Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else (13 page)

In fact, the idea conference is so trendy that a couple of New Yorkers recently hosted an ideas wedding. When David Friedlander and Jacqueline Schmidt married in Brooklyn in December 2011, their guests were issued name tags that asked them to declare a commitment. Another card urged, “Name one action you can take in the next twenty-four hours that is aligned with your commitment.” Instead of boozy speeches about the bride and groom delivered by nervous family and friends, the main entertainment was a series of TED-style talks, complete with PowerPoint presentations, about issues the couple cares about—neuroscience, the environment, and holistic healing.

A thought-leadership wedding just might be going a step too far—the Friedlander/Schmidt nuptials were snarkily chronicled in the
New York Times
and panned by
Gawker
, although the more earnest
Huffington Post
gave the pair a thumbs up. But in this age of elites who delight in such phrases as “out of the box” and “killer app,” arguably the most coveted status symbol isn’t a yacht, a racehorse, or a knighthood; it’s a philanthropic foundation—and, more than that, one actively managed in ways that show its sponsor has big ideas for reshaping the world.

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George Soros, who turned eighty in the summer of 2010, is a pioneer and role model for the socially engaged billionaire. Arguably the most successful investor of the postwar era, he is nonetheless most proud of his Open Society Foundations, through which he has spent billions of dollars on causes as diverse as drug legalization, civil society in central and eastern Europe, and rethinking economic assumptions in the wake of the financial crisis.

Inspired and advised by the liberal Soros, Pete Peterson—himself a Republican and former Nixon cabinet member—has spent $1 billion of his Blackstone windfall on a foundation dedicated to bringing down America’s deficit and entitlement spending. Bill Gates, likewise, devotes most of his energy and intellect today to his foundation’s work on causes ranging from supporting charter schools to combating disease in Africa. Facebook founder Mark Zuckerberg has yet to reach his thirtieth birthday, but last fall he donated $100 million to improving Newark’s public schools. Insurance and real estate magnate Eli Broad has become an influential funder of stem cell research and school reform; Jim Balsillie, a cofounder of BlackBerry creator RIM, has established his own international affairs think tank; the list goes on and on. It is not without reason that Bill Clinton has devoted his postpresidency to the construction of a global philanthropic “brand.”

The super-wealthy have long recognized that philanthropy, in addition to its moral rewards, can also serve as a pathway to social acceptance and even immortality. Andrew “The Man Who Dies Rich Dies Disgraced” Carnegie transformed himself from robber baron to secular saint with his hospitals, concert halls, libraries, and universities; Alfred Nobel ensured that he would be remembered for something other than the invention of dynamite. What is notable about today’s plutocrats is that they tend to bestow their fortunes in much the same way they made them: entrepreneurially. Rather than merely donate to worthy charities or endow existing institutions (though they of course do this as well), they are using their wealth to test new ways to solve big problems.

Their approach is different enough to have inspired a new phrase, “philanthro-capitalism,” which is also the title of a book by Matthew Bishop and Michael Green. Bishop and Green explain: “The new philanthropists believe they are improving philanthropy, equipping it to tackle the new set of problems facing today’s changing world. . . . [They] are trying to apply the secret behind their money-making success to their giving.”

“What they are doing is much more trying to copy business techniques and ways of thinking,” Bishop told me. “There is a connection between their ways of thinking as businesspeople and their ways of giving. If you compare it with previous eras, in each era going back to the Middle Ages the entrepreneurs have been among the people leading the response to the destruction caused by the economic processes that made them rich. You saw it in the Middle Ages, you saw it with the Victorians, you saw it with Carnegie and Rockefeller. What is different is the scale. Business is global and so they are focusing on global problems. They are much more focused on how do they achieve a massive impact. They are used to operating on a grand scale and so they want to operate on a grand scale in their philanthropy as well. And they are doing it at a much younger age.”

