Why philanthropists are precisely the wrong people to do philanthropy

Philanthropist Peter Thiel. Image: Stuart Isett/Fortune Brainstorm Tech/Flickr. CC BY-ND 2.0

Philanthropist Peter Thiel. Image: Stuart Isett/Fortune Brainstorm Tech/Flickr. CC BY-ND 2.0

Should rich people be allowed to decide what they do with their own money? Most people’s initial, gut reaction is to say: “Yes, of course. Everybody should.” If the wealthy want to splurge their cash on fast cars and houses, then so be it, just like those with less money might waste their money on gym memberships they never use.

You might think it is crass, but who is to judge? What might seem like a pointless frippery to me might be a valuable status symbol that makes you happy. Living in a free country means that you are free to splurge or save as you see fit. Go forth and spend.

But society in general is not entirely happy for rich people to decide what happens with all their money. For a start they are expected - just like everyone else - to pay taxes. How much is a matter for debate, but very few people believe that the rich should pay none, or little. And the wealthy are hit with another expectation; that they give some of their money away.

A wealthy person who is not involved in philanthropy is frowned upon. And most do want to give, whether through old-fashioned donations to a good cause, funding foundations, setting up social enterprises or some other method.

But this is where the problem starts, because the rich might well be very bad judges of where their money should be spent, suggests a recent study carried out by Rael Dawtry and Robbie Sutton from the University of Kent and Chris Sibley of the University of Auckland.


They asked 600 American adults to estimate the what percentage of people fell into each one of 11 income bands, and the average income of people within each income quintile. They were then asked how fair they thought the income distribution in the US was, and about their attitude to redistribution.

The result was that the richer subjects were, the more equal they believed income distribution was and the more the opposed redistribution. This is not just an American phenomenon: the research was repeated in New Zealand, and got the same result. Is this because wealthy people want to protect the status quo, or tend to be politically conservative? No, or not entirely, say the researchers.

“As richer and poorer people increasingly live segregated lives, the information available to becomes increasingly distorted, and increasingly different,” said Dawtry. “People are, effectively, living in an informational bubble, surrounded by people with incomes like theirs but unlike many other Americans’.” Sutton added: “These results suggest that the rich and poor do not simply have different attitudes about how wealth should be distributed across society; rather, they subjectively experience living in different societies.”

Just to put this in context, the US is one of the most unequal countries in the OECD, as a Morgan Stanley report on inequality found. They looked at various measures of inequality, and bracketed the US with southern European countries. Here is the chart, where 1 is most unequal, and 20 most equal:


So, there is a paradox here: the very people who have money to give away (the rich) might be the very people who are least able to understand where it is best needed. At the very least, we all live in our own "information bubble" which influences the way we see the world and give. This could have serious consequences. For a very immediate and worrying example, take the Effective Altruism movement.

This very interesting movement’s founder was William MacAskill, a young Oxford philosopher, who felt that we should use data to make better decisions about where to direct our altruistic efforts. He has calculated, for example, that deworming is better at increasing the educational outcomes of Kenyan schoolchildren than increasing their numbers of books or teachers, and that the carbon footprint of British tomatoes can be five times that of tomatoes flown in from Spain.

Its reliance on data has made Effective Altruism popular among wealthy Silicon Valley types, but as reported in an amazing article on the website by Dylan Matthews who attended a conference at the Google HQ about effective altruism, the tech titans appear to have interpreted the movement in their own, strange way. Rather than deworming or tomatoes, Matthews says the Google conference was dominated by discussion of “extinction risks”, or “X-risks”, in the jargon; that is, the risk of humankind being killed off. 


According to the philanthropists there - and attendees included big cheeses like Elon Musk of PayPal, Tesla and SpaceX fame, and Peter Thiel, the first outside investor in Facebook - philanthropists should worry not about suffering today (global poverty is described as a “rounding error”) but avoiding human extinction in the far future. To get a full flavour of how odd this is, here is an excerpt from the article:

To hear effective altruists explain it, it comes down to simple math. About 108 billion people have lived to date, but if humanity lasts another 50 million years, and current trends hold, the total number of humans who will ever live is more like 3 quadrillion. Humans living during or before 2015 would thus make up only 0.0036 percent of all humans ever.

The numbers get even bigger when you consider - as X-risk advocates are wont to do - the possibility of interstellar travel. Nick Bostrom - the Oxford philosopher who popularized the concept of existential risk - estimates that about 10^54 human life-years (or 10^52 lives of 100 years each) could be in our future if we both master travel between solar systems and figure out how to emulate human brains in computers.

Even if we give this 10^54 estimate "a mere 1% chance of being correct," Bostrom writes, "we find that the expected value of reducing existential risk by a mere one billionth of one billionth of one percentage point is worth a hundred billion times as much as a billion human lives."

What is the biggest “X-risk”? Why, artificial intelligence of course - something which Silicon Valley people understand well. It is also very notable that people who are, as Matthews writes “white male nerds on the autism spectrum” have found a way to be altruistic that both plays to their number-crunching bias and doesn’t involve them caring about real, existing humans. They have created a philanthropy that fits their own biases, propensities and interests. 

Does this matter? It depends how much money that might have gone to preventing children from dying of malaria instead goes on saving the people of 2525 from as-yet-undreamed-of killer robots. To give you an idea of how much money people in technology have, here is a graphic from the Eurasia Group's report about the key risks of 2016, showing the market capitalisation of several technology companies (and Bill Gates' personal wealth) compared to the GDP of various countries.


It is easy to worry that people who have got rich from technology have certain propensities and world-views which lead them to favour philanthropy that others might not agree with, or might not address real problems. 

The X-risk obsessives are a lurid example, but it is not only “nerds” whose giving is influenced by their own information bubbles and psychological biases; many wealthy people donate to causes that promote their own bugbears.


A fascinating article in the New York Review of Books by Michael Massing looked at some of the ways rich people give, using information published by the Inside Philanthropy website. For instance, the most popular think tank for billionaires to donate to is the neoconservative American Enterprise Institute. A financial services company called BB&T has donated to over 60 colleges to promote the works of Ayn Rand.

On the other side of the political aisle, the Brookings Institution became a hotbed of research into the legalisation of marijuana after receiving $500,000 from a billionaire who supported the cause. Something called The Democracy Alliance is funded by about 100 wealthy liberals who each donate at least $200,000 a year to give to liberal causes. And so on. In a democracy, such donations are troubling, at least if they are not declared. 

Absurdly, it seems that being in a position to do philanthropy makes you unsuited to doing it, as you suffer from a particular type of money-induced myopia. The kind of skills that make you rich - in particular in technology - might make you bad at philanthropy.

The wealthy are free to spend - and indeed waste - their own money as they see fit. But should wealthy people be free to influence politics? Should be able to do it secretly? Is it morally acceptable that people whose wealth and know-how might save millions of lives here and now are obsessing over the far future? And if they are not good judges of what is worthwhile philanthropy, then who is? Government? Some sort of philanthropic watchdog? Who would fund that?

The answers are not easy. But more scrutiny of giving, and more openness about what is being given to whom, would be a good start.

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