanthropy is attractive to the wealthy for a wide range of other reasons beyond necessity. I’ll dig into the varied motives behind their giving throughout the book, but one point to stress at the outset is just how prevalent the philanthropic impulse is among today’s upper class and just how many of these people are turning to giving in an organized way.
From 2003 to 2013, according to one study, itemized charitable contributions from people making $500,000 or more increased by 57 percent, while itemized contributions from people making $10,000,000 or more increased by 104 percent over the same period. Some 30,000 new private foundations have been created since 2000, along with 185,000 donor-advised funds, which offer a simpler way to channel money to charitable causes. That explosive growth is likely to continue in coming decades amid the greatest wealth transfer in U.S. history. One study has predicted that nearly $60 trillion will be transferred from American estates between 2007 and 2061, with $27 trillion of that money going to charity. Another study estimated that affluent baby boomers alone will donate $6.6 trillion to philanthropy over the next twenty years.
Numbers like this speak to just how many U.S. households have the capacity for substantial giving. While it’s pretty obvious that a billionaire would have some spare cash to give away, plenty of other people do, too.
A 2015 study found that nearly 70,000 individuals living in North America have assets of $30 million or more—a huge jump from just a decade ago. It found that some 5,000 households had assets of over $100 million. These figures include just liquid, investable assets (not real estate). Lots of Americans, in other words, have the resources to combine a lavish lifestyle with serious giving, and a growing number of today’s wealthy are doing exactly that.
New philanthropists are helped along by an ever growing complex of consulting firms and management services. The charitable arm of Fidelity is the top leader in this regard. Its advisors can handle every aspect of a client’s philanthropy, from identifying which causes to support with what strategies, to actually cutting the checks. Working with over 100,000 donors, Fidelity handled $3.1 billion in giving in 2015—making it the second largest grantmaking operation in the world, after the Gates Foundation. Schwab Charitable moved just over $1 billion in the same year, nearly twice as much money as the Ford Foundation gave.
Meanwhile, community foundations—where the wealthy have historically looked for help with their giving—are bigger and wealthier than ever, almost doubling their annual grantmaking since 2010. Grants made through the Silicon Valley Community, where Zuckerberg and other tech stars stash their cash, nearly doubled in just one year alone, between 2014 and 2015—soaring to $816 million.
As the great wealth of a new Gilded Age is harnessed to philanthropy, what will that mean for the rest of us? Will it mean faster strides in “advancing human potential and promoting equality,” which are the goals that Mark Zuckerberg and Priscilla Chan have laid out? Or will it deepen and entrench what many already see as a new era of American plutocracy?
I’ll explore these questions from many angles in the pages ahead. A starting point to grasp, though, is that the emergence of big philanthropy is adding a new wrinkle to how we understand inequality in our second Gilded Age. Mainly, people have talked about the great fortunes at the top as a symptom of a yawning economic chasm. Now, with the wealthy turning to philanthropy on an epic scale, those fortunes need to be seen in a new light: They are becoming powerful drivers of a range of agendas. Many of today’s richest Americans, we can already see, will wield a lot more influence over how the rest of us live as they give away their money than they ever wielded while making it.
How will this influence be used? How is it being used already?
If big philanthropy had a nerve center, it would be the Office of Philanthropic Partnerships at the Bill and Melinda Gates Foundation, which occupies a pair of modern V-shaped buildings in downtown Seattle. There, a small team coordinates the Giving Pledge, an effort to galvanize greater giving by the world’s richest people and, as important, to help them to have maximum impact with their money.
More than 150 people have joined the pledge, which was publicly unveiled by Bill Gates and Warren Buffett in 2010. Zuckerberg has done so. So has Mike Bloomberg, as well as a who’s who of other billionaires—among them Paul Allen, Richard Branson, Elon Musk, and David Rockefeller. Only Americans were part of the pledge at first. Now it includes billionaires from sixteen countries. Every year, members gather for an annual retreat to swap insights and hear from experts on different topics.
Fostering more philanthropy became a goal of the Gates Foundation early on, driven by the logic that new giving by other donors was a key to making a dent in the gargantuan problems the foundation was tackling, like global poverty and disease. Bill and Melinda Gates also had a strong personal interest in encouraging new donors, as did their close friend Warren Buffett. Because of the vastness of their wealth, all three had been forced to think carefully about the challenges of disposing of so much money. (Buffett’s easy solution was to pledge most of it to the Gates Foundation.) Yet in the course of hobnobbing with other billionaires, the Gateses and Buffett came to see that many of America’s richest people had yet to figure out what they would ultimately do with their money. The three thought more needed to be done to get those folks to focus on that critical question. Buffett had the idea for an organized effort, one that would draw in other top philanthropists to help proselytize for greater giving, starting earlier in life.
