Why Zuckerberg’s Critics Are Wrong | Hacker News Reader

Why Zuckerberg’s Critics Are Wrong

newyorker.com

43 pointsdonohoe63 comments

>Governments do better at providing public goods (defense, say, or education)

Not really. At least not necessarily. Health and education as provided by the government in Brazil is just horrendous. People die in line and student's grades are far, far below private schools. Public security is non-existence, whereas organized communities both poor and rich enjoy relative security with private guards in the streets and electric fences or barber wire on their houses fences. Generals have said Brazil has ammunition for just 1h of war[1]. There was recently a rise in the private education sector, with competition leading to affordable prices for the poor. However, with the current recession I think the sector has slowed to a halt, like all others.

[1] http://exame.abril.com.br/brasil/noticias/exercito-brasileir...

I have three problems with the original press release and what it entails.

1 = It comes across as the most epic humble brag of all time. The short form of the release is simply 'Look how great I am for making 10's of billions and how amazing I am for giving most of it to charity. Hell I will only leave a handful of billions for myself to live off.'

2 = He should not be trying to get credit for something he has not actually done yet. You cannot expect credit for giving 10's of billions to charity until you have actually given it to charity. Wait 20 years and then issue a press release showing how much you have actually given away.

3 = Maybe this is more of cultural issue but it is the height of uncouth behaviour to boast about your charity work. The first we hear about your charity work should be many years in the future when it is exposed that you have given billions to good causes. Deriving even the smallest credit for charity giving only diminishes the giving.

> Maybe this is more of cultural issue but it is the height of uncouth behaviour to boast about your charity work. The first we hear about your charity work should be many years in the future when it is exposed that you have given billions to good causes. Deriving even the smallest credit for charity giving only diminishes the giving.

The Jobses donated anonymously to charity for years and all we ever heard about was how Steve Jobs was an asshole because, unlike Bill Gates, he wasn't a philanthropist.

Contrariwise, Bill Gates gave billions of dollars to charity, but only his own charity named the "Bill and Melinda Gates Foundation" of which he is the full time co-chair, and uses his celebrity to popularize their work.

> all we ever heard about was how Steve Jobs was an asshole because, unlike Bill Gates, he wasn't a philanthropist.

Whoever you heard that from was probably not worth listening to, though.

The harsh criticism feels unwarranted to me as well.

It honestly feels to me like a little bit of misplaced self insecurity.

I kind of get it, but considering that there is no evidence of ill will, I get the sense that people are reacting to something other than what's actually happening here (like their dislike for Zuckerberg's fortunes, how he got it, Facebook privacy issues, etc.)

To put this into context, if a young mother dedicates 99% of her life (but not billions because she doesn't have it) into charity and she does so in the name of her children and their future, I doubt she would be receiving the sort of harsh criticism that Zuckerberg is receiving for the same thing.

It reminds of people's hatred for SUV's (seems to have died down more recently). It was always under the guise of the environment, but really other types of environmental waste were not really villified to the same extent. For example, it's far worse to own a non-SUV and decide to live out in the suburbs and drive to work than to live nearby work and have an SUV.

I'm not a Zuckerberg fan-club member, but what he did would be something I wish I could do someday and it doesn't seem weird at all to me to do this in dedication of my child. I also feel, from a pragmatic point of view, that we need to be encouraging people to donate.

>if a young mother dedicates 99% of her life (but not billions because she doesn't have it) into charity

That is the point. He is not dedicating 99% of his life, he is moving money around. If an average person gives 5% of his income to charity he is losing power and losing opportunities. He is sacrificing his well being and that of his immediate family for charity. If someone with as much money as Zuckerberg or Gates does it he is increasing his power and his opportunities. They still get influence, they earn karma points, they get a legacy, they still decide.

The average guy giving is a hero, Zuckerberg is not.

Still. Results.

Show them.

So what?

This sounds like a twisted, reversed version of Widow's Mite[0], in which the rich guy is being hated for giving a lot of money for good purposes. Yes, the average person (or the poor person) is giving up much more personally. But even the Bible story doesn't deny that the rich guy giving lots of money is doing much more for the cause. If you care about actual effect, as opposed to judging someone's moral state (to which Jesus is entitled, you're not), you should be happy that a rich person can single-handedly give more good than most other donors taken together, and you should encourage more rich people to drop their money, instead of scaring them off.

