The Zuckerberg Model Of Charity

It is 2:11 AM and rather than toss and turn while not being able to sleep, I decided to get up and do a little writing. A few problems running through my mind, and trying to think of ways to deal with a particular situation has me wide awake. Last night was a great night of sleep, tonight not so much.

I am convinced that Business has an incredible power to create positive social change, and as I read what so many people who have made a lot of money are doing with that money, my premise seems to be supported. A term that I discovered a while back was Philanthrocapitalism. This is a term given to what the ultra-rich are doing with their money. Michael Green writes in his book on the subject about Bill Gates, Warren Buffet, and others who have chosen to give away their wealth by the time they die. The fortunes they are giving away “dwarf those of the leading philanthropists of golden ages past, even those of Andrew Carnegie and John D. Rockefeller a century ago.”

Gates and Buffet are working together because they feel that much of charity in the past has been ineffective, and that they can do it differently and more effectively. Even the Skoll Foundation and Richard Branson are attempting to create social entrepreneurships that will help deal with the many social problems of life for the same reason.

Now we have another model. One that Mark Zuckerberg and his wife Priscilla Chan have developed and which the Wall Street Journal have tagged as “ending philanthropy as we know it.” Leslie L Enkowsky states, “Mark Zuckerberg’s announcement that he and his wife, Priscilla Chan, are pledging $45 Billion over their lifetime to an initiative to help solve the world’s problems has been widely hailed as an extraordinary act of philanthropy.” However, as she continued to describe what Chan and Zuckerberg are doing, one can only stand in awe at what this could do for dealing with problems that seem unsolvable.

First, the money they are giving is not a gift to a charity, but an investment in a Limited Liability Corporation. I can’t help but think that this is in response to the limited success they have had in the past with other giving events. Previously they have donated $100 million to the public schools of Newark, N.J, “but was criticized for not involving the local community.” I would question just how effective that gift was, and maybe Zuckerberg and his wife are questioning the effectiveness of the gift also. Another project was, “a group promoting an overhaul of immigration laws that has stalled in congress for years.” So, two well-meaning events that didn’t gain the leverage over social problems that they had hoped.

As a result, they started a limited liability corporation to really make a difference. The purposes of this organization are described as “clearly philanthropic.” It will attempt to advance human potential, promote equality, instead of being profit focused, which is what we usually think of with a LLC. It appears that this organization will provide grants for nonprofits, but will “own stakes in for-profit businesses in fields like education and health care, which its owners believe will help achieve their philanthropic goals.”

In one of my finance classes students are required to read an article “Charities need a bottom line too.” The premise of this article is to encourage non-profits to develop a more efficient mentality. It appears this is what Zuckerberg and Chan want to do, “they want to harness the profit motive on behalf of their philanthropic goals.” Anyone that the initiative invests in will need to show “both a financial return in order to be sustainable and a social one – for example, increased numbers of lives saved or children finishing school – in order to obtain additional funding.”

Lenkowsky argues that there are several benefits to this initiative. If Zuckerberg had created a more conventional foundation, American tax law would have forced him to sell his $45 Billion worth of Facebook shares, with this new model he will control the number of shares he needs to sell or not sell. Also, because it is a limited liability corporation other people can contribute, which gives him more flexibility. And last but not least, because it is an LLC it can create profit, which can then be put back into the company to reinvest in the community.

This is something I have been thinking about regarding our Social Entrepreneurship program. When we give away money to the students to start their businesses, how do we replenish the fund? We need to invest in or student’s future, but they need to invest in ours.

I know how difficult it can be to try to measure social impact. For several years I have been working with students as a part of ENACTUS and it has been difficult to quantify social impact, so it will be interesting to see how the initiative does this. “Assessing social returns,” can be a tricky affair. Also, with control being the main reason for creating this new model, another question will be around if the LLC will allow the flexibility needed to deal with these huge social issues? I really don’t know what will happen, but like Lenkowsky says, if it doesn’t work then the LLC will go away, not continue to do ineffective work like so many charities do today.

I am a huge proponent of Social Entrepreneurship. As Bill Drayton once said, “A social entrepreneur is not concerned about giving someone a fish, or even teaching someone to fish, they are concerned with revolutionizing the fishing industry.” This just may be what Zuckerberg is trying to do. Rather than being a charity that gives something to someone, or even teaching someone to have new skills, he and is wife are attempting to revolutionize how we deal with social problems. I hope it works, because we all know what the definition of insanity is, “continuing to do the same things while expecting different results.

And that is my thought for this very early morning!


3 thoughts on “The Zuckerberg Model Of Charity

  1. When you say; “So, two well-meaning events that didn’t gain the leverage over social problems that they had hoped.” I get the feeling that the objectives on philanthropy are not as clear as the objectives of a for-profit enterprise. Not being as clear doesn’t mean that they are not good or that we shouldn’t pursue them, even when they are not well defined.

  2. I don’t think the defined objectives are the issue, it is whether the impact expected was actually realized. I do think the reason Social Business is gaining traction is the lack of measurable results. We still have the same problems, and people that want to solve those problems are looking for new ways to solve the. Unclear goals are not the issue it is whether we gained the results or not.

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