What are Charlie Munger’s views on giving back to society?

Charlie Munger’s view on philanthropy is clear: “Those of us who have been very fortunate have a duty to give back.”  Among the most interesting questions related to this statement are:  What is philanthropy? How does philanthropy differ from charity? Are there actions which are “giving back” that are not quite philanthropy? How does one best give back?

Looking at the origins of these words is arguably helpful.  I use the term “arguably” since some of what I am about to say seems in the eye of the beholder, especially on definitions of key terms (taxonomy). Reasonable minds can have different opinions on some of these issues.

Philanthropy is the desire to promote the welfare of others. The word comes from: Late Latin philanthropia, from Greek philanthrōpia, from philanthrōpos loving people, from phil- + anthrōpos human being.

Charity has a different meaning:  the aim of giving money, food or value to a nonprofit organization. Origin: mid-12c., “benevolence for the poor,” from Old French charité “(Christian) charity, mercy, compassion; alms.

A reasonable interpretation is: all charity is philanthropy, but not all philanthropy is charity.

In recent discussions about Priscilla Chan and Mark Zuckerberg’s plans to use their  wealth to “promote change” some people have pointed out that one can be philanthropically motivated even if the effort is not charitable as defined by the United States tax code.  As an example, Felix Salmon wrote:

“Mark Zuckerberg isn’t going to be satisfied with small, visible interventions which don’t scale – feeding the hungry, say, or giving money to the poor. Such activities improve the world, but they don’t change the world.”

How would Charlie Munger feel about this? Well, he has said you can  change the world in a positive way through doing things like teaching people job skills.  Munger has specifically lauded businesses like McDonald’s and Costco for doing just that. These activities are not charitable, but he seems to be saying that they are good for society in ways that positively spillover from the normal desire of a business to seek profit. It seems a stretch to call this type of spillover benefit philanthropic, but it is nevertheless a good thing for society.

Felix is saying Zuckerberg is doing something bigger. Zuckerberg subsequently said that Felix had accurately captured what he had in mind. as an example, coming up with cheap green forms of energy can change the world. It may be that making an investment can best achieve that change, but the investment may not technically be charitable since it may earn a profit. If the return on the investment is sub-market, then it is something less than charitable and something more than just market driven. What is the best word to describe that activity? If there isn’t a word to describe that sort of activity there should be.

Someone who has forgone an opportunity has incurred an opportunity cost. Munger puts it this way:

“I just wanted to do the best I could reasonably do with the talent, time and resources I had available. That’s what I was doing then and now. Everything is based on opportunity costs. Academia has done a terrible disservice: they teach in one sentence in first-year economics about opportunity costs, but that’s it. In life, if opportunity A is better than B, and you have only one opportunity, you do A. There’s no one-size-fits-all. If you’re really wise and fortunate, you get to be like Berkshire. We have high opportunity costs. We always have something we like and can buy more of, so that’s what we compare everything to. All of you are in the game of taking the lot you have right now and improving it based on your opportunity costs. Think of how life is simplified if you approach it this way.”


There are other actions that while not quite charitable might be called philanthropic. These questions can get complex since motivations in the real world can be mixed. For example: Is a teacher who would earn far more money as an investment banker, but still teaches, being partially philanthropic? If that teacher’s non monetary motivation to be a teacher is not philanthropic, what exactly is it? Is there a word that describes forms of giving back that are not quite philanthropic?

If you spend money or devote time picking up trans on the side of a road near where you live, lobbying a government to increase foreign aid for the poor or protect the environment, is that philanthropic?  If it isn’t philanthropic, what exactly is it?

Returning to the Chan/Zuckerberg example,

“In a letter sent to Fast Company “on behalf of the Chan/Zuckerberg Initiative,” a [representative] requested a correction to clarify that Zuckerberg and wife Priscilla Chan are not donating their shares to charity but to “broader philanthropic efforts.” Further, [the representative] specifically suggested using “philanthropy” rather than charity in a sub-headline and “philanthropic efforts or new initiative” rather than charity in the text of the story.”

Where I come out on this set of issues is that society is best off if people are contributing to and promoting the welfare of other people in many ways. Philanthropy should be considered the broader term and charity  narrower in scope. Chan/Zuckerberg intentionally avoided using the term charity in favor of philanthropy. People who insist that they can only engage in 1) charity or 2) profit seeking activities and nothing else are bonkers.

As an aside, not all philanthropy should be tax deductible. Some people don’t believe any charitable donations should be tax deductible since the deduction is a tax expenditure and the money would in their view be better spent by the government. I am not going to get into that issue here.

Other reactions in the press recently to the Chan/Zuckerberg announcement are essentially different forms of: “They are refusing to take the tax deduction! How dare they try to change the world without accepting the limits we specify.” I believe Munger would say that this is “bonkers” thinking. Some things that are not tax deductible or even technically philanthropy are nevertheless a very good thing for society in terms of giving back and should be encouraged. The choices should not be limited to (1) give it to an approved charity under the tax code or (2) do nothing.

