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A woman in Mozambique uses an ethanol cookstove supplied by the Novozymes corporation to replace harmful, charcoal-based indoor stoves – and, not coincidentally, to expand its future markets for the ethanol it produces. (Jeffrey Barbee/Jeffrey Barbee)
A woman in Mozambique uses an ethanol cookstove supplied by the Novozymes corporation to replace harmful, charcoal-based indoor stoves – and, not coincidentally, to expand its future markets for the ethanol it produces. (Jeffrey Barbee/Jeffrey Barbee)

Welcome to the next generation of philanthropy Add to ...

Its great merit is that it is far more immediate, responsive and direct than the bureaucratic edifices of Philanthropy 2.0; the potential for profit prompts companies to mobilize far more people and resources far more quickly. But that is also its largest potential flaw – that self-interest could overshadow altruism, with no outside force overseeing it.

For established charities, there's another worry: If people come to believe that the world's problems can be fixed by acts of capitalism, will they be less inclined to make donations to charity?

It has come full cycle: Philanthropy 2.0, created to smooth out the flaws in the capitalist market economy, may end up being put out of business by it.

SEATTLE: The billionaires' club

On a grubby stretch of Seattle's industrial waterfront sits a drab, unmarked four-storey building that was once a cheque-processing centre. What takes place inside it is doing more to end the old order of philanthropy than anything else on Earth. The Bill and Melinda Gates Foundation is not just the largest philanthropic organization in the world. It is using its extraordinary wealth to remake the basic nature of charity, aid, development and, in some respects, government.

Founded by the software billionaire in the late 1990s, when he needed to compensate for his international reputation as a monopolist, the Gates Foundation is now to philanthropy what Microsoft is to personal-computer software.

With the $33.5-billion endowment it won in 2008 when investor Warren Buffett donated half his fortune and Bill Gates quit Microsoft to run the charity full-time, it is by far the largest charitable foundation in the world, three times the size of the next-largest (the Ford Foundation) and larger than the entire economies of many of the 100 countries in which it operates; it gives out a sum of money each year – more than $3-billion – larger than that disbursed by the other top 10 foundations combined.

If older foundations have viewed the world through the goggles of a missionary, a nurse, a social worker or a policeman, Bill Gates has approached it as an engineer. A great many of the 1,200 people working here devote themselves to metrics – painstaking measures of the precise impact of every dollar spent – for example, the precise amount it costs a particular program to extend life expectancy in a poor country by one year.

And where old-school charities would assess their projects on an annual or biennial basis, the Gates people prefer their data daily, live from the field, as it's happening.

Mark Suzman, the head of the Gates Foundation's international-development program, began his career in a UN development agency. “One of the things that was really surprising” about old-school philanthropy, he found there, “was the degree to which it was a field that had not focused on results. It was much more focused on outputs: Did you get your money out the door? … We spend a lot of time mapping out what we think the metrics of success will be, and how we will measure it, and the way it will be reported back.”

They also typically have longer time frames: Among the 20 core Gates projects, many, such as vaccination programs, are calibrated on five-, 10- or 20-year schedules. And the scope is beyond what even large governments would consider – system-wide re-engineering projects: changing the type of rice grown in Africa so it will be both flood- and drought-resistant, after climate change; changing the total secondary and post-secondary education system of the United States; ending AIDS and tuberculosis around the world, completely.

As with the Clinton Initiative, a lion's share of the Gates money does not land directly on the ground, but is instead used as seed money to help other organizations raise and disburse further sums for their work. The Gates people call this “catalytic philanthropy” – not to do something themselves, but to cause someone else to do it.

Like the postwar charities, Bill Gates sees this as a mission to correct the imperfections of faltering governments and failing capitalist economies. “Where does the marketplace fall short and therefore a foundation can have a catalytic effect?” he asked in an interview last year.

As a result, though, the Seattle team is in the odd position of being not just rivals but often the main financiers of huge charities, UN divisions, other funds and government departments around the world.

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