Lost Charity

This Obit made me sad:

Alex Grass, 82, who founded Rite Aid and built it into one of the nation’s largest drugstore chains, died Aug. 27  … By the time he stepped down as the company’s chairman and chief executive in 1995, Rite Aid was the nation’s largest drugstore chain in terms of total stores and No. 2 in terms of revenue. …

Grass was a philanthropist who contributed to civic, health and educational organizations. His legacy includes a $14.5 million medical building named after him at PinnacleHealth’s Harrisburg Hospital and $1.5 million to establish the Alex Grass School of Business Leadership at Harrisburg Area Community College.  Mr. Grass also contributed $1.5 million to the University of Florida, where he earned his law degree, to establish a chair for its Center for Jewish Studies and build a new law school building.

When we look back on people in the past and what they did that we are thankful for, creating innovative products, processes, and organizations should come out near the top; that is mainly what made us rich.  And on that count Alex Grass is a hero.

But when folks like Alex spend their later years trying to “do good” with the millions they were paid for actually doing good, they usually end up pissing it away.  We already have too much medicine and academia, because such things are mainly wasteful signals.  We didn’t need and shouldn’t be thankful for more hospital wings or lecture halls.  Imagine how much more good could have been done instead via millions spent trying to make more innovative products or organizations.

Of course most innovations attempts fail, and that wouldn’t have looked so good for Mr. Grass.   I’m sure those hospital wings and lecture halls came with grand ceremonies attended by folks in his social circle, saying what a great guy he was.  And I expect people in his social circle are more likely than most to actually use those hospital wings and lecture halls; he was showing loyalty to his clan by buying such things.

But when I think of all the good that could be done by philanthropists who actually wanted more to do good than to look good, it makes me sad.  At it doesn’t make me sympathetic toward the tax deductions and other social support our society offers for these wasteful signals.

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  • q

    what would someone like alex grass know about what you would call innovation?

    it’s not that these institutions are wasteful per se, it’s that they are geared toward producing more of the same culture that we currently have.

    why would philanthropy coming from a concentration of wealth not reflect the values of those who concentrated that wealth?

  • I liked this and put on my facebook.

    Perhaps we could convince the rich to simply fund prizes for innovation, build them a nice hall, and they too could be Nobel 1, 2, 3 …

  • Phil

    All true. But I am comforted by the fact that, even though he was probably a very, very rich man, he contributed only $17.5 million to those causes you mention.

    Given all that he did to innovate, it seems churlish to deny him the right to buy a little bit of renown for a piddly $17.5 million, doesn’t it?

    I mean, he’s not Warren Buffett, who, I bet, will wind up leaving a lot more than that to a lot worse causes. Isn’t he into zero population growth or some such? Geez, think of the harm a billion dollars with those people will do.

    • fburnaby

      Why would zero population growth be bad?

      • Patri Friedman

        I don’t know that it would be bad, but it would be less good than having population growth. A higher population hurts average happiness when most happiness is generated from fixed resources which people compete for. It helps average happiness when most happiness is generated from ideas and other creations which can easily be shared without loss. Right now, we are far closer to the latter than the former, and we probably will stay there until we run out of room in the universe.

  • Phil

    OK, his donations “include” those $17.5 million worth. He might have blown a lot more, in which case my previous comment is perhaps too kind to Mr. Grass.

    Makes me wonder … what kinds of donations will do the most good while still buying the donor all those kinds of goodwill?

    Medical treatment for the poor? Nah, you can’t put your name on the side of that. Maybe an annual award of some sort that creates good incentives and publicity where there weren’t any before?

  • Sebastian Franck

    Once again you make me think! Damn, you Robin! So we’d all be better off if billionaires just kept on doing what they do best: earn s***loads of money! And spend it on whatever they like, megayachts, private jets, privat concerts with Madonna (who will then have millions more to spend on personal trainers, personal film director husbands, who will … guess that’s the multiplier effect in action).

    Makes my head spin.

  • Robert Koslover

    As I began to read your essay, I first thought that the main reason you were sad was that a man who was such a fine leader and, it would appear, a decent human being, had died. I stand corrected. Come now, Robin. How do you really know what good these projects may produce? Yes, they may not have been the specific charities or philanthropic causes that you or I would prefer to support, but who are we to tell him what to do with his money? So you think maybe his donations shouldn’t get a tax deduction? Um, you mean, because our federal government would make far wiser decisions about how to spend that same money? And finally, if you happen to amass a fortune someday, do you promise to leave your money only to enterprises that will not associate your name with your gifts?

  • @Sebastian I don’t think that is what Robin meant. I think what he’d like to see is something more along the lines of what Bill Gates is doing with his foundation: direct support of health and education initiatives that benefit the poorest in this world.

    Last year Robin suggested something even more revolutionary: “World Welfare State” – direct cash payments to poor in developing countries to bypass corruption and inefficiencies in development programs. Recently, I found this article in Spiegel about just such a program in Nambia, which is looking to be quite successful. So the questions now is: how do we scale this up?

  • Daniel Burfoot

    Great post. Maybe in the future some rich philanthropist will endow a Robin Hanson prize for intellectual courage.

  • tony

    The Robin Hanson center for kids who can’t read good.

  • F1r3br4nd

    So, Robin, what would you bequeath 17.5 million to?

