It's sad to see so much misplaced cynicism here. If the partners had decided to keep 100% of their carry (as is typical) and used it to buy a bigger house or jet or something, nobody would comment or care. Instead, they've pledged to give half to some of their favorite charities, and some of you are acting as if it's a crime against humanity. Put away your Ayn Rand books (or whatever it is that drives you to such opinions) and go make some money of your own. Perhaps you'll discover that Andreessen and friends aren't as foolish as you imagine.
I think some of this is a result of the startup rhetoric about all the companies trying "change the world".
If that were actually true, that all the effort and money going into startups was actually focused on changing the world, then wouldn't it naturally be better to reinvest the money into that system?
Of course the reality, as we all know, is that it's only sometimes about changing the world, and sometimes it's a game to see if you can do it and win.
And since that's the case, it probably is better to channel some of the money to people actually trying to change the world, assuming those organizations are as carefully selected as the startups that generated the money are.
First, thanks everyone for a fascinating debate on a complex set of topics!
I thought I'd see if I can add some context to some of the questions particularly about our own commitment.
I don't have a view that there's an either-or here on how money can be productively deployed. We have committed to contribute at least half of lifetime earnings from venture capital, in our lifetimes. This is similar to the Giving Pledge that Warren Buffett and others have signed (including John Doerr and Mike Moritz from our world). So there's no requirement that money be contributed to nonprofits now as opposed to later. Each of our GPs will make their own personal decisions, with their families, on timing. But this leaves open the opportunity for some of us to give more actively sooner (like for example Pierre Omidyar has done), whereas others might plow all of our earnings back into for-profit ventures now and for the forseeable future and become active donors later (as Warren Buffett himself did).
So don't think of it as money coming out of the for-profit cycle sooner than it would otherwise -- necessarily. (We did announce a collective $1 million cash donation to six area nonprofits today, but that's hopefully a small part of what we will be able to do over the long run.)
In my own case, my wife and I are active donors now, most notably to Stanford Hospital. But not at a proportion that prevents us from being major personal investors in each of our own venture funds, as well as investors in several other funds and various other kinds of businesses.
I also agree with the commenter that it's not like money vanishes when it goes to a nonprofit. Nonprofits spend money just like any other kind of entity, and that money gets recycled right back into the capitalist system.
Some changes are best made via a for-profit venture, and some aren't. I'm interested in both kinds of change, and that means that I'm involved in both worlds.
Zuck paid, what, a cool billion for Instagram? Elon spent $800 million, and has an orbital vehicle that can dock with the ISS. And SpaceX is actually profitable.
So, yeah, you can be for-profit and change the world. Or be for-profit and help people share photos. Changing the world is a pretty big grey area.
It's not yet clear which venture will have a greater impact on the world. People here consistently underestimate the significance of democratizing the media.
In general, I agree. In this specific case, I disagree.
I'll confidently bet that Instagram will be "integrated" or forgotten in a few years, relegated to the dustbin of ephemeral "one feature" companies that briefly caught on with hipsters before winning the startup lottery. Meanwhile, SpaceX will still be going strong, revolutionizing private space travel and space cargo delivery, and possibly have achieved tangible milestones toward the first manned voyage to Mars. One company is not much more than an iPhone camera app with a web backend for sharing, is cheap to do, and something that many thousands of developers could do well. The other is doing rocket science, costs hundreds of millions plus, and is staffed by a team of folks of a kind where few can do it well, if at all -- and especially, it now appears, also do cheaply. Humans had tons of pre-existing ways to share photos and "apply cool filters" before Instagram came along. Humanity has very few ways of getting into space (ie, rocket companies), and now SpaceX is one of them. And I respect the significance of democratizing media -- but I felt it was very well democratized in dozens of ways before & without Instagram.
And don't even get me started on Gmail. (kidding!)
Well put. I think monetary value and impact don't necessarily correlate. One could have an amazing, long-term impact on the world without it being reflected in 'price'.
Reminds me of some of the recent Valve stories, specifically the anecdote about Doom being the most installed piece of software [1].
[1] For those that didn't know this, see the post below and scroll down to 'Valve is different'
I'm not sure what these two things have to do with each other. Elon Musk's goals with SpaceX are entirely different than Facebook's goals with Instagram. No business purpose of Facebook's would have been served by building orbital vehicles. Facebook hasn't even gone public yet; the money we're talking about isn't yet Zuckerberg's to spend randomly.
Zuckerberg has majority ownership of Facebook shares; he has defacto control of whatever capital Facebook has available to it, whether it's "his" money or not. Was there not discusion that he didn't confer with Facebook's board before completing the Instagram purchase?
No: majority shareholders of corporations continue to owe fiduciary duty to the minority. This is obviously tangential to the real point, though. Google paid more than 12 SpaceX's for Motorola. Would docking with the ISS help with the Android patent problem?
While majority stockholders may not be fiduciaries, googling "duties to minority stockholders" suggests that they have some duties wrt minority stockholders, at least in some cases.
IIUC corporate officers are fiduciaries as well; hence, shareholder lawsuits. As CEO of Facebook, Zuckerburg could be liable for wasting Facebook's money.
This line of argument the last week or so has made no sense to me.
Whether you agree with him or not, Zuckerberg's motivation for Facebook buying Instagram was related to the business of Facebook. Elon didn't make PayPal or Tesla start a rocket division, he set up a completely separate venture with its own goals.
You have to understand though that "charity" is a word just like "education", "religion", "race", "child molester" that is a third rail. People will rarely speak out against the first 4 and nobody, with the exception of a defense attorney or possibly family will ever take the side of a person accused of the latter.
This seems a bit naive. One needs to continually generate resources to continue to be able to finically stomach bets on risky ventures (startups). It wold be the equivalent of a farmer giving away all his crops and not having money to fix the engine on his thresher the following harvest.
Dependent on the details this should be applauded. Although I think it would be much more interesting if they took part of their money and created grants for companies doing good in the world that would have trouble sustaining profitability.
> ...it would be much more interesting if they took part of their money and created grants for companies doing good in the world that would have trouble sustaining profitability.
That is a very interesting idea but I suspect hard to apply in practice. I'd love to see someone try.
One example is that a number of local VCs support our local physical bookstore Kepler's in that way (it would have closed long ago if not for their grants) -- they feel its presence makes the community a better place.
Yes. Rand does not just think that forced redistribution by the state is immoral, but also that private charity is at best morally neutral, and often wrong depending on the nature of the charity (particularly if it is "sacrificial", or is given in response to the needs or shortcomings of the recipient, which in my opinion describes most of the charity in the world today). Her fictional works perhaps lend themselves to a bit of interpretation on this point, but her non-fiction work is quite unambiguous.
