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Weekend reading: Why the rich should not give money to charity

Weekend reading

Good reads from around the Web.

When I was growing up, Margaret Thatcher and Ronald Reagan championed the power of capitalism to change the world.

There was a clear alternative back then – making tractors in some Soviet gulag wearing ill-fitting overalls while being lorded over by sanctified hypocrites who hunted bears from private lodges on the Kamchatka peninsula before stuffing their faces with Beluga caviar.

I was happy to sides with Thatcher and Reagan over a Labour party that risked taking us one step in that direction.

But by the 1990s, the communist threat had gone. Plenty of us, including me, indulged our more socialist side – both in our thinking, and at the ballot box. Dotcom moguls made money almost as a by-product of their desire to change the world, and before long even Bill Gates had pledged to give away his fortune.

Now, today, we’re shaking off the credit crisis, inequality is rising out of control, and old arguments of Left Vs Right are being reborn in new guises.

So far I’ve come down on the side of the 99%. I think extremes of wealth need curbing – especially because the threat of the Siberian tractor factory is no longer there to encourage the richest to keep everyone on side.

But I don’t think we should do that simply by taxing and redistributing more money. I think the incentives can begin to act in perverse ways, locking some of the poor in dependency and dead-end thinking.

Instead I think we should boost pre-university training, give massive tax breaks to companies for taking on young and unskilled workers, create more start-up funds for new entrepreneurs, raise the income tax personal allowance to at least £10,000, think of innovative new ways to bring childcare to single mothers who want to work, and much more.

What did a rich man ever do for you?

In the midst of this debate, it’s refreshing to watch a video like the following (via Objective Wealth) that reminds me of the ultra-Libertarian other side.

It’s not often you hear Bill Gates chastised for giving billions to charity:

The guy is clearly extreme in his views (I’m sure his moguls are comforted by their billions when society overlooks their achievements) but maybe you have to be to get a view like this across. I’ve just embedded the video, haven’t I?

So what do you think? Is it time to bring back Greed is Good?

It’s hard to stomach the thought, given what those who never surrendered money as the ultimate scorecard – the bankers – did under that flag in the last decade.

But I’d always choose 1980s Manhattan over 1980s Stalingrad.

From the blogs

Making good use of the things that we find…

Passive investing

Active investing

Other articles

Product of the week: The Telegraph reviews the latest fixed-rate savings bond from the Co-Op.

Mainstream media money

Note: Some links are to Google search results – these enable you to click through to read the piece without you being a paid subscriber of the site

Passive investing

  • Buffett’s bet on passive funds over hedge funds is winning – CNN
  • Invest like a dog, not a cat – Roth/CBS
  • What explains the appeal of hedge funds over passives? – New York Times
  • 20 year anniversary of ETFs – The Economist

Active investing

  • Great illustration of recency bias via magazine covers – Business Insider
  • Apple is stronger than ever – Slate
  • US financials still look good – Part 1 and Part 2 by The Brooklyn Investor

Other stuff worth reading

Book of the week: With Apple in the news all week, I’ve been reading the authorised biography – titled simply Steve Jobs – published around the time of his death. It’s superb!

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{ 26 comments… add one }
  • 1 Simon January 26, 2013, 1:29 pm

    > “single mothers ”

    But not single fathers?

  • 2 The Investor January 26, 2013, 2:07 pm

    @Simon — And single fathers. I think there’s an endemic problem with single mothers in lower income / aspiration brackets though. Multiples more of them looking after kids than single fathers.

  • 3 Sarah January 26, 2013, 3:40 pm

    I’d also add in Martin Lewis’s cry for children to be educated in the adversarial consumer society and start simply as early as possible.

    If you’re reading this blog then you’re smart enough to have worked it out for yourself but great majority of people are not. The lessons may not register with all but maybe some will get better futures from it.

    There was this somewhat famous person who said “the poor are always with us”

    I’d add in that the stupid are always with us too. The two don’t necessarily correlate of course – witness any Big Brother contestant who has managed to get rich on being stupid.

