The Wealth Wallahs

by Shreyasi Singh

  The International Consortium of Investigative Journalists (ICIJ), a collective of global media publications, worked to make sense of the documents that were first anonymously leaked to a German newspaper. The Panama Papers made for global headlines and the names of those having exploited secretive offshore tax regimes included top politicians like Russian President Vladimir Putin, Pakistan Prime Minister Nawaz Sharif, and former Prime Minster of Iceland, Sigmundur Davio Gunnlaugsson who, in fact, resigned days after his name was made public.

  The Indian Express, part of the ICIJ, published that a group of Indians, including industrialists and actors, were also found to have shell companies. The papers seemed to reconfirm the venality and deviousness of the wealthy.

  In India, the focus on corporate defaulters, including liquor baron Vijay Mallaya — who has been served an Enforcement Directorate notice for having allegedly and willfully defaulted on bank loans of around 7,000 crore (around $1 billion)— seemed to bring home the point to many that wealthy industrialists were always gaming the system.

  It also seemed to reaffirm that their personal lifestyles are not affected by the dips in their business. People resent that. In fact, following a special inspection of bank books, the Reserve Bank of India (RBI) said that the top fifty defaulters contributed to 80 per cent of the bad loans for a banking sector crippled with non-performing assets. In television debates and newspaper editorials, the value judgment on the defaulters was evident — they were all painted in broad strokes for being corrupt, criminal and willful.

  In fact, senior economists including the Governor of the Reserve Bank of India Raghuram G Rajan, warned against seeing every loan default as a “morality” issue. While some could be cases of criminal offences, he said at a speech in New York that was reported in all newspapers, companies could default for reasons that weren’t caused by a promoter’s venality. Yet, the first assumption and image built in the media, and lapped up by readers, was that of a cabal of scheming, thieving businessmen robbing our banking system dry.

  There has also been growing research on how wealth changes people, and how the rich interact with society — whether wealth changed neural networks and caused people to behave differently from a time when they didn’t have it.

  Paul Piff is an up-and-coming social psychologist, and an assistant professor of Psychology and Social Behaviour at the University of California, Irvine, where he studies how wealth (having it or not) can affect interpersonal relationships. The results don’t often paint a pretty picture about the motivating forces of being rich. Piff has found that increased wealth and status in society lead to increased self-focus and, in turn, decreased compassion, altruism, and ethical behaviour.

  During the course of my conversations, it became clear to me that people do seem to expect those who are rich to donate generously. That doing so somehow justifies the assets they have amassed. It indicates that maybe the wealthy needed to rehabilitate their image. Giving back makes their wealth and the inequalities of the capitalist system more defensible.

  Interestingly, philanthropy was a topic the people I interviewed were eager to talk about as well. Many would bring up the issue themselves; several, in fact, seemed to anticipate that this was a question that would eventually be asked of them in a conversation focused on their personal wealth. Perhaps they wanted to talk about their charity because they are aware of the general contempt people have toward the rich. Maybe they did this as a means to appear more human to the less wealthy?

  Behaviour 101 in the land of inequalities

  India is one of the world’s most unequal places. The Credit Suisse report on global wealth, referenced earlier, found that the richest 1 per cent of Indians owned 53 per cent of the country’s wealth; and that the richest 5 per cent owned 68.6 per cent of the country’s wealth while the top 10 per cent had 76.3 per cent. Worse, the gap between the wealthy and the have-nots was widening.

  In 2000, India’s richest 1 per cent owned 36.8 per cent of the country’s wealth while the share of the top 10 per cent was 65.9 per cent21. The gap in India was also bigger than the one in other countries. The share of India’s richest 1 per cent is far ahead than that of the top 1 per cent of the US who own a mere 37.3 per cent of the total American wealth.

  Ruchir Sharma, head of emerging markets and global macro at Morgan Stanley Investment Management and author of Breakout Nations, studied what the growing number of billionaires in emerging markets says about how democratic a country’s economic opportunity and capacity for wealth creation is22. The industries minting the billionaires was an important criteria as well.

  Were the rich becoming so by fixing government contracts or were they building businesses in the free market?

  His research found that of the fifty five Indian billionaires on the 2013 list of the world’s billionaires, seventeen were newcomers since 2010, and fourteen of the newcomers came from productive industries like pharmaceuticals, education and consumer goods. These were good findings but Sharma says that the general rule is that if the total net worth of the billionaire class of a country surpasses 10 per cent of the GDP — the rough average for emerging markets — there could be a popular backlash. His 2013 research found that Philippines, Malaysia, Taiwan and Thailand were above the 10 per cent threshold, and India was sitting on the edge, with billionaire wealth equal to 9.9 per cent of the GDP.

  Worse, by breaking down the 2013 list by industry yields, Sharma found that Russia was off the charts with 75 per cent of its billionaire wealth derived from classically unproductive industries such as real estate and natural resources. India was second worst at 41 per cent.

  His was a specific study of billionaires only. This book focusses on the emerging wealthy in general and nearly nobody interviewed here is a billionaire.

