Giving back..Why should I care and how much should I give?

  • His mother, Mary Gates, who was a well known philanthropist had a guiding principle which went along the lines of “If you have been successful in life it is your responsibility not your choice to give back”.
  • He was going to give more than 90% of his wealth away to philanthropic activities to try to move the dial on major issues — as has has gone on to do in spades.
  • He wasn’t going to do anything material in the philanthropic space until he could allocate the time and energy. He felt that you should bring the same intensity of intellectual rigour and time that you bring to work to doing good in the world.
  • Why should anyone give money to charitable causes?
  • How much should you and I give?
  • The Mary Gates Principle
    “If you have been successful in life it is your responsibility not your choice to give back”
  • The Warren Buffet Principle 1 — Lucky Genes
    “My wealth has come from a combination of living in America, lucky genes and compound interest”. Buffet has talked at length about how the genes you get from your ancestors (and the inherent skills and abilities these provide the basis for), where you were born and live, what careers you fall into provide a base for wealth to accumulate. A girl born to parents with low IQ in a remote village in Uganda, who ends up parentless due to tragedy at an early age does not have the same chance as a white boy born in Sydney to wealthy, smart and hard working parents. Yet both deserve the opportunity to live a fulfilled and happy life.
  • Warren Buffet Principle 2 — Inheritance
    “I do not believe in inheriting your position in society based on which womb you came from..I think a rich person should leave enough for his/her children so that they can do anything but not enough so that they can do nothing”
  • Where money accumulates — Part 1
    It seems obvious to say that generally the jobs that accumulate the most wealth are the ones that are own equity (businesses or funds/shares). Jobs that accumulate the most wealth (outside of being a business owner) are those involved with making money for others — whether that is a direct sense (Fund Manager, Investment Banker) or by providing a service that helps a business be more productive — make higher margins and more money — (Lawyers, Consultants) or by providing products that help an individual or business be more productive.
  • Where the money accumulates — Part 2
    We all know people who had the intellectual capability to be anything they wanted to be. Some chose to be M&A lawyers, some chose to be Investment Bankers, some chose to be surgeons and some chose to be teachers. We are just all super lucky that many of our best and brightest chose careers where financial returns were not the currency of success.
    The fact that super talented and hard working people choose to be teaches, nurses, doctors, care workers, engineers and similar roles that add value while not attracting high salaries something we should all be grateful for. We just need to at acknowledge that money flowing into pockets is not built on some algorithm determining the long term benefit to society for the work undertaken.
  • The Work Ethic Argument— Financial Returns are not mapped to hours worked or effort put in.
    This kind of maps to the point above but just to labor the point. It would be super hard for any Fund Manager or Company Founder to suggest they work harder than many GPs, Tradies, store men, nurses or hospitality workers. Money does not map to hours worked or effort put in — when you get beyond the bottom quartile of salaries for work undertaken.
  • Start to allocate non-trivial amounts of money (and perhaps time) to trying to address suffering or need in our world.
  • Admit they don’t really care about anyone outside their immediate family/friend circle, or it is someone else’s responsibility to help those less fortunate. Are they really happy to acknowledge that luck has played in their favour but it is not up to them to try to use this “luck” and give back to others less lucky ?
  • Charities Waste Money
    Of course 100% of all charities are not super efficient (just as most businesses are not efficient users of capital). So rather than using this as an excuse not to give maybe use it as a motivator to search out the charities efficiently using capital and give them more resources to go good work. If you don’t want to do this selection work yourself then go to groups such as givewell.org who undertake work to select the most effective charities across a range of needy causes.
  • Australia has a big social net — so there is no real need to give
    Firstly we don’t have a big social net . As a quick summary total tax take in Australia is around 27% of GDP, UK is 34% and Sweden is 44%. We are not being overlay taxed to pay for a raft of sufficient social services.
  • People may not give $ but they volunteer
    Sure, if you are a financially struggling individual and your only real resource to offer is time then volunteering is a wonderful way to give back. It is worth noting that volunteering rates globally are declining as they are in Australia. Further some multi-millionaire choosing to allocate a few hours a month in volunteering but not giving any money away is not thinking about trying to be impactful — because allocating decent chunks of money will have FAR MORE impact than a few hours a month volunteering
  • I worked hard for my success
    Firstly see the points in the last section..Secondly you were successful because you are in a stable society with laws that protect your rights and your money, with banking and payments systems that let you accumulate wealth without the fear that the state (or some other rogue actor) will take it away. So you did not achieve this wealth in a vacuum..Your wealth came at least partly from standing on the shoulders of the society around you.
  • There are very good examples globally of very wealthy people allocating more than 50% of their new wealth to philanthropy
  • Our most wealthy do not allocate much of their wealth to philanthropy when compared to their fellow wealthy travellers in the US, Canada, UK or New Zealand.
  • There are tens of thousands of very wealthy Australians who could allocate at least 20% (probably a lot more!) to charitable giving and in doing so they would help address a vast array of needy causes. Today.
  • Our wealthy have not been introduced to or been introduced to but do not accept the concepts at the start of this post and so have never thought deeply about the responsibility of wealth nor the luck involved with financial success.
  • Our wealthy have not done the maths with regard to what they need to live a full life and what is excess capital.
  • Our wealthy think it is just fine — even good — to pass on vast wealth to their children and generations beyond.
  • Make it super easy for our wealthy to allocate serious money to philanthropy. PAFs are an amazing example of what we need to do. Perhaps there are other, reasonable actions to take to make giving even easier
  • Introduce higher tax rates for the wealthy (income and capital) and reduce capital gains tax relief for certain asset classes and over certain asset values.
  • Introduce an Inheritance Tax. Ok people. Breathe. Nearly all OECD countries have some form of an estate tax. I like this idea the best and here is my idea for one.
Tax and Giving Rate Comparions

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Investor, philanthropist, trying hard to be a good human

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Daniel Petre

Daniel Petre

Investor, philanthropist, trying hard to be a good human

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