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Philanthro-capitalism Matthew Bishop & Michael Green -New Book
How the Rich can Save The World
http://www.philanthrocapitalism.net

Editorial Reviews
Review

“A terrific book about how private money can help 
solve even the most difficult public problems. 
Philanthrocapitalism is the definitive guide to a 
new generation of philanthropists who understand 
innovation and risk-taking, and who will play a 
crucial part in solving the biggest problems 
facing the world.”—Mayor Michael Bloomberg

“Everything you need to know about the revolution 
underway in the world of philanthropy—its 
potential as well as its challenges. An 
indispensable book for anyone who cares about 
helping the world’s four billion poor get a 
chance to live their dreams.”  —Hernando de Soto, 
author of The Mystery of Capital

“Without question the best book now available on 
the global explosion of philanthropy, the new 
forms of giving and volunteering, and the many 
variations of social entrepreneurship. Indeed, it 
is the only book that provides a comprehensive, 
worldwide view of this new age of charity. In 
reader-friendly prose, notable not only for its 
felicity but also for its lack of jargon, Bishop 
and Green document the state-of-the-art practices 
with which the flood of philanthropic dollars is 
being turned toward the world’s critical social 
problems.”—Joel Fleishman, author of The Foundation

“Important. Well-written. Timely. Here in this 
wonderful book, Matthew Bishop and Michael Green 
shine a light on sparkling examples of effective 
philanthropy, and how some of the most 
accomplished people are trying to solve the 
world's most intractable problems. A superb 
portrait of a vital new force shaping the world 
today, Philanthrocapitalism deserves to be widely 
read.”—Jim Collins, author of Good to Great

“Matthew Bishop’s and Michael Green’s stunning 
book provides keen and penetrating insights into 
the growing significance of the new 
philanthropists and their commitment to use their 
wealth to change the world and deploy their 
wealth with capitalistic rigor. It is a must read 
for anyone searching for creative approaches to 
solving the world’s problems.”—Bill George, 
author of True North and former chair & CEO of Medtronic


Product Description
An examination of how today’s leading 
philanthropists are revolutionizing the field, 
using new methods to have a vastly greater impact 
on the world. For philanthropists of the past, 
charity was often a matter of simply giving money 
away. For the philanthrocapitalists – the new 
generation of billionaires who are reshaping the 
way they give – it’s like business. Largely 
trained in the corporate world, these “social 
investors” are using big-business-style 
strategies and expecting results and 
accountability to match. Bill Gates, the world's 
richest man, is leading the way: he has promised 
his entire fortune to finding a cure for the 
diseases that kill millions of children in the 
poorest countries in the world.  In 
Philanthrocapitalism, Matthew Bishop and Michael 
Green examine this new movement and its 
implications. Proceeding from interviews with 
some of the most powerful people on the 
planet—including Gates, Bill Clinton, George 
Soros, Angelina Jolie, and Bono, among 
others—they show how a web of wealthy, motivated 
donors has set out to change the world. Their 
results will have huge implications: In a climate 
resistant to government spending on social 
causes, their focused donations may be the 
greatest force for societal change in our world, 
and a source of political controversy. Combining 
on-the-ground anecdotes, expert analysis, and 
up-close profiles of the wealthy and powerful, 
this is a fascinating look at a small group of 
people who will change an enormous number of lives.


See all Editorial Reviews
Product Details
Hardcover: 304 pages
Publisher: Bloomsbury Press (September 30, 2008)
Language: English
ISBN-10: 1596913746
ISBN-13: 978-1596913745
Product Dimensions: 9.3 x 6.2 x 1.3 inches
Shipping Weight: 1.2 pounds (View shipping rates and policies)
Average Customer Review:   (1 customer review)
Amazon.com Sales Rank: #1,282 in Books (See Bestsellers in Bo

Can the rich save the world?
Interview - Matthew Bishop and Michael Green
1 October 2008
www.alliancemagazine.org


Are the super-rich the new super-heroes of the 
world stage, as Matthew Bishop and Michael Green 
claim in Philanthrocapitalism: How the rich can 
save the world? Are there limits to what 
philanthrocapitalists can achieve? Is the 
philanthrocapitalist approach likely to tip the 
power balance even more in favour of funders? 
Isn’t it undemocratic for the super-rich to have 
so much unaccountable power? Caroline Hartnell 
talked to Matthew Bishop and Michael Green about their new book.


Michael Green
Your writings about philanthrocapitalism so far 
have suggested that a new generation of 
billionaire ‘social investors’ using 
big-business-style strategies are likely to 
achieve far more through their philanthropy than 
those using more traditional ‘charity’ 
approaches. The title of your new book seems to 
make a larger claim. Can you tell me how the rich are going to save the world.

Matthew Bishop The point we’re making is that 
there are more super-rich people around than ever 
before and they have all sorts of problem-solving 
talents developed in their business lives that 
they are now looking to bring to bear on some of the world’s big problems.

At the same time, all the other players that have 
traditionally been looked to to help solve those 
problems are constrained in different ways and 
unable to rise to the task. Governments are 
overburdened with their existing 
responsibilities. Businesses have their profit 
targets each quarter or half year. Charities are 
constantly looking for funds and so equally 
obsessed with short-term goals. Philanthropists 
have a unique ability to use their money in very 
innovative ways because they’re not hidebound by 
those other pressures. They can’t do it on their 
own, but with others they can be the source of 
the change capital that the world is looking for.

Are there limits to the things that 
philanthrocapitalists can achieve – for example long-term social change?

Michael Green What we’re arguing for is a 
division of labour. Welfare and long-term 
programme funding is a job for government. 
Non-profits and business also have a role. Where 
we see a role for philanthrocapitalists is in 
providing that highly risk-taking capital for 
social change. The thing about 
philanthrocapitalists is that all they have to lose is their money.

