The Archegos Capital Management boss – whose portfolio was swiftly dismantled when his leveraged stock bets soured and he defaulted on his lenders’ margin calls – is the cofounder of the Grace and Mercy Foundation, a Christian charity that helps the poor and oppressed.
Grace and Mercy’s tax filings, reviewed by Insider on ProPublica, show Hwang donated around 121,000 Amazon shares, 945,000 Netflix shares, and 51,000 Facebook shares to the foundation over the past decade. Grace and Mercy sold those shares for about $325 million in total between 2017 and 2018, scoring a handsome $186 million gain.
However, if the foundation had kept the gifts instead of selling them, they would fetch around $946 million today, reflecting the three stocks’ price gains in recent years.
Grace and Mercy also bought shares in Amazon, Netflix, Apple, Expedia, and other companies, its tax filings show. It cashed them in for a total of $200 million between 2014 and 2016, notching a $103 million gain.
Those shares would be worth $722 million today, including Amazon stock worth $449 million and Netflix shares worth $219 million.
Grace and Mercy, which boasted nearly $500 million in assets at the end of 2018, may have cashed in Hwang’s stock gifts because it needed to finance grants to charities and fund its operations. But it undoubtedly left money on the table by selling them.
Hwang is one of several “tiger cubs” who left billionaire investor Julian Robertson’s Tiger Management to start their own funds. He shut down Tiger Asia Management in 2012 after pleading guilty to insider trading in federal court, and launched Archegos in 2013.
“Critical feedback is always super appreciated, as well as ways to donate money that really make a difference (way harder than it seems),” Musk tweeted earlier this month.
In 2012, Musk signed the Giving Pledge, an initiative launched by Bill Gates and Warren Buffett that asks signatories to donate at least half of their wealth within their lifetimes, and has primarily donated toward science and engineering education, renewable energy research, pediatric research, and human space exploration research.
But an estimate by Forbes in September found that Musk has donated just $100 million so far – less than 1% of his net worth.
A study published Scientific Reports in November concluded that companies and governments urgently need to “start developing the technologies for large-scale removal of greenhouse gases from the atmosphere,” a process known as carbon capture and storage (CCS).
Earth’s temperatures are already on track to blow past levels that the Paris climate agreement – which President Joe Biden rejoined Wednesday – set as goals for 2100.
But even if all greenhouse-gas emissions stopped by then, according to the study, at least 33 gigatonnes of carbon dioxide would need to be sucked out of the atmosphere each year using carbon capture – roughly the total amount of carbon dioxide the global fossil-fuel industry emitted in 2018 (36 gigatonnes).
The technology is becoming widely accepted as a safe and potentially effective form of geoengineering compared to other approaches, and Biden voiced support for it in his campaign platform, stating that his administration would take steps to “accelerate the development and deployment of carbon capture sequestration technology.”
Specifically, Biden wants to make carbon capture more widely available, cheaper, and scalable, and plans to increase federal investments and tax incentives for developing the technology.
If 2020 has made anything clear, it’s that billionaires aren’t going to save us — and that goes for all the millions they spend on philanthropy.
Philanthropy is currently dominated by high-net-worth individuals, and philanthropy was already serving an outsized role in American life even before the inconsistent government response to the pandemic.
Anand Giridharadas, the author whose book “Winners Take All” criticizes this overreliance, told Business Insider that instead of funneling money into causes they’re passionate about, billionaires should instead be taking less from workers.
The reliance on high-net-worth individuals for philanthropy also leaves a gap that the government needs to step in and fill.
There’s an apt metaphor for the rhetoric of “billionaires will save us” in beloved children’s cartoon “Finding Nemo.”
Our protagonists – both fish – come across sharks who paradoxically claim to be vegetarian. The sharks, to their credit, seem pretty nice. They’re trying to reform, and don’t want the fish to be scared of them. Their refrain? “Fish are friends, not food.”
They seem to be holding strong until Dory gets a nosebleed. There’s literally blood in the water; primordial instincts win out, and the sharks attack. The fish were right to be scared.
“We don’t need them to make a difference. We need them to stop making a killing at the society’s expense. We don’t need them to increase their generosity. We need them to reduce their complicity and injustice.”
Giving is still dominated by high-net-worth individuals
This week, nonprofit organizations and foundations observed Giving Tuesday. It’s a day that a grassroots movement has been increasingly successful in connecting to charitable giving after the consumer blitzes of Black Friday and Cyber Monday.
Giridharadas said there’s an important distinction between everyday Americans donating to causes they support and the ultrawealthy pouring huge donations into various causes. Someone donating $100 to a beloved cause is, as Giridharadas notes, “for the good” and worthy of celebration.
