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Richer Americans should spread their money faster

(Bloomberg) – America’s wealthiest people have received a lot of unsolicited advice about their philanthropy lately, especially since the pandemic inflated the fortunes of the richest 0.1% while devastating the broader economy.

Their critics’ biggest complaint: They should spread their money a lot faster.

Since parting ways with the world’s richest man in 2019, MacKenzie Scott has shown how it could be done. The ex-wife of Amazon.com Inc. founder Jeff Bezos has donated $ 8.5 billion in about 12 months, spreading the funds among hundreds of small organizations often overlooked by large donors.

“It’s really impressive what he’s done and what a different approach he’s taken,” said John Arnold, a billionaire hedge fund manager who retired in 2012 to pursue philanthropy full time. “I am hopeful that more people will follow that model.”

Scott’s strategy – probably the fastest philanthropic career in history – still falls short of the forces that raise the wealth of billionaires, especially the rapid rise in technology valuations. In 2019, he joined the Giving Pledge, a non-legally binding pledge from very wealthy people, to donate most of his fortunes during his lifetime. Since then, thanks to the rise in Amazon’s share price, Scott’s net worth has risen from about $ 37 billion to $ 62 billion, according to the Bloomberg Billionaires Index.

Warren Buffett, who helped create the Giving Pledge and has promised to donate nearly all of his wealth to charities, offers an even clearer example. In 16 years, despite giving up half of his stake in Berkshire Hathaway Inc., his wealth has more than doubled to $ 104 billion.

“We are living in the second golden age of philanthropy because we are living in the second golden age of inequality,” said Jason Franklin, director of Ktisis Capital, a philanthropic advisory firm based in Grand Rapids, Michigan.

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Buffett responded to the heated debate on Wednesday. In a statement also announcing his resignation as trustee of the Bill & Melinda Gates Foundation, the world’s eighth richest man offered a partial defense of the slow approach to giving.

Buffett’s first wife, Susan, had advocated “donating large sums when we were young, when our net worth was a small fraction of its final size,” she wrote. “I held out for later, being delighted with the results of compounding.”

In 2006, a couple of years after the death of his wife, Buffett, then 75, “stepped on the gas” on his donations.

The shares he has donated – $ 41 billion – would be worth $ 100 billion to the beneficiary foundations if he had waited until now.

“Would society have ultimately benefited more if it had waited longer to distribute the shares?” I ask.

Trillions of dollars depend on the response of the 0.1% members to this question. Many of the wealthiest Americans have also joined the Giving Pledge. Among them, Michael Bloomberg, founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.

There are now 222 signatories around the world, but only a small portion of the money has gone to charities, and many of today’s newly minted billionaires can expect to live for decades.

Mark Zuckerberg, the 37-year-old co-founder of Facebook Inc., signed the pledge with his wife, Priscilla Chan, in 2015, when his fortune amounted to $ 45 billion. And while the couple’s Chan Zuckerberg Initiative says it gave $ 2.7 billion in grants from 2015 through October 2020, Zuckerberg’s fortune today is $ 126.8 billion.

The argument for giving more now, rather than later, is that while wealth may increase over time, so can the problems that philanthropy seeks to address. In the fight against climate change, a cause espoused by both Bezos and Bill Gates, time is of the essence. Education now pays big dividends over a child’s life, while curing a disease could save millions of lives.

“Philanthropy also generates returns on investment,” Arnold said. If issues like intergenerational poverty are not addressed today, for example, “tomorrow will become a bigger problem.”

The donation debate has been around for decades. But the past year inspired a series of initiatives aimed at encouraging wealthy foundations and donors to be more generous, faster. Some of its creators were frustrated by the pace of donations from wealthy Americans, even as government stimulus and historically low interest rates helped boost the assets of the wealthiest.

Too many wealthy Americans are “hoarding” their fortunes, said Alan Davis, who runs a $ 150 million family foundation inherited from his parents. MacKenzie Scott “has raised the bar; I’m not sure there are that many billionaires who are willing to skip it. “

Original Note: Richest Americans Can’t Give Money Away Fast Enough

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