Where does long-term social change fall in your division of labour?

MB It depends what sort of social change you’re 
talking about. Our book gives two or three 
examples of very wealthy philanthrocapitalists 
backing bottom-up social change. One is George 
Soros, whose Open Society Institutes around the 
world have been amazing drivers of civil society 
growth. He’s very consciously tried to change 
societies in ways that promote freedom and personal expression.

Another is Jeff Skoll, who has backed Al Gore’s 
An Inconvenient Truth and other films that are 
all about helping change the way big social 
issues are thought about. Those are just two 
examples that show the start of a greater 
consciousness among philanthrocapitalists that 
because their money is relatively small compared 
to what governments and business have at their 
disposal, they need to use it to leverage policy 
change. So they’re very much into creating 
movements now and working at grassroots level.

Gates would admit that when he started out, he 
thought technical solutions such as producing new 
drugs would be enough, but he’s subsequently 
found that you need to get government and society 
working to really achieve your goals. So he, 
along with Soros and Ed Scott, each put in $1 
million to set up DATA, the organization through 
which Bono has promoted the One campaign in the 
US and the Make Poverty History campaign in the 
UK, both real mass activist movements.

Is philanthrocapitalism more diverse than more traditional foundations?

MG One thing we emphasize in the book is that 
philanthrocapitalism is as diverse as capitalism 
itself. One concern we have is that it is being 
pigeonholed as a metric-driven particular kind of 
philanthrocapitalism, but at the other end of the 
spectrum you have the big bet, big risk, 
non-metric-obsessed philanthropy of people like 
Ted Turner.  I think pledging $1 billion to the 
UN is pretty radical, and something a traditional 
foundation wouldn’t have done.

MB Traditionally foundations have steered clear 
of politics, but I think this new generation of 
philanthrocapitalists understand that getting 
involved in politics is crucial to their success.

In another way they’re less diverse than 
traditional foundations in that they’re very 
conscious of the need to focus. A lot of 
foundations have adopted a very scatter-gun, 
unstrategic approach to their giving. Gates’ view 
is that foundations should pick fewer issues and 
really concentrate their resources in those few 
areas rather than backing every horse in the race.

That brings us perfectly to my next question, 
which is about power. One of the things in favour 
of more responsive funding is that it allows 
ideas to come from a much wider range of people. 
In the September issue of Alliance, we focus on 
the issue of who sets the agenda. My assumption 
is that the philanthrocapitalist approach is 
likely to tip the power balance even more in favour of funders. Do you agree?

MG I’d like to run the analogy with capitalism 
again. Some investors work with small companies 
just as some philanthrocapitalists look for small 
organizations to back. In capitalism you also 
have the big investment banks taking big 
positions, and some philanthrocapitalists like 
Gates are doing that too. So you’ve got different 
approaches, some drawing from the bottom up, 
others offering focused, strategic leadership.

MB The other question is what you are comparing 
today’s philanthrocapitalists to. I think they 
often see their benchmarks as being on the one 
hand government, which is very bad at backing new 
ideas, and on the other hand foundations, which 
tend to back a wide range of projects for two or 
three years. All the philanthrocapitalists I’ve 
talked to want to back people with ideas and to 
want a long-term supportive relationship with 
them. So in a sense they are looking for new 
ideas bubbling up from the bottom, and people 
with the ability to take an idea and turn it into a solution.

If the traditional foundations had a better track 
record of all those projects they scatter their 
gun at consistently delivering good results, 
maybe you would think philanthrocapitalists are 
too narrow. But if you talk to people who’ve had 
funding from traditional foundations, they’re 
often terribly frustrated about the lack of 
overhead funding and capacity-building, and the 
short-term relationships. When the Center for 
Effective Philanthropy started asking grantees 
what they think of the way they’re treated by 
foundations, they found a mixture of arrogance 
and short-termism and unreliability. Compared to 
that, the philanthrocapitalists’ strategic 
thinking and long-term focus are a big step forward.

MG Intermediaries like CEP have shifted the 
balance in favour of the funded by giving them a 
voice and offering more accountability in the 
philanthropy marketplace. CEP’s grantee 
perception reports have allowed grantees to speak 
and be heard in a way they couldn’t before.

Philanthrocapitalists I’ve talked to often seem 
to have a low opinion of NGOs and existing 
organizations, which means they may have a rather 
fixed view of what an organization they’d want to 
support should look like, or even want to create their own organization.

MB I see this culture clash as one of the big 
challenges. Businesspeople are used to a command 
and control world, they’re used to being able to 
fire people and shut things down easily if they 
need to, they’re used to solving things quickly. 
They often don’t know what to make of 
non-profits. On the other side, non-profits often 
look down on businesspeople. ‘What do they know? 
All they’ve ever been interested in is making 
money while I’ve been out on the coalface doing all this hard caring work.’

The encouraging thing is that after some initial 
bad experiences the philanthrocapitalists are 
starting to see the value in the insights and 
experiences they find in the non-profit world. 
Equally, charities need to change. Save the 
Children, for example, has changed a lot in order 
to work more effectively with 
philanthrocapitalists. I’m optimistic that these 
culture clashes will become less and less of a 
factor in the future and that people will figure 
out that both sides are here to stay and they 
need to make the partnerships work if they’re going to achieve their goals.

In your column in the September issue of 
Alliance, you address the worry ‘that 
philanthrocapitalism will somehow undermine 
democracy and civil society, and erode government 
responsibility’. You argue that the rich are not 
inevitably self-serving and have often proved to 
be more responsive to the needs of the poor than 
the state. But the fact that the rich may be 
benevolent doesn’t make the system democratic. It 
still leaves a small group of people with an 
awful lot of unaccountable power, doesn’t it?