I know many libertarians are in favor of private charity and consider it a virtue, and many of these same people are also fans of Rand, but they should realize that she disagrees with them on this point.
Libertarianism is about people being free to choose what to do with their money. If they choose to give to charity, light cigars with banknotes, spend it on blackjack & hookers, invest in space flight, etc., it's all their right to make that choice.
It isn't about the relative virtue of doing this or that.
I unfortunately can't find a reference (but I'm hoping someone else can!), but my understanding is that group conflict is often greater between those who have similar ideologies than between those of very different ideologies. For example, Emacs vs. Vi rather than Emacs/Vi vs. Visual Studio or Lisp vs. Scheme rather than Lisp/Scheme vs. everything else.
She was against people feeling like they had an obligation to self-sacrifice, but she wasn't against charity as the projection of one's own values [1]. A lot of people misunderstand Ayn Rand.
It's important to actually see it in context. I may not agree with her whole overall worldview, but there are parts that are good, and reading her actual words in context shows she's not really a lunatic or savage.
I can't actually see into their houses, so I'm just speculating that they have some Ayn Rand books, but I've noticed a strong correlation between liking Ayn Rand and thinking charity is bad.
The point is that those people who are most likely to have a negative opinion of this are the types that read Ayn Rand and quote her. It's not so much a statement about her beliefs (I could see this going either way, really), but a statement about the people who she inspires.
it's not foolish. it's just not the most efficient way to spend capital. look at it from the point of view of the LPs. A VCs job is to deploy capital and maximize return to it's investors. they should reduce their management fee and carried interest income, and give them back to the LP, or re-invest them and fund more start-ups/create more jobs.
My opinion on this would've been different if they said "I am personally giving 50% of my money to charity in perpetuity..."
The half they are giving away is money they would have otherwise taken as personal income, so it is in fact their own personal money.
The other thing you should understand is that top VC firms such as AH (or YC) are not capital constrained. Dumping in twice as much money won't produce twice as much innovation or profits.
> The other thing you should understand is that top VC firms such as AH (or YC) are not capital constrained. Dumping in twice as much money won't produce twice as much innovation or profits.
Having capital to invest in more start-ups reduces risks and increases the chances of the VC earning bigger returns. In order to invest in more start-ups, the firm needs top-notch people (partners, associates, etc.).
1. The best people are not going to join a firm that's giving away 50% of their management fees and carried interest income.
2. Not enough people & capital means
-Less investments, therefore more risks and less return.
-Less due diligence and monitoring of portfolio companies (again more risks)
> Having capital to invest in more start-ups reduces risks and increases the chances of the VC earning bigger returns.
That's true up to a point, but only up to a point. You hit the point of diminishing returns pretty early. I wish it were otherwise but there's 40+ years of history that support that theory.
It's not even that there aren't enough potentially great startups. It's that the venture business is a business that scales mostly with people. Each GP can credibly be a primary investor and board member in maybe 10-12 companies at a time. I don't think arbitrarily taking that number up to 20-24 would generate twice the returns, at least without the GP's head exploding in the process.
>It's that the venture business is a business that scales mostly with people.
I agree which is why I brought up the topic of management fees and carry. You need them both to pay for additional people in order to scale your business. (which you addressed in your other comment).
> 1. The best people are not going to join a firm that's giving away 50% of their management fees and carried interest income.
True, but that's not what we're saying. We're saying that the GPs as individuals are going to do that, for the income we would have received in any event. This doesn't affect how the firm allocates fees and carry, and doesn't reduce the incentive for anyone to join the firm who would have joined before.
As far as I can tell that's actually what they did say:
"We are delighted to announce that the six General Partners of Andreessen Horowitz, with our families, are all committing to donate at least half of all income from our venture capital careers to philanthropic causes during our lifetimes."
So here's what I don't get: If people give them money to invest, and they generat returns for the investors in a way that the investors are happy with, what does it matter what fees they charge? It is a mutually beneficial transaction. The investors make money, the fees make the company money. Now the company money that goes directly to the owners, rather than say direct expenses, is the owner's personal money. It is their profit from the transaction. This is what they are giving 50% of away.
The only way I can read your argument, is that the investment company should stop being generally profitable for the owners, and return more money to the investors. How does this make business sense? It would be like saying "Apple makes profit from selling iPhones, and just gives it away to shareholders. They should really bow to the customers and lower the costs and socialist bullshit to the shareholders". Unless of course Apple share holders are magical unicorns who deserve it, and the partners in a VC firm don't.
Now usually I don't do this, but: Who are you, jimmyvanhalen, to tell Paul Buchheit about "the most efficient way to spend capital", and how Marc Andreessen and Ben Horowitz should do their jobs? Since you apparently know so much about it, surely you top Paul's worth easily?
Capitalism is a system for transferring money from those who are bad at allocating capital to those who are good at allocating capital. That's the magic of it. It also implies that people like Andreessen most likely have an above average understanding of how to allocate capital :)
Doesn't make it any less a logical fallacy. Andreessen partners could wipe their asses with $100 bills. If someone with less money tells them that's a poor use of money, would you tell him clearly Andreessen knows better because they have more money?
If only this were a logic problem consisting of three boolean variables... But reality is complex, and so I do give some weight to authority. For example, if I had a question about evolution, I would automatically trust an answer from Dawkins more than one from Santorum, even if you think that's some kind of fallacy.
You are free to believe whatever you want, based on whatever criteria you want. But to argue that something is right or wrong because someone else has more money, has no weight.
Re-read yesbabyyes comment. It makes no argument other than "who are you", "they are famous and accomplished" and "they are rich." It's a poor argument.
Typically the fact that someone has more money would not be relevant, except in this case it's a discussion of capital allocation and a person (Andreessen) who is making a lot of money by being very good at capital allocation. It's like claiming that Michael Phelps's 14 gold medals should carry no weight in a discussion of whether or not he's a good swimmer.
> It's like claiming that Michael Phelps's 14 gold medals should carry no weight in a discussion of whether or not he's a good swimmer.
Not really. It's like Michael Phelp's 14 gold medals should carry no weight in a discussion of whether or not his butterfly stroke has room for improvement.
No one is arguing that Andreessan is not good at making money. If people were, then your analogy would be correct. People are arguing whether or not his money was put to efficient use in this specific instance (by donating to charity).
Having 14 gold medals does not prove to anyone that your butterfly stoke technique could not be better. Nor does earning a lot of money prove that you always make good decisions with money. Take my $100 toilet paper example. Earning a lot of money through good investments does not make using $100 for toilet paper suddenly unassailable to criticism. Does this make sense?
> Having 14 gold medals does not prove to anyone that your butterfly stoke technique could not be better.
Having 14 gold medals means that though his butterfly stroke might or might not need improvement, a random punk on the internet doesn't have the authority to make a judgement call.
