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Capitalists, Governments, and Charity

Question: Are for-profit philanthropists more effective than governments at charity?

Matthew Bishop: Well, I think we’ve seen a lot about how governments fail in trying to solve big social problems because they tend to get very risk adverse. Politicians are always thinking about the next election so they don’t want to take a risk that might fail. And I think a lot of social change requires people to try things that you don’t quite know whether it’s going to work or not. And that’s the press. The press and really get on the back of a politician who does something that doesn’t work. Business people are much more used to that mindset of, I’ll take a risk, I know there’s a 20% chance it is going to succeed, but if I do enough of those things, then we’ll find the answer. And so that’s why I think the role of social innovation is much better driven by the private sector. Government then has a huge role to play in taking successful ideas pioneered by the private sector by philanthrocapitalists and scaling it up and taking the idea to a level where hundreds of millions of people benefit rather than smaller numbers. And I was very struck by Bill Gates. Although he is giving away three or four billion dollars a year, which seems like a huge amount of money, he is very conscious that compared to the scale of the problems he is trying to address in the developing world, that money is a drop in the ocean compared to the sort of money that governments have at their disposal. So, part of his challenge as a philanthropist is not just to come up with clever ideas for solving social problems, but to persuade those who have far more money than he does, which are by and large, governments to use their money and put their money behind his in innovative ideas.

Question: Are you optimistic about microfinance loan facilitators like

Matthew Bishop: is a fantastic innovation. It’s allowing people with $20 to give away to have some of the same experience that someone with $200 million or $2 billion to give away is going to have. Because a lot of us find we write a check to a charity and that’s all we ever hear about it. The money goes off, we don’t know whether it’s made any different whatsoever. With Kiva, you are actually able to interact with the people you are giving to. And you get the feedback of this person. This small farmer say you’ve lent money to, a few months later you’re check comes back and realize that you’re money has made a difference, they’ve managed to put that money to work and they’ve made some money and you feel great about him and then you say, well who am I going to help next. And you also see on Kiva, groups – teams forming, to compete with each other to give more money to different people and different causes, so you have at Kiva Obama supporters who are competing with the Kiva McCain people. Last year during the election, the Kiva atheists are competing with the Kiva Christians. And that’s building a sort of discussion amongst those groups that is leading to a much more informed public debate about aid and how to do it effectively and how to do giving effectively. And increasingly, I think we’re going to see partnerships between these mass organizations where we can all get involved with both big philanthropy like the Gates foundation and indeed with the government. And one of the ideas that Michael Green and I are proposing throughout philanthrocapitalism work is that 10 percent of the aid budget ought to be given away through these sites were all the members of the public can have a say in how the money is given, so Kiva should be given matching funds by the government.

Microfinance has become one of the great success stories of philanthropy and aid. But what’s so interesting about microfinance is that what 30 years ago started out as a charity, a way to basically help people help themselves get out of poverty has become a very, very profitable business. There’s a Mexican microfinance institution called Compo Tomos that was started as a charity, but had an IPO last year that raised over a billion dollars, and is one of the strongest performing shares on the Mexican Stock Exchange. This has been hugely controversial because some people say; well you shouldn’t be making money out of providing things that the poor need. But actually what’s happened is that a lot more money has gone into helping the poor because there’s a chance to make money on their investment than every comes through charity. You could never reach as many people through charity as you can through marshalling some of that money into for profit capital markets. And so, a lot of kind of – well I think some of the cleverest philanthrocapitalists and social entrepreneurs are saying, well maybe there’s a load of other services for the poor in the developing world that we traditionally have thought as charities, like providing them with water, or with healthcare, or with education, that we can actually find a business model that makes profit, and therefore, people who have a lot of capital to invest in profitable growth opportunities will say, “Let’s get in and put a lot of money behind this.” Actually, if they do that, we can actually scale out those services to the poor much quicker than by waiting for charity to do it. And so, this is a very exciting area and we are going to see a lot of action over the next few years. It’s going to be controversial, but I think it could end up making a huge difference in helping the poor far more than some of the traditional sorts of charity.

Question: How do you respond to Dambisa Moyo’s argument that charitable money promotes corruption in Africa?

Matthew Bishop: Well, Dambisa Moyo’s, Dead Aid is a cry from the heart from an African woman who has seen terrible corruption as a result of aid, hold Africa back. I think thought it is more emotional in its rather simple message that all aid is bad than it is rational because some aid is needed and the private sector will not do it on its own. The question is, can we get smart aid rather than some of the old forms of aid. Smart aid is what we think the essence of philanthrocapitalism is. It’s about business philanthropy, social entrepreneurs, charities, governments all coming together around how do we most effectively design partnerships that quickly deliver results. So its very results orientated. And that, I think, is the future of aid. But to argue that all aid is dead, all aid is useless, even though there is plenty of evidence that a lot of aid in the past has been useless, and bad, and actually harmful to Africa I think is wrong.

Recorded on:  September 24, 2009

Philanthrocapatilists and small donors are increasingly provide charity independently of governments and large institutions. Is this a good trend?

The “new normal” paradox: What COVID-19 has revealed about higher education

Higher education faces challenges that are unlike any other industry. What path will ASU, and universities like ASU, take in a post-COVID world?

