How Andrew Carnegie set the stage for Bill Gates to give away his fortune, altering philanthropy forever

Bill Gates made his money in software, Andrew Carnegie in steel.

And while roughly a century separates these two hard-charging titans of industry, they are connected not through the massive wealth they accumulated, but by the money they gave away as they aged.

Both created the largest philanthropies of their time. They pledged to give away the bulk of their fortunes, and publicly urged others to join them. They intentionally funded projects that sought to fix the root causes of persistent humanitarian challenges. And, through charity, they burnished images that to varying degrees had been marred by their aggressive pursuit of success.

They also share a desk chair.

“Upon entering your full-time career as a philanthropist, we thought it would be fitting to connect you, the greatest philanthropist of the 21st Century, with the greatest philanthropist of the 20th Century,” Jared Cohon, former president of Pittsburgh’s Carnegie Mellon University, told Gates in February 2008.

“We would like to present you with something that was Andrew Carnegie’s own from his days at Carnegie Steel,” Cohon said. As the billionaire Microsoft co-founder stood on stage at the university, he was presented with a wheeled wooden chair and a black-and-white photo of the steel magnate seated at his desk.

The two giants of business and charity have played transformative roles in the field of philanthropy, influencing both how and how much the rich give back. And their donations have had lasting impacts. Beginning in the late 1800s, Carnegie helped spark the creation of the U.S. library system. One hundred years later, Gates digitally empowered it. Both made significant investments in public education. Carnegie worked to foster peace worldwide, and Gates has tackled global health.

And Carnegie philanthropies worth billions continue supporting good causes, while the Bill & Melinda Gates Foundation is charging ahead, backed by an endowment currently totaling more than $40 billion.

The question now is how the legacies of Gates and Carnegie will continue to shape and inspire the next generation of philanthropists at a time when giving is under ever greater scrutiny and vast wealth is being disproportionately concentrated in the hands of a few — including Jeff Bezos, the Amazon founder who recently bumped Gates from his spot as the world’s richest person.

“Where is philanthropy going? The simplest answer is, it’s going up,” said David Callahan, editor of Inside Philanthropy, a charity watchdog site. “If you take the Gates Foundation out of the equation, Jeff Bezos has more money than the other top 10 private foundations in America put together.

“That’s a lot of money. Whatever he decides to do, it could have a game-changing effect in any field he chooses to go into, automatically putting more money on the table than all the other private funders in the space put together,” he said, “just like Gates did in health and development.”

But the field of philanthropy has gotten more sophisticated and more controversial over time, with critics calling out the tremendous wealth disparity that fuels the sector, allowing the rich to wield unaccountable, unchecked power through their donations.

“That’s clearly become something that a lot of critics are concerned about,” said Stacy Palmer, editor of the Chronicle of Philanthropy. “When you have wealth that is as big as a small country’s economy, should you be allowed to influence things that much without democracy?”

Seeking the right answers

While Gates for now remains the prevailing game-changer in charitable giving, he’s building on a foundation forged by Carnegie.

Carnegie “made his fortune by systemizing business,” said Kathleen Buechel, director of the Pittsburgh Philanthropy Project at the University of Pittsburgh. That included his work for the railroad, telegraph communications, and his iron and steel mills. “He believed in data and information and there was a movement toward efficiency and analysis and system approaches.”

Carnegie applied some of that rigor to charity, pursuing “scientific philanthropy” — an approach expanded upon by Carnegie’s contemporary, John D. Rockefeller. The strategy “went after problems at their root cause,” Buechel said. “This is a huge parallel between Carnegie and Gates.”

For Carnegie, that meant funding libraries and universities to give young people access to books and education, the means for their own self-empowerment and betterment. Carnegie, whose impoverished family immigrated from Scotland to the U.S. in 1848, devoured books borrowed from a private library. He spent $55 million building 1,679 libraries in the U.S., and nearly 1,000 more abroad.

