Against Charity

The proponents of Effective Altruism believe that if a business entity (or a person) is extremely successful it is morally obligated to donate part of its proceeds to charity to alleviate world’s ills. It is interesting that they invoke ‘moral obligation’ as a reason here – if the logic is structured this way it’s hard to find a skeptic of such an idea. But why should moral obligation, in which world’s biggest donors like to wallow, only be applicable to the ‘giving’ part? Why doesn’t anyone ponder on the moral obligation of ‘not taking it in the first place’? If you think of yourself as moral, shouldn’t you be moral all the way? That’s what this article tries to uncover.

I often criticize big charity because I find most charitable foundations to be vehicles for self-promotion rather than social change. But here I will give the benefit of the doubt to the donors and assume that their benevolent urges are really coming from a deep human need to help those less fortunate. And this is where the narrative really starts to break down.

Let’s assume, for argument’s sake, that the world’s biggest donors really do have a genuine benevolent streak. Then it would be difficult for them to ignore the way that the biggest industries (which they themselves run or have holdings in) contribute to the rise in the very poverty that they then seek to alleviate. To be honest with themselves they would have to address the disease as well, not just the symptom. But Effective Altruism absolves the current capitalist model.

The irony of Effective Altruism is that it implores individuals to use their money to procure necessities for those who desperately need them, but says nothing about the system that determines how those necessities are produced and distributed in the first place.

It is curious then that as possessors of those very necessities that people need (food, clean water, medicine), Effective Altruists fail to ponder on a much simpler solution: why not just give those resources directly to people who need it, skipping the foundations and the black-tie galas? If this is a moral obligation, as they claim, then why would this kind of ‘direct’ charity be different from writing a check after reaping the profits? Are profits the necessary and unavoidable step to being an altruistic person?

But that leads to a big dilemma. It is capital’s inherent trait – search for profit – that is clashing with attempts of humans trying to be good: capital will let the drowning stranger die unless it receives adequate payment. Moreover, the capital creates those drowning strangers. Further yet, capital’s commodification of necessities directly undermines the self-sufficiency of entire populations by determining how resources are allocated. As I pointed earlier on my blogpost about globalization, people who used to be self-sufficient are being priced out of the lands they used to cultivate and live off. Then they, in turn, are being sold the products that they used to produce themselves, at a premium. Sold by the very entities that later claim to be their saviors. And when they can’t afford, well, that’s where the Davos crowd comes in on a high-horse.

Meanwhile, the capitalist class is transformed into our most potent possible savior, and the moral philosophers behind it all turn into accountants and marketers for charities with pretensions of “acting now to end world poverty” and figuring out “the most good you can do.

And when people of the Third world die from hunger or disease, such a capitalist would say: “It’s not due to me, it’s due to the market.”

Rather than asking how individual consumers can guarantee the basic sustenance of millions of people, we should be questioning an economic system that only halts misery and starvation if it is profitable. Rather than solely creating an individualized “culture of giving,” we should be challenging capitalism’s institutionalized taking.



Slavoj Zizek on Charity (and many other things)

From this interview.

“I don’t believe in this model of society where the solution will be for the very rich people to spend half of their earnings. The problem is that first, they get all the money in the system, in the sense that they profit tremendously, and then they repay the debt. I simply don’t think charity and welfare is the solution.

The problem with charity is that it’s part of general ideology today. Instead of asking systematic questions like “What’s wrong with our system?” you go into personal responsibility. For me, the unsurpassable model of what is false in charity is still the first big one: Carnegie, of Carnegie Hall. On the one hand, yes, he did everything, building cultural home, concerts, etc., but on the other hand, he employed hundreds of Pinkerton detectives in Texas to beat workers to break trade unions. That’s the model for me, you know. First, you extremely brutally beat the workers, and then you offer them a concert.”

If people who give to charity were truly charitable towards their fellow human beings they would question their very business model that have enabled them to enrich themselves to such an extend, not dispense handouts on a whim.

Charity as a Conservative Delusion.