MB I think we are moving from a very egalitarian 
politics to a slightly more plutocratic politics, 
and rightly people worry about that. Who is Bill 
Gates or George Soros to be setting our agenda 
for us? That’s why we argue that it’s important 
that we have a new social contract between the 
super-rich and everyone else that makes it clear 
what we expect of them and what makes a good 
billionaire, including a commitment to 
philanthropy and paying their taxes and making 
their money in a fair and proper way and not 
exploiting people. Equally, everyone else will 
need to work out how to support the 
philanthropists and help them to be effective in their philanthropy.

A key aspect is transparency and accountability. 
We urge the philanthrocapitalists to take the 
lead in promoting the debate about a new social 
contract by being accountable and transparent in 
what they do and trying to build public support 
for their work. If they don’t do that, I think 
we’re going to get a much more ‘bash the rich’ 
approach to making them accountable, which will 
probably reduce their ability and willingness to 
get involved in these problems, and I think we’d all lose in that situation.

So is a more plutocratic politics inevitable?

MG I think there’s a danger of a kneejerk 
response that says the rich shouldn’t have any 
part in politics. We’re very clear that the rich 
must follow certain rules, but once they’ve 
obeyed those rules – paid their taxes, earned 
their money fairly, done their philanthropy – we 
should acknowledge them as important players 
because of the enormous assets they bring.

MB One of the people we talked to was Michael 
Bloomberg, a multi-billionaire  who has been 
mayor of New York for the past seven years and 
was thinking of running for US president. We feel 
that he’s better as a politician, a mayor, a 
potential president because he’s beholden to no 
one. He hasn’t had to engage in political 
fundraising or other things that create hostages 
to fortune once you’re in office.

This isn’t an ideal situation, and you can see 
how with the wrong accountability systems you end 
up with someone like Silvio Berlusconi in Italy, 
which is the bad side of plutocracy. But with the 
right rules about transparency and about putting 
your money in trust and so on, as they have in 
the US, it can work really well.

I accept that the rich have a part to play, and 
that they’ve done some good things, but isn’t it a question of balance?

MB I think the onus is on the rich to show 
they’re using the money well. Philanthropic money 
is tax favoured, typically, so it should be seen 
as outsourced government spending, which means it 
should be judged by very high benchmarks. 
Over-regulation would lead to the rich having the 
same pressures to go down the populist route as 
government has already, but fundamentally they 
need to show the public they’re really delivering results.

The alternative is taxing the rich more heavily. 
At the margin there is always room for debate 
about tax rates. I just think the lesson of the 
mid 20th century was that punitive rates of 
taxation for the rich hurt everybody by killing 
the wealth creation process. I broadly favour a 
world where wealth creation is encouraged but the 
winners feel an obligation to put money back into 
helping society solves its problems. 
Philosophically I find that attractive, but I 
also think that trying to tax the rich very 
heavily has proved to be a damaging process, and 
increasingly in a globalized world almost impossible to enforce as well.

The fact is that in almost every developed 
country, marginal tax rates have come down. Our 
point is that the winners should feel they have 
an obligation to give back, and to do it 
effectively. If we can encourage that, and 
celebrate people like Bill Gates rather than be 
excessively suspicious of them, we may get the 
best of all worlds because we’ll be getting their 
wealth creation skills and their philanthropic 
skills. The alternative is maybe to cut off our 
nose to spite our face by taxing them so much they don’t create wealth either.

What effect do you think the present financial 
crisis will have on philanthropy?

MB My bet is that, as has happened in every 
financial crisis, the rich end up getting richer 
and the bulk of the pain is felt by the rest of 
the population. Clearly some of the rich will 
lose their fortunes, but I’m confident it won’t 
be very many of them and many will see this as 
the buying opportunity of a lifetime. As they 
say, the time to invest is when the blood is on the streets.

In that world, the onus is even more on the 
philanthropists to give money and do the things 
they’ve talked about doing in the good times. 
This is the first real test for this new 
generation of philanthropists. In fact there will 
be even more need for their philanthropic 
dollars. For one thing, the downturn in the 
financial markets is going to affect how much 
money many charities have at their disposal 
because they’ve invested in the markets. In 
addition, the US government, having bailed out 
the financial system in a massive way, is going 
to be even more financially constrained, so 
government funding to all sorts of areas of 
social provision and social need is likely to be 
cut. This is the challenge for the rich.

We both went into this somewhat sceptical about 
the rich – we’re not particularly rich ourselves 
– and we didn’t really know what we would find. I 
am impressed that a significant number of the 
super-wealthy feel they’ve got more money than 
they know what to do with. They find it 
challenging to have so much money, they worry 
about the impact leaving it to their kids would 
have on their well-being, and they see themselves 
as having a huge opportunity to use this money to 
solve some of society’s problems. That’s by no 
means all the rich, but there’s a growing number of them.

The book starts with Warren Buffett and Bill 
Gates pledging to give away most of their money – 
two richest men in the world at the time – and I 
think they’re having a profound effect on many of 
the other richest people in the world, who look 
at them and say, ‘If Bill Gates and Warren 
Buffett are going to give away most of their 
money and think they can really make a 
difference, then maybe we should be thinking about doing that as well.’

MG If at the moment we’re moving into recession 
and public finances are squeezed, the scope for 
government discretionary expenditure to innovate 
and take risks will shrink. So there’s a greater 
need for philanthropy to fill that gap – not to 
deliver the basics but to provide cutting edge funding for new ideas.

Isn’t there a danger in relying on the very rich 
to help the poor if they are themselves 
struggling and turning inwards to deal with their own problems?

MB I’m not going to dispute it, it’s possible 
that this is the crisis of capitalism and we go 
into the Great Depression all over again. But I 
think the safest bet is that we’re going to have 
a couple of difficult years. In 10 or 15 years’ 
time, with the digital revolution and 
globalization and China and India coming into the 
mainstream economy, this period is going to look 
pretty trivial in the scheme of things. The trend 
we’ve seen towards a growing number of super-rich 
people who have vast fortunes way ahead of the 
typical population is going to continue. And our 
book challenges those rich people to become more philanthropic.