A measure of the importance of public engagement for today’s super-rich is the zeal with which even emerging market plutocrats are developing their own foundations and think tanks. When the oligarchs of the former Soviet Union first burst out beyond their own borders, they were a Marxist caricature of the nouveaux riches: purchasing yachts and sports teams and surrounding themselves with couture-clad supermodels. Fifteen years later, they are exploring how to buy their way into the world of ideas.

One of the most determined is the Ukrainian entrepreneur Victor Pinchuk, whose business empire ranges from pipe manufacturing to TV stations. With a net worth of $4.2 billion, Pinchuk is no longer content merely to acquire modern art. In 2009, he launched a global competition for young artists run by his Pinchuk Art Centre in Kiev, conceived as a way of bringing Ukraine into the international cultural mainstream. Pinchuk hosts a regular lunch on the fringes of Davos (Chelsea Clinton was the celebrity moderator in 2012) and has launched his own annual “ideas” forum, a gathering devoted to geopolitics that is held, with suitable modesty, in the same Crimean villa where Stalin, Roosevelt, and Churchill conducted the Yalta Conference. The September 2010 meeting, where I served as a moderator, included Dominique Strauss-Kahn, then head of the International Monetary Fund; Polish president Bronislaw Komorowski; and Alexei Kudrin, then the Russian deputy prime minister and finance minister. At a gala dinner, keynote speaker Bill Clinton addressed, ironically enough, the economic consequences of growing inequality.

As an entrée into the global super-elite, Pinchuk’s efforts seem to be working. On a visit to the United States in 2010, the oligarch met with top Obama adviser David Axelrod in Washington and schmoozed with Charlie Rose at a New York book party for
Time
magazine editor Rick Stengel. On a previous trip, he’d dined with Caroline Kennedy at the Upper East Side town house of HBO chief Richard Plepler. Back home, he has entertained fellow art enthusiast Eli Broad at his palatial estate outside Kiev (which features its own nine-hole golf course and Japanese garden, built by Japanese carpenters), and has partnered with Soros to finance Ukrainian civil society projects.

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One of the tensions in the life of the plutocrat that philanthropy lays bare is how hard it can be figuring out where to give back. If you are a global nomad, do you direct your charitable efforts at the place where you were born, the place where you live now (if that is even possible to define), or the place where you do the most business? Or perhaps the right approach isn’t to think about tribal or emotional connection; rather it is to use the same objective logic you would apply to a business investment and to try to find the place in the world where you can make the biggest difference.

I listened to a couple of members of the global 0.1 percent think through these issues over supper in Dar es Salaam. We were there, appropriately enough, thanks to the World Economic Forum, which was hosting one of its regional summits over a few muggy days in May 2010 in the Tanzanian city. One participant in the conversation was an Australian who lived in Hong Kong and had made a career largely working in Southeast Asia and China. The second was an Asian-born technologist who had earned a fortune working in Silicon Valley.

The Australian had no doubts about where it was best to target one’s philanthropy, and that was neither birthplace nor adopted city: “I always focus on where you have the biggest impact and where people need it the most—so that is always, always poor, uneducated girls in the developing world.” The Asian entrepreneur felt a greater obligation to the communities with which he had a personal connection, so his philanthropy was directed in two places: building schools in his native country and supporting the education of poor children in California.

This dual focus, working with the poorest of the poor abroad and also doing something for the people at the bottom in your own neighborhood, is the balance a lot of the plutocrats strike. You could see another example on the lawns of Kensington Palace. The redbrick mansion was once home to Princess Diana and today is a home for her sons, but the most lavish celebration held on its grounds in the summer of 2011 was the annual gala auction hedge fund manager (and supermodel-dater) Arpad Busson organizes to raise money for ARK, the children’s charity he founded.

Busson is a vocal proponent of philanthro-capitalism. ARK stands for Absolute Return for Kids, a play on the language of the hedge funds and their pursuit of absolute returns, often using aggressive techniques such as short selling, in contrast with generally more conservative mutual funds and their pursuit of relative returns, which is to say they aim to keep abreast of the wider investment pack. Busson thinks ARK needs to be run like a hedge fund. “If we can apply the entrepreneurial principles we have brought to business to charity, we have a shot at having a really strong impact, to be able to transform the lives of children,” he told
The Observer
.

