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Impact Investing vs. Philanthropy: The Zuckerberg Debate

We’ve all heard the ancient proverb: Give a man a fish and you feed him for a day, teach a man to fish and you feed him for a lifetime, right? Well, the meaning behind this proverb seems to be at the heart of a debate that has been sparked by Mark Zuckerberg and Dr. Priscilla Chan’s announcement that they would give away approximately $45 billion worth of Facebook shares over the course of their lifetimes. Any announcement made in such a public way by such a public figure is likely to ignite a firestorm of pushback and the Zuckerberg announcement was no different. Critics disparaged the Zuckerbergs for transferring the money into an LLC rather than a charitable entity because the LLC structure allows them to, both take advantage of certain tax benefits, and invest the money rather than just donate it.

The question then becomes, is this sort of charitable strategy necessarily a bad thing? Are they actually doing better by the world by making long-term investments rather than by being restricted to the donation-based work of an NGO or non-for-profit organization? Many financial and philanthropic experts agree that impact investing is a better way to create sustainable and lasting good in underserved communities. Some statistics have shown that for every $1 of impact investment, $13 of economic benefit results. Particularly in developing countries where economic opportunity may be sparse, investing in infrastructure, education, and entrepreneurship is often the most efficient way to help in the long run.

The counter argument to that theory would be that if individuals are starving, in medical need, or living under authoritarian or oppressive conditions, their ability to take advantage of infrastructure or educational improvements is likely minimal. People need to have their basic needs taken care of first and immediately, before they can start to gain prosperity via the slow moving vehicle of capitalism.

Perhaps the best approach is a combination of both an impact investing and a donation-based philanthropic strategy. Give a person a fish and he or she can eat today, teach a person to fish and he or she can eat for a lifetime. If we can work with NGOs and non-for-profits to deliver that fish to satisfy an immediate need and then work with billionaires and private enterprise to develop a framework for fishing education, then the fisherman will undoubtedly be on the path to prosperity.

Sara Baris Lead Business Blogger
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