  But the constant, sometimes dichotomous media reportage that comes up on these subjects — primarily, hailing the rise of Indian billionaires and then a much-needed scrutiny on the inequalities of our economic opportunities — moulds perceptions towards the wealthy in general.

  Great expectations, frugality and PR spins

  India’s wealthy seem to understand the atmospherics. Although my intention in most interviews has been to talk about views and attitudes to philanthropy only at the end of the conversation, in seven out of ten discussions roughly, it would be brought up much earlier.

  Several discussions — especially with those above forty five years of age — veered without any prodding towards their ideas of giving back. Several spoke enthusiastically about the causes they would like to support — there were ideas on vocational institutes for skilling young Indians, the need for old-age centres and why it was important to protect our environment. They spoke about the orphanages, causes and organisations they were already a part of — many said they did this so hoping their children would develop a sense of empathy and gratitude.

  Yet, apart from giving money on an ad-hoc, irregular basis to a few causes and charitable organisations, most still seem to be exploring and mulling over a focused philanthropic initiative. The journey to active, cause-driven philanthropy was still a work-in-progress for a large majority of the interviewees. They were only investing tiny portions of their wealth: Only a handful was comfortable openly declaring the percentage of their wealth that was going towards philanthropy.

  Was talk on philanthropy cheap or would these new wealthy eventually graduate to becoming significant donors? Would they at some point walk their big talk? What explained this disconnect between intention and action? Did they feel pushed to speak about these issues because they knew society expected them to be generous?

  Yet, on the survey that I conducted, this assumption wasn’t validated. A decisive 92 per cent said they felt no societal pressure to donate to philanthropic causes. For nearly 97 per cent of the people, the motivation for giving came from the gratitude they felt at what they had managed to achieve or build in this lifetime as well as from the sense of responsibility and power to change the lives th
ey could.

  Could the belief in hard work then have something to do with this?

  Robert H Frank, a professor of economics at Cornell University, and the author of Success and Luck: Good Fortune and the Myth of Meritocracy, believes the cult of hard work isn’t always a productive, conducive emotion although the wealthy anywhere in the world have an overwhelming affinity to it. In an article he wrote for The Atlantic, Frank pulls up an E B White quote that summed it up perfectly. ‘Luck is not something you can mention in the presence of self-made men.’

  A Pew Research Center survey, Frank writes in the same article, found that people in higher income brackets are much more likely than those with lower incomes to say that individuals get rich primarily because they work hard. He added that other surveys had revealed similar findings: The rich attribute their own success to hard work rather than to factors like luck or being in the right place at the right time.

  ‘That’s troubling, because a growing body of evidence suggests that seeing ourselves as self-made—rather than as talented, hardworking, and lucky—leads us to be less generous and public-spirited. It may even make the lucky less likely to support the conditions (such as high-quality public infrastructure and education) that made their own success possible,’ writes Frank.

  Ambassadors of generosity

  Philanthropy has definitely become a more mainstream issue in the world of business, prompted by the highly-publicised The Giving Pledge — a commitment by the world’s wealthiest individuals and families to dedicate the majority of their wealth to philanthropy. It has been signed by people such as Microsoft founder Bill Gates and his wife Melinda Gates, Berkshire Hathaway chairman and CEO Warren Buffett and PayPal and Tesla founder Elon Musk, amongst others. Biocon chairperson Kiran Mazumdar Shaw is also a signatory to the Giving Pledge.

  In India, philanthropic initiatives by business leaders such as Wipro chairman Azim Premji, HCL founder Shiv Nadar and the co-founders of Infosys, NR Narayana Murthy and Nandan Nilekani, has ensured there is a steady stream of news about the subject in mainstream business newspapers. In fact, media reporting of philanthropy is also now double of what is was six years ago, found India Philanthropy Report 2015, brought out by Bain & Company.

  Bain says the philanthropy space has grown considerably since its first report on the subject in 2010; the 2015 report referenced here. Donors are both contributing more and donating to a larger pool of not-for-profit organisations. In 2013, for example, 28 per cent of the adult population donated money and 21 per cent donated their time, which, according to the report, is a staggering increase of more than 100 million more Indians making donations in cash or time than in 2009. This has put philanthropy in India significantly ahead of that in other countries with similar levels of prosperity. India is now No. 69 on the World Giving Index, up from No. 134 in 2010, moving as a country from the bottom to the middle of the pack in a few short years23.

  The Companies Act, 2013, is expected to boost this trend. Under the Act, every company having net worth of 500 crore ($75 million) or more, or turnover of 1,000 crore ($150 million) or more or a net profit of 5 crore ($750,000) or more during any financial year, shall constitute a Corporate Social Responsibility Committee of the board consisting of three or more directors, out of which at least one director shall be an independent director.

  Essentially, it makes it mandatory for companies beyond a certain turnover and profitability eligible to make mandatory contributions. It will also improve governance in NGOs funded by the corporate. The new law requires companies to formulate clear corporate social responsibility policies and to make the progress public, either through an annual report or as updates on their company websites.

  Do the new rich give more?

