Silicon States

by Lucie Greene

  Bill Gates is famously a big fan of “The Gospel of Wealth.” “The difference is the economy he’s operating in,” says Dorfman. “Carnegie took on education with libraries, Rockefeller looked at health in the South. They could do so with an empty playing field as federal government was nonexistent in that space. They were able to assume roles to engage institutions in a way that hasn’t been done before, except in the developing world, which is why some are now attracted to health and education there.”

  As befits Silicon Valley in general, they are not shy about their donations. All are highly public in their nature. William Hewlett and David Packard, who cofounded Hewlett-Packard in 1939, were both very active in philanthropy but lower-key about their gifts. Similarly, the two largest donations in 2016, of $500 million each, came from Nike cofounder Phil Knight and his wife, Penny, and investor Nicolas Berggruen. Knight made his donation to the University of Oregon for a center for scientific research (unusually, this did not make the headlines). Billionaire Nicolas Berggruen, a fellow in the tech community, donated to his own public policy think tank, the Berggruen Institute. Yet barely an iota was mentioned in the press.

  One thing that defines tech’s new philanthropic focus is its entrepreneurial approach to solving problems in a nimble, impactful, and sustainable way. Charities are encouraged to be like businesses. Hence, much of the terminology around social-good initiatives includes references to funds, ventures, and business opportunities, with an emphasis on solving problems rather than simply alleviating them.

  “Silicon Valley is rejecting traditional forms of philanthropy,” agrees Dorfman. “Both the Chan Zuckerberg Initiative and Laurene Powell Jobs have chosen limited liability companies (LLCs), rather than private foundations. This is a trend that is going to continue, and I think they’re doing it for a number of reasons. One is a strategic reason as it gives them more flexibility for what kinds of things they can invest in. It allows them to invest in for-profits and give grants to nonprofits.”

  In response to Donald Trump’s denials of climate change, Silicon Valley is once again taking the lead in a time of government stasis. Bill Gates announced the launch of Breakthrough Energy Ventures, a $1 billion clean-energy fund, with backers including Jack Ma and Jeff Bezos. The fund aims to invest in the next generation of energy technologies. Rise, a new $2 billion social-impact fund, is another example. It was launched in 2016 by William E. McGlashan Jr., a partner at private equity firm TPG Growth, which invested in Uber and Airbnb. Board members and investors include Bono, Jeff Skoll (the first full-time employee of eBay), Laurene Powell Jobs, Richard Branson, and Reid Hoffman.

  There is the continuous thread, and comfort, of profitability and philanthropy. In fact, more than compatible, they’re seen as beneficial. “What you’re seeing is a concept with blurred boundaries,” says Soskis.

  This is also seen in Gates’s grander philanthropic style, which has been termed “philanthrocapitalism”—using economies of scale and entrepreneurialism to bring resources to people in Africa, and make a profit, while also (critics say) throwing your weight around.

  Bridge International Academies, a startup supported by Bill Gates and Mark Zuckerberg, is a good example of this approach in action. It provides cheap, internet-based mass education in Africa. Tech and market forces demonetize the offer and make it accessible, but the scheme also makes money because of its scale. There are now 400 Bridge International Academies in Kenya and more are coming. The company aims to educate 10 million children in Africa and Asia whose families earn less than two dollars a day, and it will make money with a standardized, internet-based education model. It uses tablets to deliver lesson plans to teachers. Economies of scale mean it charges just six dollars per month, per pupil. Its founders have estimated it could be worth $500 million in ten years, and Zuckerberg has invested $10 million in the company.

  But there’s a reemergence happening of late, too, in response to discomfort—ironically—about the Wild West gig economy, where benevolence blurs with simply being a fair employer. Cooperative rideshare app Juno, for example, set out to rival Uber by charging a lower commission and offering drivers equity. It touted itself as the driver-friendly car app. (This has taken a different turn of late. After the company was sold in 2017, according to Bloomberg, drivers were told their stock was void.) The principle of the original Juno is interesting to note though, and surely has potential to become a growing trend as consumer awareness evolves about the gig economy and its predication on cheap labor.

  In fact, many of these big philanthropic endeavors could be read as somewhat ironic when one considers the much-documented socioeconomic divide in the area surrounding Silicon Valley and downtown San Francisco.

  People have been quick to zero in on the fact that Silicon Valley’s philanthropic launches have largely been categorized as LLCs, thus not requiring them to disclose their grants or any information to the public, and preventing the public from examining, questioning, or challenging their acts. LLCs allow them to take a more entrepreneurial approach, they say.

  LLCs are even less transparent than the philanthropic foundations whose lack of accountability has been so criticized. “It’s much worse because it’s a private company,” says Megan Tompkins-Stange, pointing to familiar issues with dark money and nonprofits in the United States and with Super PACs (independent expenditure-only committees permitted to raise unlimited sums and distribute these sums as they choose). “Foundations at least publish their 990 forms, their tax forms, and that sort of thing. In a way, foundations are kind of Boy Scouts compared to the LLCs and the impact investors in terms of their transparency.” This also gives them the ability to weigh in on policy without accountability: “It enables them to do more lobbying and more investing outside of nonprofit grant-making,” she says.

