BCG Report: New Billionaires and Disruptive Philanthropy Technologies

Hi, Habr!

Pavel Luksha gave a tip to an interesting and quite authoritative analyst from the Boston Consulting Group about “disruptive innovations” in philanthropy (this is about how to benefit in the scale of mankind). The publication of 2016, but it is still relevant and covers the key themes of "the struggle of the forces of reason with the forces of good."

Worked on the translation: Alena Svetushkova (org. Moments), Katya Shikhova (translation), Alisa Kozlyakova (proofreading and editing), Olga Klimova (proofreading and editing), Kristina Roppelt (proofreading and editing).



The generation of "young" billionaire philanthropists from Silicon Valley is moving to a new format of philanthropy. The founders of eBay, Facebook, PayPal, Napster and other companies in the process of transformation actively express their bold and, at times, bold ideas regarding the implementation of current projects in the social sphere. Thanks to their natural enterprise, they don’t think about the current state of affairs, they are fully committed to decisive innovation. The financial condition they have achieved allows young philanthropists to invest in social projects and significantly influence the problems that they consider their main goal to solve. In addition, the chosen approach based on the original facts, transparency, speed and the final result may indicate a completely new format of charity.

Once criticized for their episodic involvement in charity, today the founding billionaires of high-tech companies are trying to compensate for lost opportunities. The founder of Microsoft, Bill Gates, founded the Bill and Melinda Gates Foundation, which since its founding in 2000, has been the largest charitable foundation among other philanthropists funded by billionaires. Today we can see how major philanthropists, including Facebook founders Mark Zuckerberg and Dustin Moskowitz, creator of Skype Niklas Zennström, one of the founders of PayPal, and the current head of Tesla Motors Ilon Musk and co-founder of Napster, are global transformations. According to media reports, in 2014, of the total donations made by 50 major philanthropists in the United States, approximately 25% were accounted for by the founders of high-tech companies under the age of 50, which exceeds the corresponding figures in 2013 (19%) and 2012 ( 4%) (see annex).

These high-tech philanthropists demonstrate a fresh look and a new approach in the field of philanthropy.

Rethinking Philanthropy: 7 Principles

Traditional funds that support applicants and the most significant projects with their grants carry out a very important function for society. But such funds are based on a business model, which involves their constant supply in the form of large donations. This type of organization of a charitable foundation presupposes the presence of experts involved in the assessment, selection and examination of grantees.

The current IT billionaire philanthropists are ready to change the current approach by proposing new investment mechanisms, such as venture capital. They no longer want to wait for proposals, on the contrary - they are actively looking for options for investing money and are set up for a quick investment and a quick end result. In the hope of catching the results of their investments during their lifetime, modern philanthropists make large and sometimes risky bets. Completely new business models provide an opportunity to invest in equity, provide a return on investment and measurable results to justify future donations.

And although the results of such investments will be noticeable in the long term, modern philanthropists are ready to become innovators from charity in the same way as in the area of ​​their specialization. Below are the seven principles of approach to the problem of the modern philanthropist.

1. Search for breakthrough solutions. Most modern high-tech philanthropists are “investing in full”, investing huge sums in “breakthrough”, often indisputable and high-risk social projects. Peter Thiel, co-founder of Google, Larry Page, and former CEO of Oracle, Larry Ellon, co-founder of PayPal and venture capitalist, joined forces to fight mortality, and only Ellison donated more than 430 million US dollars to research on slowing the aging of the human body. . According to Thiel: “Evolution and nature are inextricably linked, but our society must try to overstep the limit.” The Mask Foundation donates millions of dollars to areas such as, for example, human exploration of space. The main goal of its main project, SpaceX, is the creation of space civilization and the conservation of Earth’s resources. Gates also invests heavily in health care, stimulating the search for new means to fight malaria, which resulted in the complete disappearance of the disease.

2. Using business experience to create innovation. Most of today's philanthropic billionaires use their high-tech knowledge to gain access to new or non-standard forms of social transformation, to create social networks and new intellectual property models (so that the final results of developments of great social importance are available to all needs, without extracting any commercial profits from such projects) and the use of new technologies. Til, based on his own experience of start-ups and investing, founded the Breakout Labs Foundation, which financially supports an ever-growing number of young companies specializing in completely different areas - from food technology and biomedicine to clean energy. The Foundation provides these “breakthrough high-tech companies” too risky for traditional venture investment, with the necessary financial and partner support to “change the world and move to a new level of civilization”.