Photo: Luis Robayo/AFP via Getty Images
Sponsored by Charles Koch Foundation
  • Everywhere you turn, the idea that coronavirus has brought on a "new normal" is present and true. But for higher education, COVID-19 exposes a long list of pernicious old problems more than it presents new problems.
  • It was widely known, yet ignored, that digital instruction must be embraced. When combined with traditional, in-person teaching, it can enhance student learning outcomes at scale.
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A massive star has mysteriously vanished, confusing astronomers

A gigantic star makes off during an eight-year gap in observations.

Image source: ESO/L. Calçada
Surprising Science
  • The massive star in the Kinsman Dwarf Galaxy seems to have disappeared between 2011 and 2019.
  • It's likely that it erupted, but could it have collapsed into a black hole without a supernova?
  • Maybe it's still there, but much less luminous and/or covered by dust.

A "very massive star" in the Kinman Dwarf galaxy caught the attention of astronomers in the early years of the 2000s: It seemed to be reaching a late-ish chapter in its life story and offered a rare chance to observe the death of a large star in a region low in metallicity. However, by the time scientists had the chance to turn the European Southern Observatory's (ESO) Very Large Telescope (VLT) in Paranal, Chile back around to it in 2019 — it's not a slow-turner, just an in-demand device — it was utterly gone without a trace. But how?

The two leading theories about what happened are that either it's still there, still erupting its way through its death throes, with less luminosity and perhaps obscured by dust, or it just up and collapsed into a black hole without going through a supernova stage. "If true, this would be the first direct detection of such a monster star ending its life in this manner," says Andrew Allan of Trinity College Dublin, Ireland, leader of the observation team whose study is published in Monthly Notices of the Royal Astronomical Society.

So, em...

Between astronomers' last look in 2011 and 2019 is a large enough interval of time for something to happen. Not that 2001 (when it was first observed) or 2019 have much meaning, since we're always watching the past out there and the Kinman Dwarf Galaxy is 75 million light years away. We often think of cosmic events as slow-moving phenomena because so often their follow-on effects are massive and unfold to us over time. But things happen just as fast big as small. The number of things that happened in the first 10 millionth of a trillionth of a trillionth of a trillionth of a second after the Big Bang, for example, is insane.

In any event, the Kinsman Dwarf Galaxy, or PHL 293B, is far way, too far for astronomers to directly observe its stars. Their presence can be inferred from spectroscopic signatures — specifically, PHL 293B between 2001 and 2011 consistently featured strong signatures of hydrogen that indicated the presence of a massive "luminous blue variable" (LBV) star about 2.5 times more brilliant than our Sun. Astronomers suspect that some very large stars may spend their final years as LBVs.

Though LBVs are known to experience radical shifts in spectra and brightness, they reliably leave specific traces that help confirm their ongoing presence. In 2019 the hydrogen signatures, and such traces, were gone. Allan says, "It would be highly unusual for such a massive star to disappear without producing a bright supernova explosion."

The Kinsman Dwarf Galaxy, or PHL 293B, is one of the most metal-poor galaxies known. Explosive, massive, Wolf-Rayet stars are seldom seen in such environments — NASA refers to such stars as those that "live fast, die hard." Red supergiants are also rare to low Z environments. The now-missing star was looked to as a rare opportunity to observe a massive star's late stages in such an environment.

Celestial sleuthing

In August 2019, the team pointed the four eight-meter telescopes of ESO's ESPRESSO array simultaneously toward the LBV's former location: nothing. They also gave the VLT's X-shooter instrument a shot a few months later: also nothing.

Still pursuing the missing star, the scientists acquired access to older data for comparison to what they already felt they knew. "The ESO Science Archive Facility enabled us to find and use data of the same object obtained in 2002 and 2009," says Andrea Mehner, an ESO staff member who worked on the study. "The comparison of the 2002 high-resolution UVES spectra with our observations obtained in 2019 with ESO's newest high-resolution spectrograph ESPRESSO was especially revealing, from both an astronomical and an instrumentation point of view."

Examination of this data suggested that the LBV may have indeed been winding up to a grand final sometime after 2011.

Team member Jose Groh, also of Trinity College, says "We may have detected one of the most massive stars of the local Universe going gently into the night. Our discovery would not have been made without using the powerful ESO 8-meter telescopes, their unique instrumentation, and the prompt access to those capabilities following the recent agreement of Ireland to join ESO."

Combining the 2019 data with contemporaneous Hubble Space Telescope (HST) imagery leaves the authors of the reports with the sense that "the LBV was in an eruptive state at least between 2001 and 2011, which then ended, and may have been followed by a collapse into a massive BH without the production of an SN. This scenario is consistent with the available HST and ground-based photometry."


A star collapsing into a black hole without a supernova would be a rare event, and that argues against the idea. The paper also notes that we may simply have missed the star's supernova during the eight-year observation gap.

LBVs are known to be highly unstable, so the star dropping to a state of less luminosity or producing a dust cover would be much more in the realm of expected behavior.

Says the paper: "A combination of a slightly reduced luminosity and a thick dusty shell could result in the star being obscured. While the lack of variability between the 2009 and 2019 near-infrared continuum from our X-shooter spectra eliminates the possibility of formation of hot dust (⪆1500 K), mid-infrared observations are necessary to rule out a slowly expanding cooler dust shell."

The authors of the report are pretty confident the star experienced a dramatic eruption after 2011. Beyond that, though:

"Based on our observations and models, we suggest that PHL 293B hosted an LBV with an eruption that ended sometime after 2011. This could have been followed by
(1) a surviving star or
(2) a collapse of the LBV to a BH [black hole] without the production of a bright SN, but possibly with a weak transient."