Lifestyles of the Über-Rich and Famous

Photo: Mark Peterson, via CNN Money

“I like having an expensive private plane, but owning a half-dozen homes would be a burden,” said Warren Buffett, who is among the few billionaires who could realistically own six homes.

In a Fortune Magazine article entitled “My Philanthropic Pledge,” Buffett expounds upon the reasoning behind his decision to donate 99% of his net worth to foundations—not to be stowed away for years in the form of an endowment but spent on current needs—by the time of his death. This discussion leads segues into the Giving Pledge, which is “an effort to invite the wealthiest individuals and families in America to commit to giving the majority of their wealth to philanthropy” hatched by Buffett and Bill and Melinda Gates.

In the Fortune Features Blog, Carol Loomis details this new project, conceivably the largest fundraising drive in history. Their targets are billionaires, starting with the Forbes list of the 400 wealthiest Americans, whose lives are embellished with private jets and multiple homes. Their challenge is to persuade them to pledge half of their net worth to philanthropy, in their lifetimes or at death.

Their gain for philanthropy would be $600 billion, double the figure of what Americans as a whole give annually. At the end of the post, Loomis contemplates what success would look like for the $600 billion challenge. Melinda Gates says that she would consider the venture successful if, three to five years later, a significant number of billionaires have pledged half their net worth—50% being the low bar, according to Bill Gates. Loomis adds that society would inevitably benefit as well; the non-billionaires of society—essentially the whole world—would also be compelled to consider, and perhaps act upon, philanthropy and its place in our lives.

Sean Stannard-Stockton at Tactical Philanthropy agrees that the cultural ramifications of the Giving Pledge far outweigh the financial gain (because much of the $600 billion would go towards foundations, which only pay out, on average 5% of their endowment—$30 billion, or 10% of current American giving).

Sources: Giving USA, Forbes, Index of Global Philanthropy and Remittances

In fact, the Tactical Philanthropy blog owes its existence to the original Buffett-Gates philanthropic bombshell in 2006, when Buffett announced that he would give 85% of his wealth to the Gates Foundation, with Bill Gates at its helm. Stannard-Stockton believes that the Giving Pledge could catalyze a revolution in philanthropy, with the whole world, regardless of wealth or nationality, giving more. He considers it a significant milestone in what he calls the Second Great Wave of Philanthropy, characterized by universal participation, as opposed to the first wave, during which philanthropy was an activity of the super-rich, like Rockefeller.

Matthew Bishop at Philanthrocapitalism also regards the Giving Pledge as ground- breaking, calling it “philanthrocapitalism’s coming-of-age as a movement.”

On the other hand, Nathaniel Whittemore at the Change.org Social Entrepreneurship blog is excited about it for different reasons.

He considers the pledge itself to be “a little social change 1.0,” characteristic of philanthropy’s first wave, whose guiding principle seems to be “make money how and wherever, then eventually turn your attention to giving it away.”

However, Whittemore notes, that model is giving way to blended values and social entrepreneurship and he hopes that this fund will be able to “supercharge the movements that are springing up all around to shift our entire society’s conception of and approach to creating social change.”

In addition to a springboard for jump-starting social entrepreneurship—or, social change 2.0—the pledge demonstrates the importance of peer leadership in philanthropy and the need to increase tools that will allow donors to identify and support high impact organizations.

It is notable that Stannard-Stockton, Bishop and Whittemore all welcome the $600 billion challenge as a revolutionary landmark, but The Giving Pledge does have its critics. For example, John Tamny, a columnist at Forbes, argues that macroeconomically speaking, the removal of $600 billion in capital would slow investment and drive up unemployment in the long term.

Putting a spin on Andrew Carnegie’s “The man who dies rich, dies disgraced” quote, Tamny quips: “The man who dies rich dies a hero for his delayed consumption driving innovation and job creation.” His version of the quote, however, is a little too redolent of an Introduction to Macroeconomics class for us.

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