“The sooner, the better” is Bill Gates’s view of when the wealthy should start giving. But he didn’t always think that way. “I didn’t do much philanthropy in my 20s and 30s,” he recalled to an interviewer. “I didn’t believe in weekends, vacations. So philanthropy wasn’t the only thing I didn’t believe in. I was just fanatical.” While building Microsoft, Gates could go days working nearly around the clock. To keep up with the boss, some programmers kept sleeping bags under their desks.
When Bill and Melinda were still dating, Gates told her that he planned to give away all the wealth created by Microsoft—but only after he turned sixty (in 2015). He hated the idea of trying to both run a big company and oversee a foundation at the same time. Later, though, Gates would regret his tunnel vision. “I wish I had had a basic awareness of the different living conditions around the world,” he said.
A trip to Africa with Melinda in 1993—his longest vacation ever—started to broaden his horizons. The couple went for a safari, to see wild animals, but were deeply moved by the challenges faced by the people on the world’s poorest continent. Walking on a beach on Zanzibar, they had their first real discussion about how, exactly, they might give away a historic fortune.
Over the next few years, Bill sped up his timetable for giving as he learned more about the appalling state of global health. He and Melinda were shocked to read a news story about rotavirus, which causes severe diarrhea and kills hundreds of thousands of children every year. Melinda would recall: “We thought ‘Well, that can’t be.’ In the U.S. you just go down to the drugstore.”
Ever the geek, Bill dug into the data, poring over the World Bank’s World Development Report, among other publications. He came to see how little he knew about global health. Previously, he had thought that “there wouldn’t be a disease I never heard of that was killing over half a million children a year. And that if there were, all the drug companies would be working on it.” He had also thought that by the time he did eventually go into philanthropy, “all the really important stuff would already be addressed” and he’d “have to struggle to find something really impactful.” But once he read that report, he saw that there were huge, obvious problems to be solved—and many lives that could be easily saved. “It just jumped out at me.”
The Gateses began global grantmaking in the late 1990s, as co-chairs of their foundation. Bill has described his partnership with Melinda as the third great collaboration of his life—the first being with Microsoft co-founder Paul Allen, the second with the company’s long-serving CEO, Steve Ballmer. Never before had a husband-and-wife team worked so closely in giving away so much money. John D. Rockefeller’s wife, Laura Spelman Rockefeller, had died twenty-two years before her husband—whose main partner in giving, in any case, was Frederick T. Gates. Andrew Carnegie’s wife, Louise, was a peripheral figure as he disposed of his vast steel fortune. But the Gateses, like many wealthy couples today, have made their mammoth-size philanthropy a truly joint project.
“We come at things from different angles. And I actually think that’s really good,” Melinda has said. “So Bill can look at the big data and say I want to act based on these global statistics. For me, I come at it from intuition. I meet with lots of people on the ground. And Bill has taught me to read up from that to the global data and see if they match. And I think what I’ve taught him is to take that data and meet with people on the ground.”
Patty Stonesifer, a Microsoft executive, was another key player in the mix, as the first CEO of their foundation. Years later, as she wrapped up her work in that role, Stonesifer was part of the discussions with Bill, Melinda, and Warren about how to galvanize bigger, earlier philanthropy by the super-rich. When she stepped down from her post, in the fall of 2008, she took on a special assignment for the trio: to see if an initiative could be developed to spur such giving.
Robert Rosen, a former White House aide under President Bill Clinton and senior staffer at the Gates Foundation, was also drawn into this exploration, as was Olivia Leland, a Harvard grad who had come to the foundation in 2007 from the global development world.
The years before the 2008 financial crisis saw a huge increase in wealth accumulation—with the net worth of the Forbes 400 hitting an all-time high of $1.57 trillion in 2007—and these towering piles of money were the backdrop for the Gates conversation on how to spur new philanthropy. There was a recognition, Rosen told me, of “an incredible opportunity in terms of having an impact on society by just the amount of wealth that could be transferred. We’d been through a cycle of an enormous growth of wealth, and that money had the potential to be invested in philanthropic efforts that had the potential to benefit society.”
