Be Like a Billionaire

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Warren Buffett's philanthropy is well-publicized; the man will end up giving away nearly 99% of his wealth to charity.

As I've written before, Buffett's charitable pledge is larger than the sum total, in inflation-adjusted terms, of the donations made by Carnegie and Rockefeller combined. In a word: Wow.

Millionaires making good
But while Buffett is an extreme example of philanthropy, he's not alone.

The always interesting Conde Nast Portfolio recently published its "Generosity Index," a list of the 50 most generous U.S. philanthropists. The list is like a who's-who of Corporate America success stories. Take a look at some of them:

Donor	Business(es) That Made Them Wealthy
Warren Buffett	Berkshire Hathaway
Bill Gates	Microsoft (Nasdaq: MSFT)
Eli Broad	KB Home (NYSE: KBH), SunAmerica / AIG (NYSE: AIG)
Pierre Omidyar	eBay (Nasdaq: EBAY)
Michael Dell	Dell (Nasdaq: DELL)
Dan Duncan	Enterprise Products Partners (NYSE: EPD)
Sheldon Adelson	Las Vegas Sands (NYSE: LVS)

Source: The Conde Nast Portfolio Generosity Index, November 2008 issue.

All of these people (1) created lasting businesses, (2) owned substantial portions of those businesses, and (3) donated large sums of their wealth for philanthropic purposes. (The table should also tell you that insider ownership is very, very important in small companies.)

Don't roll your eyes yet
Let me point out the obvious here: Of course these are the most generous donors in America ... they have the most money to give away!

So, to recap: Vast philanthropic donations require vast sums of wealth.

That statement's not as useless as it may seem. In fact, according to a 2007 article featured in Portfolio, "People do give more when they become richer ... but people also grow wealthier when they give more."

Giving money makes you money?
Portfolio chronicled an eye-opening study, the conclusion of which seems counterintuitive: Giving makes you wealthy.

The study, from the Social Capital Community Benchmark Survey, looked at philanthropic behaviors and household income, factoring in age, religion, education, race, and other such factors.

While a higher income resulted in higher charitable donations, "more giving doesn't just correlate to higher income; it causes higher income." [Emphasis mine.]

The path to prosperity
The brief explanation for why this happens is that giving "stimulates prosperity," but that sounds too vague to be useful. So, let me offer a more detailed armchair hypothesis.

You see, giving is emblematic of other personality traits that allow givers to get ahead. In particular:

1. Givers are smarter with their money than non-givers. Donating to charity demonstrates knowledge and confidence about one's personal financial situation and, more specifically, shows a level of tax smarts. That undoubtedly explains some of why the billionaires in the above list are so generous.
2. