Money Talks

September 2, 2007

In June, Frank Giustra, one-time wunderkind head of Yorkton Securities, founder of Lions Gate Entertainment and current operator of merchant bank Endeavour Financial, announced the donation of $100 million-and half of all his future earnings-to a foundation that would fight Third World poverty. Called the Clinton Giustra Sustainable Growth Initiative, and primed with an additional $100 million from Mexico-based Carlos Slim Helú (who, according to Fortune, has surpassed Bill Gates as the world's richest man), the fund apparently grew from the vision of former U.S. president (and current Giustra pal) Bill Clinton, the more immediate influence of Giustra's wife, filmmaker and "venture philanthropist" Alison Lawton, and a mysterious epiphany in a Yaletown restaurant. Giustra challenged the entire mining industry to step up and, sure enough, within days the Vancouver-based Lundin Group climbed aboard with another $100 million.

If $100 million were being given away 10 years ago, people in the mining industry would more likely have been the recipients. In 2007, however, the story is about more than good times in the commodity and metals markets and the miracle revival of a moribund business. It's about "giving back," which-more than hedge funds, more than private equity, certainly more than dreary real estate-is the topic du jour among the superrich of North America.

The $30 billion or so pledged in recent years by Bill Gates and Warren Buffett to the Bill & Melinda Gates Foundation no doubt has something to do with this philanthropic fervour, but the real trailblazer was George Soros, the legendary currency speculator and hedge fund investor who "broke the Bank of England" and pocketed a billion dollars back in 1992. Not long afterwards, Soros backed away from fund management to write books and run his Open Society Institute. A liberal in both the Adam Smith and contemporary anti-conservative sense, the Hungarian-born Soros had previously helped to fund movements that brought an end to communism in Poland and Czechoslovakia, and more recently played a role in Ukraine's Orange Revolution. An equal opportunity geopolitical meddler, Soros contributed millions to the Democrats in 2004 and said he would have given away his entire fortune had there been a guarantee that George W. Bush would be defeated.

Old philanthropy had more to do with devising the decorating theme for Jacqui Cohen's Face The World bash, hosting art gallery fundraisers, ponying up for a new hospital wing; the new philanthropy tends more toward staffing your foundation with the best and the brightest, then showing UNESCO or the World Health Organization how to do its job.

Financiers like Michael Milken, and George Roberts and Henry Kravis (of private equity firm KKR), also fund and manage operations known for their clear focus and effectiveness. Whereas Soros stresses the development of free societies and democratic institutions, Milken and Kravis/Roberts lean toward the Republican virtues of entrepreneurship and accountability. Not surprisingly, the new philanthropists are not above promoting their own points of view. Who knows whether the abortion debate in the U.S. would have sustained such a high volume had Domino's Pizza founder Tom Monahan not directed tens of millions toward the "anti" side even as Warren Buffett helped keep Planned Parenthood afloat?

Still, the political basis for the current flood of foundation money probably has less to do with private obsessions than with a shared recognition that capitalism has been working extraordinarily well for some people lately, and that there are good moral and practical reasons to spread the money around. After the Giustra announcement, the media emphasized public relations: the righteousness of the cause and the magic of the Clinton name would freshen mining's tainted image. Commentators even hinted at the less modern notion of penance. If Giustra hadn't quite shaken Yorkton's involvement in the Timbuktu Gold Corp. debacle, or if Lukas Lundin harboured regrets about some Third World tailings pond his company had left behind, well, amends were being made.

Perhaps. Then again, could type-A individuals who build successful companies really be so humble? Or is this a replay of the high-profile philanthropy that took place during the Robber Baron days of the late 19th century, another era when a relative few amassed vast fortunes? People like John D. Rockefeller, John Jacob Astor and Andrew Carnegie believed that, with their vast resources and superior wisdom, they could personally change the world for the better, whether by putting a library in every town or by buying the Philippines its dependence, as Carnegie tried and-rather unusually-failed to do.

Within the famously conservative mining industry, reaction to the initiative has not been universally positive. One website introduced a Giustra interview with the observation that most charities aren't worth the money it would take to blow them up. Nevertheless, companies from around the world have been signing up, and Giustra is at least part of the way to his stated goal of creating the first charity to be supported by an entire industry. Who'd have thought this is how Vancouver would claw its way back to the kind of leadership it enjoyed back in the days of the VSE?

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