“Potential” is a key word here, because the Gates team well knew that, absent advance planning, great fortunes could end up locked away in trusts or hit by steep estate taxes and never reach philanthropy at a scale that might otherwise be possible. One analysis of estate tax filings found that in 2007 just 12 percent of all estate wealth for that year went to charitable bequests. Meanwhile, in the same year, the four hundred biggest taxpayers in the United States gave away about 8 percent of their earnings, for a total of $11 billion.
The big question was how to boost both these numbers—how to channel more estate wealth to philanthropy but also induce greater “giving while living.” Making that happen required that more of the richest people in the world really focus on their philanthropy, which wasn’t always easy. Many were super-busy. Others didn’t want to deal with sticky family issues. “There are a lot of reasons why people put off thinking about philanthropy,” Bill Gates has said. “It makes you think about your will, and what you’re going to do with your wealth.”
Also, it can be challenging and time-consuming to do philanthropy well—especially in a large-scale, high-impact way. The Gateses themselves had made a number of missteps over the years. People had to be prodded to give more, but they also needed help in doing so wisely.
As Stonesifer’s exploration unfolded, looking at how the super-wealthy approached giving, the team saw three kinds of people. There were some who were already “being incredibly generous and having tremendous impact,” said Rosen. There were others who had the right intentions and were actively giving, but “weren’t seeing the results and impact one might hope.” And then there was a third group “who hadn’t yet found their pathway to engage, or if they had, were doing it at a scale that maybe could be magnified quite substantially.”
Rosen was being diplomatic in this description. In fact, among America’s ultra-rich, there were—and are—a shockingly large number of people who’ve barely given away any money at all. In a New York Times Magazine article in 2006, the philosopher Peter Singer had called out U.S. billionaires for not giving enough even as millions of people died from preventable diseases in poor countries. Singer had even gone after the wealthy who were giving at a large level, including Bill Gates himself, for not doing as much as they could. (Singer wondered aloud why Gates was living in a 66,000-square-foot house valued at over $100 million when that money could be used to save more lives.)
You didn’t have to agree with Singer’s metrics of obligation to see that he had a point. The increase of wealth at the top of America had gotten obscene—especially compared to how little of that money was being used for the benefit of society. Something had to be done.
But what? After kicking around ideas internally for a while, the Gates team decided to put that question to a broader group. Warren Buffett had been mulling who might be part of the discussion, keeping a file of “Great Givers.” The Gateses also had names of people they thought would be interested.
In March 2009, Bill Gates and Warren Buffett sent a jointly signed letter to David Rockefeller, saying that the two had been talking about philanthropy and wanted to get a dozen or so “like-minded people around one table to broaden the discussion.” They asked Rockefeller—then ninety-five, and the surviving patriarch of one of the most philanthropic families in history—to co-host the conversation in New York. Rockefeller agreed. Invitation letters soon went out to such billionaire philanthropists as Eli Broad, Ted Turner, Charles Feeney, George Soros, Pete Peterson, Oprah Winfrey, and Michael Bloomberg. Some of these people, such as Feeney and Bloomberg, had already said publicly that the bulk of their wealth would go to philanthropy.
Most of those invited to the meeting agreed to come, and in May, a group of a dozen or so convened for an afternoon and dinner at the President’s House at Rockefeller University in New York. Going around the table, everyone shared their story of how they’d gotten into large-scale giving—along with some of the emotional challenges they’d encountered along the way. Buffett would say after the meeting that it made him feel like a psychiatrist.
Later, over dinner, the group discussed how to increase giving, batting around different ideas. That same topic would be chewed over at a second dinner in November 2009, held at the New York Public Library, as well as a third dinner in December, at a swanky hotel in Silicon Valley. Another recurring theme was anxiety among some participants—about whether they could handle the demands of giving so much or ensure that their money would be well spent.
One idea that eventually gained traction was a campaign that asked the super-wealthy to take a pledge to engage in large-scale philanthropy. The concept, said Rosen, was to “have people make a substantial commitment, and put it out there as a model for others to follow.” Eventually this jelled further, into a “Giving Pledge”—to eventually donate at least half of one’s wealth to philanthropy. That share was always seen as a minimum or floor. The pledge wouldn’t be legally binding, but rather a statement of intent. Only billionaires would be asked to join this ultra-exclusive new club.
