Philanthropists Used to Dole Out charity from the comfort of their leather armchairs. Not so John Wood. A Microsoft millionaire and head of business development for the company in China, Wood decided to start his own nonprofit back in 1999 during a trek to Nepal, where he saw firsthand the poverty and lack of opportunity. Wood handed in his resignation, cashed out $50,000 worth of shares and started Room to Read, now a $10 million organization that has opened thousands of libraries and schools for children in six countries around the world.
Wood runs Room to Read like he ran his Microsoft business. Overhead is kept in the single digits (compared with 20 percent or more for some NGOs),"investors"--a.k.a. donors--are provided with regular success metrics and, when Wood sees a market opening, he goes for it. When he couldn't find enough local-language kids' books to stock libraries in Nepal, he hired native authors and turned out his own. "Our goal has always been to become the Andrew Carnegie of the developing world," he says. "To do that, we also had to be the local-language Dr. Seuss."
Wood is one of the new crop of younger, more hands-on rich who, like their role models--people such as Bill Gates and eBay founder Pierre Omidyar--made their money young and now want to give back via a crop of more efficient and accountable NGOs. To get results, the new philanthropists often look for smaller projects where success is more measurable, then replicate the good works globally. "These people understand how to leverage resources to create a larger impact," says Eugene Tempel, head of the Center on Philanthropy at Indiana University.
They are also quite creative in how they give. When Christopher Hohn, one of Europe's most successful hedge funders, and his wife, Jamie Cooper-Hohn, decided to share the wealth, he simply started a new hedge fund: the Children's Investment Fund. It now channels a third of its management fees and 0.5 percent of all assets into their charity. Last year that added up to $7.5 million, which paid for things like the development of new, affordable antiretroviral drugs for kids in Africa.
It's not just a one-way street. For hedge-fund investor Arpad Busson--accustomed to making fast money as chair of the London-based EIM Group--working on things like the children's charity ARK, which focuses on deinstitutionalizing Romanian orphans, "has taught me patience," he says. "When you are trying to transform a state orphanage, you are changing a mind-set--and that can take years." If that kind of longer-term thinking filters back into markets, perhaps nonprofits will have taught the business titans a thing or two as well.