  Have the first-generation rich provided fresh motivational triggers for philanthropy? How do they stack up against this new trend of giving? Have they outpaced the traditionally wealthy? Most crucially, is the first-generation wealthy in India more, or less, philanthropic?

  Accelerated wealth creation at an age younger than ever before in India bodes well for philanthropy, says a first-generation pharma entrepreneur who gives away a significant part of his earnings after his son’s unfortunate death at the age of seven.

  He says he has been surprised with the quality of people — and how young some of them are — he meets at fundraisers, or on boards of not-for-profits.

  ‘There is definitely something different happening with the way first-generation wealth builders, especially professionals and entrepreneurs, are engaging with society,’ he believes.

  The green shoots are evident. It’s not as if inheritors don’t become philanthropists, the banker believes, but he finds that the first-generation rich are giving both wealth and time before the inheritors, and were doing so earlier into their wealth journey.

  The urge for them comes from the gratitude they feel towards the wealth they have created which is often so much more than they had imagined. They are outgrowing their aspirations by a wide margin and feel blessed for it: The sentiment to give back germinates here.

  This was very different from inheritors. For one, the notion of custodianship of the wealth they have been bequeathed doesn’t give them as much autonomy with what they can do with it. Their job has been to preserve the wealth for the next generation and this core motivation has possibly interfered with giving away too much.

  Besides, the new wealth builders have a very strong sense of where they come from, believes Pramath Raj Sinha. In contrast to what Robert Frank found about the self-made, Sinha believes that since many first-generation rich come from lower-to-middle-class backgrounds, and have personally experienced the shortfalls of the system, they are usually more committed to being architects of change.

  Sinha has worked significantly to make two of the largest collective philanthropic initiatives in higher education in India — the Indian School of Business, Hyderabad (of which he was the founding dean) and Ashoka University (he is one of the earliest founders), successful.

  In the fifteen years between raising funds for ISB in the early 2000s (the management college was set up in 2001) and for Ashoka University in the past five years, the emergence of the first-generation wealthy as substantial philanthropists has been striking, he feels.

  ‘The sense of humility, almost guilt, drives an obligation to give back. The sheer quantum of personal wealth created by professionals and entrepreneurs in India today is much larger as well. When people become wealthy now, not only are they doing it at an age younger than before, but the amount of the wealth created is significantly larger as well,’ he says.

  Of the 750 crore ($112.5 million) that has been raised so far for Ashoka, located in Sonepat, Haryana, more than 70 per cent of it is first-generation money. His experience indicates a striking generational change in both the ability and the willingness of the rich to participate actively.

  Ashoka counts entrepreneurs such as Info Edge founder and executive vice-chairman Sanjeev Bikhchandani, Hexaware Technologies founder Atul Nishar and private equity ChrysCapital’s former senior managing director Ashish Dhawan among its founder-trustees. Bain’s Chandra is also a founder-trustee.

  For ISB, the more significant donors at the time were the large Indian business families and corporations such as ITC and Hindustan Unilever Ltd (HUL). About 30 per cent of the money raised for ISB came from first-generation entrepreneurs, many of whom were NRIs.

  The way mainstream media celebrates wealth and success has acted as a catalyst too. In the upper echelons of corporate success, wealth and power continue to be celebrated. A new set of buzzwords has come up — innovation, social impact and philanthropy are now metrics for achievement and social stature as well.

  People are less interested in how much money somebody makes — more in, how they spend that money, a philanthropist who refused to be quoted told me.

  A long way to go

  Atul Satija is on a mammoth mission. A former senior executive at Google India a
nd then at mobile advertising company InMobi till mid-2015, he quit to follow his heart to work in the development space. The/Nudge Foundation, his not-for-profit in Bengaluru, is setting up gurukuls — essentially fully residential learning centres that will impart a combination of life and livelihood skills and literacy to young adults.

  Satija has already raised upwards of 2.5 crore ($375,000) for his foundation, with substantial contributions from Infosys co-founder Nandan Nilekani, Vijay Shekhar Sharma’s Paytm ($40,000 or 26,71,220), the Great Wall Club, an international network of executives from leading mobile companies, and his former employer InMobi, where he continues to be an advisor.

  By virtue of being in Bengaluru and having worked in India’s technology ecosystem, Satija’s fundraising efforts have been aimed at the first-generation wealthy, both start-up founders and senior executives who work in these companies.

  In his experience, considering the scale of the developmental challenge in India, he found that the people he had approached were less sympathetic than they should naturally have been. Unfortunately, in the nearly two dozen conversations he had with first-generation entrepreneurs who had built significant personal wealth in their 30s, he neither found them more forthcoming nor more socially conscious. There was no correlation between the fact that those who had made their money early in their lives would necessarily give more, he told me.

  He realised that they might have felt a sense of liberation as well as confidence that they could create this kind of wealth again. They were possibly bigger risk takers as angel investors but this spirit of enterprise and innovation didn’t automatically make them more enthusiastic philanthropists.

  Instead, it was age that was a bigger push factor. ‘I’ve found people in their 50s and 60s, whether they are first-generation entrepreneurs, senior professionals or inheritors, to be more likely to give,’ finds Satija.