  • 4 Drew @ Objective Wealth January 26, 2013, 3:51 pm

    Thanks for sharing this. I think it’s important to look at each individual (be it entrepreneur, banker, lottery winner, conman or heir) and determine where their wealth came from: was it created where none existed before, or was it confiscated from others by force or fraud? This distinction is crucial to make, as for the former they have a moral right to keep all of their wealth – their choice to give to charity is theirs to make alone and if they don’t give a cent away it’s still perfectly fine, as it belongs to them – they created that new wealth, it’s their property). There’s also a very powerful play on words in these issues, where terms like ‘greed’ and ‘selfish’ are used interchangeably. Ayn Rand was a champion of selfishness in the sense of its correct meaning i.e. ‘concern primarily with one’s own interests.’ By all means cast moral condemnation on those who have used force to obtain wealth – if you can prove it – but I for one stand up for those who have created and traded their way to wealth, as I benefit from their success without any effort on my part, except for the selfish trades I choose to make in return. Anybody with an iPhone in their pocket should understand this.

    I’m thrilled that Monevator is sharing ‘extreme’ views like this for debate and consideration for UK readers. You’re absolutely right, they are extreme compared to mainstream views, but like our new understanding of the word selfishness, does that make it a bad thing?

  • 5 K January 26, 2013, 4:13 pm

    I think faith in “greed is good” is cyclical, and different generations give different opinions. Right now, given that we’re in the aftermath of an economic crisis, faith is pretty low it will go up again. It also depends on how the US does as a country, if they do well in the next decade, faith will be restored.

    I think greed is good still holds in terms of most people’s personal choices but it has become a social taboo to talk about it.

    Personally I believe that people see no significant (cash) yield currently in their career advancement, in their house price, in their bank accounts and they have become more grumpy, wishing that nobody now makes some cash because this is their perception of fair.

    offtopic: when redeeming fund shares, are there hidden costs, like redemption fees or orders get executed at nav ( for funds with no bid-ask )?

  • 6 K January 26, 2013, 4:17 pm

    That being said, I think Gate’s charity affects some geographical areas like Africa, that didn’t benefit from Windows XP or Xbox360. In the west though, Microsoft Windows has done much more net good than any charity out there.

  • 7 The Investor January 26, 2013, 4:41 pm

    Personally I very much admire Gates’ philanthropy — the super targeted and radical approach, as well as the personal gesture.

    I think it’s interesting to consider the counterargument though. Even without going into Drew’s deep philosophy, it’s not hard to argue that the general industry has been a mixed blessing for Africa, and certainly of limited impact.

  • 8 gadgetmind January 26, 2013, 6:43 pm

    I give huge amounts to charity via PAYE and Self Assessment. What little is left after this is split two ways between retirement savings and Oddbins.

    I did once get caught up in the moment, and came very close to giving a fiver to Live Aid, but managed to stop myself just in time. Phew!

  • 9 ermine January 26, 2013, 7:18 pm

    I didn’t find the guy extreme in his views. I will look for the horns and swishy tail next time I look in the bathroom mirror. Charity given of guilt, as opposed to an inner desire to improve some situation leads to a distorted space where money is drawn to areas where it’s easy to tug at heartstrings.
    As supporting evidence I don’t think Bill Gates is giving this money from guilt. He’s taken on causes that don’t have a massive aaah factor and some that are contentious, and good for him.

  • 10 cm January 27, 2013, 5:36 am

    Randroid alert!

    The two issues this man is setting up as essentially opposed–capital building vs. charitable giving–are not opposed at all. Involvement in advancing *good* industry (and that is always an analysis; capital is not necessarily pro-society) is of course a good thing. *Good* charitable giving (another analysis) is also a good thing.

    But to even intimate that it is not an *obvious moral necessity* to share the absurdly obscene surfeit of wealth attached to one small human body near Seattle with others, to redirect most of the unfathomable overage, more than any twenty thousand working class families will earn in a 50 year working life, toward the appreciable amelioration of the world–this is the neurotoxic fluke worm of Ayn Rand speaking.

