The following is a simulation of how a young tech billionaire allowed activists to take over his wealth and run a foundation for their own political interests. It is meant to show some of the different foundation capitalism tools in action.
Henry, a rather geeky college drop-out but good at coding, was involved in solving problems in the late 1990s during the emergence of Internet search engines and e-commerce. Paid in shares that were worth nothing in the early days, he suddenly found himself, after an IPO, to be a very wealthy man. Only interested in developing his algorithms, he stayed in his basement to keep up with the waves of tech evolutions and the millions became billions in a few short years.
Urged to make a difference in life (and for tax purposes), interested actors advised Henry to set up a foundation.
Those advisers of course helped him set it up, employed staff from within their network, and engaged the services of one of the many foundation consultancies that manage countless tech billionaire funds. They run the day-to-day operations and have fund managers who do the research to decide which charities are eligible. These consultancies prefer to stay in the shadows but are significant employers in US states like California or Washington and their decisions have an important impact on the local economies, culture and politics.
Every year the consultants and advisers inform Henry, now in his mid-40s, which groups received funding based on some general guidelines drawn up with his advisers (who, after several years, set up a board of directors from within the advisers’ networks to validate the process… should Henry ever pay close attention or disagree). The annual reports run hundreds of pages long and he usually does not have the time or interest to read them.
Henry’s foundation is also involved with other groups in the creation of a third-party foundation for a special project that involved some sensitive legal and political issues. He was told it was better to use this “front foundation” as the costs of the campaign were high and the political objectives were rather controversial. He trusts his adviser (who is also involved in the shell foundation).
The billionaire is pleased to learn that his foundation is donating large amounts to NGOs fighting for positive change while still growing its capital base (without even counting the additional shares he regularly adds … for tax purposes). That is because Henry’s foundation has also set up a “donor-advised fund” to allow other wealthy individuals who share his beliefs to donate directly and anonymously to their own chosen NGO campaigns. The donor-advised funding project has also created a lucrative management fee revenue stream from these anonymous third-party funders while padding the overall funding portfolio.
Henry is also quite surprised to see reporters writing such positive things about him and his foundation. This is probably because his foundation quietly donates millions to a major news group. He was even given a keynote speaking slot at a United Nations global conference although he did not really understand the issue. While he doesn’t follow politics, Henry seems to be having a lot of meetings and photo-ops with some very powerful leaders. The foundation is growing its staff numbers and is getting more and more active in political campaigns, media relations and social justice issues. He is told his board approves of the staff’s activities.
He was recently involved in a new AI start-up with some old friends (who have also set up foundations) and it made perfect sense for them to launch the company as a foundation – a non-profit with the key ambition to develop the technology for the “good of humanity” (with all profits earmarked, once again, according to some very vague objectives). Should any company try to gain access to their markets or products, their lawyers will defend their foundation’s interests aggressively. Foundations have now become a very common business structure in the crypto and AI iterations of the tech wealth-creation journey.
A Force for Virtue or a Force to be Reckoned With?
Each element of this simulation follows from actual organizations and situations. But there are many other types of foundations finding different opportunities to service sectors from the shadows (without even getting into the cult corruption within groups like Effective Ventures).
Henry’s foundation is using capitalist-oriented techniques with the aim to influence decisions and wield power. Still seen as a force for virtue, such foundation activities go largely unchecked and unregulated. Rather, they are being courted by governments and offered beneficial tax conditions. Henry’s star has risen and is highly sought after.
Henry could have given his money to aid organizations, medical missions or service clubs and he would have seen a lot of good come from his wealth. Instead he took the foundation path, inevitably fell under the sway of political activists, and while they have elevated Henry to the level of philanthropist and social doyen, his wealth has not been used for any significant charitable ends.