3. Belief in the power of statistics. Modern "high-tech" philanthropists live with an unshakable faith in the power of statistics: they monitor and measure the results of their activities and maintain a high level of investment accounting, not because of fear of risk, but in order to get the maximum benefit from every dollar spent. Statistics and metrics are needed to collect detailed information to assess the success of the chosen strategy. Evidence-based philanthropic mechanisms, also known as “effective altruism,” use statistics not only to evaluate the current outcome, but also to identify areas for future investment. For example, Mike Krieger (co-founder of Instagram) and his wife Kaitlin Trigger, as well as Moskovits and his wife Kari Tuna recently announced their participation in the Open Philanthropy project. In their opinion, such project values ​​as “impartiality, rigorous analytical thinking and transparency” reflect their principles. The main focus of the Open Philanthropy project is important, but often ignored problems, as well as possible solutions based on detailed analytics, research, and continuous collection of statistical data.

4. Fast cycle: trial, failure, learning lessons. Another characteristic feature of “high-tech” philanthropists is the “mock-up” of an approach to solving a problem. This mechanism is a quick-change cycle “try, fail, learn lessons”, in other words, continuous improvement of the way to solve a problem before going directly to solving a problem. Such a flexible mechanism, standard in programming, speeds up the process of achieving results through cooperation and constant accumulation of experience and improvements. Failures are normal if useful lessons are learned from them.

The development of new solutions takes time, and before they get translated into life, they go a long way of trial and error. The process of trial and the rapid development of new models to an industrial scale can demonstrate the difference between advanced innovations and non-returnable investments. Modern philanthropists are very familiar with situations where good ideas start to be implemented too soon, and it’s too late to abandon the implementation of bad ideas. In this case, every mistake is too expensive. The novelty of “prototyping” lies in the fact that we refuse to test new ideas, this process has already been going on for many years, the key aspect is the speed of testing the idea and the willingness to quickly abandon it, if something went wrong, and learn from this the right lesson. According to Parker, "we must work at a very fast pace, focus on what we are interested in, have the courage to make mistakes and learn from them." The same idea is supported by Mark Zuckerberg and his wife Priscilla Chan. In their letter informing about the transfer of 99% of Facebook shares to the Chan Zuckerberg Initiative, they write: “We have to risk today in order to learn something tomorrow. We are only at the beginning, and much of what we try to do is not always possible, but we listen, learn and move on. ”

5. "Open" worldview. Philanthropists from a high-tech environment appreciate openness and the ability to share information, ideas, best practices and solutions. Similar to the process of developing open source software, this approach allows you to use the experience gained, accelerate progress, not do what has already been done, and increase the chance of getting the maximum benefit from the investment. Last year, Parker announced the creation of the Parker Foundation to “actively carry out large-scale changes in three areas: the life sciences, global health, and civil society." The Foundation will support partners with an “open” worldview, giving the opportunity to leading experts in their fields to conduct joint research. Sponsored by the foundation, scientists are called upon to share their ideas even at the generation stage, regardless of their field of activity. According to Parker, the development of cases related to the exchange of information and results of work will provide a tremendous breakthrough in the treatment of immune diseases.

The same principle builds a joint effort to find an AIDS vaccine, an activity that was initially funded by the Bill and Melinda Gates Foundation. Their foundation was founded with the view that a successful search for an AIDS vaccine is only possible together, only through the exchange of scientific information and the standardization of methods and research.

6. Attracting the best specialists and constant personal involvement. Like many other venture capital investors, high-tech entrepreneurs seek to actively participate in projects sponsored by them so that their investments bring the desired result. For example, Reed Hoffman, a member and founder of the Board of Directors and the head of PayPal, as well as the founder and Chairman of the Board of Directors of LinkedIn, participates in the process of allocating grants, and is also often a member of the boards of directors of recipient organizations.

At the same time, high-tech philanthropists are well aware that the joint efforts of the best and most talented specialists help us find a creative solution more quickly. Therefore, when allocating grants, creating research groups, and inviting to participate in the board of directors, first of all, they pay attention to what the person is. The pool of gifted specialists, to whom Parker, Musk and former Google CEO Eric Schmidt can call directly by phone, is completely different from what a low-performing non-profit organization can expect after posting a vacancy announcement. Known for their desire to innovate and having at their disposal significant resources, billionaire philanthropists are able to attract leading experts from various industries to manage investment capital. For example, the Breakout Labs Foundation was able to attract to its research specialists with advanced degrees from the Massachusetts Institute of Technology and the University of Berkeley; Jeff Skoll, the first employee and president of eBay, was able to attract former HP and Microsoft executives to senior management.

