The 'New Californians': Young entrepreneurs take new approach to philanthropy

by John Gizzi
web posted September 6, 1999

The new economic engines are high-tech, bio-tech, software, multimedia, entertainment and the Internet," observed Washington Post writer William Booth in a recent profile of the modern California economy. "And the state is producing millionaires like avocados."

This is no exaggeration. Were California an independent nation, it would be the seventh largest economic power in the world, with a gross state product of $1 trillion. When one considers that only a decade ago, the Golden State was "first into the recession and the last to get out," as Booth puts it, it is obvious that a lot of Californians have become rich in the 1990s.

Can a case be made that California is the most generous state in the nation? In 1996, Californians claimed more charitable tax deductions — $10.9 billion — than their peers in any of the other 49 states. And the nation's largest state has long been home to a large number of high-dollar donors. Professional fundraisers agree that a visit to the West is often an early priority on their itinerary.

What is new, however, is the profile of the archetypal California donor.

"He or she is usually relatively young — say, fortyish — self-made, has made this fortune in a high-tech or entertainment-related area, and after years of working slavishly to reach this point, wants to give something back," says John Campbell, executive director of the Los Angeles-based Center for the Study of Popular Culture. Campbell has also raised funds for the National Tax Limitation Committee and term limits groups.

This community of "new Californians" is responding increasingly to charitable causes. The San Jose Mercury News reports that, since 1997, "a growing number of tech millionaires have started quietly creating new programs, writing more checks and establishing foundations. New leaders are stepping forward."

But how does this "new Californian" respond to fundraising pleas from nonprofit advocacy groups? Given the state's penchant for leftist trendsetting, we might expect more of the same from the new generation of millionaires.

Surprise: many of California's new donors are supporting charities that advocate smaller government, lower and reapportionment have caused consternation on the Right, Unz has won acclaim for his support of several successful statewide initiatives, including one that abolished race-based state hiring and contracting (1996) and another that outlawed mandatory bilingual education in public schools (1998).

"There's no question that the modern economic upturn in California has worked to the benefit of the groups that promote freedom — libertarian outlets, if you will," Unz says. "People have made an income in the free market, and at least some of them are willing to invest money in seeking ways to preserve it and expand it. And freedom is not a 'fringy' cause."

John Campbell agrees, characterizing the modern California donor as "someone who is politically moderate and generally a libertarian, less concerned about social issues such as abortion than market or economic issues."

This is evidenced by the organizations that have benefitted significantly from the wealth of California's entrepreneurs. These include the Pacific Research Institute in San Francisco, which is notably involved in school reform and children's issues; the Independent Institute in Oakland, which has an extensive market-oriented publishing program; the Sacramento-based Pacific Legal Foundation, a veteran public interest litigator on property rights issues; the southern California-based Claremont Institute, which emphasizes welfare reform and the overturn of racial preferences; and the Reason Foundation, which has the ear of Los Angeles Mayor Richard Riordan as well as the national audience of a monthly magazine, Reason. Of course, the Hoover Institution at Stanford University is the forefather of conservative think tanks and enjoys much support from California's entrepreneurs.

The Washington, D.C.-based Cato Institute and the Institute for Humane Studies (IHS) also benefit from their California origins. Cato was founded in San Francisco in 1977 and moved to Washington in 1981. A few years later, IHS moved to the Washington area from Menlo Park.

Who Are They?

A representative of the new Golden State donors is T.J. Rodgers, CEO of Cypress Semi-Conductors in Silicon Valley. Rodgers has written occasional articles on free-market issues for the Wall Street Journal and does not shy from the label "libertarian." Rodgers criticizes race and gender quotas in employment and favors a loosening of laws to permit more high-skilled immigrants to join the American workforce. He also supports term limits for elected officials.

Doug Wolf heads the California International Company in Los Angeles County and reportedly gave $100,000 to Cato to build its new headquarters.

Scott McNealy, president of Sun Microsystems, is another free marketeer and a free trade advocate. He was a faithful donor to Cato until, sources say, he parted company with the think tank over the federal government's antitrust suit against Microsoft, which he supports and Cato opposes.