But he didn’t supply the books and constructed the libraries only on the condition that cities and communities agreed to pay for their upkeep. Carnegie became a leader among philanthropists in requiring that the recipients of his largess had some skin in the game.

The Gates Foundation, which formed in 2000, likewise embraced scientific philanthropy and took the principal even further.

“One of the ways they’ve changed the field is by saying, ‘We’re going to measure results and hold people accountable,’” Palmer said. “That was a really radical concept.”

Particularly in the area of global health, the foundation has focused on some trackable challenges. They reported that in 2015, the percent of children receiving basic vaccines reached a record 86 percent worldwide, and the number of annual childhood deaths has dropped by half since 1990; both are areas targeted by the foundation.

And while the Gates Foundation has played a significant role in global health — donating about $4 billion in recent years, a budget only slight less than the World Health Organization — the Gateses increasingly realize new strategies are required to boost their impact.

“They’re looking at a ‘systems approach’ to changing the world,” Palmer said. If you want to address hunger in a developing country, for example, you can’t just target agricultural production, but need to tackle a suite of social and cultural needs.

“What they’re trying to do is get philanthropists to work together to say, ‘Let’s put our money together, pool it, and really look at how we can influence an entire system,’” she said. “You keep watching their evolution and it’s fascinating. But it’s clear that they’re still saying that we’ve got to figure this out and do better. It’s not obvious what all the right answers are.”

‘The man who dies thus rich dies disgraced’

In 2010, Bill and Melinda Gates and Warren Buffett founded the Giving Pledge, an effort that asks billionaires to vow to give away the majority of their wealth while alive or in their will — instead of bestowing their estates to descendants.

Some 174 individuals and couples have signed on so far. From the tech world that includes Microsoft co-founder Paul Allen, Tesla’s Elon Musk, and Facebook co-founder Mark Zuckerberg and his wife, Priscilla Chan.

“We have been blessed with good fortune beyond our wildest expectations, and we are profoundly grateful. But just as these gifts are great, so we feel a great responsibility to use them well,” wrote the Gateses in their letter to the pledge.

The movement builds on one of Carnegie’s most significant contributions. In 1889 he published the “Gospel of Wealth,” an essay arguing that it is the moral obligation of the wealthy to give back most of their money — and to do so before their deaths.

“The man who dies thus rich dies disgraced,” Carnegie famously wrote.

The Gateses and Buffet have carried that torch, including a public approach to charity that Carnegie also practiced, leading by example. Besides inspiring others, giving publicly brings some transparency to philanthropy, which is often criticized for its opacity and lack of accountability.

Through public charity, “you get a culture of giving and people debate what should be the proper avenues of giving and it leads to more discipline,” said Benjamin Soskis, a research associate at the Urban Institute think tank and co-founder and editor of HistPhil, a site dedicated to the history of philanthropy.

And this culture of giving affects not only the super-rich, but also the broader communities where the philanthropists live and work.

The greater Pittsburgh and Seattle metropolitan areas, home to Carnegie’s steel mills and Gates’s Microsoft, are “historically philanthropic communities,” said Larry Lieberman chief operating officer of Charity Navigator, a nonprofit that evaluates U.S. charities.

Both cities have foundations distributing tens and hundreds of millions of dollars each year, with the Gates Foundation doling out billions. They’re also home to dozens of large charities receiving some of that foundation support as well as individual donations in the millions. Contributions and revenue to Seattle and Pittsburgh charities are above U.S. averages, according to Charity Navigator.

“They’re both communities that are working hard to help themselves,” Lieberman said. “It’s more ingrained in the community’s culture and the people it cultivates” and the industry leaders “absolutely” played a role in creating that legacy, he said.

Complicated legacies

With Greek and Latin roots, the word “philanthropy” literally translates to “loving people.” But some might ask to what degree that refers to philanthropists loving other people — or whether it’s about acting generously and burnishing reputations so that the people grow to love the philanthropists themselves.

Carnegie, for one, had some serious legacy polishing to do.

