Elon Musk Just Revealed Why He Doesn’t Share His Money: A lot can be said about Elon Musk, a lot of good things, and a lot of negative things. One of the key sticking points for his detractors is that he does not give out much to charities. Why is that? Well, you may be shocked to learn what he’d to say about that.
“When it comes to donations, I’d say it’s quite tough to give money away properly,” Elon Musk stated in a discussion with Mathias Döpfner, CEO of media house Axel Springer’s parent company, Insider.
When asked about the goals of his charity organization, Musk Foundation, he stated that he is more concerned with the consequences of philanthropy than the optics of it. This, he claims, makes it more difficult for him to give money away “effectively.”
“If you care about the reality of doing good and not the perception of doing good, then it is very hard to give away money effectively,” he said. “I care about reality. Perception is damned.”
Of course, this does not mean that he completely shies away from giving to charity, unlike what many of his critics would claim.
Before we start to understand Musk’s choice of words and what he really means, we should start with the history a little. According to a study of records with the Internal Revenue Service, from its inception in 2001 through the middle of 2017, The Musk Foundation has disbursed more than $54 million in 15 years of operations, with more than a third indirect gift to 160 charities.
The majority of documented prizes were in the thousands of dollars, and many went to environmental, educational, medical, and space advocacy organizations.
Other recipients have included Musk’s own children’s school, his brother’s charity, a protest group protesting traffic on Musk’s commute to SpaceX, and even an art project at Musk’s favorite festival, Burning Man.
He has also joined billionaires such as Michael Bloomberg and Warren Buffett in signing The Giving Pledge in 2012, a pledge by some of the world’s wealthiest individuals to give away the bulk of their money, either during their lifetimes or upon their deaths.
Musk has long been concerned about the potential for malicious artificial intelligence, comparing it to “summoning the demon.” In 2015, he donated $1 billion to establish OpenAI, a research organization that will build safer AI in a “way that is most likely to benefit humanity as a whole.”
“Elon’s charitable giving has kickstarted AI safety research, transforming it into what is now a vibrant and respectable research area,” said Max Tegmark, a professor at the Massachusetts Institute of Technology who got $9 million from Musk for research at the Future of Life Institute.
The Musk Foundation made one of its highest distributions in 2016, providing $37.8 million to Vanguard Charitable. It’s a donor-advised fund, which is a tax-advantaged giving instrument that stores money for several customers and distributes it over time.
This structure makes it impossible for the public to know whose client is making which rewards, which is advantageous for the publicity-phobic. While secrecy was not Musk’s reason for using donor-advised funds, he does feel that meaningful charity is done mostly anonymously, according to a representative for the foundation.
The biggest of Elon Musk’s wealth dumps happened quite recently, however. Elon Musk secretly slid more than 5 million Tesla shares out to his portfolio and donated them last November 2021, in the midst of a chaotic, headline-grabbing series of stock sales.
According to the Wall Street Journal, the stock, valued at around $5.7 billion, would propel Musk to the second-largest philanthropist in 2021, after only Bill and Melinda Gates. People are speculating that because of the time of the stock transfer, the assets could be headed to the United Nations.
In October 2021, about three weeks before Musk sold his interest in Tesla, the world’s richest man tweeted that he would sell $6 billion of Tesla stock “right now” if the UN World Food Programme could explain how the cash could be used to avert a global hunger crisis.
The organization has previously requested $6 billion from the world’s wealthy. Some speculate that Musk may want to connect his charity contributions with the goals of “effective altruism,” a philosophical movement that seeks to direct charitable efforts toward projects with the greatest net benefit to human and animal existence.
According to Bloomberg, Igor Kurganov, a former professional poker player whom Musk hired to help handle his charity contributions, is deeply entrenched in the realm of effective altruism.
If Musk donated his $5.7 billion in accordance with the principles of that movement, the money might be used to combat extreme poverty.
People in the charity sphere who have previously worked with Musk suggest one possible cause for his secrecy: According to Marcius Extavour, vice president of climate and energy at XPrize, the foundation that manages Musk’s $100 million carbon removal research effort, Musk was particularly interested on how the money could advance the field, rather than attempting to look good while doing it.
It all makes sense now. “Some people are really focused on the appearance, or, frankly the communications value,” says Extavour. “His instruction to us about the content of the prize was to make it really good. Just make this mean something.”
There are more dimensions to this that we need to consider, though. There could also be practical issues. According to Scott Walter, head of Capital Research Center, a Washington-based philanthropy monitoring group, it’s not uncommon for the ultra-rich not to divulge where their contributed riches are going.
It opens you up to pleadings from charities,” he says. “Let’s say he gives to a charter school. Every other charter school in America is going to be pounding on his door.” “You make one donation, and then you’re on 15 mailing lists, and most people hate that,” Walter adds.
“Well, when you have as many zeros in your donations as [Musk] does, imagine the relative pleading quotient that’s involved.” Finally, Musk is following a tactic that the ultra-wealthy in tech have used for years. This involves setting up a donor-advised fund to handle your charitable contributions.
These are similar to affluent donors’ checking accounts, where monies can grow tax-free and grants can be channeled anonymously over time. This is the easiest and most tax-advantageous way to give to charity, according to Fidelity Charitable, United States’ biggest nonprofit.
They’ve become so large that they’re now a new source of profit for Wall Street. This is nothing out of the usual for Silicon Valley entrepreneurs. According to The New York Times, Facebook’s Mark Zuckerberg, Netflix’s Reed Hastings, Twitter’s Jack Dorsey, Google’s Sergey Brin, Microsoft’s Paul Allen, and WhatsApp’s Jan Koum and Brian Acton are among the billionaires who have donor-advised funds with the Silicon Valley Community Foundation, which has $13.5 billion in assets.
These financial vehicles are fundamentally opaque, with no yearly giving requirements or transparency. Critics say that donor-advised funds undermine the objective of the tax code by providing donors with immediate tax relief while leaving it unclear how and when these donations will be used.
The incentive to billionaires is obvious. Money donated to such funds provides immediate tax savings by lowering taxable income and assets, particularly in years with substantial windfall earnings or major life events such as an IPO or divorce.
However, unlike family foundations, which must disperse a portion of their assets each year, donor-advised funds have no temporal constraints. Their money can be kept for a hundred years, for example.
Funds that provide money to NGOs, including partisan political ones, can be anonymous gifts with no connection to the donor. Despite all this, Musk stands as a clear opposite to Bill Gates, who has had a long history of making his charity efforts as well known as possible.
Only two billionaires have truly stepped into the spotlight during the pandemic: Bill Gates and Twitter’s Jack Dorsey. Gates, who had a net worth of $103 billion when The Washington Post began its survey in April 2020, has led an intense and thorough public campaign to mitigate and eliminate the virus, investing approximately $300 million to date through the Bill and Melinda Gates Foundation.
During the pandemic, Gates has emerged as a prominent leader, drawing on his decades of experience fighting global disease to provide leadership and strategy for dealing with the coronavirus’s spread.
In terms of gifts from his personal wealth, Gates’ total giving to date equals to around $283 for the average American donor. Gates and Musk have different reasons for their charity, and it’s perfectly reasonable.
Now at the very least, some of the enigmas from Musk’s giving habits have been cut away, and a more level-headed assessment of this thing that he’s so often criticized for is achieved.