Tag Archives: investment

How Mark Zuckerberg Should Give Away $45 Billion – The Huffington Post

It’s complicated.

Source: How Mark Zuckerberg Should Give Away $45 Billion – The Huffington Post

For a long time, the way philanthropy worked was simple: Rich people gave their money to museums and churches and opera houses and Harvard. Their names went up on buildings, charities gave them made-up awards, their grandkids went to rehab, the Earth went around the sun.

But philanthropy is changing. Today’s billionaires are less interested in legacy institutions, less obsessed with prestige and perpetuity. Part of this is a function of their age: In 2012, 4 percent of America’s biggest charitable donations were made by people under 50 years old. In 2014, a quarter of them were.

The other factor driving the new philanthropists is how they earned their money in the first place. Last year, six of the 10 largest charitable donations in the United States came from the tech sector, solidifying Silicon Valley’s place as the epicenter of the newer, bigger, disrupty-er philanthropy. There, tech billionaires form “giving circles” to share leads on promising charities, and they hire the same consultants to vet them. They use terms like “hacker philanthropy” and “effective altruism.” These guys—they are mostly guys—believe that they became successful businessmen by upending existing institutions, by scaling simple ideas, by “breaking shit.” And, with few exceptions, that is how they plan to become successful philanthropists, too.

All of this became much more relevant in December, when Mark Zuckerberg and his wife, Priscilla Chan, announced that they were giving 99 percent of their wealth to charity. The total amount they pledged, around $45 billion in Facebook shares at current valuation, exceeds the endowments of the Rockefeller, Ford and Carnegie foundations combined. If Zuckerberg gives away the upper limit of what he announced in December, $1 billion per year for the next three years, he will likely become the world’s second-largest charitable donor after Bill Gates. He is 31 years old.

Zuckerberg’s ability to remake the world in his own image, in his own lifetime, is unprecedented. Andrew Carnegie opened his first library when he was 68, and only managed to get around $5 billion in today’s dollars out the door before he died. John D. Rockefeller, generally considered the most generous industrialist in history, launched his foundation when he was 76, and only gave away around half his fortune. If he wanted to, Zuckerberg could eradicate polio, or de-neglect half a dozen tropical diseases, or fix all the water pipes in Flint, or give $9,000 to every single one of the world’s refugees.

But $45 billion, as a former Bill & Melinda Gates Foundation grantee put it, is “a 1,000-pound gorilla.” You don’t give away that much money without changing the places and institutions and people you give it to, sometimes for the worse.

[…]

the hard part about social change “is that it doesn’t scale like a social network.”

[…]

Nearly every social advance in history has technology somewhere near the center of it—the aqueduct, the steam train, the birth control pill. And whenever you start asking people about the life-altering potential of Mark Elliot Zuckerberg and the tech-based philanthropy he represents, the first words you’re likely to hear are “The Green Revolution.”

In 1975, nearly three out of five people in Asia lived on less than $1 a day. Rains at the wrong time of year meant the difference between starvation and survival. Then, researchers funded by the Ford and Rockefeller foundations created new crops—varieties that grew taller, needed less water and could be planted year-round. Over the next 30 years, this innovation radically improved the lives of hundreds of millions of people. Rice yields spiked by 1,000 percent. Wheat got cheaper, healthier and more abundant. Norman Borlaug, the scientist who developed the new wheat varieties, won the Nobel Prize.

[…]

“Technology,” Toyama says, “is the easiest part of any solution.” The hard part is everything that comes afterward. Take car crashes, which kill more people every year than tuberculosis or pulmonary disease. The technology to prevent these deaths—seat belts, motorcycle helmets—is not rocket science. It’s just that no one has figured out how to make it appeal to the people who need it, especially in the developing world, where 90 percent of these deaths occur.

[…]

he should acknowledge that the silver-bullet promise of technology only works at changing the world when it’s combined with political will and popular demand. Until he finds a way to engineer those (please don’t), he should focus on the small ways, at the margins, where technology can improve people’s lives, 8 percent at a time.

In 2001, the Gates Foundation gave PATH and the World Health Organization $70 million, 10 years and a simple objective: Develop a vaccine for meningitis A and make it affordable for every single person who needs it.

[…]

Marc LaForce headed the team in charge of bringing the vaccine to market. He says it wasn’t just the scale of the Gates donation that mattered, but its duration. In those days, most grants were capped at two or three years, with check-ins every six months. Years of work could be wiped away if a donor decided progress was moving too slowly and pulled out.
“If you want to do something major,” LaForce says, “you need the ability to go two steps forward, then one step back.”

Plus, the Gates team left LaForce alone. Back then, the foundation only employed about a dozen people who worked out of a small office in a residential neighborhood of Seattle. Staffers spent their time making lists of diseases, ranking them by annual fatalities, then calling around to find out which ones were closest to being cured.

“We didn’t need to be specialists,” says Gordon Perkin, the foundation’s first director of global health. “We just needed to know which organizations had the judgment and the infrastructure, and we gave them money.”

This story doesn’t just illustrate the potential of philanthropy. It also demonstrates that how Zuckerberg gives away his money will be just as important as what he gives it to. Because one way to look at his $45 billion is that it’s a lot of money. Another way to look at it is that it’s about what the United States spends on prisons every six months. Or education every four weeks. Or health care every five days. Even at a scale that large, efficiency matters.

[…]

The Gates Foundation, as it’s expanded to more than 1,300 employees, has become prone to the same bloat, the same “expert-itis,” as a former grantee calls it. “They hired Ph.D.s in biotech and all they wanted to do was the science that the grantees were doing.”