  Silicon Valley focuses on measurable impact and solutions. “It’s very clear that when it comes to philanthropy, this group is not interested in institutions but ideas. They go by ‘problems that can be solved,’ which are research based. They try to find problems that are amenable to tech solutions,” says Soskis.

  The young age of the current entrepreneur crop has also affected the way Silicon Valley embraces philanthropy. “There’s a tighter connection between the way they make money and the way they give it away,” Soskis explains. “That’s the defining characteristic, and it is embodied in the Chan Zuckerberg Initiative. There’s no difference between nonprofit and for-profit. It also closely aligns entrepreneurship to performance with the idea of making money and giving it away at same time.”

  The idea of cause is evolving in Silicon Valley’s approach to philanthropy on a broader scale, beyond help for the poor and elderly. Education—not as a commercial opportunity, but a cause to fix—is being addressed, as we saw earlier. They are now looking at sustainability; connectivity and the belief that the internet is a human right that unlocks economies; and getting more women and ethnic minorities into STEM subjects. Google.org’s Girls Who Code initiative is a prime example of the latter. All this, however, along with sustainable technology, can be seen as simply more business opportunities. Many also go hand in hand with endeavors such as Internet.org that blend social good with commercial ends—that being, to bring many in developing markets to the world of Facebook.

  The Industrialists of the nineteenth and twentieth centuries built infrastructure to facilitate their businesses, which wound up having a wider positive impact for people, and in many instances were nationalized. They were engaged in philanthropy. The difference is that these were approached separately, in silos, not presented as one and the same as profit-making. Institutions sat on one side. Businesses, the other.

  There’s also a key difference in the way wealth is created now. Carnegie might have built libraries, but they were later nationalized and did not become ongoing wealth generators in the form of consumer behavioral data. On that basis, anything in this era can be a revenue stream. So while ultimately doing good, Si
licon Valley’s altruism is—and will continue to be for a long time—firmly symbiotic with its self-interest. Technology is always wrapped into the solution. “Silicon Valley has taken on philanthropy but from a different orientation,” says Soskis. “It’s engineering and tech driven. Carnegie and Rockefeller understood engineering, but they weren’t engineers. Most of the folks in Silicon Valley have expertise in engineering, and you can tease that out in how you approach problems.”

  They are using tech in some novel ways, too. Jack Ma has started employing blockchain technology—the decentralized, instantly updated software platform—to monitor charitable donations made by Alipay users, tracking their donations with the Ant Love charity platform in response to a murky charity market.

  Artificial intelligence (AI) and sensors are also seen as tools to effect change with better systems. No doubt more blockchain charity solutions are to follow. Virtual reality devices have been employed by charities and described as “empathy machines” for their transformative, immersive properties. The Clinton Foundation launched a VR experience that transported people directly to the African villages it was helping. Similarly, Charity: Water founder Scott Harrison delivered a keynote speech at Web Summit 2015 about VR as a transformative, empathetic engine, taking people to the heart of causes and their impacts. The charity has partnered with YouTube celebrities as well as used GPS mapping and real-time donor updates. It is also successfully delivering remote PTSD therapy to soldiers.

  This is one of the most exciting aspects of Silicon Valley philanthropy. Immersive technologies from augmented reality to virtual reality can make causes more inspiring and create new avenues for storytelling. Real-time data analysis can show progress. Meanwhile, all of Silicon Valley’s arsenal for efficiency and making purchases simpler has immense potential for maximizing charitable donations, while also potentially saving those charities money. Here, tech can be a force for good.

  Disrupting Charity

  Does philanthropy need to be entirely disrupted?

  There’s no doubt traditional philanthropy has faced some scrutiny in recent years, notably an influential and critical essay by Gara LaMarche, published in the Atlantic in 2014. LaMarche is the president of the Democracy Alliance, a network of liberal donors who coordinate their political giving. He previously served as president and CEO of the Atlantic Philanthropies. LaMarche argues that Big Philanthropy has a disproportionate impact on government policy, while enabling tax evasion. He adds that there is little emphasis on impact and accountability. He cited the outcry over an Obama administration proposal to cap the deductible income tax for charitable contributions at 28 percent (which would only affect the wealthiest donors) in order to fund the Affordable Care Act. The health-care bill, which needed to be cost-neutral, was necessarily funded by making cuts elsewhere and, he says, “the leadership of American philanthropy jeopardized health-care reform in order to let rich people shield their money from taxation.

  “What that situation made plain to me was not just that philanthropy is quite capable of acting like agribusiness, oil, banks, or any other special-interest leader when it thinks its interests are jeopardized. It helped me to see that however many well-intentioned and high-minded impulses animate philanthropy, the favorable tax treatment that supports it is a form of privatization,” he writes. “Money that would otherwise be available for tax revenue that could be democratically directed is shielded from public control for private use.”

  LaMarche argues that the original intent behind tax breaks for philanthropy was to enable the kind of risk-taking that the public sector and government weren’t able to take on, and also to take a long view on issues made possible by lack of shareholder scrutiny. In most aspects, he says, it is failing. He also takes aim at the lack of diversity and distortion of focus as a result. Big Philanthropy faces too little scrutiny.