When it comes to picking which children, Busson, a true global nomad—he was born in France of a French father and an English mother, he has worked in New York and Paris as well as London, and his own two boys are the sons of Australian model Elle Macpherson—targets his efforts at the children of the world. ARK has projects in eastern Europe, Africa, and India, as well as in the UK. That mix would not have occurred to philanthropists of a previous generation, for whom poor neighbors belonged to a very different category from the poor of the third world. But to the globe-trotting plutocrat, there isn’t much difference between the poor child in the London estate (Britspeak for housing projects) and the New Delhi slum.

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Busson’s belief in applying business techniques to philanthropy is characteristic of the global super-elite’s approach to doing good. No one does this more effectively than Bill Gates, whose foundation, with its $33 billion war chest and rigorously analytical mind-set, has transformed charity, and sometimes public policy, around the world.

Within the plutocracy, the Gates Foundation has had a decisive cultural impact. Gates and his co-donor Warren Buffett—not accidentally two of the world’s most visible and most admired billionaires—have made it de rigueur not only to give away a lot of your money but to be actively engaged in how it is spent. Gates has become an evangelist for this idea that capitalism must do good, and do-gooders must become more capitalist. He even has a name for it, “creative capitalism,” a term he unveiled in a speech at Davos—where else?—at the 2008 meeting of the World Economic Forum.

Marx famously observed that early generations of philosophers had sought to describe the world; he wanted to change it. Gates and his plutocratic peers are having a similarly dramatic impact on the world of charity. They don’t want to fund the social sector, they want to transform it. One example is their impact on education in America. With their focus on measurable results, Gates and his fellow education-focused billionaires have spearheaded a data-driven revolution. The first step was to put tests at the center of education, so that the output—student learning—could be measured. The next step is to try to make the job of teaching more data- and incentive-driven. As Gates said in a speech in November 2010, “We have to figure out what makes the great teacher great.” That effort includes videotaping teachers in the classroom and paying them based on how they perform.

Strikingly, the ambition of the philanthro-capitalists doesn’t stop at transforming how charity works. They want to change how the state operates, too. These are men who have built their businesses by achieving the maximum impact with the minimum effort—either as financiers using leverage or technologists using scale. They think of their charitable dollars in the same way.

“Our foundation tends to fund more of the up-front discovery work, and we’re a partner in delivery, but governmental funding is the biggest,” Gates told students at MIT on a visit there in April 2010.

“Take delivering AIDS medicine. We did the pilot studies in Botswana to prove that you could deliver ARBs [angiotensin II receptor blockers] in Africa, and then PEPFAR [the U.S. President’s Emergency Plan for AIDS Relief], the U.S. government program, which is five billion [dollars] a year, which is way more than our whole foundation, just that one U.S. government help program—just one country—came in and scaled up based on some of the lessons from that.”

It is a measure of the financial and intellectual power of plutocrats in the world economy that their goal is to guide the state. Indeed, the muscle of the philanthro-capitalists is such that they can sometimes unintentionally distort the social safety nets of entire nations. That has been a complaint in some African countries, where the richly funded, relentlessly focused Gates programs on AIDS medicine and tuberculosis and malaria vaccines have lured local doctors and nurses away from providing desperately needed, but less glamorous, everyday care. Dr. Peter Poore, a pediatrician who has worked in Africa for three decades, warned
Los Angeles Times
investigative reporters, “They can also do dangerous things. They can be very disruptive to health systems—the very things they claim they are trying to improve.” Rachel Cohen, a Western aid worker in Lesotho, agreed: “All over the country, people are furious about the incentives for ART staff [as the Gates-funded health workers are known],” who can earn more than double what other health care workers are paid.