  • 11 Michael January 27, 2013, 8:49 am

    Money is not the end to happiness. Don’t be naive in your polarisation of political views. The Discourse of greed and selfishness is pure Thatcher et al. neo-liberal agenda. Do not fall into a pattern of thought equating wealth with worth. You may have had life chances others did not get and have no chance of. We must always remember the power structures and ideologies that ate and pull back from this reinforcement of such divisive dialogue. Remember those less fortunate. Help empower those people but don’t patronise and for all our sakes do not forget the damage caused to all of us in the pursuit of wealth. Neo-liberalism is destructive to any morally defensible social structure.

  • 12 Drew @ Objective Wealth January 27, 2013, 4:28 pm

    cm – by what or whose standard is *good* charitable giving good? Who decides what’s good charitable giving and what’s bad? You? The PM? It’s for the owner of the money to decide, yet if he finds nothing or nobody good to donate to (by his standards and interests)…he shouldn’t be guilt-tripped into giving for giving’s sake.

  • 13 cm January 27, 2013, 5:21 pm

    Drew – The standard for good charitable giving should be determined by utilitarian principles. Contributions toward reduction in obvious, near-universally agreed upon harms (take your pick) might be a good default.

    “if he finds nothing or nobody good to donate to (by his standards and interests)…he shouldn’t be guilt-tripped into giving for giving’s sake.”

    Why not? If a person is as rich as Bill Gates and finds nothing or nobody to donate to in this world, something has gone wrong in his mind. It would be equivalent to a man capable of easily and at no risk to himself pulling infants out of the path of crocodiles finding, *by his standards* it not worth the effort. That should be censured.

  • 14 Drew @ Objective Wealth January 27, 2013, 5:30 pm

    “near-universally agreed upon harms” – you don’t arrive at the truth just because nearly everybody agrees on it, nor even if everybody single person did. If nearly everybody agreed that communism was the best I’d be worried for the ones that didn’t…

  • 15 The Investor January 27, 2013, 8:12 pm

    I think you’re on to a losing argument picking up on Bill Gates here. If you were talking about taxing and redistributing in the UK because everyone has an inalienable right to a flatscreen TV, that’d be one thing. But Bill Gates has deliberately selected concrete hard problems in desperately poor places in the world to make a difference. Even at my most heroically and willfully contrarian, I’d find it pretty hard to argue it’s not a positive thing. Even from a pure utilisation of resources standpoint, leaving aside notions of morality, isn’t him leveraging £40 billion into Africa, say, going to do more for global GDP and humanity’s productivity than him leaving it in a bank or even investing it in US companies etc?

    It’s pretty hard to argue the world’s poorest or those sickest from (to us) trivial diseases have been tested and found wanting by the efficient hand of the free market. As Buffett might say, they surely never had the chance to succeed or to fail?

  • 16 Greg January 27, 2013, 11:04 pm

    My view is Rand’s numerous poisonous ideas are a blight on the world and the fact she died bitter and on benefits is an irony not lost on me.

    The “It’s ok that millions of people die of trivially preventable/curable diseases because that means I can get a 42″ T.V. rather than a 40″ TV.” mentality sickens me.

    Bill Gates is also a god amongst men with his current work. As TI observes, he has picked unfashionable problems of the forgotten to focus on. One serious issue with getting things done via charitable giving is the “breast vs bowel cancer” issue.

    Plus, he’s actually checking the methods work with blinded trials etc. As observed above, truth is not democratic. In the world of science they need to be incredibly careful that they don’t succumb to what feels right or what most people think is right. It is amazing to me that this sort of way of thinking hasn’t penetrated politics. (Politicians decide what’s best, then find evidence to support them. Just awful thinking.)

    Finally remember, the aim of the game is not increasing the number we call GDP. It’s about increasing average life satisfaction.

    One of my favorite Reith Lecture series is the 2007 set “Bursting at the Seams” by Jeffrey Sachs. It, like almost all the Reith Lectures is available online ( http://www.bbc.co.uk/podcasts/series/rla76 ). Give it a listen for how we can overcome the challenges currently facing us.

  • 17 cm January 27, 2013, 11:50 pm

    @Drew: ““near-universally agreed upon harms” – you don’t arrive at the truth just because nearly everybody agrees on it, nor even if everybody single person did. If nearly everybody agreed that communism was the best I’d be worried for the ones that didn’t…”

    This is not a matter of truth, but preference. And near-universal preferences are baked into our biology. It is near-universal that disease, premature death, disability, extreme constraint, etc., are considered harms. Higher level constructs, such as form of government (where Communism would be considered) are a step removed from what I am referring to.