It's results that matters.

[0] - https://en.wikipedia.org/wiki/Lesson_of_the_widow%27s_mite

>you should be happy that a rich person can single-handedly give more good than most other donors taken together

How is that supposed to make me happy?

>It's results that matters.

What results beyond Zuckerberg having even more power and influence than before?

> How is that supposed to make me happy?

Because significantly more good is being done? It should make you happy if you care about the particular issue being solved. If not, that's fair, but it means we're not complaining about philanthropy anymore, but about rich people being rich.

You claimed I should be happy about rich people being rich. I asked how you expected me to do that.

Also, I'm not sure good is being done at all. As my second question showed.

Guys, be grateful! Whatever you say he's probably still doing much better than you or me. And certainly better than thousands of bankers out there.

The 'charitable work' feels to me like it's primarily an exercise of power. An amount that an individual shouldn't have in the first place. And this particular individual doesn't have a particularly good track record.

1) For example, 'investing' in education may boost the private education system at the further detriment of the public one - long term this could be worse for accessibility of the poor to good education. Zuckerberg does not have a track record of wanting to help public education in a way that includes stake holders like ... parents. Controlling an education system also allows indoctrinating people in convenient ways. I'd rather the public decides which propaganda our young generation's minds get poisoned with rather than a billionaire with uncertain motivations.

2) For example, bringing the 1 billion poorest on the internet may involve giving them some sort of crippled Facebook+wikipedia-only access for free. This would create a great funnel to Facebook, in the name of charity, of course as a tax-deductible charitable donation, and would effectively make it harder for these people to access the real internet that can actually help solve problems for them. Because it's tough to compete with free. Zuckerberg may end up destroying local companies trying to provide access to the internet. Just like direct food donations can undermine the local food production industry.

A young mother dedicating 99% of their life to charity is unlikely to have the potential for far-reaching negative consequences. And as you described that scenario, she is less likely to have motives about accumulating power, less likely to have a negative track record of mis-using power or misrepresenting intentions.

I'd rather the public decides which propaganda our young generation's minds get poisoned with rather than a billionaire with uncertain motivations.

How are the public's motivations exempt from uncertainty?

(This is a false dilemma, anyway. The educational prospects of the poor in public schools are already bad, regardless of any action undertaken by Zuckerberg. I also find your implication that private school investment somehow "crowds out" public schools to be highly dubious. The real solution is abandoning the traditional schooling model entirely.)

The claim is that high-quality private education undermines the quality of public education. If everybody with connections, power and money has their kids and grand kids in a private school, then there's little incentive for those who could affect change to actually fix the public school system.

> The 'charitable work' feels to me like it's primarily an exercise of power.

It might feel that way. What Gates Foundation does, or what Elon Musk does (not charity, but hitting the market with a stick until it gives up and moves where he wants it to), feels like an exercise of power. It feels undemocratic. It feels good.

There are problems in this world - some of the biggest and most important problems, like climate change, energy crisis, poverty or education, are of this type - for which both democratic governments and free markets fail spectacularly. Making things worse is usually more profitable than making them better, so that's what businesses do. And democracies spend endless amounts of time and resources on constantly talking and doing nothing. I'm very happy that there are people who can single-handedly do something about problems that lie on the other side of coordination trap.

And yes, I'm aware that this type of power can backfire and the next rich person may use it for evil. But when the alternative is to continue doing nothing (or making things worse), the risk can be worth it.

most important problems, like climate change, energy crisis, poverty or education, are of this type - for which both democratic governments and free markets fail spectacularly.

Countries with democratic governments generally do not have free markets. Don't butcher the term's meaning.

(In fact, there is evidence that markets, free or otherwise, do advance education. Alternative educational institutions like Montessori, Sudbury, Summerhill and democratic schools tend to be private.)

"Poverty" also isn't what it used to be for many in both First and Second World countries, unless you're extremely myopic.

