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Andreessen Horowitz to give half their earnings to charity

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Re: Andreessen Horowitz to give half their earnings to charity

#141

Post by pmarca »

jimmyvanhalen wrote: post #130
paul wrote: post #63

Earlier quoted context omitted.

The half they are giving away is money they would have otherwise taken as personal income, so it is in fact their own personal money. The other thing you should understand is that top VC firms such as AH (or YC) are not capital constrained. Dumping in twice as much money won't produce twice as much innovation or profits.

Having capital to invest in more start-ups reduces risks and increases the chances of the VC earning bigger returns. In order to invest in more start-ups, the firm needs top-notch people (partners, associates, etc.). 1. The best people are not going to join a firm that's giving away 50% of their management fees and carried interest income. 2. Not enough people & capital means -Less investments, therefore more risks a…

> 1. The best people are not going to join a firm that's giving away 50% of their management fees and carried interest income.

True, but that's not what we're saying. We're saying that the GPs as individuals are going to do that, for the income we would have received in any event. This doesn't affect how the firm allocates fees and carry, and doesn't reduce the incentive for anyone to join the firm who would have joined before.

Re: Andreessen Horowitz to give half their earnings to charity

#142

Post by pmarca »

sophacles wrote: post #89
jimmyvanhalen wrote: post #50

Earlier quoted context omitted.

it's not foolish. it's just not the most efficient way to spend capital. look at it from the point of view of the LPs. A VCs job is to deploy capital and maximize return to it's investors. they should reduce their management fee and carried interest income, and give them back to the LP, or re-invest them and fund more start-ups/create more jobs. My opinion on this would've been different if they said "I am personally…

So here's what I don't get: If people give them money to invest, and they generat returns for the investors in a way that the investors are happy with, what does it matter what fees they charge? It is a mutually beneficial transaction. The investors make money, the fees make the company money. Now the company money that goes directly to the owners, rather than say direct expenses, is the owner's personal money. It is…

We do like to think of ourselves as magical unicorns.

Re: Andreessen Horowitz to give half their earnings to charity

#143

Post by pmarca »

alwaysdoit wrote: post #75
larrys wrote: post #52

Earlier quoted context omitted.

"sad to see so much misplaced cynicism here" Seems that over the last several years or so there has been an uptick in wealthy people using peer pressure to get other wealthy people to give away their money according to some rule of thumb that one groups thinks is right or fair. Wealthy people always gave away money and pressured others at charity events of course. But I don't remember it ever being so public. I have…

Did you miss the last two centuries where philanthropists built universities named after themselves (or their family members)? "Surplus wealth is a sacred trust which its possessor is bound to administer in his lifetime for the good of the community." - Andrew Carnegie

Interestingly, many of our investors (LPs), and many LPs of our fellow venture firms, are nonprofit institutions such as universities and foundations that were originally started by people with names like Carnegie, Rockefeller, Ford, Stanford (a "robber baron" of his age), Yale (a governor of the British East India Company of all things), Hewlett, Packard, and the like. Money earned through capitalism that got plowed into nonprofits that invest in modern venture capital -- it's a wonderful cycle.

Re: Andreessen Horowitz to give half their earnings to charity

#144

Post by pmarca »

xenophanes wrote: post #48
paul wrote: post #41

It's sad to see so much misplaced cynicism here. If the partners had decided to keep 100% of their carry (as is typical) and used it to buy a bigger house or jet or something, nobody would comment or care. Instead, they've pledged to give half to some of their favorite charities, and some of you are acting as if it's a crime against humanity. Put away your Ayn Rand books (or whatever it is that drives you to such opi…

By giving half their profit to charity, one could take them as implying that profit is bad, that they don't deserve everything they earned, and that they are appeasing the irrational anti-capitalists (if not siding with them). I don't know anything about this particular case, but in general many businessmen are complicit in bad philosophy, and sometimes even pay to promote it. That's shameful and harmful. Business pe…

> By giving half their profit to charity, one could take them as implying that profit is bad, that they don't deserve everything they earned, and that they are appeasing the irrational anti-capitalists (if not siding with them).

One could, but one would be wrong :-).

Re: Andreessen Horowitz to give half their earnings to charity

#145

Post by pmarca »

xenophanes wrote: post #48
paul wrote: post #41

It's sad to see so much misplaced cynicism here. If the partners had decided to keep 100% of their carry (as is typical) and used it to buy a bigger house or jet or something, nobody would comment or care. Instead, they've pledged to give half to some of their favorite charities, and some of you are acting as if it's a crime against humanity. Put away your Ayn Rand books (or whatever it is that drives you to such opi…

By giving half their profit to charity, one could take them as implying that profit is bad, that they don't deserve everything they earned, and that they are appeasing the irrational anti-capitalists (if not siding with them). I don't know anything about this particular case, but in general many businessmen are complicit in bad philosophy, and sometimes even pay to promote it. That's shameful and harmful. Business pe…

> You can find this sort of opinion in the Ayn Rand book _Why Businessmen Need Philosophy_. You might want to read it, and make some effort to reply to its arguments, before dismissing it as wrong enough to dismissively insult in passing.