But ultrawealthy philanthropy is a different beast entirely, he said, because it’s “engaging in giving at a scale that is quasi-governmental in ways that often seek to erase and obscure” the ultrawealthy’s role in causing many of the social problems that they laterally become interested in solving.
Even though “Winners Take All” was published in 2018, it remains a hot-button publication, and still comes up in interviews with billionaires. In December 2020, one such billionaire, former Google CEO Eric Schmidt, was asked by TIME magazine to comment on the book.
Schmidt said he hasn’t read the book, that it has been described to him, and that he thinks there’s plenty of examples to both prove and disprove its thesis. Schmidt also said that Giridharadas’ main argument, that billionaires use philanthropy to alleviate social pressure while shaping change in a way to benefit themselves, “is certainly not my goal.”
A notable Democratic donor, with close ties to the Obama White House, Schmidt acknowledged that “the American Dream is in trouble,” as the average person hasn’t been doing much better over the last decade, while “the elite, obviously including myself, have done super well.”
A representative for Schmidt declined to comment to Business Insider.
A U-shaped philanthropy curve
Research has shown there’s a “U” shape of giving, with lower-income people – particularly those making under $30,000 a year – and higher-income people giving the most.
Jacob Harold is the executive vice president of Candid, a nonprofit that helps connect people with information and data on giving. He said when looking at the numbers of how much people are giving, it’s important to recognize the distinction between giving as a percentage of income or as a percentage of wealth.
“You have folks at the lower end of the spectrum who really don’t have a lot of wealth,” Harold said. “And you also have people at the upper end of the spectrum, who are giving a lot as a percentage of their income, but actually aren’t touching their wealth, and so from that perspective are actually being less generous.”
Dianne Chipps Bailey, managing director, National Philanthropic Strategy Executive at Bank of America, said the gap is “huge,” but grassroots initiatives like Giving Tuesday can help bridge it.
Among Bailey’s clients, she said she’s seen a “significant increase in interest” in giving “to achieve racial equity.” Her team has created a four-part starting plan for impactful giving towards racial equity.
Jacqui Valouch, head of philanthropy at Deutsche Bank Wealth Management, works with high-net-worth and ultra-high-net-worth individuals. She told Business Insider that giving came to a halt in March, but was boosted “enormously” in the second half of the year.
Some high-net-worth individuals are calling for stricter regulations on that giving
A subset of potential megadonors have even started to call for their own power to be curtailed.
Scott Wallace is the co-chair of the Wallace Global Fund, a member of the Patriotic Millionaires. This group of self-described “proud traitors to their class” wants all Americans to hold the same power as millionaires – and for its own taxes to be raised.
Wallace, who ran for Congress in 2018, told Business Insider, “if I have a choice between annoying some of the wealthiest dynasties in America by making them spend more” and “helping the people in my district be served by nonprofits,” the decision is “a total no-brainer.”
Another reform? Deductions for donor-advised funds (DAFs). Currently, someone can put assets into a DAF and deduct that full amount from their taxes immediately; all of that money is earmarked for nonprofit causes, but it could sit there for a while.
Under a related reform proposed by Wallace, DAF users would only get their tax breaks once the money leaves their account, instead of when it enters. Per Wallace, the reforms could unlock $200 billion for nonprofits – which could certainly need it this year.
But while reforms in giving could help, ultimately the government – and not billionaires – can provide the relief we need
Even if billionaires are donating meaningfully, they’re still individuals with their own interests.
Most importantly, they’re also not a replacement for the government – and that’s only become clearer with the lack of structural support in fighting coronavirus and racial inequities. A nonprofit can’t singlehandedly fend off the devastating effects of a global pandemic.
“We only will succeed with deep government involvement,” Harold said. “Even though it sounds like billionaires have a lot of money, in some ways it’s quite small compared to the trillions that the US government is able to bring to bear.”
That’s not to say there isn’t a role for billionaires. Rather than giving toward individual causes, or putting black squares on Instagram in support of racial equity, Giridharadas said they can fund programs that would benefit not just Black people, but all people – if they pay “proper taxes.”
“Are any of the wealthiest and most powerful people in our society serious about bending the arc toward justice?” Giridharadas asked. “And if so, are they willing to do the only thing that is actually going to get us there, which is fighting for the kind of systemic change that would reduce their own power?”
“And the good news is if they don’t want to do that, that’s fine. That’s sort of what I expect,” he said. “The rest of us have a way to do that – which is called democracy.”
[Editor’s note: The fifth paragraph was amended after publication to clarify that billionaires’ net worths grew by nearly $1 trillion amid the pandemic, per a report by the Institute for Policy Studies.]