Buffett and the Gateses began making calls to sell the pledge in June 2010, getting in touch with seventy or eighty people—a sizeable slice of America’s billionaires. George Kaiser, an Oklahoman who’d made his fortune in oil and finance and was a huge fan of the pledge idea, pitched in to help sell it, as did the eBay billionaire Jeff Skoll. Those who said yes were asked to submit letters that would appear on a website. Buffett and the Gateses took the Giving Pledge public in June 2010, which attracted more commitments, and by the time they rolled it out officially in a press conference in August, forty families and individuals had signed on.
The list included many of those who’d been part of the initial dinners, plus many others. Some of the names had long been fixtures on the Forbes 400, like Ronald Perelman, T. Boone Pickens, George Lucas, and Larry Ellison. Others were less familiar, like John and Laura Arnold, a young couple giving away a finance fortune, and Tashia and John Morgridge, whose giving was powered by money John had made running Cisco, the tech company. The pledgers represented nearly every major sector of the economy: finance, tech, entertainment, real estate, retail, and oil and gas.
Just a few months later, in December 2010, it was announced that another seventeen people were joining the Giving Pledge, including Mark Zuckerberg and Priscilla Chan. The campaign would grow from there, eventually going global and coming to include some 150 signatories. Fortune would call it the “biggest fundraising drive in history.”
Although the Giving Pledge would become well-known, and was even featured on 60 Minutes, the actual mechanics of the campaign have received little attention. From the start, the idea was not just to get America’s richest people to promise big bucks for charity; it was also to help these pledgers to give effectively.
Olivia Leland became the first director of the Giving Pledge, working with a small staff to forge a community out of a far-flung group of billionaire philanthropists who, for the most part, didn’t know one another. Leland would hold that position during the project’s formative years, through 2014. She was succeeded by Rob Rosen.
The effort to build community has had several components. Staff bring together pledgers in an annual conference, as well as in smaller sessions and conference calls at other times. Rosen told me that the Gates Foundation has aimed to find ways to connect pledgers “through a shared learning environment so that they could be inspired and supported to find the particular areas where they wanted to be engaged and supporting mechanisms to help accelerate that and have greater impact.”
Given their wealth, pledgers are grappling with the challenge of giving on an outsized scale. But the basic questions they confront are shared by philanthropists at many levels. One question, said Rosen, is “to what?” Donors often need help figuring out what causes or issues to contribute to. A second question is “how?” Donors want to know how to choose a vehicle for giving, set a strategy, and measure results. A third area where pledgers need support, one that is fuzzier than the first two but still crucial, is how philanthropy fits in with the rest of their lives.
All these issues get attention at the annual retreats, which usually take place in late spring and attract over half of the pledgers. The first retreat was held in 2010, the year the pledge launched, and there was uncertainty as to whether such conferences would make sense, given how busy people were. The retreat took place at Miraval, a luxury resort in the desert outside Tucson, Arizona. Leland said it was a bit awkward at first, since most participants were strangers to one another—and yet some of the billionaires were well-known figures. That meeting showed that pledgers did, in fact, have a strong appetite for shared learning—especially among those newer to philanthropy. The retreats have been going strong ever since.
These events take place over a day and a half that is jammed with presentations and discussions. The matter of where to give gets taken up in panels that dive into specific issues, looking at the ways philanthropic dollars can make a difference. One year a top topic was supporting scientific research, an area that generated a lot of interest and led to a follow-up session after the retreat. Conversations about how to give are also a staple of the retreats—including, at one session, a staged debate for and against creating foundations that exist in perpetuity.
Meanwhile, the bigger question of where philanthropy fits into people’s lives always comes up. Giving away billions of dollars is no easy task, and some pledgers struggle with the work required to fulfill their commitment of giving so much to charity. “Actually making sure the resources are deployed to have great impact is a challenge to figure out, and it takes significant time and effort,” said Rosen.
One thing to understand about the Giving Pledge is that even most of those who joined years ago have made little or no dent in disposing of their fortune. Despite all the attention the pledge has gotten, its full effects are unlikely to be felt for years to come. Much bigger giving than we’ve yet seen by these billionaires is required for them to meet their commitments.
This gusher of new money will transform philanthropy in coming years. The U.S. billionaires who’ve signed the Giving Pledge have almost as much money as the combined assets of all the U.S. foundations that now exist, over ninety thousand of them. The joint net worth of just Gates and Buffett alone is greater than the assets of the top twenty-five U.S. foundations (excluding Gates’s own foundation). And while these two men have succeeded in orchestrating the Giving Pledge, both now have a lot more money than they did in 2010, as do most of the others who joined the pledge early on. Getting rid of that money will be no easy thing.
