- Day 1: Oh my God, they’re donating 99% of their wealth to charity!! How amazingly generous!
- Day 2: Oh my God, they’re transferring the funds to an LLC! This whole thing is just a tax dodge! What a couple of jerks!
- Day 3: Holy shit that is a lot of power for one family to wield.
With respect, friends, those first two statements are wrong. Like, fundamentally factually incorrect. And the third one is a truth bomb. I’ll explain why in a minute, but some advice for Mark and Priscilla:
First bit of advice: Fire the person who told you that public letter to your daughter was a good idea. Fire them now. Yeah, sure, right now you are riding a wave of mostly good publicity (aside from the creeping backlash) but it’s pretty shortsighted. You got your name in the news cycle for 48 hours, but the general public will forget about this in a couple of days, and did you need to be in the news this week? From a PR-centric view, by taking a public victory lap before you’ve really started on a lifetime undertaking, one in which you will fail early and often, you are trading a good story that you can’t capitalize on now for a depressingly predictable hit piece in two years that will have a real impact on your still nascent organization. In the smaller community of practice that will actually remember this announcement, you got a bunch of people who run various non-profit and for-profit enterprises excited that the Chan Zuckerberg Initiative cash spigot is about to rain money from the sky on their projects. Only it isn’t because you don’t yet have an organization that can deploy or manage grants and investments at scale, and you won’t for a while. You’ve made future-you’s life more difficult in exchange for a PR bump that present you doesn’t need.
Second bit of advice: If you aren’t already in the process of building a world-class team of people to deploy that money . . . well, you shouldn’t be press releasing anything. It will take time to find the right people. It will take time to get your legs under you. It will take time to build the knowledge and networks and infrastructure to be good at this. And even then, deploying almost $50 billion dollars is going to be hard as hell. 100% of your success as philanthropists will be dependent on the quality of people you bring in and the quality of organization you build, and I haven't heard anything about that from you yet.
I have a third bit of advice related to that second one but I’ll save that until the end.
Back to the euphoria, the backlash and the realization.
#1: Oh my God, they’re donating 99% of their wealth to charity!! How amazingly generous!
No, they’re not. After setting aside a half a billion dollars for living expenses, they’re allocating the rest of their wealth to making the world more how they want it. Most of their admittedly vague goals seem like good ideas to me, but there is nothing inherently generous about it. The Koch brothers spend hundreds of millions of dollars in what I assume they genuinely believe makes the world a better place – reducing the drain of wasteful government on hardworking, job creating corporations that make the products people want to buy – but I don’t see anyone in my social circle referring to this as “generosity.”
This isn’t a knock on Zuckerberg, or the Koch brothers for that matter. Modern philanthropy, with its focus on metrics and outcomes and accountability to founders, isn’t really about generosity. It is about setting a strategy of how you would like to see the world changed, and then engaging with organizations through grants and investments to enact that change. A lot of the time that vision includes education for children or better crop yields for poor farmers or eradicating illnesses, but it can also involve busting teachers’ unions or building nuclear power plants or fighting what you think is unnecessary government regulation. When someone says, “I’m going to make the world a better place!” the rational response is to say, “What do you mean by that?” The next rational response is to actually watch what they are doing and see if it matches what they are saying. Zuckerberg and Chan somewhat understandably don’t have a defined worldview or much of a track record (which is funny, given that they have already spent a billion dollars.) I don’t fault them for this, but until they do, I’m skeptical. You should be too.
#2 Oh my God, they’re transferring the funds to an LLC instead of a foundation! This whole thing is just a tax dodge! What a couple of jerks!
No, it isn’t. There were some stories in major outlets that either implied or explicitly stated that the LLC vehicle was being created to avoid paying taxes. This is simply not true. Mark Zuckerberg already has an army of attorneys “managing” his “tax liability,” and there’s no need to create yet another legal entity for that purpose, let alone engaging in some nefarious public relations double bluff for that purpose.
The reason they chose to an LLC instead of a foundation has nothing to do with taxes. If anything, there’s a chance they’ll pay more in taxes because of this decision, not less. The reason they chose the LLC structure is that there are a bunch of restrictions on what you can and can’t do with foundation funds, and they would rather pay some extra taxes than be told what to do with their money. As someone who has worked in and around foundations for a long time, I have mixed feelings on this. I think people underestimate what you can do within a foundation structure, but overall, I think it’s completely defensible. Anybody who has spent time working on program related investments or expenditure responsibility transactions or “educational materials” for lawmakers understands how a creative, ambitious person could chafe within a foundation's restrictions, and I respect the desire to do all one can to make the world a better place.
