Mark Zuckerberg Is Betting Tech Can Address Educational Equity. Is It That Simple?

5 Dec 2015 | Author: | No comments yet »

Give it to them, baby: Mark Zuckerberg’s philanthropy.

Mark Zuckerberg’s promise this week to give away 99 per cent of his shares in Facebook, worth about $45 billion, could make him one of the greatest philanthropists in US history, in the tradition of the Carnegies and Rockefellers and alongside Bill Gates today. At just 31, however, he is also part of another trend: three of the six most generous philanthropists in the US last year were in their 30s and worked in the tech industry. But Zuckerberg’s announcement, made in the form of an open letter to their newborn daughter, Max, from the Facebook founder and his wife, Priscilla Chan, has been greeted as much with scepticism as with enthusiasm. But this was no donation in the traditional sense. “They are making a personal nonbinding pledge to commit their resources in ways they think will improve the world,” said Boston College law Professor Ray Madoff. “That is to be commended.

The couple told their daughter that the shares would go to the Chan Zuckerberg Initiative, a new organisation, with two central goals – advancing human potential and promoting equality – focusing initially on personalised learning, curing disease, connecting people and building strong communities. “Today your mother and I are committing to spend our lives doing our small part to help solve these challenges. I will continue to serve as Facebook’s CEO for many, many years to come, but these issues are too important to wait until you or we are older to begin this work. If Zuckerberg had donated his shares to a 501(c)3 organization — which could be a public charity or private foundation — he could get a tax deduction equal to the current value of the shares, up to a certain percentage of his annual income. In 1956 he moved to New York to work as an arbitrage trader and gradually became the world’s wealthiest hedge-fund manager, earning a reputation for bold trades. Unlike traditional philanthropists, he is not making a donation to charity or setting up a nonprofit foundation, which would be exempt from tax but restricted in what it could do.

Both have dedicated billions of dollars to charity and seem genuinely committed to social causes, including education reform and health care in Africa. Instead he is establishing a limited-liability company, or LLC, which can invest in businesses and make a profit, as well as funding nonprofits, engaging in lobbying and running political ads. In a Facebook post on Thursday Zuckerberg said that using an LLC would give his initiative more flexibility, adding that any profits it made would go back into the initiative. Azim Premji is chairman of Wipro, India’s third-largest exporter of software services, and is regarded as a pioneer of the country’s IT-outsourcing industry. Zuckerberg said he will control the voting and disposition of any shares held by the LLC, and said he plans to sell or gift no more than $1 billion worth of Facebook stock each year for the next three years.

In 1966, after the death of his father, he cut short his engineering studies at Stanford University and took over the family’s vegetable-oil business. More than a decade later Premji saw the exit of IBM from India as an opportunity to diversify into computers and establish international partnerships. He believes the focus on the vehicle Zuckerberg has chosen is misplaced, describing the use of LLCs for philanthropy as “the latest fad” favoured particularly by entrepreneurs, but one that can help donations to work more effectively. He founded the not-for-profit organisation the Azim Premji Foundation in 2011 to provide universal primary education in India and has since become the chancellor of Azim Premji University, a private autonomous institution that aims to make significant contributions towards a just, equitable and sustainable society. And there are significant required disclosures for private foundations, said Aaron Dorfman, executive director of the National Committee for Responsive Philanthropy.

What is the future that these people are creating?” Schervish says. “And the major question for them is the same question they have in their business. A foundation “has to disclose all of its grants, the salaries of officers and key employees, all of its investments, if it gets new contributions.” A private foundation also must spend — on grants and eligible administrative expenses — at least 5 percent of its endowment each year or face a penalty. And they’re going to bring their entrepreneurial creativity to address areas where people didn’t even know there was a need, such as Facebook, maybe a latent need. Because what Chan and Zuckerberg are doing structurally — using their enormous wealth to drive social change — is not all that different from what Adelson or the Kochs, or any other member of the supposedly “bad” one per cent do when they donate to Republican causes or fund things like pro-pipeline lobbies. “I think part of it is that people who talk about it and write about it (the one per cent) are more sympathetic to the goals of the ‘good’ billionaires,” said Rogers, who is writing a book about billionaire philanthropists. The near-consensus within big philanthropy in the United States in favour of the charter-school movement has, for example, persuaded many cash-strapped cities to agree to turn public schools into charter schools, despite thin evidence that they are more successful. “They are capable of extraordinarily important and careful accomplishments, effective and significant accomplishments.

And they are equally endowed with the potential to disrupt and carry out policies that may not be good for the society.” Kieran McLoughlin, president and chief executive of the Ireland Funds, which raise money around the world for Irish causes, says donors are no longer content to write a cheque and hope that good things happen. Instead of working to replace public-sector activity or to lean on policymakers, he says, philanthropy at its best can support democratically endorsed public policy objectives. Zuckerberg gave 18 million Facebook shares to his donor-advised fund at the Silicon Valley Community Foundation in 2012 and contributed an additional 18 million in 2013. The couple also founded the Giving Pledge, with Warren Buffett in 2009, to encourage the world’s richest individuals and families into committing to philanthropy.

U2 and ourselves as private philanthropists could take that risk. “Now the programme has been proven, and 26,000 kids across the country are benefiting; 330 jobs have been established. In an interview with Der Spiegel published in 2010, German industrialist Peter Kramer called massive donation pledges, like the kind made by Buffet, Gates and Zuckerberg, “counter to the democratically legitimate state.” “It is all just a bad transfer of power from the state to billionaires,” he said. “That’s a development that I find really bad. It can be an immediate response to a disaster, a famine or a tsunami, or homelessness, closer to home,” he says. “So the Irish have the inclination to give.

What legitimacy do these people have to decide where massive sums of money will flow?” “But I think it comes at the cost of a truly equal civic life,” he said. “So it’s ultimately kind of a dual-edged sword … It’s more power in the hands of elites, but some of those elites have really great ideas.” The only difference between a charitable donation and a philanthropic donation is that a philanthropic donation is ongoing, that one makes a commitment over a longer period of time to support a particular cause. “We’re seeing it in the mental-health arena in particular.

The Cystic Fibrosis Foundation invested about $150 million in Vertex Pharmaceuticals to research the lung disease in exchange for royalties if it found a treatment. Schervish is not sure if giving most of his money away will make Zuckerberg a better person, but after a lifetime of researching philanthropy he is certain that it will make him a happier one. “The root word for philanthropy is philia. Omidyar “wanted to have complete flexibility to find great entrepreneurs whether they are working in a for-profit or not-for-profit,” said Will Fitzpatrick, general counsel for the Omidyar Network, the umbrella for both organizations.

The LLC has also invested in Bridge Schools International, which is creating for-profit primary schools in Africa. “Bridge wants to attract enough capital to scale (up). Schervish says that he has heard philanthropists, lower-end givers and the ultra-wealthy all say: “I am convinced this does more for me than it does for the people I’m helping.” That poses a challenge to traditional charities, which “are always worried about where the next dollar is coming from.” One fear is that some things can’t be fixed with a for-profit approach. “And some things are never going to be sexy enough to get the attention of Silicon Valley billionaires,” Dorfman said. Another concern: Wealth inequality is at its highest levels ever, he added. “To what extent do we want our wealthiest citizens to be exerting this kind of influence on public policy and public priorities?”

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