Researchers at the Centre for Charitable Giving are investigating the reasons why prominent entrepreneurs, like Bill Gates and Warren Buffet, become philanthropic.
"How do you become philanthropic?," is a question that has never really been studied in depth. What does the journey from entrepreneur to philanthropist look like, and how can we chart these experiences to help the cause of more and increasingly effective giving?
Our research team, based at the universities of Newcastle, Exeter and Strathclyde, has conducted a major initiative to understand the experiences of entrepreneurs turned philanthropists: the 'big-givers' of all backgrounds, whether they are local or international players, who have become committed to sharing their wealth. The group will present its findings on "Understanding the philanthropic journey" at a CGAP Conference in London on Thursday where they will co-present with two leading entrepreneur-philanthropists: Sir Tom Hunter of West Coast Capital and Hunter Foundation, and Rakesh Bharti Mittal of Bharti Enterprises and Bharti Foundation.
We want this research to show there is a logical process at play which many struggle to understand. Entrepreneurs apply the same rigour and disciplines from the world of commerce to the charitable sector, which suggests there is in fact a science to giving at this level that can be replicated and learned from.
Entrepreneurs bring business methods and disciplines to philanthropy – they don't like wasting money and like to be focussed and planned and their charitable partners to be vetted. Andrew Carnegie, a man famed for the mass manufacture of steel in America, is perhaps the best example of this.
His pervasive influence within the field of philanthropy stems more than anything from his treatise on 'wealth', known as 'The Gospel of Wealth', where he concludes: "the problem of our age is the proper administration of wealth, so that the ties of brotherhood may still bind together the rich and the poor in harmonious relationship." Through his charitable projects Andrew Carnegie gave away almost everything he had earned to a wide range of projects, from arts to education. Entrepreneurs tend to be gifted in recognising and consciously applying the principles of capital accumulation. This is critical to making philanthropy more effective at a time when there is increasing inequality of wealth and income. What are the hallmarks of entrepreneurial philanthropy? Our research shows the following:
• It is the pursuit by entrepreneurs on a not-for-profit basis of big social objectives through active involvement of their economic, cultural, social and symbolic resources.
• They apply business-like methods when making social investments: key performance indicators and rates of return.
• Entrepreneurs invest more than simply money to their causes: time, connections, the 'know-how', branding.
• They like to leverage investments and frequently partner with others, including governments.
• Businessmen and women don't believe in giving handouts. They want to help others to help themselves.
Our studies have also shown that philanthropy is not a one way street. Entrepreneurs benefit from forms of capital, like honorary titles, degrees and recognition. Their world becomes a lot richer, they meet interesting people and come to mix in very interesting circles. What they learn can be turned to economic advantage. The possession of this status and level of connections within the world helps build philanthropy further over time. Therefore, giving encourages these greater returns and helps facilitate more philanthropic enterprises.
A large aspect of the research has been interviewing businessmen and women confronted by the burdensome issue of what to do with more money than they could ever spend in a lifetime. We have asked why they decided to become philanthropic and what they got out of it.
Their motivation is often revealed in their personal experiences and personal values. What makes them get involved in the voluntary sector is commonly understood to be a landmark event within their life that triggers a transition. One entrepreneur said the death of his mother from cancer in 2008 had prompted the change:
"Suddenly life felt a bit meaningless. We were sitting there in a big house in Berkshire, with a house in the south of France, and two beautiful little girls and everything seems perfect ... It the death of his mother made me feel more emotional ... It probably made me start thinking about giving ... I think another thing is when I sold the business I didn't know, I felt like I wanted to start giving but I didn't know how to or who to give to or what way to do it, I hadn't a clue, no one teaches you how to be philanthropic."
While entrepreneurs have all the intellectual capacity to make giving more effective, they frequently search for the guidance to become philanthropic. What we need are more stories to be told by philanthropists because they are its best advocates.
We also need access to fellow philanthropists to share their experiences. The level of giving relative to wealth and also need is nowhere near as high as it could or should be. What we witness are some very generous individuals among a lot of people who do little or nothing. A lot can be learned from these practised entrepreneurs and philanthropic groups, such as The Philanthropy Fellowship led by UK Community Foundations and funded by the Esmée Fairbairn Foundation, to inspire more and better philanthropy.
The voluntary redistribution of wealth, however, cannot serve as a substitute for welfare in times of austerity. IMF figures (2012) show there is a clear relationship between income inequality and the dynamics of the global economy. The gap between the top 5% and the rest of us has risen very sharply since the early 1980s in the UK & US and other countries of the developed world. As profits and top pay rise it becomes more obvious that this is unsustainable. The power of entrepreneurial philanthropy lies in helping others to help themselves and seize opportunities for betterment.
Professor Charles Harvey is pro-vice-chancellor for humanities and social sciences at Newcastle University
published on: 9 May 2013