> Nor does earning a lot of money prove that you always make good decisions with money. Take my $100 toilet paper example. Earning a lot of money through good investments does not make using $100 for toilet paper suddenly unassailable to criticism. Does this make sense?
No it doesn't make sense. Your $100 for toilet paper example is pushing the boundaries of ridiculous which doesn't have anything to with the topic under discussion.
People who haven't earned through investment preaching people who have made a fortune about efficient use of money, money which happens to be their personal money, is just sad.
> Having 14 gold medals does not prove to anyone that your butterfly stoke technique could not be better.
>> Having 14 gold medals means that though his butterfly stroke might or might not need improvement, a random punk on the internet doesn't have the authority to make a judgement call.
>>> the "random punk" is probably a swimming coach ;)
That's the point. The defense should be valid whether or not the identity of the critic is known.
>>>>> "Michael Phelps sucks. He doesn't know shit about swimming."
This criticism should be valid regardless of my identity and credentials?
>>>>>> That's not what I said. I said that the defense should be valid regardless of the identity of the critic.
I don't know what defense you are talking about, and who are these critics defending themselves from, and why are they talking about things they have no fucking idea about, and why do they think "I sometimes drown in my bathtub but my opinions on swimming are as valid as Phelps' because fuck, you can't appeal to authority Even PG agrees with me about appeal to authority being invalid."
All I am saying is:
Does winning 14 gold medals mean Phelps technique is perfect? NO
Does it mean a random punk on the internet can critic him? YES. Freedom of speech and stuff.
Will the opinion mean anything? FUCK NO.
Will it mean anything if the random punk happens to be a swimming coach? FUCK NO.
Will it mean anything if the random punk happens to be a former olympic champion or an olympic coach? IT MIGHT. There are no rules of thumb. Different things work for different people.
> I don't know what defense you are talking about, and who are these critics defending themselves from
The critics are not doing the defending. Let me break it down for you.
jimmyvanhalen criticized Andreessen Horowitz use of money as being a relatively inefficient, compared to re-investing or lowering their fees. That was the criticism.
yesbabyyes defended with "you are a nobody in the investment world" and "you don't have as much money as Andreessen Horowitz, so you don't know what you're talking about." That was the defense.
The defense to the criticism is invalid because (aside from other logical fallacies), it hinges solely on the identity of the critic (jimmyvanhalen) and his personal accomplishments, relative to the entity being criticized (Andreessen Horowitz).
A defense with substance, one that works regardless of identity or accomplishments, would have been an argument as to why donating all the money to charity is helping people more people than re-investing.
If a wealthy self-made person says something about how to make money, that's stronger Bayesian evidence for that actually being a good way to make money then if some random person says it.
Thanks, daenz. That's what "usually I don't do this" was referring to -- which is a lazy cop out, I agree. Usually I don't do that, either. My bad.
It may not make it better, but I think I did it because jimmyvanhalen's argument was, to me, so... Preposterous. As I understand him, he is basically arguing that if you feel that you have money to give to charity, you should give that to whomever gave you that money. I wonder what he feels about my, admittedly ridiculously small, donations to charity. Am I, too, wrong to give? Should I lower my fees and "give" that money to my clients instead?
Yeah, it's a difficult subject. People are passionate about money. But kudos for owning up to your post... I made a ad hominem awhile back and someone was kind enough to point it out, thought I'd pass around the favor :)
I take it you think one should donate to charity anonymously, but humblebrags are ok? ;)
I just wanted to add that I actually think wealth and investment accomplishments are somewhat relevant in this discussion, regarding your comment on fallacies. Especially given jimmyvanhalen's very strong opinions on what "a VCs job" is, what a16z "should" do, and his confused ending statement on that what they did would be fine by him if they did... Exactly what they are doing.
Seems that over the last several years or so there has been an uptick in wealthy people using peer pressure to get other wealthy people to give away their money according to some rule of thumb that one groups thinks is right or fair. Wealthy people always gave away money and pressured others at charity events of course. But I don't remember it ever being so public.
I have an objection to this type of peer pressure. Just like I have an objection to Warren Buffet and his "Buffet Rule".
It seems that one of the most downvoted comments below is one where "PR" was mentioned. Was this done for PR reasons. No not entirely. But it also wasn't done anonymously either.
Would you rather that they compete over who has the largest yacht or the most jets? Think of it as a positive form of conspicuous consumption. Just as a business can be good for both the owner and the customer, charity can be beneficial for both the givers and the recipients.
I would rather have them compete over who can pull off the most awesome technological breakthroughs (asteroid mining, cheap space flight, life extension, genetic therapy, artificial biology, vanquishing diseases).
But honestly, how many of them were going to do that with the money, anyway? I agree that charity is better than conspicuous consumption.
I don't see spending money on yachts or jets as negative and somehow the fact that "charity" is mentioned that's automatically positive. People earn a living staffing yachts and jets, they are built by companies employing people. That money circulates further in the economy and provides benefits and is paying for someone's health care and college education.
So to answer your question "Would you rather that they compete..." I would rather they do whatever they want to do with the money they have earned without some kind of movement played out in the press which makes it looks like donating 1/2 to charity is the noble choice to make.
Where do you think money GOES when it is donated to charity? It doesn't disappear. Are you seriously making the argument that it's better for the world that $X is used to purchase an expensive unnecessary item, than actually spending it on things that matter in the world?
"charity" is not some bullshit phrase that means "wasted money". There are a lot of people in the world who make really compelling cases for certain charity money being better spent, in terms of global well being, than almost anything else. See http://www.givewell.org and http://www.givingwhatwecan.org.
I definitely agree. Do you think there's some value in making it easier for companies to promote a "positive form of conspicuous consumption"? Or do you think the action is more of a means in itself?
For example, if AZ said "Hey users of instagram (or users of AZ product that just sold), we're going to let you decide which cause some of this money goes to," would that create a delta in value from the original proposition?
Interestingly, many of our investors (LPs), and many LPs of our fellow venture firms, are nonprofit institutions such as universities and foundations that were originally started by people with names like Carnegie, Rockefeller, Ford, Stanford (a "robber baron" of his age), Yale (a governor of the British East India Company of all things), Hewlett, Packard, and the like. Money earned through capitalism that got plowed into nonprofits that invest in modern venture capital -- it's a wonderful cycle.
I have no idea how your comment relates to what I've said.
I said "Seems that over the last several years or so there has been an uptick in wealthy people using peer pressure to get other wealthy people to give away their money"
Is there peer pressure? Sure, but at the end of the day, everyone of them made a personal decision to make that pledge. Could they have redistributed their resources to more businesses? Ok, but they chose the charitable route. Are there people that need these resources more than businesses? Absolutely: http://en.wikipedia.org/wiki/Millennium_Development_Goals#Go...
