What Did This Scholar Learn From His Deep Dive Into the World of Billionaires?

We write about billionaires and their philanthropy almost every day here at IP, and so we've been intrigued by Darrell West's new book, Billionaires: Reflections on the Upper Crust

West, who holds a top job at the Brookings Institution, has written a number of books, and yesterday, I talked with him about his deep dive into billionairesand specifically, about his thoughts on their philanthropy.

In our conversation, West talked about "new models of giving that are starting to transform contemporary philanthropy."

In the old model, says West, rich people would give money and trust the host institutions to figure out how to solve the problem and the best way to use the money.

"The new model is much more activist and impact-oriented," says West. "Donors have a topic that interests them but also a possible solution that they think would make a great difference."

So, for example, many billionaires are keenly interested in education, but also have strong opinions on how their money should be used in this area, so they say to nonprofits, "There are these goals that we think are important, and we're going to use these performance measures to see how well you are achieving those purposes."

West stresses: "People need to be aware that this model is becoming more popular, both among wealthy individuals as well as leading foundations."

And how right West is. We see evidence every day that the age of passive money is fast coming to a close, and nowhere is the hands-on approach more evident than in education philanthropy, where billionaires like Bill Gates, John Arnold, Eli Broad, and Paul Tudor Jones have been deeply involved in the details of their giving.

Why are so many billionaires focused on improving education? West describes billionaires "often as individuals who grew up amidst modest upbringings or maybe a middle class home, but they got a great education, started a business and made a lot of money." He thinks these billionaires are attracted to education because "they want to make sure that other people have the same opportunity that they had."

West spotlights the fight over the common core as a great example of billionaire philanthropists diving into controversial education topics and taking a stance.

Unsurprisingly, West believes most billionaires are on the "pro-choice and pro-charter" side of the education reform debate. In terms of billionaires who are more aligned with teachers, he credits Jim Simons, a retired Wall Street financier, who has been very big on promoting STEM education. Simons has put money into the professional development of teachers and has also promoted merit pay for STEM teachers to incentivize more qualified people to enter this field.

We would add George Lucas to the short list of billionaires who side with teachers and aren't pushing to promote charters and gut teacher tenure. (See our profile of Lucas and his education philanthropy.) 

We asked West how billionaires approach the issue of poverty. "The billionaires I know are much more focused on poverty overseas as opposed to poverty in the United States," says West, "so there are a number of people interested in promoting economic development around the world in the hopes of lifting more people out of poverty."

West says American billionaires who do focus on US poverty take an array of approaches. "Some people are focused on policy solutionsthey want to raise the minimum wage, they want to promote educational opportunity, they want to have the government do a better job of coordinating the financial resources that agencies make available to poor people. There are others who focus on mentoring programs, arguing that one thing that is key to getting people out of poverty is to connect poor people with others who have experience and can help those individuals make choices that will end up improving their lot." 

West stresses the importance of raising the minimum wage in order to feed a "robust consumer economy." And he mentioned how even Peter Thiel, a well-known libertarian billionaire, now supports a wage hike. He also cites Warren Buffett as another billionaire in favor of increasing the minimum wage.  

West suggests that Bill Gates might be seriously contemplating getting behind the minimum wage issue, too. "Just this week Bill Gates had a post on his blog talking about income inequality in the U.S. and the importance of addressing it." Though Gates did not come out in favor of particular policy proposals, West calls attention to the significance of someone of Gates's stature discussing this issue.

As the power of philanthropists increases, West says it's important to improve transparency in the nonprofit sector. He notes that the Brookings Institution lists its donors in its annual report. "We encourage nonprofits to be more transparent both about their revenues as well as their spending because people want to know where the money is coming from."