Enormous Information-Age Wealth Could Fund Charitable Outpouring

Looking through a list of America’s largest philanthropies is a little like leafing through a Social Register from the Gilded Age. Most of the 20 largest foundations are built on fortunes won late in the 19th century or early in this one. Even now, the names over the doorways at many great philanthropies memorialize the visionaries and cutthroats who industrialized America and built a national consumer market: Rockefeller, Ford, Mellon, Lilly (of Eli Lilly), Mott (General Motors), Johnson (Johnson & Johnson), Kellogg, Pew (Sun Oil) and Kresge, the lord of the humble five and dime.

Today the information-age economy is generating another wave of massive fortunes--in finance, entertainment, communications, computers and the Internet. What’s not clear yet is whether this new affluence will produce charitable institutions that affect American life as profoundly as those the industrial age left behind.

The problem isn’t any lack of resources. Americans’ total wealth has increased as fast in this decade as in any this century, calculates Edward Wolff, an economist at New York University. In 1982, Forbes magazine counted 13 billionaires on its list of America’s wealthiest; now it finds 267. Ten years ago, the number of mere millionaires stood at 1.3 million; now the total is 5 million. Forbes says the trend lines point toward 20 million millionaires in a decade. Even Regis Philbin can’t match that pace.

Is this new wealth inspiring renewed social commitment? The evidence is mixed. As a share of the gross domestic product, charitable giving has increased in the last four years--though only to 2%, no more than in 1970. As a share of household income, charitable contributions have actually declined slightly since 1989.

Yet because the economy is growing so fast, even these mixed trends are widening the flow of funds to American charities. Total giving last year rose 11% to nearly $175 billion. The number of private foundations supporting charitable work has increased by nearly one-third in just the last seven years. And the names on those new foundations are beginning to include some of the titans of the new economy--led by Microsoft founder Bill Gates, whose Bill and Melinda Gates Foundation is now America’s largest.

The line behind Gates isn’t as long as it should be. But it’s much too early to write off the civic spirit of the Internet rich. “If people are assuming that the score is done and the game is over, they will be disappointed,” says Paul Shoemaker, 38, the executive director of Social Venture Partners in Seattle, a group that connects younger high-tech execs to charitable activities. “But in fairness, it’s the second inning of a nine-inning game for this generation.” And indeed at two distinct poles of the charitable world, there’s reason for optimism that a new surge of engagement and creativity is coalescing.

One promising sign is the emergence of the megaproject. So much money is now available to the very richest of the rich that the most aggressive are able to pursue ideas not at demonstration project levels but as full-fledged national programs comparable to those the federal government might launch.

If Washington had produced a scholarship program to help more minority students earn college degrees in math, the sciences and education, it probably wouldn’t have been much larger than the stunning $1 billion that Gates’ foundation recently committed to that cause. Likewise, the $155 million that New York venture capitalist Theodore Forstmann recently raised to provide private school scholarships for needy children rivals the national tests of school vouchers that House Republicans have tried (without success) to pass.

Even projects as ambitious as these can’t replace government. But they do open an alternative avenue to innovation at a time when the standoff between the two parties has prevented Washington from funding virtually any significant new domestic initiatives. “There’s stalemate on issue after issue here,” says Bruce Reed, President Clinton’s top domestic policy advisor, “but we could easily get around it if the nonprofit sector thinks big enough.”

Down in the (relatively speaking) weeds of the new money there are other promising developments. One distinctive characteristic of this boom is the amount of money it has placed in young hands. That creates great philanthropic opportunities but equal challenges, because philanthropy, like a taste for winter cruises, traditionally has been a passion acquired with age.

Yet innovative efforts are emerging to change that pattern. The industrial-age moguls built imposing national philanthropies that re-created the top-down structures of their companies. Now the information-age rich are assembling decentralized, locally focused charitable networks that reflect their management ethos, notes White House aide Eric Liu, who helped organize a recent presidential conference on philanthropy.

The best example is Social Venture Partners, which has spread from its founding in Seattle in the fall of 1997 to Austin and Phoenix, with another affiliate now forming in Dallas. The groups raise funds from young high-tech execs (who agree to give $5,000 a year) and then contribute both money and expertise to local nonprofit organizations, mostly small start-up groups working in low-income communities. In what’s been dubbed “venture philanthropy,” the partners burrow in to help the organizations upgrade their technology and devise tangible plans to raise their visibility, stabilize their finances and measure their progress.

“Benefiting shareholders is one thing,” says David Lunsford, a senior Dell Computer Corp. executive who founded the Austin Social Venture Partners. “But benefiting people who directly benefit from your services is another thing entirely.”

This intimate involvement reflects a desire for direct action among the baby boom and younger generations that has replaced a belief in national politics as the best means to improve society. Over time, the key question may be whether young executives accustomed to the instant gratification of the IPO and the adrenaline rush of business on Internet time can sustain their commitment to civic work where progress typically comes more grudgingly. Now more than ever, speed is the key to business success. But, today as much as a century ago, the indispensable ingredient for social change is stamina.

Ronald Brownstein’s column appears in this space every Monday.

See current and past Brownstein columns on The Times’ Web site at: https://www.latimes.com/brownstein.