On Peter Buffett’s Op-Ed

In a much-discussed op-ed in Saturday’s New York Times titled “The Charitable-Industrial Complex,” Peter Buffett, Chairman of the NoVo Foundation and son of Warren Buffett, shares his dismay about philanthropy. He laments what he calls a “crisis of imagination”—a failure to envisage a way for our society to function that puts an end to what he calls a “perpetual poverty machine.”

He critiques our capitalist system, while being careful to emphasize that he is not calling for an end to it, writing that he sits in meetings where people are “searching for answers with their right hand to problems that others in the room have created with their left.” His essay takes aim at many things: at philanthropic ignorance that leads to unintended and negative consequences; at a nonprofit sector that he says has become a “massive business” and led to the creation of countless “gatherings, workshops and affinity groups;” and at an over-reliance on “business principles” that simply “feed the beast.”

The response has been swift and strong. Perhaps not surprisingly, given that I run an organization that Buffett would likely see as part of the “Charitable-Industrial Complex” he criticizes, I have been on the receiving end of tweets, emails, and op-eds criticizing Buffett’s piece. While I agree with some aspects of many of the critiques, and while I found the op-ed frustrating in its disjointedness and lack of practical suggestions for what to do about the situation he decries, I also think there is something there—that there are some ideas in his piece that are worth reflecting on.

I’ll start with my criticisms.

I question his understanding of the U.S. nonprofit sector. Citing an apparent increase in the number of nonprofits in the last decade (and I think there are legitimate questions about what the actual net increase is), he creates the misimpression that philanthropy has grown relative to business and government when that is not really the case. As Tom Watson noted on the Forbes site in what I thought was one of the most thoughtful reactions (it was also one of the more positive ones) I saw to the op-ed, “While it’s true that the numbers of nonprofits have grown rapidly (as have foundations), philanthropy today represents roughly two percent of GDP—and has been stagnant at that level since roughly 1970.”

I also wonder about Buffett’s understanding of U.S. philanthropy and where it goes. He cites the $316 billion given away in 2012 (without acknowledging that this remains below the 2007 peak) and writes that “philanthropy has become the ‘it’ vehicle to level the playing field.” But the data suggests that the bulk of that giving goes to activities not primarily focused on leveling the playing field: yes, some of the dollars directed to religious and educational institutions—the two biggest pieces of the pie—might be allocated to alleviate poverty or create upward mobility, but much is not.

Perhaps philanthropy should be solely focused on leveling the playing field—although I’d argue both that government has a rather crucial role to play in this and that there are other worthy objectives for philanthropy to pursue (from combating climate change to promotion of the arts)—but, today, it certainly is not. It supports associations of all types, cultural institutions, fancy college campus centers and athletic facilities, and the list goes on.

Finally, I’d also take issue with what Buffett seems to imply about the motivations of the mega-rich. “As more lives and communities are destroyed by the system that creates vast amounts of wealth for the few, the more heroic it sounds to ‘give back,’” he writes. “But this just keeps the existing structure of inequality in place. The rich sleep better at night, while others get just enough to keep the pot from boiling over.”

I think it’s unfair to issue sweeping generalizations about the motivations of individuals who, having found themselves with great fortunes (whether inherited or the result of an IPO of their technology start-ups) choose, as his father has, to seek to put it to use for the betterment of many—rather than simply handing it down to the next generation.

. . . . .

So I have some issues with his piece. On the other hand, Buffett makes some important arguments that we should not dismiss.

I think Buffett is right to question the current fetishization of markets among many in philanthropy. For some, including Howard Husock, also writing on the Forbes site, and Matthew Bishop and Michael Green, who offered a lengthy rebuttal on their “philanthrocapitalism” site, this part of Buffett’s argument clearly touches a nerve. Husock writes, without much to back it up, that the bigger problem is that philanthropy, “has become unfriendly to the creation of wealth that provides the resources to solve such problems.” And Bishop and Green point, like trial attorneys, to an apparent contradiction in Buffett’s piece—that after criticizing the use of business terminology, Buffett himself uses the term “risk capital.”

Husock’s critique I simply do not understand, in light of what I observe. Bishop and Green make some good points in their rather bombastic post, but they seem more interested in mocking Buffett than in thoughtfully engaging his questioning of the importation of market models into philanthropy. My view is that philanthropy at its best often addresses the very problems that business and government cannot, or will not—or that result from market failure. [I wrote a six-part series on this a little more than a year ago on this blog.]

As Peter Buffett’s father put it when explaining his decision to give much of his fortune to the Bill & Melinda Gates Foundation, “In business you look for the easy things to do … Philanthropy is a tougher game.” I think that’s right, and that, therefore, it’s unlikely that market analogies, terms, and frameworks will provide the answers as we seek to make philanthropy more effective.

On a related note, Buffett is also correct, I believe, to resist over-simplification and the alluring fiction of easy answers. He argues that this work cannot be reduced to the question “What’s the R.O.I.?” He warns of the over-simplification that can lead to what he calls “Philanthropic Colonialism”—or an assumption that what works in one place can be transplanted to another without regard to differing contexts.

He argues that we need to question the “current structures and systems that have turned much of the world into one vast market,” asking, “Is progress really Wi-Fi on every street corner? No, it’s when no 13-year old girl on the planet gets sold for sex.”

He’s right, of course. But my reaction is not to want to question the motivations of those donors—such as Pam and Pierre Omidyar—who are working to help try to change that reality. My reaction is to want to figure out what can be done to help them be as effective as possible as they pursue their goals.

All this brings me back to the “charitable-industrial complex.” Fact is, if we care about making progress on our most pressing social problems, then we need foundations and nonprofits to be effective. There is a role in this effort for data about what works (and in what contexts), for bringing the views of those on the ground (grantees and beneficiaries) to decision-makers, for performance assessment that is rigorous and thoughtful, even (gasp) for meetings among those who might learn from each other.

Yes, we need to ask the big questions about how our society functions and about the role and limits of markets. But we also need to focus on making the philanthropy that is going on today, and each and every day, as effective as it can be.


Phil Buchanan is President of the Center for Effective Philanthropy and a regular columnist for the Chronicle of Philanthropy. You can find him on Twitter @PhilCEP.


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