Anything you want to add?

MB I was at a meeting last week with an African 
business leader, who said that one of the most 
striking things today is the way the new African 
wealthy are feeling that they need to get 
involved in philanthropy. The same is true in 
India and in China. After the recent earthquake 
in China, suddenly those newly wealthy Chinese 
are starting to get into philanthropy.

I think maybe in the emerging markets, the 
super-rich feel even more of an obligation, from 
a more enlightened self-interested perspective, 
to be very active in giving back. The vast social 
problems are so visible, and there’s much less 
certainty that the political system will remain 
stable and will survive great inequality. So I’m 
expecting that we’ll see many of the great 
stories of philanthrocapitalism over the next few 
years coming from developing world billionaires.

Matthew Bishop is Chief Business Writer/American 
Business Editor of The Economist. Email matthewbishop@economist.com

Michael Green works for the Department for 
International Development, but is writing and 
speaking here in a personal capacity.  Email shepleygreen@googlemail.com

Philanthrocapitalism: How the rich can save the 
world by Matthew Bishop and Michael Green is 
published by Bloomsbury Press in the United 
States and A&C Black in the UK. To read the 
authors’ blog or order the book go to http://www.philanthrocapitalism.net

Alliance © Alliance

October 10, 2008

Book Review: The Strengths and Weaknesses of "Philanthrocapitalism"

By Phil Buchanan
http://philanthropy.com/news/updates/5948/book-review-business-should-learn-from-charities-not-vice-versa

Sometimes, a book release conflicts with world 
events in such a dramatic way that you have to 
feel some sympathy for the authors, whose 
observations look dated before the printing press 
even finishes churning. Such is the case with 
significant portions of Philanthrocapitalism: How 
the Rich Can Save the World, by Matthew Bishop 
and Michael Green, which chronicles the “new 
philanthrocapitalists” who seek to “apply the 
secrets behind their money-making success to their giving.”

Those who wish to dismiss this book, pointing to 
the recent financial–market collapse as evidence 
of the frailty of unfettered capitalism and 
business thinking, will have an easy time doing so.

Passages that note, for example, that “in 
investment banking, it is taken for granted that 
decisions about how to use capital are based on 
rigorous research into performance” are now ripe for ridicule.

“While some are skeptical about the invasion of 
the M.B.A.-enabled executives in suits into the 
Birkenstock world of charity,” the authors write, 
“many philanthrocapitalists believe that the 
world of giving could benefit at least as much as 
business from a bigger role for professional 
intermediaries and advisors, and from the sort of 
transparency and accountability that exists in financial markets.”

Where, the reader is left to wonder, are the guys 
from Lehman Brothers when you need them?

But this book, despite its weaknesses, is 
important and deserves to be read. Mr. Bishop, 
American business editor of The Economist, and 
Mr. Green, an economist, write in a compelling, 
breezy voice. Their impressive list of sources 
(which the authors say is in “no particular 
order”) begins with Bill Gates, Ted Turner, Bill 
Clinton, George Soros, and Bono.

Although the authors often seem star-struck, the 
(mostly) men they write about deserve much of the 
praise Mr. Bishop and Mr. Green heap on them for 
their dedication to creating lasting social 
impact, and their voices are powerful. One of the 
greatest virtues of the book is its potential, in 
bringing these voices to readers, to inspire 
others among the “superrich” to give more and 
dedicate themselves in the same way to results. 
This seems to be an explicit objective of the 
authors, and it’s a laudable one. (Read a 
Chronicle interview with the authors.)

From the work of individuals like Mr. Gates, Mr. 
Turner, and Mr. Soros—and the foundations they 
established—to smaller-scale efforts like the 
Impetus Trust, in Britain, the authors 
extensively chronicle an array of innovative 
attempts to make more of a difference with 
philanthropic dollars. In so doing, they provide 
the most convincing evidence compiled in one 
place that philanthropy is going through a 
fundamental shift. They tell the story of a 
growing emphasis on results and an increasing 
embrace of goals, well-executed strategies, and 
rigorous performance indicators. The tide is changing.

While there is considerable truth in this, the 
authors oversimplify in an attempt to prove their point.

First, they give short shrift to both the degree 
to which the earliest foundations, like Carnegie 
and Rockefeller, were focused on assessing 
results and the successes of the philanthropy 
that preceded their book’s protagonists.

Second, they try to draw a distinction between 
the “philanthrocapitalists” and what they regard 
as the “ineffective philanthropy” of old, without 
acknowledging that some of the very efforts they 
hold out as exemplars—such as those of the Edna 
McConnell Clark Foundation—were led by staff 
members who spent their careers in the nonprofit 
world, have no M.B.A.’s to their names, and 
certainly are not among the “superrich.”

Third, their writing is often fawning: They are 
less critical of their subjects and less willing 
to acknowledge the shortcomings of these new 
approaches than are some of their subjects themselves.

Fourth, they retroactively categorize great 
thinkers, such as the management guru Peter 
Drucker, as philanthrocapitalists. When I read 
that they dubbed Mr. Drucker the “high priest” 
and “original guru” of philanthrocapitalism, I 
wondered what Mr. Drucker would say if he were 
alive today, or whether the authors ever read Mr. 
Drucker’s great 1989 Harvard Business Review 
article, “What Business Can Learn From 
Nonprofits” (and, no, I didn’t transpose the 
words in the title of that article).

The biggest mistake comes in equating all of this 
emphasis on “impact” and “strategic philanthropy” 
with “business” and “capitalism.” It’s as if 
these words are all synonyms to the authors.