Bill and Melinda Gates have said they will give away all the money in their foundation within twenty years of when the last one dies, at which point the foundation will close its doors. Right now, that sum—along with their private investments—amounts to around $120 billion. But if you add in the money Buffett has pledged to the Gates Foundation, we’re talking about an even higher figure—over $150 billion. At some point, moving money at this scale will likely require the world’s biggest foundation to get even larger, increasing an annual grantmaking level that already far exceeds that of any other funder by a large margin.
As the Giving Pledge fully plays out, though, the Gates Foundation is unlikely to remain such a lonely giant. Oracle founder Larry Ellison was among the first batch of pledgers, revealing in his letter that years earlier he had already earmarked 95 percent of his wealth to go into a philanthropic trust when he dies. If the tech billionaire died tomorrow, the Lawrence Ellison Foundation could soon emerge as an entity on a par with the Gates Foundation. George Soros didn’t sign the Giving Pledge, but has indicated that the Open Society Foundations will absorb the vast bulk of a fortune that currently stands at $26 billion and that, given his investing record to date, could be much larger by the time Soros dies. Then there is the financier Carl Icahn, worth some $17 billion. In joining the Giving Pledge, Icahn wrote that he’d decided years earlier that “substantially all of my assets would be used to fund a charitable foundation.” When it one day comes into being, that foundation may be bigger than the Ford Foundation.
Mike Bloomberg hasn’t expressed much interest in leaving behind a large foundation and instead has been on a tear to give while he’s still alive. The problem is that he’s not yet giving nearly enough. For all his big gifts in the past few years, he’ll need to get money out the door at a much faster rate to ever fulfill his Giving Pledge. Bloomberg would need to give over $1 billion a year for three decades straight to do so—that is, assuming he doesn’t get richer over time, as he has in the past. Zuckerberg, who may well get much richer in coming decades, faces an even more monumental challenge in disposing of his Facebook fortune.
Gifts by living wealthy donors constitute less than a quarter of all annual charitable giving, which totaled $373 billion in 2015. The rest comes mainly from ordinary individuals, private foundations, and corporations—which is a reminder that there’s a lot else happening in philanthropy beyond this book’s focus on the ultra-rich. In particular, legacy foundations—including big national players like Ford and MacArthur, and funders who are locally focused—play a big role in shaping what’s happening in the nonprofit sector, yet I don’t cover their activities in this book. I should also stress that it’s not yet clear whether the new wave of giving by wealthy donors will increase the overall level of charitable giving in the United States, which has remained stuck for decades at around 2 percent of GDP.
What is clear is that this growing river of money will dramatically expand the size and influence of a new power elite of living donors that already wields enormous clout. One analysis by the scholar Kristin Goss found that nearly half of America’s top two hundred philanthropists—including many Giving Pledge members—have expressed an interest in shaping public policy. The pages ahead dive into the many ways they are already doing exactly that.
In fall 2010, the same year the Giving Pledge launched, Republicans took control of both houses of Congress and a majority of statehouses. The new majorities, brought to power by Tea Party activists and record campaign spending by wealthy donors, set out to enact sweeping cuts to government spending. The next several years in Washington would see recurrent budget battles and brinksmanship, including a shutdown of the federal government and a near default on the national debt. When the smoke had cleared, though, Congress had enacted long-term budget cuts totaling over $3 trillion. As a result, the funds that the federal government has available to try new things and solve problems—not to mention sustain basic services—are now forecast to shrink steadily through the foreseeable future.
The ax has fallen in recent years across every area of discretionary spending, from scientific research to Head Start to environmental protection. In 2016, the share of the federal budget going to non-defense domestic discretionary spending, measured as a percentage of GDP, shrank to 3 percent. One analysis stated: “The share of national income going to these programs—in education, science, infrastructure, environment, medical care for veterans, human services, homeland security, and other fields—is rapidly approaching the lowest level (measured as a share of the economy) in at least five decades.”
The last time federal officials had so little discretionary money to work with, relative to the size of the nation’s economy and population, Dwight Eisenhower was in the White House. But more cuts are predicted, and bigger ones, too. Non-defense discretionary spending is projected to fall to 2.2 percent of GDP by 2024—a long slide from a high of over 5 percent in the 1970s. And the decline is likely to continue for decades.
