Peter Buffett, Warren Buffett’s son and chairman of the NoVo Foundation, recently posted an opinion piece for the NYT about his frustrations with philanthropy. He suggests there is a problem with expecting the social sector to solve problems the corporate sector helped create (funded partially by money made in the process).

Matthew Bishop, who is with the Economist in NY, took issue and responded on his blog Philantrocapitalism..

Both posts are worth reading. I very much like the idea of philanthrophy as risk investment in areas that are important and maybe don’t attract typical risk capital. The Shuttleworth Foundation fellowship, which helped start P2PU, is an excellent example for risk philanthropy. But ultimately I fall on the side of Peter Buffett. And I feel the criticism focuses too much on the window dressing, and not enough on the core of his arguments.

For example, the point he makes about “one hand takes, the other gives back (to feel better)”. Mr Bishop suggests that is not the case and lists Bill Gates and Warren Buffett to make his point. But even looking at Microsoft, there is a direct link between keeping computer software artificially high to extract rents from African governments, and limiting how many potential innovators in Africa were able to use computers in the 90s. A more philantrocapitalist approach might have been to co-design the software to be more suitable to users in developing countries, implement more flexible pricing schemes, and build capacity in Africa for software development. All of those initiatives would have slowed the growth of MSFT and reduced its profitability, but they would have given African innovators a leg up – towards solving their own problems today.

I can think of many other examples where this is the case. The financial cost of international remittances is a transfer of wealth from the poorest (who are sending money home to their families) to some of the richest (the owners of the banks). Rather than praising some of them to then give back money, we should push them to do things that reduced their income now – and create opportunity for poor people to solve their own problems. Another example are telecommunications companies who by extracting rents from fast growing African markets, are effectively limiting access to the Internet. Oil companies who use any and all means to get access to natural resources in West Africa. All of this is much more complicated than I make it out in 2 paragraphs. Clearly it is not simply the work of some greedy foreigners.

However, it is an important enough point to pay attention to for those interested in understanding and improving philanthropy.

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