Sadly, we do not live in a perfect world. The resources and opportunities we take for granted are the same ones others do not have. Giving others a chance at the life and opportunities that were given to us is probably the wisest investment of all. The returns are deeper than dollars.
By giving half their profit to charity, one could take them as implying that profit is bad, that they don't deserve everything they earned, and that they are appeasing the irrational anti-capitalists (if not siding with them).
I don't know anything about this particular case, but in general many businessmen are complicit in bad philosophy, and sometimes even pay to promote it. That's shameful and harmful.
Business people trade for mutual benefit. That provides value to society even if they never give a dime to charity. And even if they do give a dime to charity, their actual business activities provide more value, both for themselves and others. Businessmen should be proud.
You can find this sort of opinion in the Ayn Rand book _Why Businessmen Need Philosophy_. You might want to read it, and make some effort to reply to its arguments, before dismissing it as wrong enough to dismissively insult in passing.
My job is helping people start business, and I do it in large part because I think it's good for the world, so you don't need to preach to me on the benefits of business.
The mistake being made by many here is concluding that since business can be good for the world, therefore everything that isn't a for-profit business must be a waste. Not all good things are profitable.
you don't need to preach to me on the benefits of business
OK... fine. But if you aren't going to fully understand Ayn Rand's work, then you don't need to preach to us about how misguided you think it is.
The whole point of discussions like this is to have an intellectual discussion. To dismiss people who disagree with you by accusing them of "preaching" (when they aren't) has no place on HN. (As I'm sure you well know.)
I like to think I'm fairly familiar with Ayn Rand's work, though I'm by no means an expert. I'm a computer scientist, but my philosophy minor was supervised by one of the few tenured professors who specializes in Rand scholarship in academia (and he is a fan of hers).
I don't really see this as far off, though. Rand really did believe that it was unethical to be altruistic. Not because it led to negative outcomes, or was inefficient, but because it was, in her view, inherently unethical to be altruistic. The altruistic sentiment was a character flaw at best. She did approve of philanthropy in some circumstances, such as foundations that were set up to advance their founders' views. But it had to be for reasons other than altruism, and it would ideally take into account whether the recipients were "worthy" of the help, not be Christian-style unconditional charity.
You neglect to mention why Rand opposed altruism and considered it inherently immoral: because it means putting other people above oneself and therefore self-sacrificing for others.
That's true, but there isn't really much argument for that position in her work (certainly not argument I found convincing). It's almost assuming the consequent: you prove that putting your own good above collective good is moral because the alternative would be putting collective good above your own good. Well, yes, that's definitionally true. But what's wrong with putting collective good above any one individual's good (including your own)?
Her answer wasn't the consequentialist one that Adam Smith and other market-economy defenders proposed: that self-interest produces the best overall outcome. It was instead somehow more metaphysical, that somehow self-interest is the highest good, and putting any other goods above one's own good is corrupting the greatest good. I see it as a kind of take off on Nietzsche's master-morality/slave-morality dichotomy, except, unlike Nietzsche, she ties it to the free market and commerce. (Nietzsche believed in great people putting their own self-development ahead of the masses, in the elitist sense that if you're better than everyone, you should focus on your own development first... but he considered business and money-making to be a dirty, mass occupation that in no way qualified as "great" or "elite".)
She does provide various arguments. There's no shortage there. Whether you find them convincing is up to you but please don't mix that up with her not publishing stuff to argue her point. For example, not living in a second-handed way is a main theme of The Fountainhead, and that's closely related to the altruism issue.
> Her answer wasn't the consequentialist one that Adam Smith and other market-economy defenders proposed: that self-interest produces the best overall outcome.
Correct.
One thing that might be helpful is to understand Rand's view on compromise. She said you can compromise on concretes when you agree on a principle, but you must never compromise your fundamental principles.
For example, if you agree on the principle of trade, you can compromise (haggle) on the exact price or contract terms, and you're still both following a good principle and can both benefit.
But you must never compromise between collectivism and individualism, capitalism and socialism, life and death, freedom and slavery, rationality and irrationality. Those sorts of compromises between opposite principles amount to sacrificing some good that one shouldn't give up, and allowing in some unacceptable evil. Nor should you compromise your values in order to get something that you don't value or value less. That isn't a reasonable compromise, it is surrendering your values and principles for the benefit of others.
Given this sort of view of compromise, it's no good to ever compromise your own life, no good to ever sacrifice yourself. Anything that asks you to do that is evil. If there is a rational trade to make, then make the exchange and benefit, but don't sacrifice yourself for unspecified or vague future benefits which no one is accountable for providing to you.
> One thing that might be helpful is to understand Rand's view on compromise. She said you can compromise on concretes when you agree on a principle, but you must never compromise your fundamental principles.
This is why I find it so interesting that Rand ended up accepting social security and medicare from the government[1]. You seem to know a lot about Rand -- do you have any idea how she justified her accepting government benefits?
She took the benefits because the government took far more than that from her! She was just getting a tiny part of it back.
She actually wrote at length about this issue [1]. That people keep puzzling over it shows that they don't understand AR (which is perfectly fine if they don't claim to understand her), or just want to smear her.
That view of compromise is actually at the core of what I don't see convincingly argued for. Why shouldn't we compromise on principles, rather than just concretes, if it would produce pragmatically better outcomes? Why is it better to have dueling, inflexible idealized political positions, the hardline socialist against the hardline capitalist, each knowing they're right through some kind of metaphysical inspiration which can never be shaken by the presentation of actual facts? I would much rather have people in closer contact with reality, working out case-by-case situations pragmatically, than people living in an inflexible, idealized world where they know their views are pure and good, and opposing views are evil and bad.
The problem with using her novels as an argument for the position is that they only really work in an affective, sense, imo, as implying consequentialist arguments, sort of along the lines of a morality tale or fable: look what could happen if things are done this way, or alternately, if they were done that way. And I think a lot of people do read them that way; the famous "going Galt" plot, for example, is commonly taken as a parable for why bad things will happen if you institute too much regulation and burdening of productive individuals. But she explicitly disclaims "things will turn out better/worse" as a reason to accept or not accept her philosophical/political views, so her novels aren't supposed to be read that way. But they're actually more effective that way! Which is why I think it's so common for fans of Rand to ignore Objectivism and instead read her as more of a general pro-free-market, libertarian author.
You seem to believe that there is a conflict between principles and reality. AR did not. Because principles are induced from reality and are always true (within the relevant context).
That's what I think is clearly a sham in her work: her unacknowledged Nietzschean influence is quite strong, and like him, she does not deduce principles from reality, but from metaphysical first principles that are arrived at through an obscure armchair-philosophizing process, certainly not an inductive, scientific one.
