In today’s keynote address, Matthew Bishop from The Economist discussed the theory behind his new book Philanthrocapitalism: How The Rich Can Save The World (co-authored by Michael Green).  He highlighted the effective ways new philanthropists are working to solve the world’s most pressing problems.

Bishop posed a number of thought-provoking questions.  He asked how we can simultaneously create wealth and a society that we are proud to live in.  He explained how the great capitalists of our society—those who have made their fortunes through business—have become leaders in creating social change.  Bishop noted that Africa’s first billionaire has recently become engaged in philanthropy.  Bishop also spoke fondly of the moment when Bill Gates and Warren Buffett stood on a stage in New York and announced that they would devote their respective fortunes to making the world a better place.

Bishop explained that philanthrocapatalists, such as Bill Gates, initially saw themselves as merely providing technical assistance.  However, these individuals have quickly realized that in order to achieve their social goals they also need to participate in politics, i.e., change systems and shape public opinion.  Bishop cites Bono’s organization, DATA.org, as a good example of this.

Here are some other points made by Bishop that I found particularly compelling:

• In the future, solutions to society’s problems cannot come solely from government.
• Bishop said that in the nonprofit sector “overhead” is a bad word.  No one wants to fund overhead, because it is perceived as somewhat wasteful.  In the for-profit sector, however, overhead is actually “investing in employees,” which is accepted. Bishop indicated that the Gates Foundation has been more open to nonprofit efforts in this regard. (Interestingly, George Overholser made a similar distinction in an earlier breakout session. He pointed out that while it’s natural for for-profits to market their organizations, the same acceptance is not given to nonprofits that spend money to market theirs. Overholser said we need to “decriminalize” development costs in nonprofits.)
• There is too much duplication in the social sector.  Bishop noted that in the business world it is perfectly normal for small, unprofitable operations to go out of business.  Meanwhile, ineffective nonprofit organizations live on.  Bishop feels that this is an urgent issue.  He asked, “How do you kill bad organizations?”  His implied that bad organizations need to go away so that philanthropic funds can be more easily directed to high-performing organizations.
• Philanthropy is important as a means of testing out new models, such as with micro-finance.  Bishop said that without philanthropy, for-profit models might never happen.

Bishop closed by cautioning that business models will not always make sense in solving social problems.  He thinks it is most useful to think about systems in “entrepreneurial ways,” even if there are no revenue-generating opportunities available.  For more information on Matthew Bishop’s work, check out www.philanthrocapitalism.net.