[…]

It’s hard to overstate just how un-Silicon Valley all of this is. “Money is sitting there to make the world a better place, and to dole it out cautiously is antithetical to why it’s there,” says Freada Kapor Klein, a partner at the Kapor Center for Social Impact, a foundation set up by Mitch Kapor, an early investor in Uber and other unicorns.

[…]

Zuckerberg shouldn’t be afraid to fail; he should approach philanthropy like a venture capitalist, testing out ideas to scale up later on. Bypassing legacy institutions is what Silicon Valley CEOs are good at, right? All those consultants must strike them as the charity equivalent of taxi medallions.

[…]

What Zuckerberg actually announced last December wasn’t a big fat donation to charity. All he did was establish a limited liability company (LLC) and issue a promise that he would use it for good. Much of the reaction at the time was suspicious, speculating that an LLC was a scheme for Zuckerberg to avoid taxes (which isn’t true) or that it would allow him to spend mountains of money without disclosing how he was doing so (which is).

But the corporate approach actually makes a lot of sense. Under the standard philanthropic model, billionaires set up a foundation and give it a huge endowment. Every year, the foundation has to give away at least 5 percent of its total value. Meanwhile, the other 95 percent gets invested in blue chip stocks, hedge funds, foreign currencies, whatever will keep the total endowment the same size. That’s how foundations like Rockefeller and Ford exist in perpetuity: Do-gooders work on one side of the building finding things to donate to, while bankers work on the other side, making sure there’s more to donate next year.

[…]

“This idea that philanthropy is only about nonprofits is an outdated model,” says Paula Goldman, a vice president at the Omidyar Network. Pierre Omidyar, the founder of eBay, was one of the most prominent tech billionaires to merge his investing and grant-making. The foundation still gives donations, but the LLC provides loans and seed capital and invests in things like solar-powered lighting startups, Brazilian test-prep companies and funds that discover Indian entrepreneurs.

Zuckerberg is going even further, giving up on a foundation entirely and putting all of his charity money in a corporate form with no limits on how to spend it. He’s not interested in making his money back. He just wants the flexibility to fund charities or companies or both. Which explains why one of Zuckerberg’s most recent donations wasn’t a donation at all. It was $10 million in seed capital for an education startup called Bridge International Academies, a chain of private elementary schools that wants to deliver education to the world’s poorest students.

[…]

The primary appeal of Bridge, especially to investors like Zuckerberg, is the $6 per month it says it charges its students. Operating as a business rather than a charity gives each school an incentive to deliver a decent education and ensures that it’s not going to wither away when development agencies or donors move on to the next idea.

[…]

It’s tempting to stop there, to say capitalism perverts philanthropy, full stop, and advise Zuckerberg to just go back and form a foundation. But that’s not right either. One of the most successful private-sector development projects of the last 10 years is M-PESA, the mobile-money system that allows people in Kenya to transfer money via their cell phones. Before the system launched, Kenyans sent money to each other by mail, or by giving envelopes full of cash to bus drivers. Replacing an inefficient, expensive system with a regularized one made everybody better off. That’s not as easy to argue, in the long run, about education.
So, when Zuckerberg hears pitches from companies seeking to solve the world’s problems, he shouldn’t ask them if they have a plan to grow, or an ambition to exist in perpetuity. He should ask himself whether he really wants them to replace the systems that already exist, or simply make them better. Because successful companies don’t just disrupt other companies—they disrupt economies, governments and the people who depend on them. That’s not something that Zuckerberg ever had to worry about, but he has to start.

In 2009, four grad students came up with an audacious idea: Instead of giving poor people the things we think they need—bags of food, stacks of clothing, a pair of goats—what if we gave them enough money to decide for themselves?
They called their charity GiveDirectly, and in 2011 they started doing exactly that. They went to villages in Kenya, found the poorest people living there and transferred $1,000 straight to their cell phones. Later, they came back to ask the villagers what they did with the money. Mostly, it turns out, the villagers spent it on better roofs, better food, paying off debts, starting up businesses. All the stuff the development system used to buy for them—but without any overhead.

[…]

In the end, though, Zuckerberg’s greatest impact might be in the model he sets for other philanthropists. The Giving Pledge, which encourages billionaires to donate the majority of their wealth to charity, has attracted more than 142 commitments totaling more than $400 billion. The Founders Pledge has convinced 151 startup executives—most of them look about 19—to devote a portion of their exits to philanthropy. Charitable giving in the United States has nearly quintupled since 1994, and shows no signs of reverting back to opera houses and Harvard.

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The Art-World Insider Who Went Too Far – The New Yorker

Yves Bouvier made hundreds of millions of dollars selling paintings. Was it fraud?

Source: The Art-World Insider Who Went Too Far – The New Yorker

The Geneva Freeport, which may be the world’s most valuable storage facility, consists of seven beige warehouses and a large grain silo in La Praille, an industrial zone a short tram ride from the city’s lakeside panorama of banks and expensive hotels. One recent morning, rain was falling on the chain-link fence that runs through the property, and snow was visible on the mountains to the south. Iris scanners, magnetic locks, and a security system known as Cerberus guard the freeport’s storerooms, whose contents are said to be insured for a hundred billion dollars, but the facility retains a blue-collar feel. There were signs to the showers. Men stood around in aprons and smoked. Everything about the place tells you to look the other way.

The freeport began, in 1888, as a group of sheds near the waterfront. It was one of countless similar spaces around the world, where customs authorities allow duties and taxes to be suspended until goods reach their final destination. In time, however, the Geneva Freeport became legendary. It grew very large, and its official status—the freeport is eighty-six per cent owned by the local government—and kinship with the opaque traditions of Swiss banking made it a storage facility for the international élite. Under the freeport’s rules, objects could remain in untaxed limbo, in theory, forever. Treasures came and they did not leave. A generation ago, these goods were cars, wine, and gold. More recently, they have been works of art.