That there is really no nuance or context in her novels (or other work) follows fairly directly: these are idealized, metaphysical types, and an empirical or inductive methodology is nowhere in sight. She occasionally claims something about induction, but does not actually follow any such methodology, certainly not in any rigorous fashion.
her unacknowledged Nietzschean influence is quite strong
Can you point to one actual claim made by AR that is in common with Nietzche? I seriously doubt there is one.
Going away from actual claims to mere generalities, yes, AR and Nietzche were both "individualists" in a sense - but in a totally different one. Nietzche in a predatory way, AR in a "mutual trade for mutual benefit" way.
she does not deduce principles from reality, but from metaphysical first principles
She doesn't decduce, she induces, and she does not do it from metaphysical first principles at all. Her core metaphysics is axiomatic, but the rest of her philosophy is inducted from reality. Most of her philosophical essays are just summaries of the results of this process. There is no work that "competely induces" Objectivism. There are a couple of works by Leonard Peikoff that talk about the Objective process of doing this. Until recently, they were only recorded lectures, but "Understanding Objectivism" was just released as a book.
That there is really no nuance or context in her novels
A lot of people don't "get" the novels. Just a few days ago an Objectivist was telling me how mind-blowing Atlas Shrugged is, because there are about "12 layers" (quoting him) of meaning in any given chapter. You would be surprised. It does not appear to be this way on the surface.
> You can find this sort of opinion in the Ayn Rand book _Why Businessmen Need Philosophy_. You might want to read it, and make some effort to reply to its arguments, before dismissing it as wrong enough to dismissively insult in passing.
Like a lot of people here, I read Rand as a teenager. As a slightly older teenager, I concluded she was an extremist who I think would have hated living in the world that her philosophy would have led to had she been wholly successful (Hobbes' phrase "nasty, brutish, and short" comes to mind).
The point about business transactions being mutually valuable and societally value-add is generally (although not always) true, in my mind, but that doesn't eliminate the need for either government or philanthropy if one wants to live in a civil society.
I don't see what's so wrong with implying that the might not deserve everything they earned, unless you also think people in poverty deserve to be where they are.
> By giving half their profit to charity, one could take them as implying that profit is bad, that they don't deserve everything they earned, and that they are appeasing the irrational anti-capitalists (if not siding with them).
This is great. Something people often disregard, but which is hugely important, is charity effectiveness. This boils down to measuring the impact that you can make with a given donation: it turns out some charities are literally thousands of times more effective than others.
A lot of people don't realise how much good they can do with modest donations to the right charities -- until a year ago I really had no idea myself. There are a couple of groups which I know of which do analysis of charity effectiveness:
* Giving What We Can (http://www.givingwhatwecan.org/) are an Oxford, UK based organisation who estimate that you can save a life for ~£300.
They both publish lists of the most effective charities they've researched, and Giving What We Can have a calculator which shows you how much you can achieve by donating 10% of your income each year:
Oh and this is similar to the approach that the Gates foundation is taking. As far as I can tell Gates approached this as an optimisation problem: given that he has X billion dollars to give to charity, how can he maximise the effect that his donations have? How many lives can he save* with that money?
* lives saved is of course the wrong metric: no-one has ever saved a live, just prolonged it, but it's a convenient shorthand for maximising the number of quality adjusted life years (QALYs)[1] that a donation could buy.
All good stuff, but I'd want to emphasize that directing your philanthropy based on doing the most good does not require you to be a utilitarian, nor (if you are) does it require the utility function be denominated in QALYs.
Agreed about the importance of making sure you donate to the right charities, which is why I was disappointed to read this: "And, to begin, they have sprinkled $1 million on Silicon Valley nonprofits that focus on everything from urban forestry to homeless families."
For what it's worth, those six nonprofits weren't just chosen randomly. Each GP picked one he and his family had direct experience with.
For my part, I don't know as much about this as some people, but my wife teaches philanthropy at Stanford and has studied, written about, and taught the topic of effective giving for her whole career, so that works out nicely for me. (Can't resist plugging her recent book "Giving 2.0" for people interested in the topic.)
Thank you for taking the questions here seriously and taking the time to address them thoughtfully.
This sort of topic brings out high emotions on both sides, and it's good to bring the rhetoric level down a bit. Certainly it's the way to win people over to your way of thinking and have even more of an impact.
I'm curious, has your wife written about the sorts of topics raised here? Would she do so on the web, if she hasn't already? There's a notable portion of the entrepreneurial community that has these sorts of legitimate questions and it would seem like she'd be in a unique position to discuss them and sway hearts and minds.
Hey Marc, speaking of giving 2.0, do you think there's some value in making it easier for companies to promote positive initiatives like this? Or do you think the action is more of a means in itself?
For example, if a16z said "Hey users of instagram (or users of a16z product that just sold), we're going to let you decide which cause some of this money goes to," would that create a delta in value from the original proposition?
I'm not an expert (and don't want to comment on any particular company or product), but it's an intriguing idea. I think Marc Benioff was an early innovator in this area. It will be interesting to see what new ideas entrepreneurs -- or their investors -- come up with along these lines.
Given that "how people donate money" (or spend money, or invest money seems to conflict with what they claim are their stated preferences, I wonder which is more representative. I'd bet on the revealed preferences by actions.
Basically no one would say (or is allowed to say in polite company) that they care more about having art available locally than the lives of a thousand people in some third-world country that they'll never meet. Yet, it seems pretty obvious that donations to local art save fewer lives than the anti-malarial mosquito nets, and should be obvious to the people donating.
Agreed about nobody saying they prefer local art over thousands of lives, but I don't think that means their revealed preferences are more representative of what they really want, I think it just shows how irrational they are. Most people don't sit down and think about what they want most and construct a plan to achieve that, so it shouldn't be surprising that they end up doing such drastically sub-optimal things as donating a lot of money to a museum when someone asks them to. It seems like a good thing to do, so they do it. They don't consider whether it's what they actually most prefer.
I also thought a lot of the art donations (at the high end) were weird tax dodges, or done for the ancillary benefits of donating (getting your name on a building or bench, access to high end parties, cute art girls, etc.)
clearly a PR ploy. it's a waste of capital imo. Reduce your management fee and carried interest income and return them to your LP. or re-invest that capital in start-ups to create even more jobs.
edit: it's their money and what they do with it is their business. but they're in the venture capital business, not in the charity business. their job is to deploy capital and maximize returns to their investors (they create jobs and companies in the process).
Horowitz shakes off the potential for such troubles at Andreessen Horowitz, saying that half of firm earnings will be more than enough to satisfy its partners' lifestyles. "We don't play polo," he says. "And our skills are better suited for doing this than working full-time at a non-profit... I think this works out better for both us and the nonprofits."