Ironically, this is the same mistake made by the 
Ford Foundation’s Michael Edwards, who published 
in March a highly entertaining, much 
discussed—and blogged about—pre-emptive rebuttal 
to Mr. Bishop and Mr. Green titled Just Another 
Emperor? The Myths and Realities of 
Philanthrocapitalism. Mr. Edwards, director of 
governance and civil-society grant-making 
programs, asserts that terms such as 
“high-performance,” “results-based,” and 
“data-driven” are codes for “business thinking.” 
(Read a Chronicle opinion article by Mr. Edwards, based on his book.)

But it is wrong to suggest that a focus on 
performance and results is somehow the sole 
province of business. Both Philanthrocapitalism 
and Mr. Edwards’s book approvingly quote Jim 
Collins’s Good to Great and the Social Sectors: 
Why Business Thinking Is Not the Answer to support their arguments.

But neither seems to have taken seriously the 
points Mr. Collins makes in his manuscript, which 
opens with this line: “We must reject the 
idea—well-intentioned, but dead wrong—that the 
primary path to greatness in the social sectors 
is to become ‘more like a business.’”

Mr. Collins goes on to point out that most 
businesses are somewhere between mediocre and 
good, asking, “Why would we want to import the 
practices of mediocrity into the social sectors?” 
(Disclosure: Mr. Bishop and Mr. Edwards are 
debating each other at a conference next spring 
for foundation executives that my organization is 
hosting, and Mr. Collins is also on the program for that event.)

Those of us who have worked in corporations and 
nonprofit groups, as I have, know all too well 
that Mr. Collins is right that there is greatness 
and mediocrity—and all shades in between—to be 
found in both business and philanthropy. We also 
understand how much more difficult it is to know 
what results you are achieving in the nonprofit 
world because of the nature of nonprofit organizations’ goals.

Nonprofit performance cannot be judged simply 
based on universal measures, like profit, found 
in financial statements. That doesn’t make 
performance assessment less important; indeed, it 
makes it more important—but a lot harder.

So we’re better off acknowledging the differences 
rather than creating a 
word—“philanthrocapitalism”—that is essentially 
an oxymoron. If businesses and government could 
successfully solve all our challenges, or meet 
all our needs for association and expression, we 
wouldn’t need nonprofit organizations. As Warren 
Buffett put it shortly after he made his gift to 
the Bill & Melinda Gates Foundation, “In 
business, you look for the easy things to do. In 
philanthropy, you take on important problems, and it is a tougher game.”

And, let’s be clear: At least some of the social 
problems philanthropy seeks to reduce are ones 
corporate interests helped create in the first 
place as they pursued profits for their 
shareholders. So, for all the talk within the 
halls of institutions like Harvard Business 
School about the positive effects of “blurring 
the boundaries,” for all the made-up vocabulary 
that seeks to marry business and philanthropy, I 
think we’re better off with some clarity on the 
distinction. Tension between nonprofit groups and 
corporations in the pursuit of different 
interests isn’t just healthy, it’s vital.

About 270 pages into a book that argues for 
employing the tactics of business in 
philanthropy, Mr. Bishop and Mr. Green try some 
semantic gymnastics as a way to deal with this 
critique. They say that critics of their 
worldview are “mistakenly confusing being 
businesslike with becoming more like a business.” 
I had to reread that sentence three times before 
giving up, concluding that, to the authors, 
“businesslike” is just a synonym for “effective.”

But it’s not, and it shouldn’t take the headlines 
of the last few weeks to make that clear. The 
challenge—worthy of all our attention—is to 
develop the right language of effectiveness for 
philanthropy, which can and must improve its 
performance. Yes, nonprofit groups can sometimes 
usefully look to business for approaches and 
frameworks. But they can also learn from other 
nonprofit organizations. And businesses can learn 
from nonprofit groups. It’s time to get beyond 
the “sector wars” and focus on results.

At the organization I lead, we have developed 
tools to allow foundations to get confidential, 
comparative feedback about their performance from 
grant recipients and others. People widely 
assumed we used customer-satisfaction surveys in 
the corporate world as our model, but we did not; 
our model, in fact, was the comparative reports 
based on student survey results put together for 
decades by a consortium of nonprofit colleges and universities.

The reality is, many (though by no means enough) 
nonprofit groups in this country are models of 
effectiveness—and they were not all founded in 
the last decade by the protagonists of Mr. Bishop and Mr. Green’s book.

Despite the book’s flaws, Mr. Bishop and Mr. 
Green deserve credit for expertly chronicling an 
important trend, even if they mislabeled it. The 
push for greater results and for better 
approaches to achieving them is vitally 
important. My hope is that nonprofit 
organizations respond to this book with a strong 
and clear voice—and do not cede ownership of 
crucial concepts like strategy and performance assessment to anyone.

Phil Buchanan is president of the Center for 
Effective Philanthropy, whose headquarters are in Cambridge, Mass.

Philanthrocapitalism: after the goldrush
Michael Edwards
http://www.opendemocracy.net/article/globalisation/visions_reflections/philanthrocapitalism_after_the_goldrush

The application of business principles to the 
world of civil society and social change has 
fashion, wealth, power and celebrity behind it. 
But where is the evidence that 
"philanthrocapitalism" works, and are there 
better ways to achieve urgently needed global 
social progress? It's time to end the hype and 
start the debate, says Michael Edwards

(This article was first published on 19 March 2008)
20 - 03 - 2008



It's indisputable that something genuinely 
important is stirring in the world of 
philanthropy - a movement to harness the power of 
business and the market to the goals of social 
change, what Matthew Bishop calls "philanthrocapitalism".

There is justifiable excitement about the 
possibilities for progress in global health, 
agriculture and access to micro-credit among the 
poor that have been stimulated by huge 
investments from the Bill & Melinda Gates 
Foundation, the Clinton Global Initiative and 
others. Philanthrocapitalism should certainly 
help to extend access to useful goods and 
services, and it has a positive role to play in 
strengthening important areas of civil-society 
capacity. These are surely good things, so why 
have I written a book - Just Another Emperor: the 
Myths and Realities of Philanthrocapitalism 
(Demos/Young Foundation, March 2008) - that 
challenges the increasing influence of business thinking in philanthropy?

