The Kind of Philanthropy I Hate

I value many of the same things - open space, wilderness, wildlife - that environmental activists value.  The difference is that I do not wish to achieve my goals by force.  For years I have donated money to various environmental funds that focus on using private funds to buy land for preservation (the Nature Conservancy being the most famous of these, though it has had some problems of late).  I particularly eschewed donating to groups who used most of their funds for lobbying.  These groups are using their funds to try to buy government coercion to back whatever goals they are seeking, often including taking more money from me by force and limiting my rights to manage my own property as I see fit.  I hate that.

Which is why I am very disappointed in the recent actions of Bill Gates.  To date, Gates has dumped billions of his own money into trying to improve public schools.  I personally think that to be useless**, that the management and incentives of government monopoly schools are broken and no amount of money can fix them.  However, it was his money and God bless him for trying.

However, it appears Gates is tired of the slow progress, and is taking the great second-rater escape clause, using his money now not to fund improvement programs but to lobby the government to spend more of my money:

Eli Broad and Bill Gates, two of the most important philanthropists in
American public education, have pumped more than $2 billion into
improving schools. But now, dissatisfied with the pace of change, they
are joining forces for a $60 million foray into politics in an effort
to vault education high onto the agenda of the 2008 presidential race.

** I have written several times about the dynamics of organizations and management, but it is my belief that there comes a time when certain managements and cultures are beyond saving, and the only solution is for the market to let them fail and have their assets and people be taken in by more dynamic organizations.  I wrote about this in the most depth in the context of GM, in a post on corporate DNA and value creation:

A corporation has physical plant (like factories) and workers of
various skill levels who have productive potential.  These physical and
human assets are overlaid with what we generally shortcut as
"management" but which includes not just the actual humans currently
managing the company but the organization approach, the culture, the
management processes, its systems, the traditions, its contracts, its
unions, the intellectual property, etc. etc.  In fact, by calling all
this summed together "management", we falsely create the impression
that it can easily be changed out, by firing the overpaid bums and
getting new smarter guys.  This is not the case - Just ask Ross Perot.
You could fire the top 20 guys at GM and replace them all with the
consensus all-brilliant team and I still am not sure they could fix
it. 

All these management factors, from the managers themselves to
process to history to culture could better be called the corporate
DNA.  And DNA is very hard to change.  Walmart may be freaking
brilliant at what they do, but demand that they change tomorrow to an
upscale retailer marketing fashion products to teenage girls, and I
don't think they would ever get there.  Its just too much change in the
DNA.  Yeah, you could hire some ex Merry-go-round executives, but you
still have a culture aimed at big box low prices, a logistics system
and infrastructure aimed at doing same, absolutely no history or
knowledge of fashion, etc. etc.  I would bet you any amount of money I
could get to the GAP or the Limited faster starting from scratch than starting from
Walmart.  For example, many folks (like me) greatly prefer Target over
Walmart because Target is a slightly nicer, more relaxing place to
shop.  And even this small difference may ultimately confound Walmart.
Even this very incremental need to add some aesthetics to their
experience may overtax their DNA.

Corporate DNA acts as a value multiplier.  The best corporate DNA
has a multiplier greater than one, meaning that it increases the value
of the people and physical assets in the corporation.  When I was at a
company called Emerson Electric (an industrial conglomerate, not the
consumer electronics guys) they were famous in the business world for
having a corporate DNA that added value to certain types of industrial
companies through cost reduction and intelligent investment.  Emerson's
management, though, was always aware of the limits of their DNA, and
paid careful attention to where their DNA would have a multiplier
effect and where it would not.  Every company that has ever grown
rapidly has had a DNA that provided a multiplier greater than one...
for a while.

But things change.  Sometimes that change is slow, like a creeping
climate change, or sometimes it is rapid, like the dinosaur-killing
comet.  DNA that was robust no longer matches what the market needs, or
some other entity with better DNA comes along and out-competes you.
When this happens, when a corporation becomes senescent, when its DNA
is out of date, then its multiplier slips below one.  The corporation
is killing the value of its assets.  Smart people are made stupid by a
bad organization and systems and culture.  In the case of GM, hordes of
brilliant engineers teamed with highly-skilled production workers and
modern robotic manufacturing plants are turning out cars no one wants,
at prices no one wants to pay.

Changing your DNA is tough.  It is sometimes possible, with the
right managers and a crisis mentality, to evolve DNA over a period of
20-30 years.  One could argue that GE did this, avoiding becoming an
old-industry dinosaur.  GM has had a 30 year window (dating from the
mid-seventies oil price rise and influx of imported cars) to make a
change, and it has not been enough.  GM's DNA was programmed to make
big, ugly (IMO) cars, and that is what it has continued to do.  If its
leaders were not able or willing to change its DNA over the last 30
years, no one, no matter how brilliant, is going to do it in the next
2-3.

  • atr

    A miniscule fraction of the population appreciates the immorality of government coercion. Most people happily use the force of government to accomplish their ends, "charitable" or otherwise.

    It is not surprising that Bill Gates, whose fortune has been amassed largely thanks to government coercion (enforcement of I.P.), would seek to use the government to accomplish other ends as well. Indeed, to the extent he values the pursuit of just ENDS, from his perspective it would be immoral to eschew the most effective means of accomplishing those ends.

  • dearieme

    How odd that Gates can't think of a better way. Perhaps innovation is more of an Apple thing.

  • MGW

    Isn't it at least possible that his lobbying will be to allow him more freedom to improve schools?

    For instance, in many states charter schools are illegal, but if he wanted to start one (say to test all of his initiatives), he'd lobby to make them legal.

    I think we need to make a distinction between lobbying to make something legal v. lobbying to compel the government to take action/spend money/enforce some policy. One action is lobbying for more freedom, the other is lobbying to take it away from someone.

    Granted, I don't think you should have to lobby to have freedoms, but from a practical perspective, it may be inevitable (the people who want to take away freedoms certainly do a lot of lobbying).

  • http://www.steamstreet.com Jon Nichols

    Even if Gates wanted to lobby, the fact that he is doing so at the federal level is so sad, again trying to take something that has been a function of states and local governments and nationalize it.

    Instead of lobbying, why not take the money and start a series of reasonably priced private schools? Use the power of competition to drive costs lower and provide better service. Give scholarships to needy, smart kids. Reward the best teachers, fire the worst.

    Then, when you show that it can be done (and I assure you it can), use some of the money to educate the public about what you've done, and encourage others to do the same. Yes, it will take time, but if you stay focused on the goal, change will happen.

    Question: is somebody doing this already? I would gladly invest money in this kind of group or company.

  • happyjuggler0

    Milton Friedman's school vouchers site is a great place to start for info on "school choice".

  • http://powerandcontrol.blogspot.com/ M. Simon

    It always bothered me that GM went for the "car of the future" type gimics instead of "five years from now" so they could gain some market reaction to planned improvements. Of course this gives the competition ideas.

    They should have spent the "car of the future" money developing hybrids. They were late to the game and still don't get it.

    Best engineers in the world. Stupid management.

    I'm still waiting for the Chrysler Hybrid Truck that doubles as a electric generator on job sites and can also recharge its batteries from your home/shop 110 outlet.

    Develop the market. Get some vehicles on the road. Try stuff.