Before I begin this charity watch, full disclosure: I worked at Microsoft for 6 years, and I have given to CARE.
We need to pick a measure of success for a charity. Here is mine: the amount of money that a charity spends on charitable works each year that is funded by voluntary "contributions" from private sources, like individuals and corporations.
Let's look at CARE, a non-profit usually considered a model of success. In 2005, CARE collected about $250 million, from private sources, to be spent for charitable works in that year.
CARE's total budget was significantly higher, because $400 million in its annual budget came through government grants, which are supported by taxes. "Donations" (taxes) that are collected under the threat of jail time - if private individuals do not pay - do not qualify as my definition of "voluntary giving" :-)
Microsoft and the Bill and Melinda Gates Foundation
CARE is a complete failure compared to Microsoft, a for-profit company. Microsoft collected enough money from private sources to supply more than $1.5 billion for charitable giving in 2005, six times the amount CARE achieved!
Of course, the two organizations' approaches to raising charitable funds are very different. CARE asks people to give money out of the goodness of their hearts.
Microsoft sells individuals and companies "a poorly debugged set of device drivers." This income stream inspires another set individuals and companies to buy Microsoft stock.
Some of these investors buy Microsoft stock from the Bill and Melinda Gates Foundation, which received the stock from Bill himself, who in turn got it for his role as a founder of Microsoft. The Bill and Melinda Gates Foundation uses the income from these sales, and reinvestments, to generate the $1.5 billion that it gave away in 2005.
Charities in Microsoft
Some will object that Bill Gates did not have to give his stock to a charitable foundation. Similarly wealthy individuals, like Larry Ellison and Paul Allen, would rather spend their money on enormous personal yachts. When I bought a copy of Windows, there was no guarantee that any of my money would end up in a charity.
This is true, but I did not buy Windows because my money would go to charity. I bought Windows because it was something I valued for my own selfish reasons: for example, to make it easier to write this blog.
The Best Charities
This brings me back to the answer of my original question. If the goal is to maximize the amount of money available from private sources for charitable works, then the for-profit Microsoft is clearly a better model than the non-profit CARE. You just need to make sure at least one of the founders is not ridiculously acquisitive. :-)
The jury is out on whether Craig Newmark is pursuing the best path to maximize charitable works by making craigslist a for-profit company. Clearly, the for-profit route was the best one for Bill Gates.
Are you maximizing your income, so you can give it all away? Check it out with our salary calculator.
Dr. Al Lee