Michael Edwards's essay is based on a talk he 
delivered at the launch of his new book - Just 
Another Emperor: the Myths and Realities of 
Philanthrocapitalism (Demos/Young Foundation, 
March 2008) - at the Young Foundation on 10 March 
2008. The book is co-published by:

The Young Foundation - a centre for social 
innovation based in East London - combining 
practical projects, the creation of new enterprises, research and publishing

Demos - a non-partisan public policy research and 
advocacy organisation in the United States 
committed to building a society that achieves its highest democratic ideals

Michael Edwards's website is here

My worry is that the hype surrounding 
philanthrocapitalism will divert attention from 
the deeper changes that are required to transform 
society, reduce decisions to an inappropriate 
bottom line, and lead us to ignore the costs and 
trade-offs involved in extending business 
principles into the world of civil society and 
social change. I'm concerned that these 
questions, and the evidence that underpins them, 
are not being given a fair hearing. And I want to 
provoke a conversation in which different 
positions can be aired and listened to. The only 
way that philanthrocapitalism will be able to 
fulfill its considerable potential is by moving beyond the hype.

What is it?

So, what exactly is philanthrocapitalism? It's an 
elastic term, both connected to but distinct from 
social enterprise or social entrepreneurship, 
venture philanthropy, and corporate social 
responsibility. I think there are three distinguishing features:

* Resources: very large sums of money being 
committed to philanthropy, mainly the result of 
the remarkable profits earned by a small number 
of individuals in the IT and finance sectors during the 1990s and 2000s.

* Methods: a claim that methods drawn from 
business can solve social problems, and are 
superior to the other approaches used in the 
public sector and in civil society.

* Achievements: a claim that these methods can 
achieve the transformation of society, rather 
than increased access to socially-beneficial 
goods and services - a noble goal for sure, but 
insufficient to lever deeper changes in the 
distribution of power and resources across the world.

What does the evidence tell us about these 
claims? We already know that for-profit 
involvement in human services is often 
ineffective, at least in social terms. This is 
what philanthrocapitalism is supposed to fix. 
Take the huge investments in global health, 
micro-credit and environmental services that Bill 
Gates and others are making. The available 
evidence from these investments so far suggests 
that it is perfectly possible to use the market 
to extend access to useful goods and services, 
but far harder to have any substantial impact on 
social transformation. The reason is pretty 
obvious: systemic change involves social 
movements, politics and the state, which these experiments generally ignore.

At a smaller scale, increasing numbers of 
initiatives are successfully deploying market 
methods to distribute goods and services that 
benefit society, like the One Laptop Per Child 
programme, which manufactures cheap computers 
running on open-source software with Google's help.

These are important experiments, but the evidence 
suggests that they are very difficult to operate 
successfully at scale, and that they usually 
experience some trade-offs between their social 
and financial goals. For example, a survey of 
twenty-five joint ventures in the United States 
showed that twenty-two "had significant conflicts 
between mission and the demands of corporate 
stakeholders"; moreover, the two examples that 
were most successful in financial terms also 
deviated most from their social mission - 
reducing time and resources spent on advocacy, 
weeding out clients who were more difficult to 
serve, and focusing on activities with the 
greatest revenue-generating potential.

Or take Project Shakti, a public-private 
partnership promoted by Hindustan Lever (HLL) in 
India, which integrates low-income women into the 
marketing chain of its producers, selling things 
like shampoo and detergent "to boost their 
incomes and their confidence." A recent 
evaluation showed that there is "no evidence that 
the project empowers women or promotes community 
action", as opposed to making then "saleswomen 
for HLL", often at considerable cost to 
themselves (since there are cheaper brands 
available, returns on investment are therefore 
low, and the work is very hard).

There's a lot more evidence like this in my book 
that shows how difficult it is to blend the 
social and financial bottom lines. Few of these 
experiments are truly self-sustaining, 
"mission-drift" is common, and failure rates are 
high. The other problem is scale: fairtrade is 
estimated to reach 5 million producers and their 
families across the developing world, while 
social enterprises had earned revenue of only 
$500 million in the United States in 2005.

Michael Edwards is the author of Civil Society 
(Polity Press, 2003) and Future Positive: 
International Co-operation in the 21st Century (James & James, 2004).

For more information visit www.futurepositive.org 
His latest work is Just Another Emperor: the 
Myths and Realities of Philanthrocapitalism (Demos/Young Foundation, 2008)

Also by Michael Edwards in openDemocracy:

"For Alan Beavan" (24 September 2001)

"Love, reason and the future of civil society" (22 December 2005)

"Democracy in America: paths to renewal" (21 November 2006)

"A world made new through love and reason: what 
future for 'development'?" (25 April 200

The second area where philanthrocapitalism claims 
to make an impact lies in improving the financial 
and management capacities of civil-society 
organisations. I have always been confused by the 
way in which venture philanthropists and social 
entrepreneurs differentiate themselves from the 
rest of civil society on the grounds that they 
are results-based"' or "high-performance", 
implying that everyone else is uninterested in 
outcomes. Sure there are mediocre citizens' 
groups, just as there are mediocre businesses, 
venture philanthropists, social entrepreneurs and 
government departments, so (as Jim Collins of 
Good to Great fame asks) "why import the 
practices of mediocrity into the social sectors"? 
What separates good and bad performers is not 
whether they come from business or civil society, 
but whether they have a clear focus to their 
work, strong learning and accountability 
mechanisms that keep them heading in the right 
direction, and the ability to motivate their 
staff or volunteers to reach the highest collective levels of performance.

