What would you do if you had $1 billion to give away?
As we enter peak gift-giving season, I examine several strands of charitable giving, looking at how mega-donors work, where the donations go, and who are the most charitable. How can 100-44=100?
Ruth Gottesman, a longtime professor at the Albert Einstein College of Medicine, donated $1 billion to that school to make free tuition available to all students. Michael Bloomberg’s foundation donated $1 billion to Johns Hopkins University to cover tuition entirely and, in some cases, living expenses for medical students from a family making less than $300,000.
This is certainly generous. Yes, med school is expensive, and many graduates may have $200,000 or $300,000 in debt by the time they start their residencies. However, to me, devoting such gobsmacking piles of money to help a group of men and women, many of whom will be earning $400,000 or more in a few years, seems wrong-headed. Most MDs could pay off their debt in two or three years while still living comfortably.
I had originally expected to put in a plug for resources to encourage more primary care physicians—internal medicine, family practice, and pediatricians. But data intrudes. According to the Bureau of Health Workforce—an agency within the U.S. Department of Health and Human Services (at least for now)—the projection is for only a modest shortfall of such physicians by 2035. On the other hand,
The specialties with the lowest supply adequacy in 2035 are thoracic surgery (69%), ophthalmology (70%), other specialists (71%), plastic surgery (75%), and nephrology (79%).
Moreover, there are far better uses for these large endowments than for the soon-to-be wealthy. For one, much smaller sums could be targeted to physicians who start their careers in underserved and lower-paying rural communities or in urban non-profit clinics. Rather than depending on now moot plans for blanket loan write-offs by the federal government, what about helping new teachers who might have “only” $60,000 in college debt but are earning about that same amount annually when they start?
What’s a billion?
But let’s back up. What is a billion dollars? In some ways, we may have become desensitized to that number when we see multiples of it casually displayed daily. The Biden Administration just asked Congress for an additional $100 billion for FEMA and other emergency relief. The Defense Department had a budget of $841 billion this past year. Elon Must has a net worth of about $318 billion, a third more than Jeffrey Bezos. And poor entrepreneur Mark Cuban, I guess, barely getting by with $5.7 billion.
So what is a billion? It’s 1000 times $1 million. So, if you earn $1 million annually, it would take you 1000 years to have earned $1 billion. Yeah, that’s not gonna happen. You could spend $114,155 every hour of every day for a year and not quite spend $1 billion. Or how about $1,902 every minute of every hour for a year without reaching a billion? Or $31.70 per second. It’s a big number.
That makes it more impressive that in 2023, Americans made $557.16 billion in charitable donations. The largest source of charitable giving came from individuals, who gave $374.40 billion, representing 67% of the total. Foundations accounted for 19% of the total, and corporations accounted for another 6%.
Lots of numbers follow. But it’s just basic arithmetic.
A digression: When foundations of philanthropists make a multi-million dollar donation, it’s often spread over several years. They typically don’t generally just sign a big check for the full amount. That means in some cases, the donation may not actually reduce the principal of the giver. One billion dollars in 10-year Treasury Notes purchased on November 22, 2024, would yield $44 million in interest yearly. Therefore, a benefactor with $1 billion in assets could pledge $440 million to a cause and, if paid out over 10 years, still have that $1 billion in the end.1 Most foundations likely have a return somewhat greater than a Treasury note.
In 2021, the Chan Zuckerberg Initiative, initially funded with Facebook stock, made a $500 million donation to Harvard to create an institute for artificial intelligence and neuroscience. The donation was to create 10 faculty positions, new computing infrastructure, and more student resources at all levels. However, it would be paid out over 15 years, or roughly $33 million annually.
I don’t know how the Chan Zuckerberg Initiative funds such a donation. I assume Meta Platforms stock (i.e., Facebook) is involved. On the day it was announced, Meta stock was $321.57 per share, or 1,554,871 shares to equal $500 million. So here’s the beauty of using the stock of a growth company. To send Harvard the first $33 million would require selling 100,531 ($33 million/$321.47). In the three years since, Meta stock has increased to $559.14 as of Nov. 22, or 74%. To send Harvard $33 million on that day would require selling under 60,000 shares. I doubt that Meta stock can continue growing by almost 25% per year for 15 years.2 Let’s use a more modest 8%/year, which would then be valued at $1021/share (or the equivalent if the stock split). If so, to fund the final year of $33 million would require selling only 32,648 shares.