The topic of charity as a distraction is really gaining ground. In the last week I stumbled upon 2 articles on the topic, both making powerful arguments against private charity.

First is the article in LA Times that gives trenchant observations about the failure of private charity to attend to social needs, summarized in two main points:

1. Private charity is as cyclical as the economy. It can’t step up precisely when it is needed the most – in times of economic collapse;

2. Charity is not synonymous with helping the needy. Most charitable donation go towards religious institutions, alma maters and other personal pet projects.

To quote Robert Reich, former Labor Secretary, “Philanthropy appears to be more about the pursuit of one’s own projects, a mechanism for the expression of one’s values or preferences other than a mechanism for redistribution or relief for the poor.”

I guess that explains why we have Koch theater at the Lincoln Center, but not in the projects.


Second article is Mike Konczal’s long read. It aims to strike at the conservative myth of charity as a functional replacement of government programs. He calls it “voluntarism fantasy.”

At a basic level, much of our elite charitable giving is about status signaling, especially in donations to elite cultural and educational institutions. And much of it is also about political mobilization to pursue objectives favorable to rich elites. As the judge Richard Posner once wrote, a charitable foundation “is a completely irresponsible institution, answerable to nobody” that closely resembles a hereditary monarchy. Why would we put our entire society’s ability to manage the deadly risks we face in the hands of such a creature?

He also makes a case for liberals to reclaim the definition of charity as, to use President Truman’s words, “good will towards one’s fellow man; of brotherhood, of mutual help, of love.” The idea is that true charity is not a whimsical giveaway from rich to the poor, but a common participation from all members of the community. This way it won’t be easy for people like Paul Ryan casually throw “charity” as a panacea and retreat back into his ideological niche, thinking that the problem of poverty is in no need of further attention.

The Burden of the 1%.

BERNARD: But sometimes, Willy, it’s better for a man just to walk away.

WILLY: Walk away?

BERNARD: That’s right.

WILLY: But if you can’t walk away?

BERNARD: I guess that’s when it’s tough.

Arthur Miller, Death of a Salesman

Wealthy Manhattanites reel from dull predictability of highly structured lives.

There’s this magazine, Departures – a great read if you care about what’s on the 1% wish list. The magazine comes free if you have an American Express platinum card. If you don’t have an American Express platinum card, there’s a good chance you’ll find this magazine in a bathroom of your rich friend, right by the toilet seat. Open any random page and the amount of bullshit will blow your mind. “Are you still waking up to a traditional alarm clock and showering with ordinary municipal water? That’s so old school,” begins one article. You are in luck: The showers infused with vitamin C, lighting that optimizes your circadian rhythms and task-specific aromatherapy will soon be available to some lucky health-obsessed and, well, solvent Manhattan dwellers.

The burden of the 1% is lack of alpha and lack of adventure. If you represent a market niche for that vitamin shower but have read Hemingway in your youth, you sense that something is not quite right. You sense some hard-to-nail-down dissonance. As a former member of the 1% I know the feeling. I was there myself. Back in the day, when I was a mid-level Wall Street employee I wasn’t exactly lacking the thrills at work. Back then the volatility resembled a wild bronco. I had to clear 3-4 points bid-offer just to break even. That’ll keep you awake at night. I’m not complaining, after all I was well-paid. I’m just showing off my battle scars. To a Wall Streeter everything is a battle or a game, you know. Then, when you’re off work, your life is a sterilized and predictable routine: gym, healthy eating habits, domestic help. Eventually, this dichotomy – dirty combat at work/decontaminated existence outside – becomes mentally draining. If you’re able to block those creeping thoughts about the nature of your existence, you’re lucky. I wasn’t that lucky. Like many others, I’m sure, I looked for rationalizations: there must be some purpose in all of this, some meaning. But there was none. It’s just one of those bullshit jobs with a good payoff. We were not really funding any businesses or providing liquidity. I refuse to believe that those still employed in those areas don’t realize that – they are way too well-read and overeducated to not appreciate the predicament. So many are looking for some mental release, for a justification. Because we are good, dammit! We are all good people just doing our jobs.

