Billionaires to the rescue?

Messy, fun and spontaneous, so is Matthew Bishop. His day job includes heading The Economist’s New York bureau and editing the magazine’s U.S. Business section. By night he is the acclaimed author of The Road from Ruin: How to Renew Capitalism and Put America Back on Top, with Michael Green, and Philanthrocapitalism, a lauded book about how philanthropy can change the world.

Walking into Bishop’s New York office is like entering an archive that no one has cleaned in a long time. Documents seem to appropriate walls, the desk, chairs and even the floor. It’s almost as if you were looking at an x-ray of his brain, full of facts and historical trends. Those who work with him say his intelligence is only surpassed by his disorder. And they say he’s brilliant.

Figuring out the clutter has not been a problem for Bishop. He has authored several of the magazine’s special reports, on topics as diverse as emerging economies, the changing face of philanthropy, the private equity boom and capitalism’s ailments.

Sitting in The Economist’s conference room in New York, Bishop took a break to talk with PODER. He didn’t smile much, despite having excellent British humor, but let’s face it, what matters is learning from his impeccable mind, which is bright in the midst of disorder. The following is an edited version of that conversation.

[PODER ENTERPRISE] How did modern philanthropy start up in the United States and why hasn’t it spread to Latin America?

[MATTHEW BISHOP] Philanthropy was very much part of American culture. When you had the first period of massive wealth creation at the end of the 19th century there was really obvious social inequality. This was a time when communism was taking hold. There was a real sense of, ‘Could society survive that kind of inequality?’ So the more enlightened people who made money, like Andrew Carnegie, said ‘We can’t.’ And Rockefeller said, ‘We can’t just sit here and hold the money, we have to invest in making society sustainable and deal with the problems of inequality.’ So they did, and they created the modern large endowment foundations. The tax laws were changed to make that possible.

I think it’s why you are now seeing a new wave of philanthropy. The wealth creation that we have seen in the past 25 years has given people a lot of money and at the same time the world is going through all sorts of very disruptive changes. We are seeing inequality. We are seeing climate change. The Internet and global news have made us all much more one world and so anyone who has got resources and hasn’t got his head buried in the sand knows there are a lot of problems out there. The example of people like Bill Gates is making them realize that they can’t just sit and watch these problems. They should actually do something about it.

All those different factors are coming together at once, and I think those are true of Latin America. In Latin America you probably have less entrepreneurial wealth creation and more of the wealth is wrapped up in the elite businesses. But they must be aware as they look out at other parts of the world where there is entrepreneurial wealth creation that they could do better on that front, and at the same time they must be aware of Chávez-like movements across Latin America that are threatening wealth creators. If they have any sense of their enlightened self-interest they should start giving a lot more money away and play a more active part in providing an alternative to the Chávez world view.

[PE] What should wealthy people do then?

[MB] We actually sent out this thing that we call, ‘The Good Billionaire Guide,’ which has four rules that we think the public should apply when judging whether someone is a good billionaire or not. The first is that they made their money in legitimate ways, and the second is that they pay a reasonable amount of taxes. If you are paying less of your wealth in income tax than poor people, then you are probably not being a good billionaire. Thirdly, they should engage in philanthropy and they should be giving away more money than ordinary people who haven’t got as much money as them. And fourthly, they should be making an effort to give to philanthropy to make a difference rather than just writing a check and getting a building with their name on it. I think Gates, for example, probably makes all four of those boxes. Warren Buffett as well.

[PE] Who is a better example of a philanthrocapitalist, Warren Buffett or Bill Gates?

[MB] I think they are both different. Bill Gates is a good example because he is actually giving his life as well as his money to this. It’s what he really cares about. You know he spends most of his day trying to figure out how to solve these problems. I think one of the good things that he is doing is challenging other business people [by saying] ‘You can use your business mind, you can use your entrepreneurial skills, to actually make a better world, not for just making money.’

Buffett is a good example in another way, in that Buffett doesn’t really have any great personal interest in spending his time doing good. He is more interested in making money and playing bridge and so he is saying that if you are someone like that, who doesn’t really want to get involved in all this, it doesn’t mean that you don’t give away your money, it just means that you spend a bit of time finding someone you really trust and get them to give away your money. I think there are a lot of people like Buffett out there who made a lot of money and just think they are going to leave it in their will or set up a foundation for when they die. But meanwhile the money is just sitting in the bank not doing any good. They could find other foundations that are good at putting the money to work and they could start giving much sooner.

[PE] Where does Latin America stand in terms of philanthropy?

[MB] I think philanthropy in Latin America might be starting to change in a way that it changed in places like the United States and Britain. Philanthropy, traditionally in most of the world, has been about charity, about giving to people who are in need, but without necessarily thinking about how do you change the situation fundamentally by addressing the causes of the problems rather than relieving the symptoms. So in America, for example, people like Bill Gates have set about trying to change the underlying problems of say the education system in America or the causes of diseases in the developing world by changing government policies, by working alongside companies to change their products. I think in Latin America people are only starting to wake up to the potential that philanthropy has to really change society.

[PE] Which country in Latin America is the most advanced in terms of philanthropy?

[MB] I think it’s more about particular individuals and particular organizations that are doing well. One of the organizations that we write about in the book is called Endeavor, which is a U.S.-based philanthropic organization that is about helping entrepreneurs grow their businesses by connecting them with wealthy people. It’s doing very well in Mexico. It’s doing very well in Brazil. It’s doing very well in places like Chile and Argentina.

Another organization we write about in the book is Compartamos Bank, which was started as a charity but has—with the guidance of Alfredo Hart, following his kidnapping in Mexico—figured out how to turn a charity into a for-profit business, which has meant that they have been able to get a lot more money to grow their business and help a lot more poor people. You are seeing a lot of the leading philanthropists in America and other parts of the world look at Compartamos as a model and say, ‘Well, can we look at other services for the poor that are currently seen as a charity, and figure out how we can turn them into businesses and therefore help far more.’