Like a lot of people here, I read Rand as a teenager. As a slightly older teenager, I concluded she was an extremist who I think would have hated living in the world that her philosophy would have led to had she been wholly successful (Hobbes' phrase "nasty, brutish, and short" comes to mind).

The point about business transactions being mutually valuable and societally value-add is generally (although not always) true, in my mind, but that doesn't eliminate the need for either government or philanthropy if one wants to live in a civil society.

But, to each her own...

Re: Andreessen Horowitz to give half their earnings to charity

#146

Post by pmarca »

hprhpr wrote: post #37
rjshade wrote: post #18

This is great. Something people often disregard, but which is hugely important, is charity effectiveness. This boils down to measuring the impact that you can make with a given donation: it turns out some charities are literally thousands of times more effective than others. A lot of people don't realise how much good they can do with modest donations to the right charities -- until a year ago I really had no idea my…

Agreed about the importance of making sure you donate to the right charities, which is why I was disappointed to read this: "And, to begin, they have sprinkled $1 million on Silicon Valley nonprofits that focus on everything from urban forestry to homeless families." Another good essay about this stuff is here: http://lesswrong.com/lw/3gj/efficient_charity_do_unto_others...

For what it's worth, those six nonprofits weren't just chosen randomly. Each GP picked one he and his family had direct experience with.

For my part, I don't know as much about this as some people, but my wife teaches philanthropy at Stanford and has studied, written about, and taught the topic of effective giving for her whole career, so that works out nicely for me. (Can't resist plugging her recent book "Giving 2.0" for people interested in the topic.)

Re: Andreessen Horowitz to give half their earnings to charity

#147

Post by pmarca »

Blocks8 wrote: post #79

Giving is great. I wonder if down the road they will consider helping incubate these non-profits to make the return on their charitable investment even greater. They have the expertise of helping companies grow, why not give the money and brain power to help the charities too. A side question, any idea if the contributions are from the firm or the individual partners? I'm curious about the tax break breakdown. If the…

> A side question, any idea if the contributions are from the firm or the individual partners?

From the individual General Partners.

Re: Andreessen Horowitz to give half their earnings to charity

#148

Post by pmarca »

creamyhorror wrote: post #104
poorpointofview wrote: post #98

The emotions of man are stirred more quickly than man’s intelligence; and, as I pointed out some time ago in an article on the function of criticism, it is much more easy to have sympathy with suffering than it is to have sympathy with thought. Accordingly, with admirable, though misdirected intentions, they very seriously and very sentimentally set themselves to the task of remedying the evils that they see. But the…

This is a subtle comment, with the key statement being "The proper aim is to try and reconstruct society on such a basis that poverty will be impossible." I'm not so sure socialism is the answer there, but it's definitely a goal to have for the long term.

The only part I don't like about the idea of trying to reconstruct society on a basis that poverty will be impossible is that previous attempts to do that tended to result in millions of people being killed. Funny how that works :-).

Re: Andreessen Horowitz to give half their earnings to charity

#149

Post by pmarca »

rdl wrote: post #69

It's interesting to note that Sequoia's LPs are themselves largely charities, so money Sequoia makes goes to charitable causes, too. (and I find it unlikely GPs at other top-tier VCs, like Sequoia, don't donate a lot of wealth already...probably not 50% of income, but a lot of famous investors have endowed huge foundations).

Yes, and that's also true of us, and at least several of the other top venture firms. And it's worth noting that Mike Moritz is already a signatory to the Giving Pledge.

Re: Andreessen Horowitz to give half their earnings to charity

#150

Post by jimmyvanhalen »

pmarca wrote: post #141
jimmyvanhalen wrote: post #130

Earlier quoted context omitted.

Having capital to invest in more start-ups reduces risks and increases the chances of the VC earning bigger returns. In order to invest in more start-ups, the firm needs top-notch people (partners, associates, etc.). 1. The best people are not going to join a firm that's giving away 50% of their management fees and carried interest income. 2. Not enough people & capital means -Less investments, therefore more risks a…

> 1. The best people are not going to join a firm that's giving away 50% of their management fees and carried interest income. True, but that's not what we're saying. We're saying that the GPs as individuals are going to do that, for the income we would have received in any event. This doesn't affect how the firm allocates fees and carry, and doesn't reduce the incentive for anyone to join the firm who would have joi…

Thanks for the clarification.
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