When you’re used to your career trajectory moving up at a 45 degree (or steeper) angle, you are at a loss when it inevitably begins to flatten; you’ve groomed yourself for battle after all. Your built-up ambition doesn’t slow down in correlation with the diminishing opportunities. It doesn’t just disappear. And then what? At some point acquiring luxury items stops bringing satisfaction. At some point your life becomes about seeking the next thrill. Mine did. Like in some vile videogame you must move to the new level, new quest – this time searching for meaning, validation, benevolence or adventure. Adventure is hard to come by in Manhattan, unless you are a homeless drug addict or a street hooker or, well, poor. One can search for meaning on various charity boards, the other may find refuge in drugs or alcohol. I’m indifferent to most drugs; I’m partial to coke, but it makes my nose bleed. Marathons are pointless in my view. I consider charity – a common mental refuge of the successful – to be just a contrived display of benevolence, a self-promotion tool. I like gambling though. But my point is this: outlets for a real adventure are limited for the top 1%. But that pent-up demand – to be someone beyond the P&L, beyond the “number” – is palpable among the Wall Street/hedge fund crowd. They can’t sit quietly in the room and enjoy the spoils. They must do something. That desire is not necessarily bad, it just has nowhere to go. To exacerbate the problem, there’s no alpha today, no volatility. Hedge fund managers feel emasculated. They are basically reduced to extracting value from others, relying on insider tips, bullying everyone down the food chain and engaging in insurance scams. I guess that explains Bernanke hatred: he took away the hedge funds’ thrill rides. There are very few opportunities today to show the world what a top dog you are. And it sucks having to think of yourself as a swindler or a bully. Ask any credit trader to describe what he does for a living and more often than not you’ll hear self-deprecating: “Oh, I’m just a monkey pulling a lever,” followed by a sheepish giggle. The reason for this faux humility is that he himself knows that what he does is bullshit, a high-paying bullshit. You would never hear something like this from a doctor or a teacher.

That’s where pretentious bullshit comes in. It takes many forms. Sometimes it comes in the form of a fake adversity. The popularity of various races “for the cure”, marathons, charitable trips to Haiti, underground Wall Street fight clubs speak of that furtive need. All of a sudden, the 1% want to be regular folk, or at least find what they think is regular folks’ experience: physical challenges, dangerous situations, scarcity of resources. That credit trader fake display of modesty is often followed by a story about how they flew to Vegas with the guys for a weekend and got into a drunken fight in a nightclub. They seek adversity so that they can “overcome” it and then tell stories. But in our sterile Manhattan/Greenwich cocoon we are just grasping at straws. Local businesses got smart about those repressed desires: they structure their businesses to look like they serve a bunch of destitute laborers. Ralph Lauren store in West Village sells those Boardwalk Empire themed clothes that will make you look like you just came from a Depression era stock footage. Naturally those clothes cost a small fortune. Trendy restaurants must contain words like “farm”, “kitchen”, “shack” or “mission”. Or how about those cronut lines in Soho? People stand in line for 3 hours to get a freaking pastry! Those are not exactly working folk standing in line for a piece of bread. Why do they do that if not for that rare sense of accomplishment? Or have you tried to get into Momofuku Ko? You have to know a guy who knows a guy who can get you a reservation, but even then you won’t be able to find the freaking place. You’ll be going up and down the 1st avenue block trying to find the goddamn door. It makes for a good adversity story though. Going to Per Se or Daniel does not sound like much of an adventure. I guess in the end it’s not so much about the product as it is about the process.

