Matthew Bishop, Chief Business Writer and U.S. Business Editor at The Economist, was introduced by Professor Ray Horton in a talk to MBA students about the economics of philanthropy and his new book on the subject due out next Spring. This event was sponsored by the Bernstein Leadership & Ethics Board and the Media Management Association.
Referring to leaders including Bill Gates, an ardent reader of The Economist who donated $1.2 billion to eradicate malaria in 2005, and Mayor Bloomberg, who plans to spend an equally large amount of his personal fortune to eradicate smoking worldwide, Mr. Bishop stated that a change in philanthropy has occurred from the heydays of the New Deal/Roosevelt Age of Philanthropy. This “new age-style” philanthropist looks at philanthropy where the results are specific, measurable and global—in a similar parallel to how a stock market operates. And that means: efficiency, accountability, and results.
This trend doesn’t just stop with the individual billionaire donor: Mr. Bishop sees an increasing number of for-profit organizations developing parallel nonprofit organizations that are run like their for-profit counterparts. Indeed, organizations like EBay Foundation, Soros Foundation, Goldman Sachs Foundation, and the Gates Foundation all follow this pattern, and Mr. Bishop predicts that more organizations are likely to do the same. The shift in our generation’s form of philanthropy parallels the for-profit world, with the formation of “social private equity firms”, “social entrepreneurs”, and “social venture capital firms.” His last special survey section in The Economist described the economic benefits and consequences of the, at the time, emerging private equity boom at a time when most experienced bankers had not yet fathomed the depth of variability. As a result, Mr. Bishop is something of a rock star in the world of forward-thinking publications about economics.
And speaking of rock stars and philanthropy, that brings us to Bono from the band U2. It seems the world cares very much about what Bono thinks and does. In 2005 a group of social venture capitalists decided to use a different kind of leverage than a leverage recapitalization or an LBO: “Bono-leverage”. At the World Economic Forum at Davos, Bono— along with other notables—enabled the country debt cancellation for a multitude of impoverished nations. Thus, an investment of $32 million yielded $55 billion worth of debt reversal.
How do business school students fit in? The time is ripe, in Mr. Bishop’s opinion, as philanthropic growth typically occurs during periods of economic dominance. In addition, Mr. Bishop states that there is a high demand for young, socially conscious innovators to develop the tools which many of the billionaire philanthropists can find in the for-profit world, but are hard-pressed to find in the nonprofit world. Specifically, there is a need for measurement tools like a global stock market for social causes and a global rating system for social organizations, perhaps similar to Moody’s highly-recognized system in the for-profit world. Mr. Bishop thinks that today’s MBAs are up to the challenge. Also look out for a new social enterprise elective course that is being developed for the fall semester, which will examine topics in strategic philanthropy.