Yves Bouvier was among the first to see the potential of the freeport as an adjunct to the art market. A blond, compact man of fifty-two, Bouvier is the owner of Natural Le Coultre, a moving and storage company and the largest tenant in the complex. For more than a hundred years, the firm shipped everything from citrus fruit to industrial machinery; during the First World War, Natural Le Coultre supplied prisoners of war with Red Cross food parcels. Since 1997, however, when Bouvier took over the firm from his father, it has handled only paintings and sculpture. Bouvier refurbished the company’s premises at the freeport, which include two showrooms, and encouraged a framer to open a workshop in the building. Since 2013, Natural Le Coultre has rented more than twenty thousand square metres in storage space and has had well over a million objects in its care.

Every item passes through a single packing room, where it is unwrapped, photographed, and studied for damage. On the morning I visited, a Bob Dylan painting had arrived, along with a Picasso bronze from Greece. There were hammers hanging in order of size, and a stack of crates containing works by Léon Pourtau, a minor Impressionist. Ramon Casais, who has worked in the freeport for the past thirty years, agreed to show me a corridor of locked storeroom doors only after he had gone ahead to make sure there was absolutely nothing to see.

Specialist logistics companies, like Natural Le Coultre, are the quiet butlers of the art world. They operate deep inside it but are not quite of it. When an artist has made a sculpture out of butter, or scalpels, or half a passenger jet, it is up to a shipper to get it from Hong Kong to Miami in the same condition as when it left, and to make no fuss. To do their work, shippers must know many things. They are given records of private sales and the names of collectors, in order to navigate customs. In the course of a typical day, stopping by the homes of dealers and the back rooms of galleries, they learn who answers the door and the phone number of the assistant, and see the other pictures on the walls. The shippers’ professional indifference means that they are often in the room at moments of extreme commercial sensitivity. “Imagine that I am in Basel and I need to show a client a painting,” Thomas Seydoux, a dealer and a former chairman of Impressionist and modern art at Christie’s, told me. “Ninety-nine per cent of the time, you are going to show it with a transit agent.”

This intimacy means that, once you find your shipper, you tend to stick with him. Relationships last for decades, built on trust and a sense, usually unspoken, of absolute limits. In sixteenth-century Venice, diplomats were instructed to employ illiterate valets, who would be unable to read any secret documents they were asked to carry. A transit agent “should by default be a blind man,” Seydoux told me. “That is the very nature of his job.” Everything works fine, as long as people stay within their allotted roles. Seydoux said, “You can’t win somebody’s trust by saying you are blind and then open your eyes.”

[…]

Bouvier speaks an imperfect, gestural English, but he explained that becoming a shipper allowed him to immerse himself in “the feeling and the difficulty of art.” He had no formal training, just what passed through his hands. “It started with the touch,” he said. “You have all the panoply: small, huge, it’s with value, with no value. You have everything, so you learn.”

Shipping also introduced Bouvier to the complicated lives of the rich—their taxes and their divorces—and the other ancillary trades that help the art world go around: restorers, framers, hired experts, operators of tiny galleries in Paris clinging on from sale to sale. He realized they all had needs of their own.

[…]

Bouvier financed purchases that dealers couldn’t afford on their own. He sorted out cash flow and bills. He became adept at setting up offshore companies—Diva, Blancaflor, Eagle Overseas—to enable galleries to buy specific works and mask the identity of other investors in a transaction.

[…]

“When you buy, it is always to sell,” he said. “You always have the buyer before you have the seller.” On August 16, 2000, he bought a Paul Gauguin landscape, “Paysage aux Trois Arbres,” from Peintures Hermès, a Swiss gallery associated with the Wildenstein family of art dealers, for $9.5 million. Two weeks later, he sold the picture to Mandarin Trading, a Bahamas-based art fund, for $11.3 million, making a profit of sixteen per cent. Mandarin Trading later sued the Wildensteins for fraud, alleging that it was the victim of a scam to inflate the value of the painting. The case was dismissed in 2011. I once asked Bouvier what drew him to particular propositions. “In the mountains, it was the same,” he replied. “I go in the place which is the most complicated, the most risky place.”

[…]

Building a collection involves a thousand small, complex tasks: storage, shipping, condition reports, restoration, making copies, framing, due diligence, insurance. For these services, Bouvier would charge an extra two per cent of the purchase price of any painting he sold them.

[…]

Major buyers typically build collections through several dealers and auction houses, knowing that they will be charged the maximum the market can bear. To protect their interests, many also employ an art adviser or consultant, who works for them and is paid a retainer or a commission—in the region of five per cent—on the works that they acquire. Very rarely are all these roles performed by one person.

[…]

The relationship between art dealer and collector is particular and charged. The dealer is mentor and salesman. He informs his client’s desires while subjecting himself to them at the same time. The collector has money, but he is also vulnerable. Relationships start, prosper, and fail for any number of reasons. It is not always obvious where power lies. Over time, each one can convince himself that he has created the other.

[…]

Access to the oligarch was strictly controlled. “Besides his lawyer and his hairdresser, I don’t think he sees normal people at all,” Rappo once told me.

[…]

Hidden behind company names and, often, dealers working on his behalf, he tended to disguise his role in transactions. “To be invisible is the best way to make business,” he said.

