Understanding today’s philanthropists

When Andrew Ross Sorkin questioned, in the New York Times on 29 August 2011, why Steve Jobs, Mr Apple, was not a prominent philanthropist, he raised some important questions around philanthropy and the role of business and the business entrepreneur.

Back in 1985 in an interview published in Playboy (apparently there are articles!), the ever prescient Steve Jobs spoke about philanthropy. In doing so he gave us vital clues as to how many "millionaires and billionaires" approach the whole notion of social impact. Jobs said:

….in order to learn how to do something well, you have to fail sometimes. In order to fail, there has to be a measurement system. And that's the problem with most philanthropy–there's no measurement system. You give somebody some money to do something and most of the time you can really never measure whether you failed or succeeded in your judgment of that person or his ideas or their implementation. So if you can't succeed or fail, it's really hard to get better. Also, most of the time, the people who come to you with ideas don't provide the best ideas. You go seek the best ideas out, and that takes a lot of time.

It is this assessment of philanthropy that is behind the quest for measurement and evaluation. It is driving innovation in the social sector and making all sectors of society rethink how to make a real difference for the benefit of the community.

Last year Carlos Slim Helú, the Mexican telecommunications billionaire, defended his lack of philanthropy and his refusal to sign the Buffet/Gates US Giving Pledge. "What we need to do as businessmen is to help to solve the problems, the social problems," he said in an interview on CNBC. "To fight poverty, but not by charity."

In the Harvard Business Review (Jan-Feb. 2011), Harvard Business School Professor Michael Porter, together with co-author Mark Kramer, sought to redefine capitalism through a concept of 'shared value' stating that:

A growing number of companies known for their hard-nosed approach to business-such as GE, Google, IBM, Intel, Johnson & Johnson, Nestlé, Unilever, and Wal-Mart-have already embarked on important efforts to create shared value by reconceiving the intersection between society and corporate performance.

The principle of 'shared value' as defined by Porter and Kramer, involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do but at the centre. Porter and Kramer identified three key ways that companies can create 'shared value' opportunities:

• By reconceiving products and markets
• By redefining productivity in the value chain
• By enabling local cluster development.

So what does this look like? The Clinton Global Initiative for example is using market-based solutions to design and implement low-cost, high-performance technologies that prevent disease, improve health, and reduce poverty.

Closer to home we have GoodStart Childcare Limited, the not-for-profit organisation established by Mission Australia, the Brotherhood of St Laurence, the Benevolent Society and Social Ventures Australia, to acquire and run 661 ABC Learning Centres. They believed the demise of ABC Learning provided a once-in-a-generation opportunity to transform childcare in Australia – its quality, funding and educational outcomes. The transaction to acquire the ABC Learning Centres was undertaken with the assistance of a $15 million medium-term loan from the Australian Government, along with debt financing from the NAB and additional support from a range of private investors who have provided 'social capital'.

Understanding these principles of "shared value" is critical. Today's philanthropists are seeking solutions through social innovation and public policy ideas that recast wicked issues for systemic change. They are looking for ways to fund and leverage their own resources through research, advocacy, networks and collaboration. They are seeking to solve the problems society faces not by themselves but through multi-faceted cross-sector partnerships.