Again: If they think they're earning too much. reduce their management fee and carried interest income and return the money to their LPs.
> "they're in the venture capital business, not in the charity business"
They're in the business of being human.
As is true for any of us, that means something complex, multidimensional, and personal. It's not some sort of affront to venture capitalism to use the profits it generates for something other than more venture capitalism. It's not a "waste of capital" to use your own capital for whatever you find important.
the money they make for their LPs goes to pension funds, universities, businesses, etc. which in turn creates more jobs, start-ups, investments, donations to charities, etc.
If you're going to donate to charity, do it personally and without all the media hype.
The money they give to charity goes to researchers, consumers, and so on. That money gets spent, moving back into the economy, which creates more jobs, start-ups, investments, donations to charities, etc. It's hard to say which route generates more benefit down the line; I have yet to see a robust economic model that handles even second-order effects well.
Media hype can be a good thing or a bad thing. If it's about your own ego, I agree, STFU and give privately. But hype can also convince others to change their behavior. Consider the use of "matching funds" as an incentive to increase charitable giving. Various publicity techniques (such as somebody famous emphasizing philanthropy) can increase giving or help direct it to where it can do the most good.
A stellar example of living your values. I hope this swings more deals their way (it would certainly affect our choice of VC) and creates pressure for the entire industry to adopt similar pledges.
This is why wealthy individuals are better for society than shareholder-owned corporations. If the latter made a move like this, the entire board would be fired immediately.
If 90+% of the shareholders voted to distribute that quarter's profits to charity - the equivalent scenario to the general partners so voting, no? - who would be firing the board?
That's not equivalent; the equivalent is the board deciding to give 50% of their own fees to charity. (Note that it's only the general partners, i.e. fund managers, doing this; they do return 100% of profits to their limited partners, i.e. clients.)
A substantial portion of those a funds that are responsible for investing their member's money. Are you asking me to invest half my profits in my superannuation fund to charity? To me, my fund will give me more benefit by maximising the profit from investments, hand me back my share of profit, and let me choose MY choice of charity!
I mean "rational" in terms of being able to justify it to others, and have it be rational to them too. I can convince the board why a moderate donation to Charity X is good PR, or why funding Product Y is a sound investment. It's much harder to justify why the company should give away half its profit with no direct return.
Giving is great. I wonder if down the road they will consider helping incubate these non-profits to make the return on their charitable investment even greater. They have the expertise of helping companies grow, why not give the money and brain power to help the charities too.
A side question, any idea if the contributions are from the firm or the individual partners? I'm curious about the tax break breakdown. If the company is the vehicle for donation, there is a larger ability for a full tax break on the money donated. However, it seems that for an individual, there is a maximum: "Only if you contribute more than 20% of your adjusted gross income to charity is it necessary to be concerned about donation limits. If the contribution is made to a public charity, the deduction is limited to 50% of your contribution base." - http://www.charitynavigator.org/index.cfm?bay=content.view&#...
So, if 100,000 was donated by the company, the tax break would be 100,000. $100,000 goest to the charity and the company has no tax on that income. But for the individual, if the maximum tax break is 50%, then $100,000 goes to the charity but $50,000 was taxed at the individual's income tax bracket (likely 35%+ for these guys) so the 'cost' was really $117,500 to give $100,000. Check my math here, I'm not a tax expert but curious about they are looking at maximizing their contribution at the lowest cost.
It's interesting to note that Sequoia's LPs are themselves largely charities, so money Sequoia makes goes to charitable causes, too. (and I find it unlikely GPs at other top-tier VCs, like Sequoia, don't donate a lot of wealth already...probably not 50% of income, but a lot of famous investors have endowed huge foundations).
Yes, and that's also true of us, and at least several of the other top venture firms. And it's worth noting that Mike Moritz is already a signatory to the Giving Pledge.
This makes me (even more) happy to work for an a16z portfolio company. Though in a long-term and indirect way, more of the product of my work will go toward a great cause.
The emotions of man are stirred more quickly than man’s intelligence; and, as I pointed out some time ago in an article on the function of criticism, it is much more easy to have sympathy with suffering than it is to have sympathy with thought. Accordingly, with admirable, though misdirected intentions, they very seriously and very sentimentally set themselves to the task of remedying the evils that they see. But their remedies do not cure the disease: they merely prolong it. Indeed, their remedies are part of the disease.
They try to solve the problem of poverty, for instance, by keeping the poor alive; or, in the case of a very advanced school, by amusing the poor.
But this is not a solution: it is an aggravation of the difficulty. The proper aim is to try and reconstruct society on such a basis that poverty will be impossible. And the altruistic virtues have really prevented the carrying out of this aim. Just as the worst slave-owners were those who were kind to their slaves, and so prevented the horror of the system being realised by those who suffered from it, and understood by those who contemplated it, so, in the present state of things in England, the people who do most harm are the people who try to do most good; and at last we have had the spectacle of men who have really studied the problem and know the life – educated men who live in the East End – coming forward and imploring the community to restrain its altruistic impulses of charity, benevolence, and the like. They do so on the ground that such charity degrades and demoralises. They are perfectly right. Charity creates a multitude of sins.
There is also this to be said. It is immoral to use private property in order to alleviate the horrible evils that result from the institution of private property. It is both immoral and unfair.
~ Oscar Wilde
You would think smart men as these would want to cure the disease instead of curing the symptoms.
Oscar Wilde said this because he believed in the complete abolition of private property. I do not think you can convince any VC that that is a good idea.
A beautifully written but easily misunderstood statement. Thanks for sharing. I have read it at least 3 times today.
I came here expecting the worst from what can be a youth-worshipping and wealth-worshipping crowd at times but was rather pleasantly surprised by this and other responses today. Perception altered.
This is a subtle comment, with the key statement being "The proper aim is to try and reconstruct society on such a basis that poverty will be impossible."
I'm not so sure socialism is the answer there, but it's definitely a goal to have for the long term.
The only part I don't like about the idea of trying to reconstruct society on a basis that poverty will be impossible is that previous attempts to do that tended to result in millions of people being killed. Funny how that works :-).
Though I'm not religious, there's a specific set of bible verses I think of when I see news of someone being publicly charitable:
1 Take heed that you do not do your charitable deeds before men, to be seen by them. Otherwise you have no reward from your Father in heaven. 2 Therefore, when you do a charitable deed, do not sound a trumpet before you as the hypocrites do in the synagogues and in the streets, that they may have glory from men. Assuredly, I say to you, they have their reward. 3 But when you do a charitable deed, do not let your left hand know what your right hand is doing, 4 that your charitable deed may be in secret; and your Father who sees in secret will Himself reward you openly.
--Matthew 6:1-4
I think it means that the spirit of charity is purest when it is anonymous.