[…]

The income from his dealing enabled Bouvier to expand his storage facilities. For several years, he had been looking to build a freeport outside Europe similar to the one in Geneva. In 2005, he settled on Singapore. In 2008, Bouvier decided to base himself in the country as well. The Singapore Freeport, which required new legislation to be passed by the national parliament, opened in 2010. Bouvier put Tony Reynard, his childhood friend, in charge. The freeport, which abuts the city’s international airport, is an over-engineered hybrid of vault and temple. It cost Bouvier a hundred million dollars to build. At first, no bank would finance it. “They thought we were loonies,” Reynard said.

A freeport offers few tax advantages and scarcely any security features that a standard bonded warehouse cannot provide. But Bouvier’s development in Singapore carried within it two ideas. The first is that freeports will become hubs in the sixty-billion-dollar international art market, destinations in themselves—places for scholars, restorers, insurers, art-finance specialists, consultants, and dealers. The second idea is that the ultra-rich don’t want just another warehouse. “If you buy a painting for a hundred million, what do you want? You want to feel well,” Bouvier said. “Why else do people travel in first class?”

In Singapore, Bouvier specified each component, from the fire-resistant walls, coiled through with steel, to the height of the doors: three metres, to admit the largest contemporary installations. “I chose everything,” he said. “The door handles. I’m obsessive about that.” He used a lighting artist named Johanna Grawunder, whose work he collects, and commissioned an enormous sculpture, “La Cage sans Frontières,” by the Israeli artist and designer Ron Arad, to stand in the atrium.

The opening of the Singapore Freeport, and its immediate success—Christie’s took a space—brought Bouvier international attention. The facilities tapped into a fascination with the tastes and financial shenanigans of the one per cent. Bouvier opened a second, slightly smaller freeport in Luxembourg, in September, 2014, and The Economist noted his role in the development of “Über warehouses for the ultra-rich.” He made plans to replicate the model in Dubai and to act as a consultant for a vast new project in Beijing.

[…]

He bought a Gauguin that had not been sold since the Second World War and a lost Leonardo da Vinci, “Salvator Mundi,” that had been sensationally rediscovered. On its display at the National Gallery in London, the da Vinci became one of the most talked-about pictures in the world. According to Rappo, Rybolovlev wanted it for the wall of his study. Bouvier brought the painting to the Russian’s apartment in New York, where, Rybolovlev told me, he experienced a profound emotional reaction—“a vibration”—in its presence. He bought the picture for $127.5 million.

[…]

ery transaction at the top end of the private art market involves a chain, a cast of characters that stretches from the buyer to the seller: finders, agents, lawyers, lenders. It is rare for the principals to know everyone involved, and it can be improper to ask. Bouvier was a master at making chains—short, long, simple, or twisted, depending on the deal. If he knew that a seller would prefer an approach from an auction house, he would send someone, usually from Sotheby’s. Otherwise, Bouvier would send an intermediary. Often this was a Corsican named Jean-Marc Peretti, who was investigated for running an illegal gambling circle in Paris in 2009. Bouvier is attracted to outsiders in the art world. “The best people are just good businesspeople—they are butchers,” he said.

[…]

Bouvier told me that such blurring of who exactly owns what, and when a transaction occurred, is commonplace in the art market. When you walk into a gallery, you never know what the dealer is selling on consignment, what he owns outright, or how prices have been arrived at. “It is not lying,” he said. “There is always a part of the story which is true.” But Bouvier was ruthless in exploiting what was left unsaid. “Joueur de Flûte et Femme Nue,” which Bouvier sold to Rybolovlev for twenty-five million euros, he had bought the day before for just three and a half million. He made a sixty-million-dollar profit on the Klimt.

[…]

In the early nineteen-fifties, Rothko began experimenting with powdered pigments, solvents, and egg to lend extra force to the colors in his canvases. He wanted viewers of his pictures to feel as if they were inside them. When Bouvier drew back the curtains, the painting seemed to explode in front of his eyes.

[…]

Around this time, I spent a day at the Luxembourg Freeport. The building is made of sixty-five hundred tons of concrete. Heavy doors are locked with six-digit codes.

[…]

As he spoke, Bouvier kept four Nokias and a BlackBerry within reach at all times. When one of them rang, he would turn it over, to see which realm of his dealings the inquiry was coming from. He reminded me, in a not entirely unlikable way, of an animal busy in carrion, like a jackal.

Geneva’s art storage boom in uncertain times – BBC News

It may contain 300 Picassos but few have ever explored the riches in the Geneva free port art storage site, the BBC’s Imogen Foulkes reports.

Source: Geneva’s art storage boom in uncertain times – BBC News

The art boom has led to good times for institutions known as “free ports”: bonded warehouses in which all sorts of commodities, from grain, to gold, to fine art, can be stored, and remain, while they are in storage, exempt from tax and customs duties.
The Geneva free port is, from the exterior, a rather unimpressive warehouse in an industrial area of the city.
Inside, it is said to house the largest collection of fine art anywhere in the world, although it is hard to find out exactly what is in there, as both the port’s management and local customs officials refuse to divulge any information.

[…]

“I was led to a storage place where paintings were stored,” he explained, “and I had to go through Picasso works, so I was brought down in the morning and they locked me into the safe.
“At lunchtime I had to ring for them to take me out of the vaults. It was quite a strange environment because I was alone and I was surrounded by so many valuable artworks.”
It is estimated there are at least 300 works by Picasso alone stored at the free port, many belonging to the reclusive Nahmad family, who have been buying and trading art as an investment for half a century.

[…]

One Nahmad family member has been quoted as saying that “Monet and Picasso are like Microsoft or Coca Cola”, meaning that they are likely to be safe investments for a long time to come.