My back-of-the-envelope calculation is that if Meta stock did increase an average of 8% annually, instead of selling the 1,554,871 shares that would have funded $500 million in 2021, it would need to sell only about 750,000 shares over the years. The remaining shares (1,554,871-750,000) would have a value at the projected $1021/share of about $821 million—64% greater than the initial amount pledged to Harvard.
When does 36-17 = 27?
Mackenzie Scott, who received 25% of her ex-husband’s Amazon stock when she divorced Jeff Bezos in 2019, has operated differently than most big donors. Her foundation first sells Amazon stock and then donates the cash to organizations. Her share of Amazon stock at the time of the divorce was worth about $35.6 billion. Since then, she has sold about 65% of her stock, giving away about $17.3 billion. However, as Amazon’s stock price has more than doubled in the past five years, the current value of her remaining shares is about $27 billion. To recap, Scott started with $35.6 billion and donated $17.3 billion. Normal math would suggest that 35.6-17.3 = 19.2. However, the value of her remaining stock is $27 billion, which is available for her donations.
Now, I don’t want to demean the generosity and good intent of the donors. They could have kept all this to themselves and distributed more to their progeny. Society is better off with good charitable works. I go through this exercise to identify the math behind these mega-donations we read about. And the calculation that works for the mega-donors may also be applied to your and my far more modest contributions.
What would you do with $1 billion to give away?
If you had $1 billion to give away, what would you do with it? There are many good works, such as research on Alzheimer’s and Parkinson’s disease. Businessman and New England Patriots owner Robert Kraft, committed $100 million to expand the work of the Foundation to Combat Antisemitism. Perhaps helping women and girls, the aim of Lucia Woods Lindley’s $63 million in donations to the Ms. Foundation for Women and the Chicago Foundation for Women. David and Kathleen LaCross awarded $57 million to the University of Virginia Darden School of Business to support its extensive artificial intelligence program.
Nicolas Kristoff, in The New York Times, recently offered his favored list of do-good organizations. They include many obscure organizations, such as the Fistula Foundation and Muso Health.
I asked Copilot, Microsoft’s generative AI application, “What would be some of the most productive ways to donate one billion dollars?” This is the compilation it suggested:
Education: Funding scholarships, building schools, and supporting educational programs can transform lives and communities. Organizations like the United Negro College Fund and UNICEF are great examples.
Healthcare: Investing in medical research, hospitals, and global health initiatives can save lives and improve health outcomes. Consider supporting organizations like Direct Relief or St. Jude Children's Research Hospital.
Environmental Conservation: Protecting natural resources and combating climate change are crucial for future generations. Donations to environmental nonprofits can have a lasting impact.
Poverty Alleviation: Supporting programs that provide food, shelter, and economic opportunities can help lift people out of poverty. Organizations like Feeding America and Habitat for Humanity are doing incredible work in this area.
Social Justice: Funding initiatives that promote equality and justice can help create a fairer society. This includes supporting legal aid organizations, civil rights groups, and community development programs.
Scientific Research: Investing in scientific research can lead to breakthroughs in technology, medicine, and other fields that benefit humanity.
Curiously, it neglected the largest single category of charitable giving: religion. In 2023, giving to religious-affiliated organizations accounted for nearly $25 out of every $100 of giving in the U.S. The next largest were human services applications (14%), education (14%), grantmaking foundations (13%), and public-society benefits (10%).
Mining government and survey research data for his 2006 book Who Really Cares, current Harvard professor Arthur C. Brooks found that, no surprise, religious people donate more to religious organizations—often their church—than secular society. However, religious people also give substantially more to non-religious causes.3 Comparing two people identical in income and education,
The churchgoer will be 9 points more likely than the securlarist to give to nonreligious charities, and will give $88 more to those organizations each year. He or she will also be 25 points more likely to volunteet for secular causes.
Personally, I asked some relatives inquiring about my gift list to make a donation to the Alzheimer’s Foundation instead. I really don’t need another shirt, sweater, or, heavens knows, a package of socks.
Best wishes for a fulfilling— and filling—turkey day. May any political discussions remain civil.
Of course, due to inflation, the remaining billion dollars would buy less.
If it did, each share would be worth more than $8,100.
See chapter 2.
Damn, I just bought you a package of socks for Chanukah. Happy Thanksgiving.
Where do I go to get the billion dollars I need to distribute????