If your goal is to increase the amount of donations to a charity, then by all means, do it publicly...inspire and/or pressure others to do the same. If your goal is a personal exercise in selflessness and giving, then do it anonymously.
And which is the more selfless-and-giving of the two goals? The one that's about maximizing the benefit to a charitable organization, or the one that's about maximizing one's personal selflessness?
Depends, one is a short term investment and the other is a long term investment. Which is more giving and selfless: giving a man a fish, or investing time in learning how to be a great fishing teacher, then teaching men to fish?
Personally I believe that the purpose of charity is to give unyieldingly and without reserve or provocation, without any personal gain to you...not to look good to others, not tax breaks, whatever.
Anonymous charity is irrational from a survival perspective. It makes no sense to help someone unless you have something to gain. So therefore helping others at the expense of yourself is the purest form of selflessness.
> What about when your deed might inspire/put pressure on people of similar stature to do the same? Ie: Gates or AH?
Depends on your goals. If your goal is to increase the amount of donations to a charity, then by all means, do it publicly...inspire and/or pressure others to do the same. If your goal is a personal exercise in selflessness and giving, then do it anonymously.
I am frankly a bit saddened by this. These guys are some of the best in the world at deploying capital. Humanity would be better served if they continued to invest their own money. Now these guys half-work for some charity, and when the charity doesn't deliver great results, they will feel like they are half-working for little results.
It is a mistake for the best capital allocators to pledge future earnings. They should pledge their future wealth, not earnings. This way, the harder they work and the more earnings they successfully redeploy, the greater the contribution to charity.
It's unbelievable how much genius is wasted in poverty.
What if those charitable dollars helped someone in an absolute destitute situation, who later turned out to be a success?
Let me give you an example. In New York there is a non profit called "East New York Farms." If you aren't aware, East New York is one the roughest places you can come across in Brooklyn. They provide kids with the chance to run an organic garden from both the operational/agricultural side and the business side of things. And on top of that, they sell it in the local neighborhood. I talked to a girl who didn't know what broccoli was before she did this program. Her parents just gave her honeybuns from the corner store for dinner. Now they have Whole Foods quality vegetables in the middle of a destitute area for cheap, and it services the community. https://goodkarmaapp.com/np/enyfarms
Think of the marginal increase a dollar creates there vs going to a kid from a top university.
I think you've misread his post. He's talking about donating what they have now VS donating more money after they get richer in the future. He's not talking about donating to charities VS donating to kids from top universities. The second would just be a consequence of the first.
When do you stop, though? If you take the "first I'll get rich, then work on charitable causes" route, and Andreessen Horowitz aren't yet rich enough to qualify, what level is rich enough? Does it have to be $100 billion or something before you're allowed to decide it's time to start diverting some money to charity?
> It's unbelievable how much genius is wasted in poverty.
Examples of genius that didn't thrive because of poverty? The example you gave is about kids learning to sell vegetables. Are their studies about geniuses that didn't achieve their best work because they were poor?
That's not a very good question -- how can we know someone is a "genius" unless they have the resources to thrive? We can debate on the meaning of genius, but regardless of how you view it, a person simply cannot reach their full potential if they have to constantly worry about feeding themselves or a family.
Before we can even identify someone as a genius, they have to have been successful in some way. For them to be successful, they have to have access to at least some basic resources (there are "rags to riches" stories, but I'm not sure it's even possible to argue that those are the norm). So how would you even begin answering your question? How do we identify someone as a genius even before they've actually succeeded at something? Isn't there some massive selection bias there?
Since the only difference between a wealthy person and a person raised in poverty is income/upbringing (poverty doesn't change your genes, does it?), I think it's a safe assumption that we're missing quite a few "geniuses" because of poverty.
I'm not disagreeing with you. I'm just asking for examples that back his claim "It's unbelievable how much genius is wasted in poverty."
The statement he made is unnecessary to his overall point, which is that charity can help people. His claim about the "unbelievable" number of geniuses being squandered has no real basis in fact.
But aren't you ignoring a potential reason why it has no "basis in fact"? The reason why we can't find examples of "genius being wasted in poverty" is simple: how can we identify someone as a "genius" until they've actually produced something notable? How can someone with little to no resources produce something notable? It's possible, but the odds are skewed a lot.
The statement was very necessary. If we operate on the assumption that a person's ability is largely defined by their upbringing (and from what we understand so far in the social sciences, this is a pretty fair assumption to make!), it's essential to point out that poverty prevents people from achieving their full potential, and the number of people it affects is in the billions.
Just because it can't be accurately measured doesn't automatically make the point invalid: if you're trying to argue that the population of (over a billion!) people without ready access to food or clean water doesn't contain the same number of potential geniuses as our population, then you have the burden of proof because every bit of understanding we have about nature vs. nurture indicates that improving a person's upbringing allows them to accomplish more.
In other words, he doesn't have to prove with hard statistics that poverty prevents genius from emerging, because our existing knowledge of human behavior and development clearly demonstrates this without having to answer: "exactly how many geniuses were lost?"
Genius manifests itself in many ways. It's foolish to think that simply by living in poverty, genius can be stopped. If you raise the living standards everywhere, the lowest living standard becomes the new poverty. Are we then to say that genius is being squelched in those new areas?
> The reason why we can't find examples of "genius being wasted in poverty" is simple: how can we identify someone as a "genius" until they've actually produced something notable?
Poverty does not prevent the identification of. I've lived in a poor community. Yet I've seen genius in people who can fix vehicles, in people who can track animals to hunt, or in just retelling amazing stories. Those people are geniuses. Just because they don't invent some new-fangled iBullshit, or get on the NYT best seller list, does not diminish their genius. It does not mean that it did not exist. And it does not mean that a cash infusion would have made them any "more" of a genius. Open your eyes. Geniuses are not resources to be exploited by people who want to make a good return on an investment.
Ah. I see where the disagreement lies. Your position is that they're still geniuses even if they "only" figure out how to fix cars on their own. I agree, they're still geniuses, but I would also agree that it is a waste.
If the genius had lived outside poverty, they might be inventing nanotech or getting us into space or performing on Broadway.
The opportunity of "genius" is to make an impact on the world, and that is why genius is wasted in poverty.
These guys are brilliant, and a lot of people respect them.
Do you really think they're going to go from being amazingly smart about investing money in companies to being morons about using the capital for charity?
I suspect they'll act like Bill Gates, not like the UN, in how they deploy their capital for charitable purposes. They will invest in things which have huge returns, just not necessarily returns they can directly monetize.
Ending polio, malaria, etc. probably creates bigger returns than even their Instagram investment. It's just that the returns go to to a billion poor people, vs. being concentrated in a company.