[…]

“We see art actually as a very good investment,” he said. “It’s a great way to diversify your portfolio, a good hedge against inflation. There are many reasons to consider art now as an investment.”

[…]

Still, the current boom in art means free ports are booming too. Geneva is building a 10,000 sq m (108,000 sq ft) extension, due to open next year, and new free ports are springing up in Luxembourg, and in Singapore.
But, said Jean-Rene Saillard, Geneva remains the oldest, the biggest, and the one with the most art.
“It would be probably the best museum in the world if it was a museum,” he added.

Why New York Real Estate Is the New Swiss Bank Account — New York Magazine

Why New York Real Estate Is the New Swiss Bank Account — New York Magazine.

“The global elite,” says developer Michael Stern, “is basically looking for a safe-deposit box.”

[…]

The influx of global wealth is most visible on the ultrahigh end, as Stern and other builders are erecting spiraling condo towers and sales records are regularly shattered by foreign billionaires, like the Russian fertilizer oligarch Dmitry Rybolovlev, purchaser of the most expensive condo in Manhattan’s history ($88 million), and Egyptian construction magnate Nassef Sawiris, who recently set the record for a co-op ($70 million). But much of the foreign money is coming in at lower price points, closer to the median for a Manhattan condo ($1.3 million and rising). In fact, if you’ve recently been outdone by an outrageous all-cash bid for an apartment, there’s a decent chance that, behind a generic corporate name, there’s a foreign buyer and an offshore bank account.

[…]

The Census Bureau estimates that 30 percent of all apartments in the quadrant from 49th to 70th Streets between Fifth and Park are vacant at least ten months a year.

To cater to the tastes of their transient residents, developers are designing their projects with features like hotel-style services. And the new economy has spawned new service businesses, like XL Real Property Management, which takes care of all the niggling details—repairs, insurance, condo fees—for absentee buyers.

[…]

Even those with less reflexively hostile reactions to foreign buying competition might still wonder: Who are these people? An entire industry of brokers, lawyers, and tight-lipped advisers exists largely to keep anyone from discovering the answer. This is because, while New York real estate has significant drawbacks as an asset—it’s illiquid and costly to manage—it has a major selling point in its relative opacity. With a little creative corporate structuring, the ownership of a New York property can be made as untraceable as a numbered bank account. And that makes the city an island haven for those who want to stash cash in an increasingly monitored global financial system. “With everything that is going on in Switzerland in terms of transparency, people are being forced to pay taxes on their capital that they used to hold there,” says Rodrigo Nino, the president of the Prodigy Network. “Real estate is a great alternative.”

[…]

“Real estate is a wonderful way to cleanse money. Once you buy real estate, the derivation of that cash is forgotten.”

[…]

Every year, the British real-estate brokerage Knight Frank publishes a document called “The Wealth Report.” The latest edition produces the curiously precise estimate that there are 167,669 individuals in the world who are “ultrahigh net worth,” with assets exceeding $30 million. “Of course, the big question is: are the rich getting richer?” the report asks. It answers gleefully in the affirmative, forecasting that over the next decade, the ranks of the ultrarich will increase by 30 percent, with much of the growth coming in Asia and Africa.

This new global wealth is being lavished on the usual status items—planes, yachts, contemporary art—but Knight Frank is pleased to report that the rich favor real estate most of all. Real estate can serve as a convenient pied-à-terre, an investment hedge against a wobbly home currency, or an insurance policy—a literal refuge if things go bad. Other financial centers boast a similar mix of glamour and apparent security—Knight Frank’s list of the top-ten “global cities” includes London, Paris, Geneva, and Dubai—but New York is forecast to add more ultrahigh-net-worth individuals than any city outside Asia over the next decade.

[…]

As expensive as New York’s luxury real estate might seem, it’s a bargain compared to other global capitals; a million dollars will buy twice as much space here as it does in Monaco or Hong Kong. New York is perceived to be more stable than Miami, Shanghai, and Beijing. It is much cheaper than London, where tabloid-fanned outrage over property prices has created an uncomfortable political climate and various new or proposed taxes are aimed at foreign investors and offshore entities. In New York, by contrast, buyers of new construction often qualify for a tax abatement.

[…]

The first rule of selling property to the ultrarich is that you can’t try to sell them property—you offer them status, or a lifestyle, or a unique place in the sky. A marketing video for 432 Park Avenue, scored to “Dream a Little Dream,” features a private jet, Modigliani statuary, and Harry Macklowe himself costumed as King Kong. One recent morning, at the development’s sales office in the GM Building, Wallgren led me down a hallway lined with vintage New York photographs, through a ten-by-ten-foot frame meant to illustrate the building’s enormous window size, to a scale model of Manhattan.

“If you bend down like this,” Wallgren said, stooping to street level, “you can really appreciate the height of it.”

[…]

“Rich people come to the U.S., and these people are busy,” he said. “What is, for these people, very important? I am asking you! To save the time.” Perepada doesn’t drag his clients to a bunch of open houses. He takes them to Jean Georges, gets them hockey or Broadway tickets, rents helicopters or horse carriages, sets them up with plastic surgeons. He says that by building a rapport, he is able to sell 80 percent of his properties with a simple phone call.

[…]

“Did you see The Wolf of Wall Street?” Perepada asked as we drove. “I love this movie. You see how he works? Amazing. ‘If you trust me, you have to buy. If you don’t trust me, you need to work with someone else.’ This is my regulation: Trust me, take it.”