That’s the cruel predicament that the 1% got themselves into. The well-off work hard to eliminate the chance, the spontaneity in their private lives and then spend enormous amounts of money trying to recreate it in a controlled environment. Nassim Taleb, the author of Black Swan and Antifragile, calls this kind of phenomenon “touristification”. Even their thrill seeking time will be planned and scheduled and will have a private guide. Even when you travel to, say, Cambodia, all you gonna end up doing is riding in an air-conditioned car, occasionally stopping in some indigent villages to take pseudo-National Geographic pictures of dirty barefoot kids. While tracking gorillas in Rwanda you’ll have an option to stay in the slums for a night and lend a helping hand to orphaned children. Or if you really want to immerse in the lives of destitute there is a new trend in luxury “shanty town” vacations. Options include a $26 tour of Cape Town where you can experience feces in plastic bags being thrown at you (without plastic bag is extra?). Think about stories you’ll be able to tell back at your desk and at cocktail parties! And yet, you’ll still feel restless.

There’s a cure for that restlessness. I hate to sound pious but you can become a better person for real. The only way to help the poor and the destitute is to stop doing what you’re doing. It’s not like you have to do it. Stop trying to devise new ways to extract value from the rubes. Stop charging public pension funds million dollar fees for some questionable services. Fuck HFT, fuck CDX IG! You are looking for excitements in all the wrong places: it’s a world of diminishing returns for as far as I can see. Take the money you already have and retire or find another line of work. Some are doing it already. Seriously. It’s unorthodox, I know. What’s that? Leaving the industry will prevent you from funding your philanthropic foundation that helps poor people? Perhaps when you stop fleecing people in the first place they won’t need your mercy after all. Stopping this bullshit is what really matters. Walking away from your line of work is the real adversity, the real-life adventure that you so desperately seek. Think of it as if you’re throwing the ring of power into the fires of Mordor.

I understand that for many it may be all too real. People have families, bills, lifestyles to maintain. One can’t just walk away from all of this unscathed. Oh, well. I guess that’s when it’s tough.

Growing Inequality Can’t Be Cured by Charity.

It’s very hard to make a connection between one man’s actions and the other man’s suffering due to those actions. For a hedge fund manager it’s difficult to link his actions to a suffering of a small town teacher. His thinking goes: I exploit market discrepancies, I make money and pay taxes, I donate to charity. He may even think: I am genuinely a nice guy and I really want to help. It’s hard to trace the root of the problems back to himself and his colleagues and industry peers. That would require the rethinking, perhaps painful and unwelcome, of his entire existential premise: is he as good for the society as he thinks he is? And if he’s honest with himself, he will realize that the answer is not necessarily yes.

I wrote recently about how hedge funds these days, rather than engage in honest betting on markets are instead seeking to extract value at the expense of the communities, bully others for value or simply seek rent opportunities. None of those activities produce anything of value; they strip value from the existing caches. Then they use various tax loopholes. And then they donate to charity, being under the illusion that it can cure social ills and because, you know, they are not monsters.

That’s the model we’ve had for some time.

But here comes the danger. In another illuminating Bloomberg article (Bloomberg columnists are really on a roll, finding their mojo recently), we’re risking societal breakdown if we continue on the present course. This sentiment has been widely explored on the pages of my blog, but this article summarizes my thoughts in a concise and trenchant manner. Over the course of history many societies have reached this point. Many got out of this rather unscathed, if they embarked on the policy of alleviating the social and economic discrepancies (New Deal), many others have experienced a more painful chain of events.

I want to stress, again and again, that helping the poor does not turn us into Commies and socialists. It merely helps smooth out such transitions, it is in the very interests of those hedge fund managers. Blaming the poor, the unemployed and food stamps recipients on the lack of alpha is disingenuous and counterproductive.

Magnetar’s Capital New Trade

At Policymic.

If it’s all about business, then, perhaps, Magnetar can halt its cheap displays of benevolence. A $25,000 donation by the property manager to staff one police officer at one of city’s schools would be a nice gesture if it weren’t accompanied by the attempt to strip the very same community of $1.39 million. If Magnetar really wants to repair its image from times past and to demonstrate its goodwill to the local community, there’s a great and easy way to do it: Pay property taxes and stop extracting value at the expense of the locals.

More on Charities.

Next time you’re about to make a donation to some charity read this article.