Quite apart from the legacy of the Tea Party, the public sector is facing intense fiscal pressure from two long-term trends. First, mandatory spending on seniors is set to explode as more and more boomers retire and start relying on Social Security and Medicare. Outlays for these and other entitlements is projected to nearly double in the next decade alone to more than $4 trillion annually. Second, interest payments on America’s vast national debt will spike upward, to $900 billion annually by 2026, nearly four times higher than current levels. By 2046, it’s projected that—absent major reforms—mandatory spending will consume 21 percent of GDP, about the same level as all federal spending in 2016.
Things won’t be much better at the state level, where many employee pension systems have been woefully underfunded, and now face long-term shortfalls of nearly $1 trillion, according to a 2015 study by the Pew Charitable Trusts. Top cities are also in the red, like New York, which had $46 billion in unfunded pension liabilities in 2014. States and localities have loads of other debt, too, thanks to the liberal use of bond measures over many years—and all told now have $3.7 trillion in outstanding debt.
Even if big reforms do happen—say, a combination of tax hikes and spending cuts—the discretionary resources that government can deploy to tackle social or environmental problems are likely to keep falling for many years to come. In future decades, government is likely to spend much of its money cutting checks for seniors and bondholders.
Meanwhile, philanthropic giving is projected to keep rising as far as the eye can see, at least in raw numbers. And if such giving also rises as a share of GDP, beyond 2 percent, it could equal or surpass the percentage of national wealth going to federal non-defense discretionary spending within the next few decades, which would be a striking milestone. Following World War II, government was always the richer, more powerful actor in partnerships with philanthropy—the sector that could take the ideas incubated with private funding and bring them to scale. In a future that’s already arriving in some areas, as we’ll see, it may be philanthropy that is often holding the fatter checkbook.
A fiscal squeeze isn’t the only problem facing government. Public institutions often aren’t effective change agents because of lumbering bureaucracies and political dynamics that have grown ever more dysfunctional. While decades of conservative assaults have badly damaged public agencies, signs abound of a deeper calcification of government—which the journalist Jonathan Rauch has described as “demosclerosis.” In Rauch’s telling, the public sector is no longer so good at innovation. “The way for governments to learn what works in a changing world is to try various approaches and quickly abandon or adjust the failures: trial and error,” Rauch writes. But that’s become harder to do as myriad interest groups have become ever better at defending failed or unnecessary programs—from anachronistic farm subsidies to ineffective urban enterprise zones. “In Washington, every program is quasi-permanent, every mistake is written into a law that some vested interest will defend furiously. The result is that as the old clutter accumulates, government cannot adapt.” Rauch wrote these words more than two decades ago. Things have only gotten worse since then.
In the past few years, trust in government has sunk to new lows amid spectacular failures and fresh reminders of public sector impotence. Just look at the problems revealed in the Veterans Administration or the bungled rollout of Healthcare.gov, a linchpin of Obamacare. Or look at California’s efforts to build a high-speed rail system, an obvious need for a sprawling state choking in traffic. Finding the money to cope with ever ballooning costs has been only part of the challenge; equally daunting for the state has been overcoming lawsuits and environmental challenges to the rail line. Jerry Brown, the state’s Democratic governor, has run into similar obstacles in trying to get more affordable housing built. Any number of other big public plans around the country have also struggled in recent years. As Philip Howard has written in his book The Rule of Nobody, this tends to happen because “no official has authority to make decisions.” Instead, he writes, “Government is run by millions of words of legal dictates, not by the leaders we elect or the officials who work for them.”
There remain plenty of bright spots in government, especially at the local level, where dynamic mayors are doing neat things. Overall, though, the public sector is not as inviting as it once was to people who aspire to make change.
Plenty of Americans still want to heed JFK’s famous call to give back to their country. But many of the most ambitious would rather be on the payroll of philanthropy than the public sector.
One defense offered by today’s mega-donors for their activist giving is that they’re helping America get around demosclerosis—whether by outflanking interest groups like the fossil fuel industry and teachers unions, or by financing the risky experiments that elected officials won’t touch. This can-do mentality helps explain why the givers have so many champions even as a growing chorus of critics warn of creeping plutocracy. Ultimately, though, the power of the purse is the main factor that’s moving philanthropists into the driver’s seat of American life.