The most important results measure impact at the 
deepest levels of social transformation, and 
there is a wealth of evidence showing that they 
are generated by social movements that rarely use 
the language or methods of business management. 
Yet, to repeat, there is already evidence that 
those who do use these techniques encounter 
trade-offs with their social mission.

It is easy to identify quick fixes in terms of 
business criteria, only to find out that what 
seemed inefficient turns out to be essential for 
civil society's social and political impact - 
like maintaining local chapters of a movement 
when it would be cheaper to the central office to 
combine them. And although solutions have to work 
economically this doesn't necessarily imply the 
raising of commercial revenue. 
Philanthrocapitalists sometimes paint reliance on 
donations, grants and membership contributions as 
a weakness for civil-society organisations, but 
it can be a source of strength because it 
connects them to their constituencies and the 
public - so long as their revenue streams are 
sufficiently diverse to weather the inevitable storms along the way.

The impact on civil society

Is there any evidence that civil society as a 
whole is being damaged by these trends? There are 
certainly some worrying signs, including:

* The dilution of "other-directed" behavior by 
competition and financial incentives (for example, paying volunteers)

* The diversion of energy and resources away from 
structural change, institution building and deep 
reform, in favor of social and environmental service-provision

* The loss of independence that comes with 
dependence on business or government, and the 
consequent weakening of civil-society's ability 
to hold them accountable for their actions.

* Increasing inequality within civil society 
between well-resourced service providers (or 
other groups considered to be high performers by 
large investors) and under-resourced community and advocacy groups

* Changing the relationship between citizens' 
organisations and their members to one of passive 
consumption (giving money at a distance), instead of active participation

* The erosion as a result of civil-society's role 
in social transformation through co-optation, or 
even emasculation, instead of equal partnership

The accumulated outcome is that civil society may 
be getting larger - but not stronger or more 
effective in leveraging fundamental changes in society.

The market and the movement

Why does involving business and markets produce such mixed results?

The answer is that the logics of business and 
social transformation are not just different - 
they pull in opposite directions in many 
important ways, and there is long experience of 
the risks involved in mixing them together. Take 
attitudes to redistribution and social justice, 
which rarely appear on the radar screen of the 
philanthrocapitalists but are central to any 
transformative agenda. "Wealth is like an 
orchard", says the Mexican philanthrocapitalist 
Carlos Slim, "you have to distribute the fruit, 
not the branch", presumably because the branch, 
tree and forest all belong to him.

Or take competition versus cooperation, or 
individualism versus collective action and 
mutuality. Jeff Skoll, who co-created e-Bay, is 
proud to say that social enterprise "is a 
movement from institutions to individuals", 
because they "can move faster and take more 
chances." Indeed they can, but can they also 
generate system-wide changes in social and 
political structures that rely on collective 
action and broad-based constituencies for change? 
History shows that systemic change was achieved 
in relation to the environment, civil rights, 
gender, and disability through the work of social 
movements rather than heroic individuals, and 
involved politics and government as well as civil society and business.

And that's a crucial point. In markets we are 
customers, clients or consumers, whereas in 
movements we are citizens, and each has very 
different implications. "NPC LLC researches, 
evaluates, and selects organizations for each of 
our funds so that our customers don't have to." 
This isn't an advert for Wall Street, but a group 
in the United States that advises on charitable 
donations. In future you won't need any contact 
with the organisations you support, never mind 
participation in their activities, you can just 
invest in a political mutual fund and write it off to tax.

In the ever-growing outpouring of books, 
newspaper stories and conference reports on 
philanthrocapitalism you will find plenty of 
attention to finance and the market, but scarcely 
a mention of power, politics and social relations 
- the things that really drive social 
transformation. Although the landscape is 
shifting a little as a result of accumulated 
experience (especially at the Gates Foundation) 
the great majority of venture philanthropy 
supports technical solutions and rapid scaling up 
("technology plus science plus the market brings results").

In business, the pressure to quickly go to scale 
is natural, even imperative, since that is how 
unit-costs decline and profit-margins grow, but 
social transformation moves at a slower pace 
because it is so complex and conflicted. Having 
inherited their wealth or made it very quickly, 
the philanthrocapitalists are not in the mood to 
wait around for their results, and the metrics 
they use to evaluate success focus on short-term 
material gains not long-term structural shifts in 
values, relationships and power.

Business metrics privilege size, growth and 
market share, as opposed to the quality of 
interactions between people and the capacities 
and institutions they help to create. When 
investors evaluate a business, they ultimately 
need to answer only one question - how much money 
will it make? The equivalent for civil society is 
the social impact that organisations might 
achieve, alone and together, but that is much more difficult to evaluate.

The blend and the commons

These are deep-rooted differences, but are these 
rationalities unbridgeable, frozen forever in 
some mutually-antagonistic embrace? 
Philanthrocapitalism says absolutely not, but I'm not so sure.

All organisations produce different kinds of 
value in varying proportions - financial, social 
and environmental - whether they are citizens' 
groups or business. These proportions can be 
changed - or "blended" - through conscious or 
unplanned action, but not without real 
implications for those forms of value that are 
reduced, challenged or contradicted in return. 
Does one set of values become diluted or polluted 
when you mix it with the others? Is the resulting 
cocktail tasteless - like mixing wine and vinegar 
- or delicious, a margarita made in heaven? And 
are there some things - like oil and water - that do not mix at all?

Discussions of blended value seem to take place 
in a world free of trade-offs, costs and 
contradictions. Positive synergies are possible 
between service provision and advocacy for 
example, and service providers can certainly get 
more social value against an acceptable financial 
bottom line, but there is plenty of experience 
among organisations that started off with a 
social purpose and steadily lost it as they 
became more embedded in the market. Over time one 
type of value tends to squeeze out the others.