Other names to watch among the young, prosperous Californians include Brad Freeman of the Freeman Spongli Group; James Parstel, who accumulated his estimated $198.9 million as a key player at Netscape until its recent merger with America Online; and Los Angeles "superlaw-yer" Gerald Parsky, a former top U.S. Treasury Department official during the Nixon administration who now heads the Aurora Corporation.

George Getty, heir to an oil fortune and patron of the arts, is different from most others on the Golden State list because his wealth is inherited. Recipients of Getty's philanthropy include the Cato Institute and term limits advocates. Like his legendary ancestor J. Paul Getty, Gordon Getty is reclusive and prefers to give anonymously. Remarking on a benefit Getty hosted at his home recently, one professional fundraiser remarked, "It wouldn't surprise me is he didn't show up for his own function."

Quiet Donors

Wild, McNealy, Rodgers and others cannot be dubbed "reclusive," but their names are not household words. They eschew the limelight, in part because they fear being "panhandled" en masse.

California's donors to free-market groups also tend to tip-toe in the state's minefield of "political correctness." To be known as a large donor to free-market causes can lead to harassment or social shunning. "I would bet that the Left out here in California would pay handsomely for profiles of those who are the most generous toward promoting the ideas they hate," says Larry Arnn, director of the Southern California-based Claremont Institute.

It is true that a few major California donors — including the late Henry Salvatori of Los Angeles, Howard F. Ahmanson of Orange County and John Walton of San Diego — make little secret of their views and their philanthropy. (See Foundation Watch, October 1998.) But it also must be noted that the younger Wilds, McNealys and Rodgers' are of a later generation and still actively manage businesses and accumulate wealth. This may explain their tendency to avoid the limelight.

Ron Unz of Palo Alto is one of the few 'new Californians" who is quite open about his ideology and philanthropy. But he is not certain that his peers' libertarianism is a long-term trend.

"I'll certainly agree that the booming economy here makes California a better place for causes," Unz says. "And certainly groups that specialize in freedom, such as Reason or Cato, have benefitted.

"My only question," Unz asks, "is just how conservative are some of these young entrepreneurs who are listed as major conservative donors? They certainly are socially liberal. But most of them were 'no-shows' on the key conservative initiatives I worked on — affirmative action and bilingual education. For the most part, the business community did not come through for measures which would help California business."

Unz even questions the causes that many of his peers do support.

"A number of the people considered high-tech entrepreneurs in the [Silicon] Valley are the same people who now want to lift the two-thirds requirement of the legislature to permit school districts to raise more money for public schools," Unz complains. "That's a tax increase."

Looking to the Future

To be sure, there is a dichotomy between entrepreneurial California's apparent desire to advance market freedom and its budding concern about "quality of life" issues. But three predictions can be made about the future of philanthropy in the state:

First, donations to charities and other nonprofits will continue to grow as the California economy continues to grow and creates more millionaires. Funds will pour into community foundations and local charities as well as certain public policy think tanks.

"There should be more giving," says Petero Hero, president of the Community Foundation of Silicon Valley. "We have a gold rush going on.... Mega-wealth is being created."

Second, public policy groups and bread-and-butter charities like United Way will have to justify their solicitations and better explain how their funds are spent and what the results are. "Accountability" is the word heard by staff at the Reason Foundation and the Cato Institute. They say their presentations to donors increasingly require charts and graphs showing just how donated funds are spent.

So it also is with the growing charities in Silicon Valley. The Center for Venture Philanthropy, a new collaborative that aims to raise $3 million over the next 18 months, will closely monitor the groups to which it donates.

"A lot of Silicon Valley business people want to see the return on investment," says Center director Welsch Gray. "They think of themselves as investors as much as donors.... They want to see results. They want to see the bar charts, and also want to hear about the person whose life was turned around."

Third, the work of the professional fundraiser will become more difficult as the passion for anonymity and quiet giving persists among up-and-coming California donors. Much as the California economy has changed dramatically in the past decade, so has the nature of philanthropy. The contrast will intensify between advocacy for freedom and concern about "quality of life" that often becomes an excuse for more government.

Overall, it seems a safe bet that fundraisers for free-market nonprofits will continue to accumulate frequent flier miles heading West. Whether social conservatives will find much support in California, however, depends on how the aging process affects the interests of the "new Californians."

The author is the Political Editor of Human Events. Printed with the kind permission of the Capitol Research Center.

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