His steel mill in Homestead, just outside of Pittsburgh, was the location of an infamous labor strike and battle between union workers and company management. The 1892 standoff killed and wounded dozens on both sides of the dispute and broke the union.

And beyond the notorious strike, workers at Carnegie’s mills endured nightmarish conditions, working 12-hour days, seven days a week with only Christmas and the 4^th of July off. Many workers lived in poverty, earning only $50 a month, while Carnegie was amassing a fortune that eventually totaled $350 million.

Carnegie, in his “Gospel of Wealth,” argued that instead of paying higher wages to his workers it was better that he used the money for “public purposes” such as the construction of libraries and parks, which he deemed “more valuable to them than if scattered among themselves in trifling amounts.”

“He tried to detach all the messy history behind his wealth from the gift itself,” Soskis said of Carnegie. “In an interesting way, Gates has done something similar.”

While no one would argue that Gates engaged in labor practices anything like Carnegie’s, there was a time when Microsoft was often referred to as the “Evil Empire” thanks to its size, aggression and monopolistic dominance. In 1999, Microsoft lost an anti-trust case brought by the U.S. government that alleged it had engaged in anti-competitive practices. The company faced similar charges in Europe. In 2000, the software behemoth settled for $97 million a case brought by “permatemps” — employees who regularly worked for Microsoft through temp agencies, but were denied health and other benefits offered to full employees.

Soskis doesn’t think that Gates was motivated to give because of Microsoft’s controversies, but his reinvention has reshaped his legacy nonetheless.

“Gates has transformed himself into this full-time philanthropist, and his associations with Microsoft and some of the less reputable ways in which some of his fortune was created was really eroded,” Soskis said. “It demonstrates the ways in which these long careers in philanthropy can transform one’s public identity.”

Disrupting philanthropy

Does philanthropy today still have that same redemptive power?

“Since the financial crisis there has been growing distrust of elites and the wealthy and of Wall Street and some of that has percolated into critiques of philanthropy — and certainly now there is a growing new distrust of the giant tech companies,” Callahan said.

The Gates Foundation itself has faced criticism over the years. That includes programs delivering dramatic and sometimes unsuccessful changes to public schools and initiatives supporting charter schools. Critics have pushed back on agricultural funding in developing countries that relies on technology-based solutions with less attention to bolstering traditional approaches.

The Gates Foundation is also credited with some amazing, life-saving accomplishments, and shown a willingness to acknowledge mistakes and take corrective actions.

The field of philanthropy, however, has invited greater scrutiny as charity work has become more political in nature — consider Jeff and MacKenzie Bezos’ recent $33 million donation to a scholarship program for immigrants known as Dreamers who were brought to the U.S. illegally as children.

And there is a blurring between nonprofit and for-profit enterprises as foundations pledge money to both. Zuckerberg and Chan even set up their philanthropy as an L.L.C., a business structure that provides them with more flexibility and less oversight than a traditional foundation.

“Looking at how there is a growing backlash to big tech and a growing backlash to big philanthropy, that would have to be in the mind of Jeff Bezos, and Mark Zuckerberg would have to be worried about that,” Callahan said.

But with some of the unconventional approaches of tech entrepreneurs comes an enthusiasm for the new batch of donors that can push major philanthropic efforts well past its origins with Carnegie and Rockefeller, perhaps even into territories unexplored by Gates.

Those tracking the sector read with interest Bezos’ tweet last summer regarding philanthropy, in which he ruminated: “I want much of my philanthropic activity to be helping people in the here and now — short term — at the intersection of urgent need and lasting impact.”

They wonder more generally if the disruptive business strategies that made tech innovators rich can pay comparable dividends when spending those dollars.

“That’s the wonderful thing about tech culture: they’re used to failure and they fail fast and they try things,” Palmer said. “That is what all of philanthropy could use a little more of. So if we see them influencing things that way, it would be wonderful for the field.”

Top 10 foundations in Seattle and Pittsburgh, ranked by assets