The philanthrocapitalists want to extend 
competitive principles into the world of civil 
society, on the assumption that what works for 
the market should work for citizen action too, 
but they haven't thought through the implications 
of their actions. Some call this the creation of 
a "social capital market", in which non-profit 
groups would compete with each other for 
resources, allocated by investors according to 
certain common metrics of efficiency and impact. 
Believers in this school of thought therefore set 
much sway on the collection of standardised data 
and its storage on the worldwide web, so that 
those who want to give to charity have more 
information to guide their decisions. But these 
data rarely measure progress towards social transformation.

Competition might actually retard progress by 
pushing non-profits to economise in key areas of 
their work, eschew the most complicated and 
expensive issues, and avoid those most difficult 
to reach. Outside service provision, it is 
difficult to see how competition would make any 
sense at all, and not just because the relevant 
market conditions are unlikely to exist.



Matthew Bishop & Michael Green, 
Philanthrocapitalism: How the Rich Are Trying to 
Save the World (Bloomsbury, 2008)

Would local voluntary groups compete to host the 
children's Christmas party? Would there be 
increasing competition between groups dealing 
with different issues like HIV and schools? And 
who would really benefit? It is true that 
advocacy groups compete for members and for 
money, but often they cooperate, and in any case 
organisations are not easily "substitutable" in 
civil society because affiliations are based on 
loyalty, identity and familiarity, not on the 
price and quality of services provided. It's 
unlikely that members of the National Association 
for the Advancement of Colored People in the 
United States will cross over to the Puerto Rican 
Legal Defense Fund if they feel dissatisfied with their leaders.

It's because of these problems that I think 
collaboration among separate organisations may be 
better than blending or competition. It preserves 
the difference and independence required to lever 
real change in markets (not just extend their 
social reach), and to support the transition to 
more radical approaches that might deliver the 
deeper changes that we need, like new business 
models built around "the commons" such as 
open-source software and other forms of 
"non-proprietary production"; and community 
economics and worker-owned firms, which increase 
citizen control over the production and 
distribution of the economic surplus that businesses create.

The follower and the leader

The problem is that these approaches are absent 
from the philanthrocapitalist menu, perhaps 
because they would transform the economic system 
completely and lead to a radically different 
distribution of its benefits and costs. Systemic 
change has to address the question of how 
property is owned and controlled, and how 
resources and opportunities are distributed 
throughout society. That is presumably why Jim 
Collins, in a pamphlet that seems conspicuous by 
its absence given his stature in the corporate 
world, concludes that "we must reject the idea - 
well-intentioned, but dead wrong - that the 
primary path to greatness in the social sectors 
is to become more like a business."

"What could possibly be more beneficial for the 
entire world than a continued expansion of 
philanthropy" asks Joel L Fleishman in his book, 
The Foundation, that lionises the venture-capital 
foundations. Well, over the last century far more 
has been achieved by governments committed to 
equality and justice, and social movements strong 
enough to force change through, and the same 
might well be true in the future. No great social 
cause was mobilised through the market in the 
20th century. The civil-rights movement, the 
women's movement, the environmental movement, the 
New Deal and the Great Society - all were pushed 
ahead by civil society and anchored in the power 
of government as a force for the public good. 
Business and markets play a vital role in taking 
these advances forward, but they are followers not leaders.

The best philanthropy does deliver tangible 
outputs like jobs, healthcare and houses, but 
more importantly it changes the social and 
political dynamics of places in ways that enable 
whole communities to share in the fruits of 
innovation and success. Key to these successes 
has been the determination to change power 
relations and the ownership of assets, and put 
poor and other marginalised people firmly in the 
driving seat, and that's no accident. This is why 
a particular form of civil society is vital for 
social transformation, and why the world needs 
more civil-society influence on business not the 
other way around - more cooperation not 
competition, more collective action not 
individualism, and a greater willingness to work 
together to change the fundamental structures 
that keep most people poor so that all of us can live more fulfilling lives.

Would philanthrocapitalism have helped to finance 
the civil-rights movement in the US? I hope so, 
but it wasn't "data-driven", it didn't operate 
through competition, it couldn't generate much 
revenue, and it didn't measure its impact in 
terms of the numbers of people who were served 
each day, yet it changed the world forever.

The symptom and the cure

To conclude, I'm arguing that:

* The hype surrounding philanthrocapitalism runs 
far ahead of its ability to deliver real results. It's time for more humility

* The increasing concentration of wealth and 
power among philanthrocapitalists is unhealthy 
for democracy. It's time for more accountability

* The use of business and market thinking can 
damage civil society, which is the crucible of 
democratic politics and social transformation. 
It's time to differentiate the two and reassert 
the independence of global citizen action

* Philanthrocapitalism is in part a symptom of a 
profoundly unequal world. It hasn't yet demonstrated that it provides the cure

So here's the 55-trillion-dollar question (the 
amount of philanthropy that is projected to be 
created in the United States alone over the next 
forty years): will we use these vast resources to 
pursue social transformation, or just fritter 
them away in spending on the symptoms?

The stakes are extremely high, so let's have a 
global public debate to sort out the claims of 
both philanthrocapitalists and their critics.



For a US debate about the implications of Mike 
Edward's pamphlet for philanthropy see Nonprofit 
Quarterly s www.justanotheremperor.org

Michael Edwards is the author of Civil Society 
(Polity Press, 2003) and Future Positive: 
International Co-operation in the 21st Century (James & James, 2004).

For more information visit www.futurepositive.org 
His latest work is Just Another Emperor: the 
Myths and Realities of Philanthrocapitalism (Demos/Young Foundation, 2008)

Also by Michael Edwards in openDemocracy:

"For Alan Beavan" (24 September 2001)

"Love, reason and the future of civil society" (22 December 2005)

"Democracy in America: paths to renewal" (21 November 2006)

"A world made new through love and reason: what 
future for 'development'?" (25 April 200