[…]

Jajan believes the most important service he offers is reassurance. “The client wants an adviser here; he wants to feel comfortable knowing he has someone he can trust here in the United States.” Jajan’s firm offers a range of management functions. “We recently purchased a vacuum cleaner,” he told me. “It was for one of our high-net-worth clients that bought $15 million worth of property this year. We’re not about to say, ‘We don’t do that, we’re lawyers.’ ”

[…]

An anonymous high-net-worth client of Credit Suisse, who spoke to U.S. Senate investigators after taking advantage of an amnesty for tax cheats, described the process by which he would manage his funds when visiting Zurich. A remote-controlled elevator would take him to a bare meeting room where he and his private banker would discuss his money; all printed account statements would be destroyed after the visit.

The theatrical secrecy is designed to build personal trust between such bankers and their clients, which is especially vital when the goal of the transactions is to conceal assets from the prying eyes of rivals, vengeful spouses, or tax collectors. Moving the money itself is a relatively simple matter: A wire or a suitcase can convey cash from China to Singapore, or from Russia to an EU member state like Latvia, and once the funds have made it to a “white list” country, they can usually move onward without triggering alarms. Concealing the true ownership of a property or a bank account is trickier. That’s where the private bankers, wealth advisers, and lawyers earn their exorbitant fees.

Behind a New York City deed, there may be a Delaware LLC, which may be managed by a shell company in the British Virgin Islands, which may be owned by a trust in the Isle of Man, which may have a bank account in Liechtenstein managed by the private banker in Geneva. The true owner behind the structure might be known only to the banker. “It will be in some file, but not necessarily a computer file,” says Markus Meinzer, a senior analyst at the nonprofit Tax Justice Network. “It could be a black book.” If an investor wants to sell the property, he doesn’t have to transfer the deed—an act that would create a public paper trail. He can just shift ownership of the holding company.

Recently, scrutiny from the United States has punctured some of the traditional secrecy of Swiss banks. But that has just pushed clients to boutique advisory firms, often run by the same personnel. “Banks like working with those firms,” Meinzer says, “because they are then legally in the clear, without the risk of going to prison.” As international blacklisting has pushed some offshore locales toward greater legal compliance, new havens have arisen. New Zealand trusts offer similar secrecy to those of the Caymans, without the stigma.

It’s a sophisticated, well-oiled system that rarely requires crude subterfuge. Though U.S. authorities track all transfers over $10,000, a wire into a real-estate lawyer’s escrow account should look perfectly routine. “A lot of times, I don’t even know where my clients are from,” says the lawyer Bruce Cohen. “But I know that certain countries are very careful about the money that leaves their country.”

[…]

The best—though still fuzzy—global estimates say as much as $1.5 trillion in criminal proceeds is laundered each year. The United Nations figures that as little as one-fifth of one percent of that is ever recovered.

 

In Praise of Idleness By Bertrand Russell

In Praise of Idleness By Bertrand Russell.

I think that there is far too much work done in the world, that immense harm is caused by the belief that work is virtuous, and that what needs to be preached in modern industrial countries is quite different from what always has been preached. Everyone knows the story of the traveler in Naples who saw twelve beggars lying in the sun (it was before the days of Mussolini), and offered a lira to the laziest of them. Eleven of them jumped up to claim it, so he gave it to the twelfth. this traveler was on the right lines.

[…]

Whenever a person who already has enough to live on proposes to engage in some everyday kind of job, such as school-teaching or typing, he or she is told that such conduct takes the bread out of other people’s mouths, and is therefore wicked. If this argument were valid, it would only be necessary for us all to be idle in order that we should all have our mouths full of bread. What people who say such things forget is that what a man earns he usually spends, and in spending he gives employment. As long as a man spends his income, he puts just as much bread into people’s mouths in spending as he takes out of other people’s mouths in earning. The real villain, from this point of view, is the man who saves. If he merely puts his savings in a stocking, like the proverbial French peasant, it is obvious that they do not give employment.

[…]

In view of the fact that the bulk of the public expenditure of most civilized Governments consists in payment for past wars or preparation for future wars, the man who lends his money to a Government is in the same position as the bad men in Shakespeare who hire murderers. The net result of the man’s economical habits is to increase the armed forces of the State to which he lends his savings. Obviously it would be better if he spent the money, even if he spent it in drink or gambling.

But, I shall be told, the case is quite different when savings are invested in industrial enterprises. When such enterprises succeed, and produce something useful, this may be conceded. In these days, however, no one will deny that most enterprises fail. That means that a large amount of human labor, which might have been devoted to producing something that could be enjoyed, was expended on producing machines which, when produced, lay idle and did no good to anyone. The man who invests his savings in a concern that goes bankrupt is therefore injuring others as well as himself. If he spent his money, say, in giving parties for his friends, they (we may hope) would get pleasure, and so would all those upon whom he spent money, such as the butcher, the baker, and the bootlegger. But if he spends it (let us say) upon laying down rails for surface card in some place where surface cars turn out not to be wanted, he has diverted a mass of labor into channels where it gives pleasure to no one. Nevertheless, when he becomes poor through failure of his investment he will be regarded as a victim of undeserved misfortune, whereas the gay spendthrift, who has spent his money philanthropically, will be despised as a fool and a frivolous person.

[…]

I want to say, in all seriousness, that a great deal of harm is being done in the modern world by belief in the virtuousness of work, and that the road to happiness and prosperity lies in an organized diminution of work.

First of all: what is work? Work is of two kinds: first, altering the position of matter at or near the earth’s surface relatively to other such matter; second, telling other people to do so. The first kind is unpleasant and ill paid; the second is pleasant and highly paid. The second kind is capable of indefinite extension: there are not only those who give orders, but those who give advice as to what orders should be given. Usually two opposite kinds of advice are given simultaneously by two organized bodies of men; this is called politics. The skill required for this kind of work is not knowledge of the subjects as to which advice is given, but knowledge of the art of persuasive speaking and writing, i.e. of advertising.