... this is the untold story of the quietly wealthy; the millions of smart, capable people with vast reserves of capital who do their darndest to make sure they don't have to do anything at all.
I generally agree with the whole "wait till you get rich then donate to charity" sentiment. But it's hard to tell when you're rich enough. It would be a risky bet either way. You can't be sure how much more you'll be able to make your earnings grow in the future, just as you can't be sure if your charities will pay out.
And the longer you wait, the longer those charities you could have been investing on, are not seeing any benefits.
So you have two balance these two: Wait too long and charities of today don't see much benefit. Wait too little and you might be unable to grow your money and do less overall charity in the future. How do you know what's the right point in your career? Ideally, you wanna start donation when you're at the top of your career. And don't wanna risk falling from where you are.
After the recent investments maybe Andreessen Horowitz think they got to that point. They've got more money than ever and it's getting riskier to wait longer. So they considered that balance and judged it was the right time to donate to charity. You might disagree with their timing. But hey, remember they're pretty good at this stuff, so maybe they're right :)
There has been research done (by Alumni organisations) that show that the people who 'wait till they get rich' never donate. The 'wait till I get rich', despite the best of intentions, is just an excuse. The other related excuse is that 'I'll wait until I can make a sizeable and therefore meaningful donation'.
The research (and I don't have a link sorry) showed that if an Alumni made a donation, even $1, within 3 years of leaving, there was an 80% chance of them donating again. If they didn't make a donation within three years, the chance of them donating again in the future was very very small.
ie donators donate now. Everyone just makes excuses.
The fact is, you're always 'rich' enough to donate. Give up that coffee or muffin you were about to buy and donate a couple of bucks a week, or a month, every six months or whatever. If you can't do that, donate some time/your expertise to help out at a charity. If people are serious about donating money to charity, there is zero reason they can't start right now.
That seems like you might be measuring something other than total donation -- just donation to one specific charity.
Sure, if I pass on donating to MIT today (IMO they have enough money already), I might not get around to it ever. But, given that I am unlikely to have kids, if I die, my money will all be going to some charity or set of charities eventually.
(I do donate now, mainly to groups like MAPS and EFF, but my income and liquid net worth are pretty insignificant compared to my goal.)
No - the research is about people's attitude and actions around donations. It doesn't matter who or what you donate to - the act of donating right now is the indicator of whether you will donate in your lifetime.
If you have committed to donating your estate to charity by putting it into your will, good for you! But if you haven't already committed to this by putting it into your will, then you (at this point in time) reinforce the research - which is people always promise/intend to donate, but they have excuses to delay donating till some point in the distant future which result in them never donating in the end (so in this case, I'll donate my estate when I die).
> when the charity doesn't deliver great results, they will feel like they are half-working for little results.
What information do you have about their decision making process that makes you believe that they will select charities that don't deliver great results?
What about success in venture capital, in your view, would prevent these individuals from successfully selecting/starting/advising philanthropic endeavors?
I have a hunch, for example, that Marc Andreessen isn't going to roll up and pour a bag full of money out into the little jar the Salvation Army Santa runs outside of Macy's.
Getting results from charities is hard. Bill Gates quit his job to solely focus on this. Warren Buffet pledged all his money to Gates because he doesn't think he would be particularly good at it.
My point is, why pledge earnings rather than wealth? I think pledging earnings is risky, and the world is better off because Warren Buffet did not do it.
a16z isn't short on LP money. This is basically money which would traditionally be spent on consumption by GPs (since they can't invest outside the fund, and 50% of crazy upside is more than enough to buy their stakes in the next fund).
Even if you view this as pure consumption, I respect Ben Horowitz more for a $100mm charity contribution than adding an extra $100mm extension to his house.
Due to how the funds are structured, it is different for a VC to donate carry/management fees vs. someone like Warren Buffet to liquidate equity to donate to charity.
Sorry, we did not intend to draw that distinction. I described this in detail in another comment, but we made a commitment of half of lifetime earnings/wealth/whatever you want to call it from venture capital to nonprofits, over our lifetimes. So there's no presumption that each year we give half, as opposed to at some later date.
As someone who has done some work in the Alumni area, there is research (sorry, I don't have a reference at the moment) which stated something like: If an alumni doesn't make a donation (even $1) in the first 3 years of leaving their organisation, the chance they will ever make a donation is a small percentage. If they donate something (no matter how small) in the first three years, the chance they will donate again is 80%. (I can't remember the exact figures).
ie Donators donate - no matter what their circumstance. Everyone else just promises to 'in the future' and never do.
So kudos to them for committing to donate and not just waiting to do it sometime in the future.
From a purely financial perspective, the net present value of AH's future earnings is almost certainly much higher than the net present value of the money deployed elsewhere, assuming their hot streak continues.
Two things mitigate this:
1) The likelihood that they can keep doing return >25% a year on their whole portfolio is very very small. It's much easier to earn $25m on $100m than it is to earn $25000m on $100000m. See, e.g. Warren Buffett - still a great investor, just too much money to invest efficiently.
2) There are incredible tax advantages to money given to charity, because the charities are usually tax exempt.
That is, a charity that's allowed to grow the money at 10% a year with no taxes, does better in the long run than someone who can make 12% a year with 20% in taxes.
Bah! Entrepreneurs should reinvest their profits into more businesses. Profits are the reward you get for serving society effectively. Society would probably be better served if Bill Gates, etc. reinvested their cash instead of donating to charities. If charities actually cost-effectively served society than they would be a business instead!
Well of course I'm not suggesting we forcibly make them do anything with their money. I am just saying, in terms of societal net benefit, we are probably much better off if our most successful investors continue investing in more businesses rather than charities. Not a fan of thought experiments?
I assure you that there are lots of wealthy people who reinvest their money into more businesses, so I'm not sure of the value of your thought experiment. There seem to be fewer wealthy people giving half their fortune to charity. Not a fan of real-world experiments?
>I am just saying, in terms of societal net benefit, we are probably much better off if our most successful investors continue investing in more businesses rather than charities. Not a fan of thought experiments?
Exactly, WE. Thing is, there are millions of people that aren't included in that "we" and the benefits they get (i.e. saving lives) FAR outweights the benefits we'd get.
You can only build so many businesses within a given period of time; and when the business leaders have more money than is required to do so is when they donate to charity.
Donations like the one outlined in this article give me faith in humanity. It's nice to see us looking out for one another.
As for me, I strive to build business(es) so I can do the same, whether the most effective way to raise the standard of living for everyone is donating, building, or most likely both.
Is that irony or ignorance? There are plenty of things worth doing that do not have a viable business model. How would you achieve the goals of the two nonprofits mentioned in the article? There are really no short term benefits from protecting the environment or helping families become self-sufficient. It takes years for trees and families to grow and measuring the economic value of these investments is not straightforward.