It should be pretty obvious why shrinking public resources and dynamism translate into more power for private philanthropists: because they’re the people to whom social change makers and others will increasingly turn to finance new initiatives and existing services. Already this dynamic is playing out in multiple arenas like education, science, environmental conservation, and health care. If you have a big idea for improving society, chances are you’ll get further by hitting up a billionaire to back it than by lobbying elected leaders. In fact, increasingly public officials themselves are turning to a private donor class to finance new projects.
This shift is occurring against the backdrop of another long-standing and better-known trend: the growing dominance of the wealthy over politics, which has reduced the voice of ordinary people when it comes to who gets elected and what laws get passed. In his 2012 book, Affluence and Influence: Economic Inequality and Political Power in America, the scholar Martin Gilens compared the preferences of different income groups with actual policy outcomes in Washington, D.C., to confirm an obvious point: that the responsiveness of elected leaders “is strongly tilted toward the most affluent citizens.” Gilens found that the “preferences of the vast majority of Americans appear to have essentially no impact on which policies the government does or doesn’t adopt.” In his 2008 study, Unequal Democracy, Larry Bartels found that low-income Americans were especially impotent, writing: “The preferences of people in the bottom third of the income distribution have no apparent impact on the behavior of their elected officials.”
Studies like this help explain why so many Americans have come to view U.S. society as rigged in favor of the rich: Because it is, and more people are catching on. One 2016 survey found that 65 percent of respondents agreed that “the economic system in this country unfairly favors powerful interests.” Other polls have found the same thing, showing that Americans have grown deeply worried that the upper class has too much power.
Now, with the rise of big philanthropy, the wealthy are using an ever wider range of levers to turn their money into influence.
Some say this isn’t a problem because the givers back a diversity of views, including the voices of low-income groups and environmental activists who otherwise wouldn’t be heard. There’s much truth to this, as we’ll see later in the book. But research has also documented that the rich diverge sharply from the general public in how they view key issues. That’s especially true when it comes to economic policy.
One survey, funded by the Russell Sage Foundation, found that the general public was much more likely than the wealthy to favor a higher minimum wage, expanded tax credits for low-income workers, and job creation efforts by government. The wealthy, for their part, are more prone to favor spending cuts to close budget deficits and to support free trade than is the general public. And they are far less likely to agree with a majority of Americans that the economic system is rigged in their favor. That 2016 survey mentioned earlier found that only 38 percent of respondents making over $100,000 a year thought the economic system was unfair, compared to 60 percent of middle-income people. Which makes sense: If the status quo is working just fine for you, you’re less likely to question it. Meanwhile, on social issues, like gay marriage and abortion, and also on the environment, the affluent tend to be more liberal than the general public.
The rich really are different from the rest of us. And, lately, philanthropy has become a more popular and powerful way for them to advance views that aren’t necessarily shared by their fellow citizens.
One other thing: even as more wealthy donors charge into the nonprofit sector, ordinary Americans—struggling with stagnant incomes and rising costs—have reduced their own giving, according to some analyses. A 2016 study of tax data found that since 2005, “charitable giving deductions from lower-income donors have declined significantly, and have been declining at almost the same rate that contributions from higher-income donors have increased. While itemized charitable deductions from donors making $100,000 or more increased by 40 percent, itemized charitable deductions from donors making less than $100,000 declined by 34 percent.” Along with the rise of broader inequities in our new Gilded Age, civil society itself has become ever more dominated by the upper class.
These trends are troubling in a nation that prides itself on its egalitarian values. Yet the details of how the new philanthropy is actually affecting people’s lives and U.S. society are complex. In some cases, the wealthy are wielding this power in ways that further reinforce their dominance—financially, politically, and culturally—and you don’t need to look very hard to find self-interested giving. In other cases, their money is going to empower marginalized people, amplify new voices in the public square, or make headway against problems that have stymied elected officials. Often, what’s happening is a murky mix. Even when wealthy donors are expanding debates, true to the spirit of pluralism, we can’t forget that it’s they who are choosing which voices and ideas get extra juice.
Cheerleaders for philanthropy see nearly everything the givers do as positive, while critics can be just as myopic and, at times, paranoid. The deeper I’ve dug into today’s mega-giving, the more I’ve come to feel whiplashed between hope and fear. This is a trend that is profoundly exciting and inspiring—but also very scary if you’re worried about civic equality in the world’s oldest democracy.