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What Warren Buffett’s son doesn’t understand about the world

Modern-day philanthropy is merely a means of buying indulgences: giving those who created problems such as global poverty an easy conscience and a better brand. The mega-philanthropists makes themselves out to look like altruists, but really it’s all a facade, serving to hide the world’s real need for deep, systemic change.

Or so says Warren Buffet’s son, Peter Buffett, in an op-ed for the New York Times—echoing views advocated forcefully and earlier by Slavoj Zizek. The only trouble with the view—apart from its vagueness, lack of evidence, and basis on associative reasoning—is that it’s false. In fact, it is the opposite of true.

His view is that new mega-philanthropists such as the members of the Giving Pledge, where the world’s richest promise to donate most of their wealth, are giving with one hand but taking with the other. Perhaps in some cases, this is true. George Soros precipitated Black Wednesday by short-selling sterling, costing the UK economy £3.3 billion. And when Starbucks promotes the fact that it uses fair trade coffee, I have no doubt that they are focused on marketing rather than the well-being of Ethiopian farmers.

But it’s by no means the rule. The Bill and Melinda Gates Foundation has provided vaccines, tuberculosis treatments and HIV research, saving an estimated five million lives. And how did Gates make that money? By making and selling software for personal computers—something that is in itself an incredibly valuable thing for the world, allowing children to learn better, businesses to work more productively, and even enabling philanthropic heirs to write badly reasoned op-eds that can be read all over the globe. Now, I’m the first to agree that Windows is a truly terrible operating system. But I wouldn’t trade it for five million lives. Should we judge the whole of philanthropy because it can be used for bad ends? Of course not. And nor should we judge the whole of physics because it was used to create the A-bomb (though that does mean we should be careful).

Peter Buffett’s argument belies an astonishing lack of understanding of both economics and of the extremity of global poverty. He admonishes a condom distribution program he was involved in, because that led to a higher price for unprotected sex from prostitutes. But let me get out my economics 101 textbook: higher price means lower quantity demanded, which means fewer instances of unprotected sex. In other words, the “terrible unintended consequence” that he speaks of is actually a pretty great indicator that the program was achieving the desired outcome.

He argues for the futility of microlending and financial literacy, claiming that though that will help the poor rise above $2 earnings per day, all that results in is that they can “buy more.” But if you’re making $2 per day, being able to “buy more”—that is, to buy goods such as decent meals, medicines and education—is a matter of life and death. (He’s also wrong about the efficacy of microfinance). And he bemoans the idea that business principles such as return on investment are being used in the context of charity. But when some causes are thousands of times more cost-effective than others, then looking at what outcomes can be achieved with the same amount of resources is exactly what philanthropists need to do.

Of course, there are plenty of specific policy changes that would enormously benefit the global poor, and that have been put in place by the leaders of affluent countries: the Common Agricultural Policy, the TRIPS agreement, and restrictive immigration policies, are all good examples. But soapbox socialists like Peter Buffett and Slavoj Zizek seem not to like specific examples, instead preferring vague prescriptions about the need for “new code.” When philanthropy is labeled as neocolonialism by those who are sitting in the richest 1% of the world’s population, it sounds like an all-too-convenient reason to hang on to one’s money rather than give it away. Terms like “capitalism” or “systemic change” are far too vague to be useful. The current economic system has merits and faults, and we need to get into specifics before we can say more than that. (Capitalism doesn’t cause malaria. Mosquitoes do.)

However, Peter Buffett admirably decries the have-a-go do-gooders: philanthropists with no relevant experience or understanding of the issues thinking that they know it all already and can offer pronouncements about what to do. He begins on this point, and I was excited, thinking he might segue into a discussion of the importance of effective altruism. He might have noted that there is a dearth of understanding of what works and what doesn’t when it comes to helping others, and that charity, unlike business, doesn’t have the feedback mechanism of profit and loss by which to correct itself and learn. He might have argued that it’s crucial for philanthropists to find and rely on the best research available, and to honestly and humbly try to do as much good as possible.

But he chose not to go this route. Instead—and perhaps this was a stroke of genius—he chose to prove his thesis by example. By showing himself to have no understanding of the relevant issues, he really did demonstrate that some people, in charge of large amounts of philanthropic capital, have no idea what they’re talking about. And that’s really something that needs to change.

Will blogs at effective-altruism.com. We welcome your comments at ideas@qz.com.

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