#8/25 Foundations - a billion-dollar misunderstanding?!

Dear Readers,

I will remember this 80th anniversary of the end of the war for a long time.

In the morning, Iris Brilliant told us in our podcast how she helps heirs deal with the Nazi past of their money. After exactly one year of "Das Neue Geben", our strongest episode, in my opinion.

At noon, Bill Gates explains to the New York Times why he closing the world's largest foundation much earlier than planned. I am on the phone with the media right away, because this is not news of failure, but a sign of exactly that consistency in dealing with urgency, about which I will give the most important lecture of my life a few hours later.

In the evening, I stand on the TEDxBerlin stage (video in about 4 weeks). I have been preparing for weeks. Because at all the events and interviews about my book, I was still not satisfied with how understandable I make a simple message: wealth is not the problem, but its shackles.

And unfortunately, foundations are more part of the problem than the solution today. A billion-dollar misunderstanding. That is what this newsletter is about.

And what else happened? A new federal government, to which I wish a lot of success for all of us, but from which I expect nothing regarding my topics. And a new Pope. Only there eternity still works.

Yours,

Felix

A number that stays in your head: 2045

Foundations tie wealth to a purpose. Forever. There are two medieval roots for this: In monastic "foundations" (Stifte), charters protected Christian treasures, manuscripts, and relics from worldly turmoil. And kings guaranteed crusaders with "trusts" that their property would remain in the family even beyond their life.

Today, the two roots have grown together - and have become an instrument of financial service providers whose mandate and incentive is to keep money together and multiply it.

Anyone who understands foundations as an instrument for generosity is falling prey to a historical misunderstanding: they are there to secure wealth. Not to spend it on urgent purposes. But that is what is driving more and more people.

The founder of the world's largest foundation is sending a signal. Already in 2045, several decades earlier than planned, the foundation is supposed to have spent its assets. Because the costs of doing nothing (and government retreat) in development cooperation and global health are much greater than any return. Because it makes more sense to give today instead of the day after tomorrow.

The Gates Foundation is already distributing about ten percent of its assets per year. Because of high investment yields (also from fossil and other investments), it would have taken over 50 years to use up the money.

Now the founder has decided to contribute all of his remaining assets of about $200 billion and to spend the money during his lifetime instead of preserving it dynastically. This will increase the annual distribution by four to five times, to far more than $30 billion.

The comparison to German foundations is striking: from their €100-200 billion foundation capital, barely 1% is distributed annually to other organizations. Far less than the cost of doing nothing. They probably spend more on administration, but given the database, nobody knows for sure.

What can be changed about this? Legally, quite a bit: a distribution requirement, an option to convert perpetual assets into expendable assets, a corresponding reversal of the taxation of top-up donations (Zustiftungen), flexibility in impact investing - and, of course, a publication of the finances. (More on this in Chapter 10 of my book)

Will other wealthy people follow Bill Gates' lead? That is certainly his hope. Because even with these reforms, it would be too late for the assets already shackled in perpetual foundations. But most of the money is not yet shackled. Most of the private billions are still waiting for a contemporary offer of purpose.

I believe it is crucial that we end the conceptual confusion around foundations (Stiften) and distinguish between foundations as an instrument for wealth preservation and foundations as an instrument of giving. A rebranding. More on that below.

A person who inspires me: My son

“Can you put some of that in my foundation for me?”, my eleven-year-old son asked me the other day when we were talking about my wanting to give him recognition for spending an evening distributing pizza at a bcause event.

Why do most people start their giving late in life? I tend to agree with progressive education: children can already do almost everything, they forget most of it under the guidance of adults.

Of course, his account is not public. To be precise, he doesn't own the foundation either. But he is experiencing something that I only learned much later in life: there is the money for sweets in the pocket, the money for one's own future in the account, and the money for the future of all of us - in the foundation account.

We learn that we do not talk about money. Yet generosity is contagious. When you share it. That is why we have now made bcause's premium features free for people under 25, also based on our experience with our children. They can earn interest on their balance and invite their friends to join in.

And another question now comes from my son more often: “Is there a Haferkater here?” He invested in this social business from his foundation account because he supports the mission of healthy nutrition at railway stations. We have already eaten a multiple of his small investment there, each time with a good feeling.

An idea to think further: Rebranding Philanthropy

Martin Krohs is an heir, journalism entrepreneur, investor (also in bcause) and philosopher (another thing that unites us). In the current "Philosophie Magazin", he wrote a clever article that inspires me: In "Reale Beidheit", he describes how we let ourselves be seduced by unambiguity, even where ambiguity would make more sense. To prevent the worst climate change, it is both right to restrict consumption and to invest in technological ways out. Yet both positions face each other irreconcilably in public discourse. This is how our society blocks itself.

I experience this also in dealing with wealth. Some want to ban it, whatever that is supposed to look like (see my appearance on the ZDF show "13 Fragen" on the topic "Should billionaires be allowed to exist?"). Others sell family businesses and their foundations as the ideal of long-term thinking.

It is uncomfortable to sit between these chairs, and you have to explain a lot, as I have experienced during the many events and interviews about my book.

We should distinguish the two strategies at least conceptually. "Stiften" (endowing/founding) is about preserving assets. This only makes sense for assets that are worth securing: culture, nature, presumably also data. Anyone who wants to use money should rather speak of "giving". Both are important, but it is time for a rebranding.

How about "long term capital"? Or "preservation funds"? What do you think? Which advertising agency would like to inspire billions with an idea? Who knows someone?