How Crypto Billionaires Will Transform Philanthropy

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If the price of Bitcoin were to reach $200,000, Coinbase Chief Executive Officer Brian Armstrong observed recently, half of the world’s billionaires would be crypto billionaires. Even at the lesser valuations that currently prevail, this crypto wealth has vast potential to reshape philanthropy. Expect a relative decline in the influence of longstanding nonprofit institutions — and more weird, stand-alone projects.

Bitcoin itself is a weird, stand-alone project. The true identity of its inventor, Satoshi Nakamoto, is still unknown, and the broader Bitcoin ecosystem is not owned or controlled by any company or institution. It has been self-sustaining since the beginning, and so it should hardly come as a surprise that Bitcoin billionaires take Bitcoin itself as a model for future institutions, including in philanthropy.

As philanthropists, Bitcoin and other crypto billionaires will likely look to support ideas that can launch in a dramatic way and quickly acquire escape velocity. They are unlikely to fund the ongoing labor costs of established cultural institutions.

Bitcoin and many other cryptocurrencies seem designed to stand independent of any government or mainstream financial institution. That too suggests that the philanthropic emphasis of crypto wealth will be on non-establishment, non-governmental organizations.

Compare this to the philanthropic approach of an earlier America. The Cleveland Symphony Orchestra, for instance, received significant support from Midwestern businesses and businessmen, especially from people connected to Cleveland. It was one of the best orchestras in the world for decades (and is still very good), even though Cleveland was never a first-tier American city. The mid-20th century philanthropic system worked very well for sustaining this kind of institution.

Many of the very wealthy individuals from crypto are quite young. That probably rules out a lot of philanthropic support for art museums, opera houses, and high-culture festivals, which typically command greater loyalty from older people, both as customers and as donors. Yes, two very wealthy people did patronize the arts when they bid $60 million-plus for the NFT of a Beeple artwork. But that bid can be seen as an effort to jump-start a new genre of art.

Nonprofits will have to respond to these new donors by looking for ways to achieve their ends with lower labor costs and more innovative ideas. Not all current nonprofits are up to this challenge.

Venture capitalist Paul Graham has pointed out that wealth is earned much more quickly nowadays, and that is all the more true in crypto, which after all is only 12 years old. Unlike many of the wealthy people in law or investment banking, these are not people who had to spend their lives working their way up, finally achieving a top position in their 60s. They either are founders of rapidly growing and scaling companies, or they bought large sums of the right crypto assets early on, or both. Either way, their temperaments are geared to expect immediate action and rapid results.

Nonprofits will have to adjust accordingly, even though speed is not typically their comparative advantage. That in turn suggests that the organizational structures of many nonprofits will have to change fairly radically. Many of them were designed or have evolved to be good at continuity, like the Cleveland Symphony Orchestra, which after all is still playing Beethoven with violins and cellos.

Some of the crypto billionaires might end up feeling politically vulnerable, in part because they do not run enterprises that create a large number of well-defined, specific jobs in an easily identifiable community. Crypto may have positive effects on the overall economy, but crypto titans don’t have obvious political power bases the way the mainstream financial sector tends to have very good relations with New York state senators.

That in turn may suggest an interest in directly humanitarian philanthropy, not only for altruistic reasons, but also to burnish their public image and to protect against political assault. So if you have a new and radical idea for how to help the poor — at very low steady-state costs — there has never been a better time to be a nonprofit entrepreneur.

I am neither a paper nor a crypto billionaire, but I headEmergent Ventures, a philanthropic project that helps social entrepreneurs quickly develop and test their ideas.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include "Big Business: A Love Letter to an American Anti-Hero."

©2021 Bloomberg L.P.

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