Compassionate capitalism

Google.org’s synergy of capitalism and philanthropy

By Deaglan Halligan and Jessica Mintz
From the December 2006 Print Edition

Google.org, Google’s philanthropic brainchild, is already maturing, helping to alleviate world poverty and disease and making money in the process. But isn’t a philanthropic business a blatant oxymoron? Actually, Google.org is not really nonprofit at all; rather, it is a philanthropic organization with a twist, consisting of the Google Foundation, a small nonprofit organization, under the blanket of the larger, unabashedly for-profit parent organization. Google is among the first to catch on to the growing charitable trend. Miraculously, this new paradigm has proven to be not only controversial, but promising.

Google.org is undeniably an unconventional venture into the world of charity. Google is buying into the pioneering philosophy of groups like the Acumen Fund, which boldly proposes that world charity can benefit from an injection of capitalism. The resulting synergy of capitalism and philanthropy is promising enough in principle to warrant large investments. Circa $1 billion in Google shares and resources have been dedicated to Google.org; however, only around $90 million of that is allocated to the nonprofit Google Foundation. The remainder is expected to be used to fund venture start-up charities, make donations, invest in burgeoning environmental and charity industries, and, of course, generate a profit.

One of the Google Foundation’s largest current commitments is to the Acumen Fund, a nonprofit organization that promotes "market-based solutions to global poverty" and supplies affordable goods and services to "the 4 billion people in the world who live on less than $4 a day." Other announced commitments include Technoserve, which is launching a business plan competition in Ghana, Water Research, a program being conducted by Alix Awane and Edward Miguel of UC Berkeley to prevent child deaths caused by poor water quality, and Planet Read, an organization formed to increase literacy in India.

The iconoclastic philosophy of Google.org invites criticism, but it has undeniable strengths. Google.org executive director Dr. Larry Brilliant argues that the for-profit status of the organization will vastly increase its power to practice philanthropy, citing the numerous limitations on 501(c)3 foundations. Brilliant argues that creating industries or building companies may be the only way to deal with global problems such as poverty and environmental crises: "We can start companies, build industries, pay consultants, lobby, give money to individuals, and make a profit." Nevertheless, criticisms abound. As a for-profit organization, Google.org must file for taxes, burning money that could be reinvested in charities. Some of Google.org’s ambitions also seem far-fetched to critics. Consider for example its plan to build a fleet of ethanol-electric hybrid cars that get at least 100 miles per gallon, surely an impressive feat for a company that has economically and technologically proven to be a bit of a one-trick pony.

However, other companies have been quite successful with similar ideas. Take for example the Grameen Bank in Bangladesh, which has saved tens of millions of people from debt and poverty through small loans. The Grameen Bank is clearly a for-profit company, but it has proved that profit and charity can coexist with both positive economic and social effects.

Acumen’s successful A to Z bed-net company in Tanzania, which manufactures inexpensive bed nets to shield people from malaria-bearing mosquitoes, is currently finishing off payments on its loan and has had a significant health impact in the region. Google.org’s for-profit status will allow it to produce capital that can be reinvested in charities, and even lobby in Congress to pass laws, among other things.

Google.org may not be a sacrosanct nonprofit with all the answers, but it has the idea right. With the presence of huge philanthropic organizations like the Bill and Melinda Gates Foundation, the availability of money is arguably less of an issue for combating poverty than the vacuum of ideas for managing that money. When naively thrown into needy countries it tends to disappear in the hands of dictators, and when blindly given away it generates no new capital to reinvest. Acumen buys equity in companies and grants loans instead of handing out cash. Google.org brings Silicon Valley business strategy to the table. University of Michigan professor of economics C.K. Prahalad argues that vast market potential exists in those 4 billion people at the bottom of the pyramid.

Many people assume a posteriori that philanthropic organizations must make no profit, but this is not justified, at least in the case of the Grameen Bank. On the contrary, profit can be reinvested in charity and it encourages the growth of industries and companies that fight poverty. When people out of convention say that social change presupposes nonprofit, they must consider the successful examples of Acumen and the Grameen Bank. Such organizations have demonstrated that a seemingly unlikely combination of profit and charity can have lasting social effects. In principle, Google.org’s synergy of capitalism and philanthropy may very well be greater than the sum of its parts.

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