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Xiaomi founder Lei Jun attends a launch ceremony of the new flagship Mi 9 in Beijing, on February 20. Photo: Reuters
Opinion
The View
by James Chen
The View
by James Chen

How Xiaomi founder Lei Jun’s US$956m could be better spent – China’s richest should take charity to the next level, like Bill Gates

  • Chinese billionaires like Xiaomi founder Lei Jun are donating, but not yet venturing into philanthropy. They should apply business techniques to giving, like Bill Gates, so their donations can go further and transform the world we live in
Lei Jun, the founder and chairman of Chinese smartphone maker Xiaomi, made the headlines last week when it was revealed that he had received a compensation package nearly equal to the company’s profit. For 2018, he took compensation of shares valued at US$956 million. Xiaomi’s adjusted net profit for the year was US$1.3 billion.

Admirably, Lei has promised to devote all of these shares, after tax, to charitable purposes. But charity is not the same as philanthropy, and Lei’s remarkable donation would go much further with a dedicated philanthropic approach.

Only last month, Azim Premji, the billionaire chairman of Indian tech company Wipro gave shares worth US$7.5 billion to his philanthropic foundation, in what may be the biggest single donation in India. He has donated a total of US$21 billion to the Azim Premji Foundation.

There is a major difference between Premji and Lei’s donations, and approaches. Charity is arguably less strategic. Philanthropy uses loss-absorbing capital, expertise and a deep understanding of issues to bring long-term change. Philanthropists get their hands dirty on their mission to inspire change.

Like the Bill & Melinda Gates Foundation, the Azim Premji Foundation – which supports education – represents an investment of its founder’s time and money to gain understanding of a field, build expertise and develop long-term, forward-thinking solutions. Philanthropists can glean insights from failures and successes, and figure out a nimble way to fund and execute even the ideas perceived as high risk. Lei’s US$956 million donation will change lives, but without a focused approach, it will never realise its full potential to create enduring – even revolutionary – change.
Lei is following in a centuries-long Confucian tradition which mandates a strict hierarchy in society, as in families. In this tradition, those who are financially successful have a social obligation to give to charity, but those who bring about social change are frowned upon. China’s wealthy are generous, but they are not making the same impact as American billionaires.

Large sums of money are life changing, but the world we live in is ever changing, and the social issues charity seeks to alleviate are increasingly complex. Blank cheques are rarely the seeds of long-term change or sustainable development. Instead, private philanthropists are increasingly channelling their funds into initiatives that reflect the kind of society they want to live in.

This makes much greater demands on the philanthropist, but the rewards can be far greater. As Premji has said: “Social issues are much more complex than business, and if you want to make a genuine difference, it takes a long time.”

There has been an evident shift in the United States for some time: not only has there been a surge in donations – which passed the US$400 billion mark for the first time in 2017 – but philanthropists are also looking into catalysing social transformation and incremental development in a range of areas. Apple CEO Tim Cook has summarised this attitude: “You want to be the pebble in the pond that creates the ripple for change.”

The Gates’ indisputable commitment to social change is a shining light in the philanthropic world. The Bill & Melinda Gates Foundation is a leader in venture philanthropy, applying business techniques to health care, poverty and education.

Since 2011, the foundation has invested US$200 million in reinventing the toilet for poor countries that lack sewers and waste treatment plants. This self-contained toilet processes excrement into drinkable water, and could transform the daily lives of an estimated 892 million people worldwide who have no access to toilets. Lei’s donation could fund four projects of this size and scope.

Wealthy private individuals like Lei have a special, and widely untapped, potential to donate innovatively and catalyse change across the world. Unlike charities, non-governmental and governmental organisations, private philanthropists are not accountable to voters, boards, stakeholders or donors.

Instead, they are uniquely placed to take the risks that will reap the biggest, most-life-changing benefits. Private philanthropists alone will be rewarded by their willingness to invest in social, technological and developmental transformations that shape the world we live in.

Catalytic philanthropy depends on donors’ loss-absorbing capital to derisk inventive solutions, resolve ingrained social issues and overcome developmental challenges for future generations around the world.

Such investments and donations don’t show short-term gains, but result in slow, incremental changes that fundamentally change the course of society. Private wealth and philanthropy, coupled with the expedience and financial acumen that come with private interest, can and must provide the basis for risky social change. Effective private philanthropy should strive to socialise success and privatise failure.

Many say catalytic philanthropy is too risky. But I would argue that the reward is great if you are serious about making an impact. With charitable donations climbing, and an increasing sense of duty to do good if you are doing well, catalytic philanthropy must play a key role in delivering enduring social change.

James Chen is the founder of Clearly and chairman of The Chen Yet-Sen Family Foundation

This article appeared in the South China Morning Post print edition as: Skill of strategic giving
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