I'd argue that more democratic countries (say, Denmark) are more successful at dealing with climate change, poverty or education than less democratic countries (like Saudi Arabia or the United States).

> The 'charitable work' feels to me like it's primarily an exercise of power.

All uses of wealth are uses of power; wealth is a form of power, after all.

>To put this into context, if a young mother dedicates 99% of her life

The difference, of course, as you note is that she is either "dedicating" or has "dedicated" 99% of her life while Zuckerberg's claim is for the future. That combined with other factors (as you state -their dislike for Zuckerberg's fortunes, how he got it, Facebook privacy issues, etc.), seems to explain the criticism.

Actual title: In Defense of Philanthrocapitalism, by James Surowiecki

The page has the same title as this story currently, so at least the clickbaity title is coming from the source and not OP.

Surowiecki did a horrible job of making a case for his conclusion. After reading that, I'm left wondering why his critics are wrong. Perhaps he should have avoided the click-bait title and tried to actually explain something reasonably rather than arguing from the position of "Zuckerberg and I are right, and you're wrong. Now I'm going to write some paragraphs".

Here's an idea:

Don't allow tax deductions on "charitable" contributions.

If, for instance, somebody wants to give $100MM to Central Park, let them do it because they like Central Park that much, rather than because they like it $70MM worth, and the tax payers can cover the other $30MM.

Philanthropy is about giving, period. Not giving when it has financial benefits that make it easier at the expense of others.

I think it's perfectly reasonable to deduct charitable contributions - up to say, 10K per year. There exist people who sit on huge amounts of unrealized capital gains. If they donate 100M in stock, then they can sell 100M in stock without ever paying any taxes whatsoever.

I agree that setting a limit (rather than getting rid of deductions altogether) could be beneficial, while also eliminating a lot of the abuse, but there is one other thing to consider:

If the limit is $10,000, the middle class and wealthy gain the benefits of directing tax dollars while the underclass remain unrepresented.

I'm a capitalist through and through (you might guess that based on my ideas herein), but giving different people different rules is always a problem.

The "underclass" likely already don't gain any benefits because they almost certainly take the standard deduction instead of itemizing.

Well, you could make it 1K$. But I think the issue is to try to make it harder to use donations for tax-avoidance by very rich people; this isn't really about the middle class vs poor people (who tend to pay fewer taxes anyway).

I think another general issue is that many deductible donations go towards organizations that spend very little on their prescribed cause; or aren't non-profits or for the benefit of the public at all.

Right, but it's still a net loss to them. If I have $200M in unrealized long-term capital gains (taxed federally at 20% for 2015), I have $160M in after tax potential. By donating $100M, I'm losing $60M in potential cash as opposed to paying my fair share. Aside from certain intangible benefits from donating my stock, I'm actively incentivized (to the tune of $60M) NOT to donate.

There is at least one caveat to the above. As long as I donate to a 501(c)(3) entity, I can choose any entity I want - even one I control. The Bill and Melinda Gates foundation is an example of an extremely wealthy couple "donating" to an entity they effectively control. (I assume they do, since it bears their name. I haven't looked up their management structure.) This entity must use their donations in accordance with the entity's stated mission statement, or they risk losing their non-profit status. Beyond this, the donated money is still mostly controlled (within the bounds of the non-profit's stated mission) by the wealthy couple that donated. Aside from using the funds for "pet" projects with dubious public value, this opens up another potential caveat, non-profit bribery.

It is possible for donations or non-profit entity direction to be applied as a tax-free bribe. I might donate to develop a park in a city I hope to win a contract from. I could fund a non-profit campaign for reform on legislation that might benefit an industry my business is in. I could direct a non-profit I control to purchase supplies from a specific vendor as a favor for special consideration in pricing.

Don't forget the indirect costs of tax deductions. How many man-hours does the IRS spend auditing deductions? How much revenue is lost to uncaught fraud?

Assume someone makes 50K and they want to give their entire 50K to charity. Do you think that person should be able to give 50K to charity and not pay tax or only 32.5K (50k x 35% tax rate) and have to pay 17.5K in tax?

