Harnessing the Real Wealth at the Top

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Michael Minihan's picture

Harnessing the Real Wealth at the Top

Money is a powerful tool for progress but it alone cannot provide permanent solutions. When discussing how the wealthy give back to society, we are frequently guilty of possessing too narrow a focus. Many of those individuals fortunate enough to be at the “top of the pile” have often invested capital more wisely, had access to many years of elite education and travelled extensively. This triumvirate of attributes can help to yield insights that make wealthy people vital to any discussion on how to improve society in whatever form we envision.

Philanthropy is more effective when combined with vision. There is a danger that we can become so focused on the explicit benefits of the wealthy to society that we forget about their implicit benefits; that is, their intellectual and human capital is often overlooked in favour of their material and financial capital. Historical experience proves this to be unwise. A series of

philanthropic ventures from earlier eras show us that harnessing the intellectual and human capital to define a vision and putting a plan in place on how to get there, is fundamental.

The example set by one celebrated philanthropist, Andrew Carnegie, provides a model for giving by the wealthy in the twentieth-first century and beyond. Carnegie was a steel magnate, who saw the long-term benefits his money could bring if managed properly. In his autobiography, he wrote, “There was no use to which money could be applied so productive of good to boys and girls who have good within them and ability and ambition to develop it, as the founding of a public library in a community which is willing to support it as a municipal institution. I am sure that the future of those libraries I have been privileged to found will prove the correctness of this opinion.1

Carnegie’s vision, formed as early as the late 19th century, was to provide the gift of knowledge to under-privileged children who might not otherwise have had a chance to attain an education. The best way of reaching out to as many of these as possible, he believed, was through funding public access libraries. His vision at the outset was admirable in itself but how he intended to get there was extremely well-thought-through. Every decision taken was motivated by the vision. Long before the term was coined, Carnegie had effectively put in place a precursor of public-private partnerships.

Before providing funding, Carnegie ensured that towns themselves were willing and able to actively engage in the process of bringing the library to reality. Every application for Carnegie-provided funding involved answering a rigorous “schedule of questions.” The ultimate aim of these was for Carnegie and his advisors to establish if a library could be sustained by the town in question2. This schedule included an exhaustive list of questions on the town´s existing public and private libraries and what tax measures were being put in place to run the new library. An example of which is that the town was required to match his donation, effectively doubling his philanthropic wallet and ensuring their “buy-in” to the project.

His funding was not made on a one-off lump sum basis, but rather a series of payments as separate milestones were reached. Funding increased as the project neared completion to incentivize progress. His funding strategy also involved using data from the national census to ascertain the population of the town receiving his money. Based on this information, he then provided around $2 per member of the population, which was generous on one hand, but an amount which could be matched by local governments on the other.3

By the time of his death, there were over 2,500 “Carnegie Libraries” in the English-speaking world.4 The existence of so many of these libraries even today is testament to the power of insightful long-term investing. If Andrew Carnegie had donated all of the money to governments at the outset of his philanthropic work, would they have provided the libraries he did? It’s highly unlikely. Unfortunately, few public officials have the kind of vision that Carnegie could provide. Fewer still are given the mandate to make brave decisions whose payoffs are immense, but not necessarily short-term. This allows me to return to my initial thesis.

Carnegie’s example vividly illustrates the importance of philanthropy combined with vision. His legacy is enhanced with every new reader in one of his libraries. The considerable means he provided were invested more wisely than most could have imagined. And just as his philanthropy represented a great investment, Carnegie’s successors in twenty-first century society count among them the world’s greatest investors. The decisions they take on a daily basis to both manage and invest their financial capital are not the obvious ones: they employ vision. On this basis, perhaps we should look more to our wealthiest individuals for this incredibly valuable resource rather than what sits in their bank accounts.

References: 
  1.  Carnegie, Andrew and John Charles Van Dyke. The Autobiography of Andrew Carnegie. Boston, New York, Houghton Mifflin Co., 1920. Page 29.
  2. Nasaw, David. Andrew Carnegie. Penguin Books, 2007. Page 606.
  3. Van Slyck, Abigail. Free to All: Carnegie Libraries and American Culture, 1890-1920. University of Chicago Press, 1997. Page 22.
  4. http://www.lib.niu.edu/1999/il990275.html