So… who’s your billionaire?

“So, which billionaire do you work for?”

This isn’t a question you hear very often in the NGO industry, though it probably should be. If you’re someone in the US who works on large-scale social change, there’s a good chance that your salary is paid by a billionaire – either a live or dead one. This is more true in the US, where tax rates tend to be lower, and social change organizations tend to be funded by personal philanthropy, rather than through taxation and government largess, as they often are in Europe.

Me, I work for two billionares – one live, one dead. The regional editors and translators who work on Global Voices are supported by a gift from Reuters – Rebecca and I have fellowships at Berkman that are supported in part by a gift from the MacArthur Foundation. According to the MacFound website, John D. MacArthur “was one of the three wealthiest men in America at the time of his death.”

When not working on Berkman projects, I consult for Open Society Institute, the foundation established by billionaire financeer George Soros. I serve on the sub-board that oversees OSI’s Information Program, and I periodically consult on other IT-related issues.

Here’s the difference between live and dead philanthropists: no one knows what the dead ones think. Would John D. MacArthur approve of a fraction of his wealth going to support our efforts to call attention to bloggers in developing nations? I have no idea. The program officers of the foundation are, I’m sure, influenced by the wishes and instructions MacArthur gave when he and his wife were alive… but I’m also sure that they’ve had to make thousands of decisions based on general intuition about the goals and priority of the foundation.

We make a lot of decisions at OSI based on the idea of supporting open societies, an idea articulated by Karl Popper and further developed by Soros in the eight books he’s written. Every so often, we discover that we’ve voted to fund a proposal that Mr. Soros doesn’t think advances the idea of Open Society. This usually doesn’t mean the funding is pulled… but it does mean that we hear about it. Working with a live billionaire means that the priorites of a foundation can and will change, which can be disconcerting for the people who spend their lives trying to better people’s lives in accordance with their understand of the principles articulated by the funder.

In the next few years, a lot of people in the NGO sector in the US are going to start working for billionaire Bill Gates, the world’s wealthiest man. His foundation, the Bill and Melinda Gates Foundation, employs some very, very smart people (including some friends of mine) and does amazing work in public health and education. With an unprecedented gift of $30 billion by Warren Buffet – the world’s second wealthiest man – to the Gates Foundation, the foundation now has $60 billion in assets.

It’s hard for me to get my head around $60 billion. Discovering that it’s the gross domestic product of Bangladesh – a nation of over 144 million people – doesn’t really help. (Constant USD, not PPP, for the economists out there.) But here’s a way I’ve found useful to think about it:

Foundations, under US law, suffer tax penalties if they don’t distribute at least 5% of their assets per year. This means that the Gates Foundation will need to give more than $3 billion a year to avoid penalties, public condemnation and other bad things. And that’s harder than it looks.

OSI gives about $400 million a year in grants. To oversee those grants – deciding which applications are worth funding, making sure the grantees do the work they promised, reporting the results, coordinating with other funders – OSI employs several hundred people. (I don’t know the exact number – I do know that the meeting I attended two weeks ago, which featured many, but not all, senior staffers and board members had about 300 attendees.)

The Gates Foundation is going to give roughly ten times that much money every year.

Now Gates and OSI give money very differently. Our program at OSI gives lots of very small grants – many under $5,000 – and very few “big” grants – “big”, for us, means “over $100,000”.The Gates Foundation has been making very large grants, especially on issues of public health – $22.6 million for sleeping sickness, $8.6 million for AIDS testing, and so on…

With twice as much money, the foundation will start bumping up against some interesting problems. Many organizations who work on AIDS have observed that organizations in developing nations don’t have the capacity to absorb the amounts of money foundations like Gates want to put to work. In other words, everyone wants to tackle AIDS in Botswana… but giving twice as much money to an organization in Botswana may not mean twice as much work. Organizations don’t have the accounting or computer systems to track the money. Trained nurses and health aids aren’t available for hire. Corruption – by governments and individuals – can become a major problem.

NGOs respond to this problem by engaging in “capacity building” – basically, this is code for making nonprofits more effective. This can require a great deal of handholding… which requires people who work for the foundation who can hold those hands. Yes, Buffett’s gift means that the Gates Foundation will give more large gifts to universities to support basic research on vaccines… but it also likely means that thousands of people, in the US and in developing nations, will work directly or indirectly for the Gates Foundation.

Warren Buffett could have set up one of the world’s largest charitable foundations with the $30 billion he gave the Gates Foundation. The foundations run by his children – which he gave single-digit billions to – are already large and relavent funders around important issues like reproductive choice. That he didn’t start his own foundation reveals two things about Mr. Buffett – he’s a remarkably humble billionaire, and he believes in the value of live billionaires.

The Gates Foundation has already done very impressive work. With Bill Gates retiring from Microsoft and turning his attentions to the foundation, I suspect it will get even better. My suspicion is based on the fact that I think OSI is so effective in no small part because it’s got a live funder, who can change his mind, deciding to focus on certain issues and stop focusing on others. By placing his trust in Gates, Buffett is making the decision that a foundation headed by a very smart software guy can do philanthropy better than one headed just by professional philanthropists.

I think that OSI has done some pretty amazing work in the past two decades, helping independent voices in repressive societies get heard and become politically influential. But the Forbes list of 700+ billionaires is a useful reminder that Soros is far from the only person out there capable of using his funds for social change. Mr. Soros ranks 71st on the list with a net worth of $7.2 billion. What are Sergey Brin and Larry Page going to do, with $12.8 billion each, when running Google’s no longer a challenge? Will Larry Ellison get sick of buying fighter jets with his $16 billion and start focusing on his foundation? Is it possible that Gates and Soros may share a common goal – getting living billionaires interested in the tremendous challenge of supporting social change through philanthropy?