The latter.

Suppose that someone wants to donate their money to their friend, or to Walmart then. Why should they be penalized while somebody person who donates their salary to the Ku Klux Klan (a 501c3 organization) pays no taxes?

Here's a different idea:

Don't judge people's reasons for donating money. I'm happy to accept people's donations, regardless of their reason for giving it, because who am I to judge what they do with their money?

Telling people who are trying to donate money that their money is no good because their intentions are wrong seems like the most effective way to stop everyone donating money in their tracks immediately.

>at the expense of others.

Maybe we're talking about different things here, but how is it that a net $70MM donation is coming at the expense of taxpayers?

Yeah well those billionaires don't just donate money to you. They'll create some organization that will compete with yours, then donating money to that. Or they come in and say 'ok we want to support your cause to give free internet for the world's poor, but it should only work with Facebook' or some such strings.

I think the critics are mostly, maybe at a subconscious level annoyed by the unfairness of Zuckerberg first having a fortunate upbringing / IQ, then making $45bn before turning 30 and then doing saint like stuff. So they try to knock him down which I guess is understandable, and rationalise it in various not totally logical ways which I guess is human nature.

The complaints are largely that he is talking about doing benevolent dictatorial stuff in the future, not that he is *doing saint like stuff now".

I'm glad you're making an effort to understand the criticism, but unfortunately you need to spend more time doing so.

His company, Facebook, is infamous for not paying taxes. (On profits of three billion last year, it paid six thousand dollars in corporate taxes.)

Now, instead of paying taxes on his personal capital gains, he's placing them in an LLC, which he controls, ostensibly to do philanthropic work.

He could avoid all criticism by simply paying his taxes.

Well, I'd argue that the problem is not that companies make use of legal loopholes, which after all is perfectly legal, but that the system still hasn't been fixed to stop them from doing that.

It's not like I don't try to pay the least amount of taxes I can every year.

that is LOL bad reasoning: take a look at human history and see the lengthy list of atrocious things that have been legal at some point in time.

This is naive. Incentives matter. No matter how much you try to ethically spin it, actors generally perceive taxation as adversarial. Any country implementing a tax policy is fully aware of the risks they take from noncompliance and avoidance.

(Avoiding or resisting taxes is also not always a purely self-interested endeavor. It's a tried and true political protest technique.)

its naive to think that a bullet proof tax code can be written, at least based on history. at some point people need to be accountable for their actions, and not given a pass just because they can avoid breaking the law. its fine if you disagree about where that point is.

You have the causal chain backwards. It is the initiator of an action who must plan their decisions to reach an optimal end. It is not the fault of a consumer for refusing to engage in a given exchange with a producer. It is the producer who must make their offers palatable. In the same way, the government, being the one levying the tax, is the entity which ultimately bears the burden of structuring its tax policy to achieve the highest return.

that sounds like ignoring practice in favor of theory. when your boss asks you to build them something, you dont ask finer and more detailed questions until you have gotten them to write the code. i think its bad to let the lowest common denominator dictate our legislative policy- the lowest common denominator is going to fuck you over regardless.

I can see Eric Schmidt's point when he was CEO at Google which was being criticised for not paying tax in the UK. Basically that Google paid the exact amount stipulated in UK law and it that was too low it was up to the governments to change the law. I kind of agree - the situation is not good and should be fixed by the governments not the CEOs. After all the CEOs main duty is to serve the shareholder which they are doing in this case. The governments main duty should be to serve the people which they are being slack at.

I've got my own idea how to fix the situation. Could almost be done as a start up - feel free to use the idea - we need some sort of (ideally official) global accounting body that estimates how much profit each large international company makes globally and what percentage of their sales are in each country. So for Facebook that might be $4bn global profits, 42% US, 5% UK, SomeRandomTaxHaven 0.01% etc. Then all the politicians in any country have to do is say companies have to pay tax on the larger of either their local tax return or the international pro rata figure, so in this example the UK would tell Facebook to pay corporate tax on 4000*.05 = $200m or they'll ban them.