    “We already have too much medicine and academia, because such things are mainly wasteful signals. ”

    Now, that is rich. What facts have you in support of such an assertion? From where I’m sitting (working on government-funded anti-aging research) we don’t have nearly enough medicine, and won’t until aging is a treatable disease.

    Most of the time I side with market-based solutions, lower taxes, smaller government, etc. But now and then I get reminded (often on this blog) why economists should be taken with a huge grain of salt. This is one such time.

    You simply don’t have a good answer to the problem of positive and negative externalities, and for the most part you have a huge bias against their very existence. What I know is that the private sector is doing jack-all to advance basic blue-sky research; their time horizon is too short. Therefore, certain projects become the niche of government, or preferably charity.

    When an individual has amassed that much money, perhaps nudging the world in a direction that might be more conducive the survival of one’s descendants and their species is more rational than reinvesting it to make yet more money they won’t live long enough to spend.

    • gwern

      > Now, that is rich. What facts have you in support of such an assertion? From where I’m sitting (working on government-funded anti-aging research) we don’t have nearly enough medicine, and won’t until aging is a treatable disease.

      Robin has posted dozens of times about wastefulness in medicine and academia; although perhaps it is rich of me to expect commenters to do things like click on that enormous ‘Medcine’ tag link on the righthand side, and read what was written…

  • i would have donated it all to planned parenthood. i recently got sterilized and it was a huge ordeal because of the paperwork required by planned parenthood to get federal funding. I dream of a clinic where anyone can walk in and get sterilized that day. talk about doing good!

  • Phil

    How about: an annual college scholarship fund that goes to high-school students in the three states that have the largest proportion of students using school vouchers? Is it legal to give politicians incentives like that?

  • Tyrrell McAllister

    We already have too much medicine and academia, because such things are mainly wasteful signals. We didn’t need and shouldn’t be thankful for more hospital wings or lecture halls.

    Obviously a lot of innovation is wasteful signaling, too. I could imagine someone claiming that we “don’t need and shouldn’t be thankful for more innovation,” that instead our resources would be better spent on fewer, higher-quality innovations.

    Is there some rigorous way to establish that we would be better off with more innovation, even if you don’t weight for quality?

    I guess the more pertinent question is: Would we be better off with the innovation that Grass might otherwise have generated with that $17 million? The answer might seem like an obvious “yes”. But sometimes people just have one good idea in them. If Grass had felt pressured by a quest for status to produce innovation for its own sake, he could conceivably have done more harm than good.

    How might this kind of question be settled empirically?

  • Ilya Shpitser

    Robin, do you think too much or not enough money is spent by our society on ‘long term research?’ Do you think academia is overfunded in general or underfunded and organized poorly (due to status/signalling reasons, etc.)?

  • Given that there’s too much venture capital being thrown at bad venture capitalists, how do you throw money at innovation? Give it all to the X-Prize Foundation?

  • “Given that there’s too much venture capital being thrown at bad venture capitalists, how do you throw money at innovation? Give it all to the X-Prize Foundation?”

    That wouldn’t be a bad idea.

    I’d also suggest donating to research universities with some parameters to insure that the money is spent on underfunded areas (high risk, high reward fields that typically don’t do well in grant proposals).

  • Alan

    Your post answers the question, Who is Alex Grass? At intervals over the last several years I’ve had occasion to drive past the the medical building bearing this name prominently displayed. From a utilitarian viewpoint, the funds used in its construction might have been expended pursuing some expressly innovative endeavor with a higher potential societal payoff, but as a an example of meaningful philanthropy generative of positive externalities, the building succeeds on several levels. It’s new, it’s prominent, and it’s attractive–located in an area that will really benefit from those attributes. Serving patients of from various social strata, the building can be seen as a signal of urban vitality.

    As to the community college gift–where’s the cause for grief? Business elites and their social circles don’t usually send their kids to community college. Richly endowed Ivy schools are categorically different. Maybe someone who attends community college will go on to generate innovative benefits to society that would otherwise have been out of reach. If it was the late Mr. Grass’s intention to give something back to his community, not just to reinforce a dominance signal to his social class, an argument can be made that he succeeded brilliantly.

  • diogenese

    Community College — The NEW status signal for the social elite in America.

    • Diogenese wins the comments thread.

      Sometimes I’m convinced this blog is an elaborate joke.

  • George

    I think we should give Alex Grass the benefit of the doubt. Perhaps he ran out of innovative business ideas and wasn’t able to judge other peoples. His charitable giving was then the least worst think he could do with his money.

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  • Maybe Alex Grass had a clear idea of what he was good at. Maybe there was background innovation in Rite Aid, but what it looks like from the outside is the result of taking a sound standard idea and being dedicated to expanding it.

    If he thought he wasn’t likely to come up with a useful new sort of charity, he might have been right. Or maybe he should have worked on expanding existing good charities into chains.

  • You say: “We already have too much medicine and academia, because such things are mainly wasteful signals.”

    I don’t agree with this point. Spending on health care and education is strongly correlated with future growth. There are several plausible theories for why we should expect this and the evidence seems largely to support causation here.

    You don’t provide any argument to support your claim. Until you do I’m not even vaguely convinced.

    I’m sure that many professors spend time on economically and culturally unimportant musings and that many medical procedures occur that do not contribute much to the overall well being of society. Its just that I don’t think business does much better and there are some things for which a profit motive isn’t the most effective driver.

    I think this post has a right wing economic bias.

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