We’ve written a lot lately about the new philanthropists emerging from the tech sector, and how they think. But what about the new funders coming out of finance? What generalizations might hold true for these people?
It’s an important question, given the enormous wealth that has been created through finance in recent decades—and how much of that wealth is starting to flow to philanthropy. Regardless of what you may think of the tax and regulatory policies that have helped Wall Streeters get so rich, anyone who raises money has to understand this crowd.
Along with tech, finance is the sector that’s producing the largest number of major donors these days. At least 25 members of the Giving Pledge made their fortunes in finance, and some rank among the very wealthiest people in the United States. Beyond that top tier of mega-givers, though, are numerous other philanthropists from finance, many of whom fly well under the radar. At Inside Philanthropy, we’ve written profiles of over 100 of these donors. Here are few general points we can offer about Wall Street donors in terms of who they are, how they operate, and how to get to them. (Click on links for related IP articles.)
They Give More Than You Think
The finance world has a reputation for greed, and a zeal for making money so intense that ethics may fall by the wayside. But strong philanthropic currents have long run through this world, and have grown significantly in recent years. The growth of the Robin Foundation, Wall Street’s favorite charity, is a good barometer of what’s been happening. That group pulled in $161 million in contributions in 2014, up from $64 million in 2005. Many of the largest financial firms have robust employee giving programs and some have even required employees to contribute. (Bear Stearns, the investment firm which collapsed in 2008, compelled employees to contribute 4 percent of their bonus money every year to charity.) We’ve been struck by how many philanthropists we’ve identified that are associated with just one firm, Goldman Sachs. At least a half-dozen Goldman guys have appeared on our radar, including Hank Paulson and Larry Linden. But it's hedge funds that are producing the most significant new donors from finance, including George Soros, James Simons, Julian Robertson, Bill Ackman, John Arnold, John Paulson, Steve Cohen, Ray Dalio, Stanley Druckenmiller and Tom Steyer. Are Wall Streeters giving as much as they should be? No, but more new donors are emerging from this world than Inside Philanthropy can easily track, and we discover new ones all the time.
Many Are Just Beginning
While some philanthropists from finance, like George Soros, have been giving for decades, a great many are just getting started and have barely scratched the surface of their wealth. For example, we’ve written a bunch about Ray Dalio, who’s worth $15 billion and signed the Giving Pledge. Dalio has been ramping up fast, giving away over $100 million in some recent years. But that’s nothing compared to what he’s likely to give down the line. This is even more true of Carl Icahn, another Giving Pledge signatory, who’s currently worth $18 billion and has said that nearly all that money will go to charity—yet he has only given modestly so far. Other finance winners, like David Tepper—who’s worth $11 billion—have emerged as very active philanthropists, but not yet at a level that can make a dent in their fortunes. Quite a few of these people are still relatively young and focused on their careers. In short, whatever giving we’re seeing now from Wall Streeters is nothing compared to what lies ahead. Within a few decades, we’ll probably see a half-dozen foundations larger than Ford created with finance money.
They Are Spread Out Geographically
If you raise money in the New York area, you’re in the right spot, since many of the top new funders in finance live and work in the Tri-State area. Many also like to focus their giving locally. But finance is very much a national industry, and it’s grown greatly in the past decade in places outside New York. We track finance donors living all over, including in Boston, Chicago, Washington, Los Angeles, and the Bay Area. Notable non-New York finance donors include the Johnson family in Boston, and also Seth and Beth Klarman; Herb Sandler and Charles Schwab in San Francisco; Kenneth Griffin in Chicago; Denny Sanford in San Diego; David Rubenstein and Daniel D' Aniello in Washington; John Arnold in Houston; and others. In turn, these big names are just the tip of a large iceberg of local finance money.
Many Are Quite Intellectual
A lot of the new finance money has been made using sophisticated strategies to predict the markets, and the hedge fund world in particular has some notably intellectual billionaires. Soros, of course, is most well known in this regard, as the author of numerous books and articles. Then there is James Simons, who parlayed his math genius into trading gains, ending up with a $14 billion fortune. I could name plenty of other billionaires who’ve gotten rich, in large part, by monetizing their intellectual prowess. A related key to their success is predicting trends and using leverage. This holds a few implications for their philanthropy: First, many of these donors understand complicated fields that involve science, such as climate change and medical research; two, they appreciate the importance of research and the role of expertise; and three, they are often drawn to sophisticated grantmaking strategies developed with expert input.
They Tend To Be Politically Moderate, But Very Pro-Market
Most finance donors aren’t very ideological. They’ve spent their careers focused on making money, not thinking about public policy. That said, many believe deeply in the power of markets to solve problems, and that belief can drive their giving in different ways. Most famously, of course, finance donors are stalwart supporters of the school choice movement. But their belief in markets extends to other areas like the environment, where they’ve sought to create new financial incentives for ecological progress (see Larry Linden’s funding); and global development, where some, like Bill Ackman, see see a huge potential for social enterprises to combat poverty—for example, through helping small farmers make more money.
Yet Some Are Key Ideological Donors
Finance donors play a key role in underwriting policy groups on both the left and the right. Two of the top conservative think tanks in Washington, AEI and Cato, rely heavily on Wall Street money, as do many lesser-known outfits. We wrote recently, for example, about how the hedge fund executive Robert Mercer has emerged as a top funder of conservative causes. While you might expect finance guys to back such work, more surprising is how many notable progressive donors have emerged from finance. Beyond George Soros, there is Herb Sandler, who’s backed liberal think tanks; Tom Steyer, who is leading a high-profile charge on climate change; David Gelbaum, who’s given huge sums to the ACLU and Sierra Club; and Glenn Hutchins, a major backer of the Center for American Progress and other liberal work. Meanwhile, there are a number of philanthropists from finance who don’t self-identify as progressive, yet give heavily on such issues as climate change, gun control, or college access for undocumented immigrants. Finance donors have played an especially key role in scaling up environmental groups in recent years.
Most Keep a Low Profile
Philanthropists from finance are often very private about their giving. Many don’t have well-established foundations or publicize their donations. They seldom speak to the media about their philanthropy. In fact, the only way to learn about what a great many of these people are doing is to pull their 990s and study up. (Or subscribe to Inside Philanthropy!) Related to this, many of these donors don’t have clearly established processes by which fundraisers can get in touch, and anyway, don’t accept unsolicited proposals. This can make things very difficult for fundraisers, who struggle to find an entry point. Extensive networking is essential for getting anywhere near these people.
Their Wives Are Key
Nearly all of the top philanthropists from finance we track are men. That said, much of the money flowing from this world is controlled by women—namely, their wives. As we’ve discussed before, nearly all philanthropic couples make their giving decisions jointly—yet it’s the wives who often handle the day-to-day details, and that seems especially true in finance. Many finance leaders are older, and traditional gender roles are more pronounced here than in tech. As a practical matter, this means that fundraisers don’t actually need to get to well-known financiers; they need to get to their wives, who are often more accessible through charitable networks.
Most Will Keep Getting Richer
While finance leaders already have a lot of spare cash, they’ll have even more in coming years. These people just keep getting richer and richer. George Soros’ net worth, for example, has more than tripled in the past decade. Quite a few younger philanthropists from finance are still at relatively early stages in their careers, and will be much wealthier down the line. Of course, entirely new finance billionaires keep popping up. Anyone who raises money wants to watch this world like a hawk.