High-tech philanthropists often turn to their colleagues for advice on charity: they are people of the same circle, they are often members of boards of directors in companies from each other and welcome collective efforts. And although each of them leads quite independent philanthropic activities, their paths often overlap when it comes to co-financing the project and exchanging views.

7. Count on profits. Modern billionaire philanthropists usually do not have a hint of doubt about making a profit on their investments - this is “venture philanthropy” - to do good deeds and make money from it. For example, the Breakout Labs foundation issues grants that become a share in equity when profits exceed a certain level. For example, John Doer (Kleiner Perkins) uses a venture capital model to distribute money between different organizations, for example, he provides funds to the New Schools Venture Fund. As a result, he expects to profit from his investments and strategic knowledge.

Such an approach can open up new opportunities for reinvestment and free organizations with a non-commercial status from certain limitations. When Zuckerberg and Chan decided to transfer 99% of their Facebook shares, they established an LLC - a commercial organization - to ensure maximum control and retain the right to differentiate between philanthropy, investment and advocacy. Their colleagues, including Pierre Omidyar and Steve Jobs' widow, Lauren Powell Jobs, followed a similar path - the creation of limited liability companies to control philanthropic activities in Silicon Valley.

With the right approach, ventures can generate enough money to continually reinvest, so the benefits and efficiency will only increase.

Balance of risk and benefit

Changing the format of philanthropy is not without risks. High-tech entrepreneurs already have tremendous economic power both in Silicon Valley and beyond. Their philanthropic "attempts" may be of interest to some and discourage interest from other players. For example, a massive influx of investments in one scientific direction or a narrow area of ​​research can bypass government or public organizations, private investors. As a result, the concentration of resources can provoke conflicts related to the distribution of resources, or undermine the authority of specialists in a particular area. And if philanthropists decide to invest money in something else, then instead of investment there will be an empty space.

Moreover, some philanthropists consider only high-risk investments that will bring them income. When scientists and thinkers start worrying more about making money than doing something revolutionary, sacrifice comes first of all with progress. A competitive philanthropic model can interfere with basic research in many areas. For example, the thirst for profit in combination with the potential can prevent the “star” philanthropist from investing in those areas where you can hardly count on profit (human rights, protection and conservation of wildlife).

In addition, some features by which such an approach can be effective may endanger the whole business. For example, the fast cycle “test - failure - repetition of the cycle” is optimally suited for software development, rather than for social projects, on whose realization people’s living conditions depend. With a minimum margin of error, any failure can have disastrous consequences.

By definition, changing the format of philanthropy casts doubt on the effectiveness of the traditional way of giving. And although philanthropy, like material well-being, is not a zero-sum game, there is no need for competition between different charitable foundation formats. High-tech philanthropists should be sensible in choosing donation strategies, and also work closely with all stakeholders to reduce the risk of isolation within their community. A new innovative approach does not mean ignoring the lessons of the past, on the contrary - it means drawing lessons and breaking patterns.

Perspectives

In business, the destruction of stereotypes is a proven method that helps create even faster, more efficiently new and sometimes revolutionary products, services and methods of work. Will the new philanthropy format help make new discoveries, solve social problems, move towards humanistic goals even faster in the long term?

The expectations of philanthropic billionaires associated with important achievements and quick results may be related to their past great successes, coupled with youthful maximalism. Bill Gates says that he created his foundation with the same zeal with which he developed Microsoft, but then he realized that many of the problems associated with the foundation turned out to be more complicated than he had imagined, and it was not so easy to solve them, even having shoulders many years of experience. However, he remains an “impatient optimist”, his approach to investing has changed - from finding a technical solution to systemic problem solving. As young entrepreneurs move along roughly the same path, we can observe how their views evolve.

The transition of “high-tech” billionaires to new forms of work, the use of a large amount of statistical information, analytical rigorism, the exchange of information and a firm focus on the measurable result are the most important characteristics of successful philanthropic models and opportunities in such an important matter.