[…]

Modern technique has made it possible for leisure, within limits, to be not the prerogative of small privileged classes, but a right evenly distributed throughout the community. The morality of work is the morality of slaves, and the modern world has no need of slavery.

[…]

To this day, 99 per cent of British wage-earners would be genuinely shocked if it were proposed that the King should not have a larger income than a working man. The conception of duty, speaking historically, has been a means used by the holders of power to induce others to live for the interests of their masters rather than for their own. Of course the holders of power conceal this fact from themselves by managing to believe that their interests are identical with the larger interests of humanity. Sometimes this is true; Athenian slave-owners, for instance, employed part of their leisure in making a permanent contribution to civilization which would have been impossible under a just economic system. Leisure is essential to civilization, and in former times leisure for the few was only rendered possible by the labors of the many. But their labors were valuable, not because work is good, but because leisure is good. And with modern technique it would be possible to distribute leisure justly without injury to civilization.

[…]

The war showed conclusively that, by the scientific organization of production, it is possible to keep modern populations in fair comfort on a small part of the working capacity of the modern world. If, at the end of the war, the scientific organization, which had been created in order to liberate men for fighting and munition work, had been preserved, and the hours of the week had been cut down to four, all would have been well. Instead of that the old chaos was restored, those whose work was demanded were made to work long hours, and the rest were left to starve as unemployed. Why? Because work is a duty, and a man should not receive wages in proportion to what he has produced, but in proportion to his virtue as exemplified by his industry.

This is the morality of the Slave State, applied in circumstances totally unlike those in which it arose. No wonder the result has been disastrous. Let us take an illustration. Suppose that, at a given moment, a certain number of people are engaged in the manufacture of pins. They make as many pins as the world needs, working (say) eight hours a day. Someone makes an invention by which the same number of men can make twice as many pins: pins are already so cheap that hardly any more will be bought at a lower price. In a sensible world, everybody concerned in the manufacturing of pins would take to working four hours instead of eight, and everything else would go on as before. But in the actual world this would be thought demoralizing. The men still work eight hours, there are too many pins, some employers go bankrupt, and half the men previously concerned in making pins are thrown out of work. There is, in the end, just as much leisure as on the other plan, but half the men are totally idle while half are still overworked. In this way, it is insured that the unavoidable leisure shall cause misery all round instead of being a universal source of happiness. Can anything more insane be imagined?

The idea that the poor should have leisure has always been shocking to the rich. In England, in the early nineteenth century, fifteen hours was the ordinary day’s work for a man; children sometimes did as much, and very commonly did twelve hours a day. When meddlesome busybodies suggested that perhaps these hours were rather long, they were told that work kept adults from drink and children from mischief. When I was a child, shortly after urban working men had acquired the vote, certain public holidays were established by law, to the great indignation of the upper classes. I remember hearing an old Duchess say: ‘What do the poor want with holidays? They ought to work.’ People nowadays are less frank, but the sentiment persists, and is the source of much of our economic confusion.

[…]

If the ordinary wage-earner worked four hours a day, there would be enough for everybody and no unemployment — assuming a certain very moderate amount of sensible organization. This idea shocks the well-to-do, because they are convinced that the poor would not know how to use so much leisure. In America men often work long hours even when they are well off; such men, naturally, are indignant at the idea of leisure for wage-earners, except as the grim punishment of unemployment; in fact, they dislike leisure even for their sons. Oddly enough, while they wish their sons to work so hard as to have no time to be civilized, they do not mind their wives and daughters having no work at all. the snobbish admiration of uselessness, which, in an aristocratic society, extends to both sexes, is, under a plutocracy, confined to women; this, however, does not make it any more in agreement with common sense.

[…]

Industry, sobriety, willingness to work long hours for distant advantages, even submissiveness to authority, all these reappear; moreover authority still represents the will of the Ruler of the Universe, Who, however, is now called by a new name, Dialectical Materialism.

[…]

For ages, men had conceded the superior saintliness of women, and had consoled women for their inferiority by maintaining that saintliness is more desirable than power. At last the feminists decided that they would have both, since the pioneers among them believed all that the men had told them about the desirability of virtue, but not what they had told them about the worthlessness of political power. A similar thing has happened in Russia as regards manual work. For ages, the rich and their sycophants have written in praise of ‘honest toil’, have praised the simple life, have professed a religion which teaches that the poor are much more likely to go to heaven than the rich, and in general have tried to make manual workers believe that there is some special nobility about altering the position of matter in space, just as men tried to make women believe that they derived some special nobility from their sexual enslavement.

[…]

A large country, full of natural resources, awaits development, and has has to be developed with very little use of credit. In these circumstances, hard work is necessary, and is likely to bring a great reward. But what will happen when the point has been reached where everybody could be comfortable without working long hours?

In the West, we have various ways of dealing with this problem. We have no attempt at economic justice, so that a large proportion of the total produce goes to a small minority of the population, many of whom do no work at all. Owing to the absence of any central control over production, we produce hosts of things that are not wanted. We keep a large percentage of the working population idle, because we can dispense with their labor by making the others overwork. When all these methods prove inadequate, we have a war: we cause a number of people to manufacture high explosives, and a number of others to explode them, as if we were children who had just discovered fireworks. By a combination of all these devices we manage, though with difficulty, to keep alive the notion that a great deal of severe manual work must be the lot of the average man.

