Matt Ridley: Doing good by doing well

Mark Zuckerberg and his wife Priscilla Chan marked the birth of their daughter Max by promising to donate 99 per cent of their Facebook shares during their lifetimes to support good causes. For this they were pilloried by some. The economist Thomas Piketty called it a “big joke”. For author Linsey McGoey it was “business as usual, rebranding as philanthropy, and announced with a deceptive air of selflessness”.

We have reached new depths of cynicism when a couple say in a letter to their newborn child that “our hopes for your generation focus on two ideas: advancing human potential and promoting equality” and some people can only sneer.

Much of the carping is deeply confused. The Zuckerbergs have been criticised for not handing their shares to a tax-deductible charitable foundation now, which would net them a big tax break up front, and in the very same breath for not handing over their fortune in tax.

The young couple really do think they can help to make the world better off and more equal, and they are impatient to start. Indeed they think they have already started this through Facebook. I know this partly because I have met them and discussed these issues with them, but also because the letter they have written to their daughter, if you read it carefully, makes a well-reasoned case that technology can be the greatest leveller the world has seen: it can achieve what socialism promised but signally failed to deliver. (“Dot-communism”, it’s sometimes called.)

The greatest beneficiaries, by far, of vast business ventures such as Facebook are not the founders, but the customers. When Lancashire entrepreneurs made cotton textiles affordable for all, it was all who benefited; when Rockefellers did the same for oil, or Carnegies for steel, again the overwhelming majority of the benefits flowed to the customers. One study, by William Nordhaus, found that entrepreneurs end up with less than 3% of the societal value that they have created. Some goes to financiers, but the vast bulk of the benefit turns up as consumer surplus.

Likewise with today’s magnates: the fortunes amassed by the Messrs Gates, Jobs, Bezos and Zuckerberg are as nothing to the value that has been captured by their willing customers in the form of better services delivered far more cheaply and easily.

So let’s ditch the zero-sum mentality and remember that an entrepreneur who makes something that was once a preserve of the rich cheaply available to ordinary people has done an act of philanthropy through his business, even if he also makes a fortune in the process. To reach the number of followers anybody can now have on Facebook once required either a large sum of money to spend on paper and stamps and secretaries, or an even larger sum to buy a newspaper or a radio station.

Zuckerberg thinks that “the only way to achieve our full potential is to channel the talents, ideas and contributions of every person in the world”. To that end he wants to get the four billion people who do not have access to the internet online. Through “internet.org” he is trying to find ways to use solar-powered drones flying at 60,000 feet and equipped with infra-red lasers to bring the internet to remote parts of the developing world where they could give farmers weather forecasts and crucial market information, plus a chance to educate their children.

Yet even for this he is pilloried, because although internet.org is open to all low-bandwidth content, some purists felt giving free access through Facebook threatened the principle of “net neutrality” — that internet providers should not discriminate between different providers of content. In India, in particular, there has been a backlash, with politicians castigating Facebook for offering free access to diverse content.

Here my sympathies lie entirely with the blogger Tim Worstall, who wrote recently: “Someone is offering to give away one of the few things we know about that absolutely increases economic growth. And people are whining about it? Quite frankly, if Facebook was insisting that people must strip naked, spin thrice widdershins and then shout ‘Hail Zuckerberg’ before using internet.org I’d regard that as a small price to pay for the economic benefits that are going to flow from its use.”

It is hard to quantify the effect that the internet has on economic growth, but it is almost certainly huge. When Zuckerberg was in India in October, he cited the estimate, repeated in his letter to his daughter, that for every ten people who gain access to the web, one job is created and one person is lifted out of poverty. Was he in India to try to grab more customers in a lucrative market, or because he wants to bring philanthropic benefits to poor people? How about both?

Philanthropy does not have to hurt to do good. That some of today’s digital billionaires, such as the “robber barons” of a century before, are keenly aware of how lucky they are to have been in the right place at the right time and are therefore generous with their personal fortunes is merely an additional benefit. That some of them, notably Bill Gates and Warren Buffett, are spending that money very carefully and effectively — far better than governments would spend it — is no bad thing.

Yet most foundations start out effective and gradually become captured by political correctness and vested interests. The Rockefeller Foundation did a truly brilliant thing in the mid-20th century when it supported Norman Borlaug’s tireless efforts to breed high-yielding varieties of wheat in Mexico and then to get them adopted in India and Pakistan, thus sparking the “green revolution” that has brought billions out of hunger. Later in the century, it succumbed to fashionable dictums and failed to back Borlaug’s attempt to do the same for Africa, arguing that high-yielding crops might be bad for the environment.(Recently it has reversed again and joined the Gates Foundation in supporting agriculture in Africa.)

With this sort of history, it is little wonder that the young Zuckerbergs want to retain flexibility in deciding how their Chan-Zuckerberg initiative does good work. So they have not made it into a charity, but a limited-liability company, which means it does not have to give away 5 per cent a year and can venture some of the funds by betting on risky and for-profit enterprises. Like, say, solar-powered drones, or software development for self-organised learning in schools.

The Zuckerbergs think that “advancing human potential and promoting equality are tightly linked”. The evidence suggests they are right: innovation has steadily improved global equality as well as prosperity.

Matt Ridley, a member of the British House of Lords, is an acclaimed author who blogs at www.rationaloptimist.com. This article was first published the Times.