  The Bill & Melinda Gates Foundation, a crossover between traditional and hacker philanthropy, was included in his critique. In 2014 it was four times bigger than any other philanthropic organization. “Not only does it make a difference to others in the fields it engages in—it can virtually define the fields and set the policy agenda for government as well as philanthropy,” LaMarche says on the subject of its scale. Gates has argued that size gives more impact.

  LaMarche further points out that such criticism is not new: “When the titans of their day, Andrew Carnegie and John D. Rockefeller, sought to set up trusts to spend some of their vast wealth for charitable purposes, Frank P. Walsh, a progressive lawyer who chaired a congressional inquiry into industrial relations, called the new Rockefeller Foundation and Carnegie Corporation ‘a menace to the future political and economic welfare of the nation.’ In that period, one hundred years ago, the foundations’ endowments surpassed what the federal government, in the pre–New Deal era, spent on education and public health. Walsh called for the ‘democratization of private benevolence’ through more progressive taxation.”

  Tompkins-Stange’s recent book, Policy Patrons: Philanthropy, Education Reform, and the Politics of Influence, looks at four major U.S. foundations that invest in education, their influence on public policy, and the effects of this on local communities and their relationships. The book’s unique approach is that it features lengthy, highly candid thoughts and observations given anonymously by foundation insiders, further reinforcing the lack of transparency in big philanthropic foundations, the most pertinent being the Bill & Melinda Gates Foundation. “I don’t think anyone would have talked to me and said anything of value if they were on the record,” she says. “It was really striking how different the reflections were, how candid they were, when people were given that mask.”

  And the biggest revelations? “Someone talked about the rickety evidence around strategic philanthropy and how people don’t necessarily have the most rigorous evidence-based processes around some of the projects they fund,” says Tompkins-Stange. “That led me to really want to know more about how research is marshaled toward providing empirical justification for certain policy interest or certain ways of framing policies that foundations are interested in and funding . . . I had never had someone in an elite foundation really admit that.”

  Tompkins-Stange also found that many major foundations are not simply funding education but trying to influence policy. They are, she explains, “not just funding certain things that they hoped would have an impact on policy, but actually very intentionally and strategically undertaking agendas to set the course of policy according to their preferred models of social order or social change.” Though, she adds, the Gates Foundation has started responding to such critiques of late.

  Silicon Valley’s solution-oriented approach to philanthropy in general is problematic. After all, what of life’s most complex challenges have had absolute “fixes” that worked? “The Sean Parker–Silicon Valley mindset is very indicative of what I call technical framing, or the technical mindset. It’s like, ‘OK, we’ve put a certain amount of capital toward a problem and we will get a solution,’” she says.

  Taking a moment to read LaMarche’s comments and his criticisms of big traditional philanthropy is quite revealing, especially when one considers Sean Parker’s characterization of Silicon Valley’s shinier version.

  Many problems LaMarche raises are eerily similar to Silicon Valley’s practice of philanthropy. LaMarche critiques Big Philanthropy for not being diverse, for not always addressing the right issues, and for distorting the problems that are solved as a result. He says foundations wield too much power over government while not being transparent, not facing enough criticism, and trying to influence policy. In many ways the problems of Silicon Valley’s version, like the scale of its donations, is Big Philanthropy x 100.

  “There is a real risk as more and more philanthropically minded wealthy people seek to make the world better by using the power of markets,” warns Dorfman. “The risk is that the causes that can’t be helped through markets will be short-changed and get
left behind, and that there will be a lack of investment available for them. Traditionally, nonprofits are doing things that meet a societal need that governments and the private sector are not meeting. I am a fan of using investment capital to make the world better as well, and we encourage foundations to devote some of their resources and their investment capital to that approach, but there is no substitute for grants to nonprofits doing good work. I worry that some of the newer donors may be overlooking that.”

  Indeed. Silicon Valley’s empathy gap was pointed out in a widely circulated essay for The New Yorker written by True Ventures and GigaOM founder Om Malik in the wake of the 2016 presidential election, examining Silicon Valley’s collective shock at the election of Donald Trump. “Silicon Valley’s biggest failing is not poor marketing of its products, or follow-through on promises, but, rather, the distinct lack of empathy for those whose lives are disturbed by its technological wizardry,” he writes. “Perhaps it is time for those of us who populate the technology sphere to ask ourselves some really hard questions . . . My hope is that we in the technology industry will look up from our smartphones and try to understand the impact of whiplashing change on a generation of our fellow citizens who feel hopeless and left behind.”

  “I worry about the Silicon Valley approach,” reflects Tompkins-Stange. “It’s very much a white, wealthy, twenty-five-year-old man’s approach, with a real blind spot toward issues of race and gender, which I guess makes sense given that’s the average person working in Silicon Valley.” Problems that are easily solvable are not necessarily the deep structural ones, “and that’s what I mean about race, class, and gender,” she says. “I think if you’re not surrounded by other people who are different from you, people who maybe have grown up in poverty or who are a member of a nonwhite identity group or population demographic, of course you’re going to have a blind spot . . .”