My understanding is that the founding of the Chan Zuckerberg Initiative has no tax implications at all. The only way that tax would be avoided is if the foundation sells some Facebook stock and donates the proceeds to accredited non-profits in the same year. But the exact same deductions would apply if the Chan-Zuckerberg family donated directly.

That's opaque; of course it's the same as if he had donated directly.

I'm not accusing him of illegal tax evasion. I'm accusing him, and Facebook, of legally not paying taxes. That it's legal, though, is of little consolation. Remember that it was legal to send Rosa Parks to the back of the bus, at the time. The criticism is directly that its legality is a poor veil and its morality open to debate.

I don't think Facebook is different from any other publicly traded company in that regard. No publicly traded for-profit company is going to pay more taxes than it is legally obligated to. Also, Facebook's taxes are not the same as his personal taxes, and the LLC will still be taxed, since it is not listed as a non-profit.

I'm going to go out on a limb here and say that "philanthrocapitalism" is a term used to obfuscate the issue of billionaires setting up tax havens in the guise of philanthropy. The term implies that philanthropy can be or is a mode of capitalism, whereas in reality it's the opposite because philanthropy deals with altruistic allocation of resources rather than profit-seeking allocation of resources. Let's not use this term, because it's deceptive and doesn't make sense internally.

Instead, let's do some white hat thinking (purely facts, as little spin as possible) about Zuck's new venture. Fact: Zuck has laid down a large chunk of change for a new project, and marketed this project to the public as large scale philanthropy. Fact: Zuck will get a large amount of leeway on taxes and oversight by moving his money in this way. Fact: some billionaires before Zuck have made similar moves that actually turned into fantastic philanthropic organizations that have made tangible positive impact in the world (Gates Foundation)-- but others have used the construct as purely a means to protect their money and get good PR.

These are some of the facts. I do not believe that there is any way to get around or reinterpret any of them without adding opinion, which probably snuck in anyway despite my efforts. At this point, I think that the reactions of those who question Zuck's motives are justified because we haven't had the time to see the program in action disbursing money as it claims that it will. A promise, a wad of cash, and a lot of PR do not make an effective philanthropic organization. Effective philanthropy requires that real, living people and real institutions are altered in an objectively positive way. The proper stance is skepticism and a request for more evidence of good will.

EDIT: I will add that the rabid detractors of Zuck have counterparts with the rabid pro-Zuck crowd... I doubt Zuck is looking out for anyone other than himself, but there is more to life than celebrity-watching, and it seems petty no matter how you slice it.

Is it at all clear that Zuckerberg is getting any tax benefit from moving his shares? I believe the "foundation", which is not a non-profit, will still pay taxes when it sells FB shares. If the LLC donates to a non-profit then it will get a tax benefit.

IANAL, so please someone who is actually informed feel free to correct me. A lot of what I've seen written is completely un-nuanced and probably wrong.

I am a lawyer -- or used to be one -- and your understanding is consistent with mine. I think some people are confused and think there's something shady going on, because they think Zuckerberg is getting some tax benefit from gifting to a non-charitable organization. But what you say is actually what's happening: no tax benefit to Zuckerberg on the gift to the LLC, although the LLC itself will be able to claim tax benefits by making subsequent gifts to non-profits.

I agree with your "white hat thinking" that Zuck's initiative may turn out either way, but I'm not so sure about your take on "philanthrocapitalism". Call me naive, but I think that the recent trend among tech billionaires to do philanthropy may actually be genuine.

Look at it from Zuck's or Gates' perspective. They have pretty much all the money in the world, and they know there isn't much to spend it on. They've seen past the usual bullshit like boats and rolexes - they know how it's made, so it's nothing special. Zuck can't use that money to indulge in new toys, because he already has access to the cutting-edge toys and if he wants more, he literally has to fund their creation (which takes time).

OTOH, they all know and see that the world is in deep shit, and they have some power to directly affect it. Not turning to philanthropy in this situation would be something weird. I don't believe that those people are literally made of greedonium, like the common stereotype of rich persons would like to paint them.

Some people have a tendency to tell other people what to do with their money. This can range from annoying when it's some pundit doing it, to dangerous when it's someone in government.

Surowiecki

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