Carol Smith still gets angry when she remembers the box that arrived by mail for her dying husband.

Cancer Fund of America sent it when he was diagnosed with lung cancer six years ago. Smith had called the charity for help.

“It was filled with paper plates, cups, napkins and kids’ toys,” the 67-year-old Knoxville, Tenn., resident said. “My husband looked like somebody slapped him in the face.

“I just threw it in the trash.”

Just to follow up on my previous article on charities.

The Problem with Charity

There’s been a number of articles lately, exploring charitable impulses of the rich and powerful. There was one article describing people deliberately picking high-paying jobs so that he can give money to charity.

I think such people are self-deluded. Moreover, I think that modern day charities with its black-tie galas and names attached to the donated amounts are simply great tools for self-promotion. Felix Salmon has a similar idea about charities. In short, it’s all bullshit designed to make a giver feel important.

When I was several years into my career on Wall Street and when a certain career trajectory, routine and expectations have set in and certain goalposts have been achieved, I, as I’m sure many thinking, self-aware people at this stage, began to think what’s the point of all of this? Why am I doing what I’m doing and if this is all about money what would I do if I had enough in the bank to not have to work again? A thought of a passive retirement and a move to warmer climates was depressing and nauseating. One can’t just switch from combative and aggressive mental disposition – a Wall Street unspoken desideratum that takes years to nurture and develop – to a laid-back beach bum, hippie worldview. That kind of mental switch just doesn’t exist, not for Wall Street breed anyway. Ideally, I thought, it would be nice to open and run a charity with an asset-management arm. Charitable impulse is a natural evolution path for a seasoned and somewhat jaded and battle-weary Wall Street professional who would like to think of self as a progressive, benevolent and a good-hearted person deep inside. That’s what I thought of myself. However, a sober observation of industry and its business model would compel an honest and introspective person to question the “allocating assets and providing liquidity” rationalization, a popular line of defense among financial professionals justifying their existence to Main Street. This is where, for many, the urge to show the world one’s better side begins to kick in, and it is manifested in an attempt at making obscene amount of money now, so one can demonstrate his generosity and good nature later. I remember the mood on the street back in 2007: many felt something very ugly was coming and wanted to exploit the market to the fullest in order to set themselves up financially, just in case. The worse the things became, and even though I had the right trade on, the more I became burdened with the emptiness of the whole exercise, perhaps even the public damage, however small or indirect, of my actions. With the tools at my disposal (certain synthetic indices) I wasn’t “providing liquidity”, and I wasn’t helping businesses “raise capital”, I was merely placing a bet as one would in a casino with someone else’s money. Thoughts of future charity provided poor refuge: are the people whom I would potentially target with my benevolence – the disadvantaged kids, the poor girls in need of a scholarship, the hungry, the homeless – the very people I’m, however indirectly, fleecing now? Many on Wall Street could easily disassociate the two sides of the same coin – either by willful ignorance or a set of self-rationalizations or a mental block. I tried very hard to do that myself. For Christ sake, my entire career and by extension my entire personality was vested in this industry, the decade of long hours, wasted weekends, all-nighters, personal life structured around work, forgotten hobbies and interests – how could I not seek a justification for my sacrifices and hard work? But there came a point where I couldn’t convince myself anymore.

Those who successfully separate those two sides of the coin but still maintain and cultivate a hint of humanistic streak throw themselves into the charity circle. It is usual for people celebrated for their ruthlessness to want to show their kind and generous side at an opportune time. But let’s be honest: charities depend on whims and moods of the powerful and the powerful tend to be more interested in preserving their legacy by giving $100mln donations to business schools and art causes, than in sponsoring a soup kitchen or a homeless shelter. Those that need charity the most are simply not good at providing Kodak moment opportunity.

I don’t think I’m alone and I’m not the first in thinking about charity from this angle, but perhaps many don’t have much time to put further thought into it: why there are increasing number of people and causes that need charitable help? Why such misallocation of resources in the first place? Food for thought for the powerful and benevolent.