Human Centred Capitalism — Making It Work For Everyone.

We must do more in encouraging early stage businesses to ‘Share Their Shares’

The Problem We Face

As I outlined in an earlier blog, only about 2% of GDP is donated to charities and non profits across the United States and this is in a country that is considered to be the 4th most generous country in the world. This totals to $460m which I am sure can go a very long way but given that US charitable giving accounts for only 1/4 of the size of Apple’s market cap ($2 trillion) I think that we still have work to do.

In the 21st Century, we have witnessed rapid innovation in a number of different sectors including e-commerce, finance and advertising. However, innovation in less profitable areas such as education, global poverty and government has not experienced the same upward incline. What’s lacking here is the money and motivation to drive investment into these areas.

Whilst Government plays an important role in supporting these areas, it is bureaucratic, does not deploy money effectively and can occasionally be tainted with corruption as seen with the UK governments poor handling of PPE contracts during the COVID-19 pandemic. I personally don’t think that the solution is for us to rely on Government alone. Rises in taxation and increased tax spend on the welfare of our citizens and our education can certainly help but I believe that there is a role that Capitalism and Philanthropy can play too. Capitalism has the potential to be an important engine in charitable giving if only we encouraged a mindset shift.

Don’t get me wrong, philanthropy currently plays an important role in accelerating the growth of these stagnant areas of our society and 2020 was certainly the year of philanthropy helping us during COVID-19. Let’s take the World Health Organisation which receives more donations from the Bill and Melinda Gates foundation than most world governments. And yes, there is a lot of philanthropic giving; it’s becoming pretty popular amongst the world elite with the rise of the “Pledge 1%” campaign spearheaded by Warren Buffet and Bill and Melinda Gates. Scott Mackenzie (net worth $61.4bn), the ex-wife of Jeff Bezos has been incredibly aggressive in her giving. Scott’s 2020 charitable giving totalled $5.8 billion, one of the biggest annual distributions by a private individual to working charities. It is true and evident that Philanthropy supports Civic Society where profit is less likely to be made. But that’s why we need to lean on it even more, we’re not doing enough.

By the time wealthy people have made their millions, it is often too late. Whilst we might like to think that many people will “Pledge 1%” when they eventually become a billionaire there are always new priorities for spending your money no matter whether you have a net worth of £10 billion or £10. As humans, we often create good ideas in theory about changing the world and helping others but life’s priorities get in the way & our giving is put on the back burner. I’m not excusing these priorities to be more important than charitable giving but in everyone’s mind there is always something else that needs to be paid for such as childrens school fees, holidays, savings and investments. In our day and age, everyone is trying to “Keep up with the Jones’s” and charitable giving can sometimes fall by the wayside unless it’s being used for tax break purposes.

Charitable giving takes time and energy.

These people are busy, busy people. Their time is incredibly precious and sought after. Who’s to say they have the time and knowledge of where there money will be best put to use. How can they tell that they are making the biggest impact?

This is why I believe that support for the Effective Altruism community is so vital. I’ll cover more about the Effective Altruism philosophy and it’s inportant role in upcoming blogs. In short, Effective Altruism is both a philosophical theory and community popularised about a decade ago by Peter Singer amongst other 21st century philosophers.

Effective Altruism advocates the use of evidence and reasoning to determine the most effective ways to benefit others. The theory looks at doing the most good with whatever resources are available – as opposed to only doing some amount of good – as well as determining what is the most good by using evidence and reasoning – as opposed to only doing what feels good or appears intuitively appealing.

It’s all about looking at how can my $1 go the furthest and do the most “good.” Whats the cheapest way to save a life?

But the brilliant thing is that there are organisations such as Give Well & The Centre for Effective Altruism dedicated to answering these questions meaning that we can outsource those difficult predicaments to them.

No longer do we need to put off our giving because we don’t know where it’s best put to use.

The Solution

Before introducing what I deem to be a viable solution let’s recap the problems we face:

• Philanthropy plays an important role in our world, but we don’t lean on it enough.
• Wealthy people put off giving significant sums to charity because there’s always another priority to be paid for first.
• Billionaires might want to give in theory, but in practice it’s much harder than it seems.

What if we created a way of committing to charitable giving before billionares even become billionares, what if we sought to encourage donations much earlier on in the lifecycle of billionaire creation. If we can link the growth of wealth to the growth of charitable giving, that way we can make capitalism work for everyone.

“Share Your Shares” is a campaign that encourages early stage start ups and entrepreneurs to donate a small proportion of equity (say 1%) to a locked fund that pays out to a selection of effective charities and organisations backed by the data and evidence.

The campaign gets young people who are usually still more positive about the future and ambitious about changing the world to commit their wealth to charity legally before they even come into money. I see younger people as more sympathetic to the causes before you have new priorities to your family and investments and it’s much easier to give away money that you don’t yet have and too late to turn back on your promise when you come into that money.

It’s also incredibly hard to encourage people who don’t have a lot of wealth in their early 20’s to give to charity, it’s a period in their lives when they are building their wealth, not trying to give it away. They might feel that the small amounts that they do give are but a drop in the ocean. They struggle to understand what impact they can make on the world. Why would someone want to donate $20 when they don’t really know if their dollars will actually make much of an impact, they might as well leave the philanthropic giving to the multi millionares.

The Impact We Could Make

$300 billion dollars of cash is created from VC exits every year and this doesn’t account for the remaining share options and continued growth of the assets that are still invested. 2% of this cash ($6bn) equals the same charitable giving of Mackenzie Scott who as we discovered early is considered to be one of the most giving individuals in America.

The rise in the volume of investable assets increased from around $64 trillion in 2018 to $102 trillion by the end of 2020, a compound growth rate of nearly 6%.

Imagine if charities could own 2% of those assets. A $2 trillion injection could be game changing.

What’s the benefit to Start Ups

By being part of such a programme, there’s three benefits I can envision. “Share Your Shares” would strike up partnerships with impact investors who would have an increased pool of potential deal-flow and start ups would have an effective avenue for fundraising.

Secondly, entrepreneurs in the programme would form a community of likeminded considerate capitalists who know that as their wealth grows, their charitable impact grows too. Everyone involved wins and we’ll be rooting each other on, we want you to win, because society wins. We want to make the people who are the richest in our society individuals are actually the most giving, considerate and caring because in turn they can become our innovators in our discarded areas like education and global poverty.

Finally, every company involved has an opportunity to shout about their involvement and get customers, clients and investors bought into their journey. It creates an effective PR engine.

For very little effort, entrepreneurs get invaluable gains. By simply commuting a small amount of equity, you’re getting a PR strategy, community and access to further investment.

Everyone wins, Everyone benefits. We’re making capitalism work for everyone.