    Can I produce an airtight is-implies-ought argument to tell us all precisely what to do for all cases? No. Are there some really thorny and contentious corners of the moral space? You bet. Does this mean we are all off the moral hook to just make any moral call as we want? No.

  • 18 Drew January 28, 2013, 12:59 pm

    A preference is a matter of choice, not biology.

  • 19 Matt January 28, 2013, 3:37 pm

    I met Yaron Brook last week – I like some of Rand’s ideas but find it all a bit too black and white. Let’s look at societies with a high wealth redistribution, for example Norway. Norway has a low crime rate and indicators of happiness are higher there. Interestingly any citizen can look up the tax returns of any other citizen and even see each persons salary, but this is regarded as a good thing. I believe on one hand that taxes should be low as I don’t think governments can spend my money better than me, but on the other hand I can see equality is good in many ways… It’s a hard circle to square

  • 20 cm January 28, 2013, 7:40 pm

    @Drew Do I choose to prefer vanilla over strawberry? Does one choose to prefer persons of the opposite sex for physical intimacy? Does one choose to prefer to keep one’s hands off of hot stoves? These things are not commonly assigned to the category of “choice”.

  • 21 cm January 28, 2013, 7:44 pm

    @Matt “I don’t think governments can spend my money better than me”

    Would you know how to spend it to build roads, schools, etc.? I wouldn’t. I like the idea of a non-profit, accountable, overseen, and empowered entity in charge of determining the best way to spend it for such purposes. I don’t ask the government to pick out my sweaters or where I go on vacation–*that* I know how to spend better than it–but for civic projects, that’s what they do. That I’ll kick in for.

  • 22 The Investor January 28, 2013, 7:52 pm

    Well, despite what I’ve said above I do think Drew is correct it’s a choice.

    We live in a world with nearly a billion people who go to bed hungry, with poverty still commonplace. I don’t know anyone who sends all their money to relieve that or even anything remotely close to doing so — so clearly we’re all exerting our choice to live with it.

    It’s possible in 100 years that we could be looked upon as odious by future generations who are born into a new and more equal reality and who wonder how we slept at night. Just like 300 years ago we (most of us) didn’t worry about the poorest, we enslaved them in Africa and shipped them to North America and sent 8 year old children up chimneys and down mines, and now we wonder at that mentality.

    So I agree it’s a choice. But I think some choices are better than others, and Gates is making the infinitely superior one.

  • 23 cm January 28, 2013, 9:04 pm

    @The Investor. Agh, the tyranny of the pronoun “it”. What’s “it” in your sentence that “it is a matter of choice?”. Drew is claiming, wrongly I think, that our *preferences*, that is, those things we prefer, even our most fundamental preferences are a matter of choice. That we choose to prefer x vs. y. We choose to prefer to avoid pain, we choose to prefer to have freedom of action, we choose to prefer health to disease. What I’m saying is, no, we don’t choose these preferences. They are factored supplied by our brains. It’s how humans are put together.

    And admitting this then constrains our morality. Supporting charities that align effectively with fulfilling these fundamental preferences is morally commendable. This is just what you mean by “better” in your phrase “some choices are better than others”, but in your case your use of “choice” refers to the choice of what to do with our money or efforts, not your choice of preferences.

    It’s an important distinction, because, without it, you get the sort of moral nihilism that Drew appears to be advocating.

  • 24 Drew January 28, 2013, 9:43 pm

    If moral nihilism consists of subordinating ‘fundamental preferences’ (by which I believe you mean instinct) to choice (by which I mean volition) then that’s a shame, because that’s exactly what I’m advocating.

    It’s my fundamental preference to continue this conversation, but I’m going to choose not to – I have a blog to get back to!

  • 25 David Stuart January 28, 2013, 10:42 pm

    Didn’t seem extreme to me once he explained it

    All he was saying was give credit to the wealth creators

  • 26 Fred@Foxy Finance January 31, 2013, 9:38 am

    After watching the video I have to agree I do agree with him. Much like benefits in the UK should be cut and the funds should be given to wealth creators!

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