Turning to the question of more obvious charitable and philanthropic activities engaged in by Charlie Munger, Janet Lowe wrote in her biography of Charlie Munger (Damn Right!) that at the time the book was written it was: “Munger’s habit to choose just two or three public causes that seem important, then concentrate on making a difference there.” Munger has been the on the board of Good Samaritan Hospital in Los Angeles, for example, since 1979.  As an aside, in making his recent comments about the business practices of Valeant, Munger is not speaking as someone who does not understand the issues involved in drug distribution and pricing. In his role as chairman of Good Samaritan Hospital, Munger said, “I could see the price gouging.”

Munger has adopted more philanthropic causes since Janet Lowe wrote her book. But even in 2000 she pointed out that: “Munger has given some of his Berkshire stock to Good Samaritan Hospital, Planned Parenthood, Stanford University Law School and the Harvard Westlake School.” Since Lowe wrote her book, Munger has given away considerably more money and stock to recipients like the University of Michigan, Stanford University, Polytechnic School in Pasadena and the Los Angeles YMCA.

On the question of the right timing for philanthropy,  Munger has said that whether you give your money away all at once when you die or as you go along is a personal choice. In 2013 Munger said he is choosing the latter approach:

“I’m deliberately taking my net worth down. If it’s not below a billion, it soon will be. My thinking is, I’m not immortal. And I won’t need it where I’m going. There’s nothing as insignificant as an extra $2 billion to an old man.”

“I’m soon going to be departed from all of my money. Why not give more of it away while I get the fun of giving it?”

Munger believes that people have a duty to give back more than money, especially if they have earned their fortune doing something he feels isn’t particularly productive, like picking stocks:

“To the extent that all I’ve done is pick stocks that have gone up and sat on my ass as my family got richer, I haven’t left much contribution to society. I guess it’s a lot like Wall Street. The difference is, I feel ashamed of it.”

“I’m somewhat ashamed… That I’ve profited from being shrewd with money is not by itself satisfying to me. To atone, I teach and try to set an example. I would hate it if the example of my life caused people to pursue the passive ownership of pieces of paper. I think lives so spent are disastrous lives. I think it’s a better career if you help build something. I wish I’d built more, but I was cursed at being so good at stock picking. ‘The man is the prisoner of his talents.’ You can laugh, but I’ll bet this room is full of people who are prisoners of their talents. It tends to be the human condition.”

“I do my outside activities to atone, and Warren uses his investment success to be a great teacher.”

Munger knows that he is a teacher in his own way: “I try to make up for it with philanthropy and meetings like this one today. This meeting is not out of kindness. This is atonement.”

There is some indication from statements made by his family that Munger enjoys intentionally acting like a curmudgeon for comedic effect. One example would be this type of self-effacing comment:

“Early Charlie Munger is a horrible career model for the young because not enough was delivered to civilization in return for what was wrested from capitalism. And other similar career models are even worse.”

The other way to “give back” of course is to be a teacher.  Munger points out: “The best thing a human being can do is to help another human being know more.”

In my own small way I am trying to teach too with these blog posts. You have probably figured out by now that I often use Munger as a foil for expressing my own views. He is far more interesting than I am and can generate more page views and reach more people who could use some help with investing. Writing a book or blog to help people with a topic that most people find boring is quixotic, but that’s my choice. That I have only modest success in this effort is fine with me.



The Chronicle of Philanthropy

“Although Mr. Munger left the University of Michigan before graduating, he became one of its most generous donors when he pledged $110-million last year for graduate student housing and fellowships.

The 90-year-old investor is directing $100-million of his gift to build a housing complex where graduate students from varying disciplines can live together and avoid the social isolation that so often accompanies graduate study. The remaining $10-million will go toward a graduate fellowship program designed to encourage study and interaction among graduate students in different fields.

He gave the gifts because he believes housing has a big affect on one’s education.

“It’s very uncommon that administrations are much interested in creating dormitories because if you’re an elite place and you’ve got 10 applicants for every spot, it’s perfectly natural to think, ‘Why the hell do we need to do any more for the students? They’re begging to get in,’” he says. “I don’t think you abuse your best customers merely because you can get by with it.”

This isn’t his first donation of this sort. In 2011 he gave $20-million to the university’s law school to renovate housing for law students.

He decided to donate the money now rather than give it as a bequest so he can see the results of his giving.

Two other organizations benefited from Mr. Munger’s gifts in 2013. He donated $38.5-million to the Huntington Library, Art Collections, and Botanical Gardens for a new education and visitor center that is scheduled to open in 2015. His late wife, Nancy, was a Huntington trustee; not including this most recent gift, Mr. Munger has donated about $27-million to the organization over almost three decades.

In addition, he gave nearly $1.9-million to the Marlborough School, a private girls’ school in Los Angeles, for an athletics center. His wife was an alumna of the school, as were a daughter, two granddaughters, and a daughter-in-law.”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s