[…]

The fact is that moving matter about, while a certain amount of it is necessary to our existence, is emphatically not one of the ends of human life. If it were, we should have to consider every navvy superior to Shakespeare. We have been misled in this matter by two causes. One is the necessity of keeping the poor contented, which has led the rich, for thousands of years, to preach the dignity of labor, while taking care themselves to remain undignified in this respect. The other is the new pleasure in mechanism, which makes us delight in the astonishingly clever changes that we can produce on the earth’s surface. Neither of these motives makes any great appeal to the actual worker. If you ask him what he thinks the best part of his life, he is not likely to say: ‘I enjoy manual work because it makes me feel that I am fulfilling man’s noblest task, and because I like to think how much man can transform his planet. It is true that my body demands periods of rest, which I have to fill in as best I may, but I am never so happy as when the morning comes and I can return to the toil from which my contentment springs.’ I have never heard working men say this sort of thing. They consider work, as it should be considered, a necessary means to a livelihood, and it is from their leisure that they derive whatever happiness they may enjoy.

It will be said that, while a little leisure is pleasant, men would not know how to fill their days if they had only four hours of work out of the twenty-four. In so far as this is true in the modern world, it is a condemnation of our civilization; it would not have been true at any earlier period. There was formerly a capacity for light-heartedness and play which has been to some extent inhibited by the cult of efficiency. The modern man thinks that everything ought to be done for the sake of something else, and never for its own sake. Serious-minded persons, for example, are continually condemning the habit of going to the cinema, and telling us that it leads the young into crime.

[…]

The butcher who provides you with meat and the baker who provides you with bread are praiseworthy, because they are making money; but when you enjoy the food they have provided, you are merely frivolous, unless you eat only to get strength for your work. Broadly speaking, it is held that getting money is good and spending money is bad. Seeing that they are two sides of one transaction, this is absurd; one might as well maintain that keys are good, but keyholes are bad. Whatever merit there may be in the production of goods must be entirely derivative from the advantage to be obtained by consuming them. The individual, in our society, works for profit; but the social purpose of his work lies in the consumption of what he produces. It is this divorce between the individual and the social purpose of production that makes it so difficult for men to think clearly in a world in which profit-making is the incentive to industry. We think too much of production, and too little of consumption. One result is that we attach too little importance to enjoyment and simple happiness, and that we do not judge production by the pleasure that it gives to the consumer.

When I suggest that working hours should be reduced to four, I am not meaning to imply that all the remaining time should necessarily be spent in pure frivolity. I mean that four hours’ work a day should entitle a man to the necessities and elementary comforts of life, and that the rest of his time should be his to use as he might see fit. It is an essential part of any such social system that education should be carried further than it usually is at present, and should aim, in part, at providing tastes which would enable a man to use leisure intelligently. I am not thinking mainly of the sort of things that would be considered ‘highbrow’.

[…]

The pleasures of urban populations have become mainly passive: seeing cinemas, watching football matches, listening to the radio, and so on. This results from the fact that their active energies are fully taken up with work; if they had more leisure, they would again enjoy pleasures in which they took an active part.

In the past, there was a small leisure class and a larger working class. The leisure class enjoyed advantages for which there was no basis in social justice; this necessarily made it oppressive, limited its sympathies, and caused it to invent theories by which to justify its privileges. These facts greatly diminished its excellence, but in spite of this drawback it contributed nearly the whole of what we call civilization. It cultivated the arts and discovered the sciences; it wrote the books, invented the philosophies, and refined social relations. Even the liberation of the oppressed has usually been inaugurated from above. Without the leisure class, mankind would never have emerged from barbarism.

The method of a leisure class without duties was, however, extraordinarily wasteful. None of the members of the class had to be taught to be industrious, and the class as a whole was not exceptionally intelligent. The class might produce one Darwin, but against him had to be set tens of thousands of country gentlemen who never thought of anything more intelligent than fox-hunting and punishing poachers. At present, the universities are supposed to provide, in a more systematic way, what the leisure class provided accidentally and as a by-product. This is a great improvement, but it has certain drawbacks. University life is so different from life in the world at large that men who live in academic milieu tend to be unaware of the preoccupations and problems of ordinary men and women; moreover their ways of expressing themselves are usually such as to rob their opinions of the influence that they ought to have upon the general public. Another disadvantage is that in universities studies are organized, and the man who thinks of some original line of research is likely to be discouraged. Academic institutions, therefore, useful as they are, are not adequate guardians of the interests of civilization in a world where everyone outside their walls is too busy for unutilitarian pursuits.

In a world where no one is compelled to work more than four hours a day, every person possessed of scientific curiosity will be able to indulge it, and every painter will be able to paint without starving, however excellent his pictures may be. Young writers will not be obliged to draw attention to themselves by sensational pot-boilers, with a view to acquiring the economic independence needed for monumental works, for which, when the time at last comes, they will have lost the taste and capacity. Men who, in their professional work, have become interested in some phase of economics or government, will be able to develop their ideas without the academic detachment that makes the work of university economists often seem lacking in reality. Medical men will have the time to learn about the progress of medicine, teachers will not be exasperatedly struggling to teach by routine methods things which they learnt in their youth, which may, in the interval, have been proved to be untrue.

[…]

Good nature is, of all moral qualities, the one that the world needs most, and good nature is the result of ease and security, not of a life of arduous struggle. Modern methods of production have given us the possibility of ease and security for all; we have chosen, instead, to have overwork for some and starvation for others. Hitherto we have continued to be as energetic as we were before there were machines; in this we have been foolish, but there is no reason to go on being foolish forever.