I used to work at Omidyar Network, the first organization I’m aware of to use this LLC structure. If I am at all less skeptical than usual about ZCI, it’s because I went to work every day at ON with good hearted smart people who were genuinely interested in using every tool at their disposal to help people. I can say with great confidence that Pam and Pierre Omidyar had no motive in creating the LLC structure other than maximizing the amount of good (albeit “good” as they define it) they can do in the world. I’m proud to have worked there, but if we’re being honest Omidyar Network is still figuring out what to do with all this freedom. As an organization has had its ups and downs. In its 11 years of existence, it has already gone through several generations of staff, strategies and tactics. There was a time, hopefully past, when it had a hard time figuring out what kind of people it should hire and how to retain them. Understanding the right way to use investments, the right way to use grants and how and when to combine them for impact is still a work in progress. I don’t think there is any shame in saying that ON is still just learning how to explain to other stakeholders in the community what it is, what it wants and how it works with others. It’s relatively easy to cast off a flawed foundation model, but without a clear template to follow, ON and now ZCI are basically ensuring that their first few years of existence will involve a lot of fits and starts and organizational convulsions. If you pick this path, you’ll fail more than you succeed in the beginning, and you’ll change directions multiple times. Pam and Pierre Omidyar, despite their wealth, had the advantage of being relatively private figures compared to Zuckerberg and Chan, so ZCI has the disadvantage of having to do this on a more public stage. Which leads us to the third reaction:
#3: Holy shit that is a lot of power for one family to wield.
It’s not like there hasn’t been any debate over Bill and Melinda Gates philanthropy, but the Gates (Gateses?) chose to work primarily within the traditional limitations of philanthropy. People I talk to are generally curious, nervous and/or deeply suspicious about what ZCI will do having cast off these limitations. (It’s interesting to me that I have friends who are far more enraged by the vagueness of this charitable commitment than they would have been by an announcement that Zuckerberg will buy jets and islands and leave the rest to his children, but that’s a post for another day.)
From an ethical perspective, I’m not sure whether Zuckerberg and Chan actually owe us more of an explanation than they have given. My opinion for now is that we as a society have an economic system and tax regime in which this money (and power) has legally accrued to them, and until we pass a different set of rules, they can spend it however they want. However, I also respect every one else’s right to be really fucking suspicious of what this totally unconstrained, unprecedented new organization is going to do with all this money and power.
OK, so where does that leave us? We have a new organization with no infrastructure or clear model for success that is going to fail more than it succeeds in the early years. It has a tremendous amount of money and power concentrated in the hands of one family with no constraints or even a template for how they might wield that power. I would guess that most people who follow this news are solidly behind Zuckerberg and Chan (How couldn’t they be, they’re for communities and children. Who’s anti-communities and children?) but there is already a vocal minority of folks, especially in the circles that ZCI will be working in, who are deeply distrustful of ZCI’s agenda. You can count on that that group growing in the first few years as this new organization experiments, stumbles and pivots on a very public stage. And ZCI will be a less effective organization because of this loss of public trust. Listen to me. I worked at google.org.
So here is my third bit of advice for Zuckerberg and Chan (well, whichever of them is a regular reader of America’s greatest profanity-friendly impact investing blog) is this: Make ZCI a benefit corporation. I support your casting off of the constraints of a foundation, but you need to articulate what rules you are playing by to give people reason to trust you. Codify how you plan to work with others and welcome some debate on the topic. You’ve already talked at lengths about the societal benefits of radical transparency, and I would be genuinely intrigued by how you could enact that within a philanthropic organization. How much power and decision making can you push out of ZCI into the communities you aim to serve? This would be incredibly difficult and it would take years of revision to get right, but it’s worth doing, and it would serve the next generation of philanthropists, many of whom will pick this structure and will need guideposts on how to work.
OK, let’s end on a positive note. I hope ZCI becomes an amazing organization of awesome people. If anyone needs help with something, you know where to find me.