Solutions Today > Solutions Tomorrow
As the pandemic hit, Ray Dalio, whose Bridgewater Associates is both the largest and most hyper-rational hedge fund in the country, noticed something: As the kids of his native Connecticut were dispatched to attend school from home, the economically disadvantaged were doomed to fall further behind. Many were fooddeprived, living amid density that both deprived them of private space and increased their likelihood of getting sick. And 22% did not have access to any home computer, much less one of their own, or reliable connectivity.
“I saw a real tragedy,” Dalio says. “And I saw a bunch of people pull together to say, ‘This must not happen.’ ”
Lubricated by an earlier $100 million pledge from Dalio, matched by the state of Connecticut, that “bunch of people”—including Bill Gates and Microsoft, Michael Dell and Dell Computer, and the legislative and educational leaders of the Nutmeg State—got 60,000 fully loaded computers delivered to low-income students.
For Dalio, who Forbes estimates is worth $18 billion, that decision was a no-brainer: an ROIdriven result at the heart of a Greater Capitalism. It’s also a harbinger of where philanthropy is going right now.
A subset of intellectuals have been railing against philanthropy of late, arguing for confiscatory tax rates to prevent the richest from having such societal influence. It’s lousy economic policy—while most billionaires have already girded for some kind of tax increase no matter who wins the 2020 election, Beatles-style rates would suppress growth more than generate revenue.
It’s also lousy public policy. Democracy is structurally poor at long-term outcomes. The cost of imprisoning a person—financially, much less socially—is many multiples of what it would have cost to educate and nurture him properly. But good luck persuading politicians to invest in 20-year outcomes when they’re simultaneously tempted by the sugar high of immediate action. Philanthropy can serve as risk capital for problems, proving concepts and making the mistakes that governments don’t dare.
But philanthropy, as currently practiced, has invited such scrutiny. Despite large subsidies in the form of upfront tax breaks, some $4 trillion mostly sits around perpetually waiting for the problems of tomorrow to arrive rather than systematically attacking the problems of today. By law, charitable foundations must put at least 5% of their assets to work every year—and for most of them, that 5% floor is also a ceiling. Meanwhile, the 730,000 trendy donor-advised fund accounts have managed to score the same tax breaks without any annual minimum outlay whatsoever.
The pandemic has highlighted this problem. At no point in our lifetimes has the public need been greater—and yet, because endowments have fallen in tandem with the market, the amount of philanthropic activity is likely decreasing.
And so key players are using this moment to morph philanthropy with an emphasis on transparency and a “give while you live” philosophy. Exhibit A: 43-year-old Twitter and Square cofounder Jack Dorsey, who recently made headlines for pledging $1 billion toward the coronavirus crisis and related problems—and has been logging his donations one by one in a public Google Doc.
In May, a group of more than 275 philanthropists and professionals, led by the $100 million Wallace Global Fund, formally called on Congress to double the minimum outlay for foundations and donor-advised funds, for the next three years, to 10%—a move that would put another $200 billion to work. “It’s not about being a financial headstone that forever marks your coffin,” says Abigail Disney, one of the signatories. “This should be about what the world needs, not how people remember you.”
Meanwhile, according to insiders, various signatories of the Giving Pledge have been holding discussions regarding whether to move past the group’s famous agnosticism about when and where to give (other than at least half their fortune before or when they die). Ideas include a pooled response fund to tackle Covidrelated issues and efforts to encourage the givewhile-you-live ethos. (No decisions have yet been made.)
The stakes right now couldn’t be higher. Economic tumult emboldens the fringes. During the Great Depression, communism, isolationism and nativism all surged—and that was before social media. Instead, a decade after the Depression, American businesses were the envy of the world, and American workers achieved a quality of life their parents and grandparents couldn’t have fathomed.
We’re at that same crossroads right now: toward a Greater Capitalism, or a continued societal fraying, and the sobering alternative that this would all be for naught. “We will have a revolution of one type or another,” Dalio says. “Either it’s going to be bad. Or we can do this thoughtfully, together.”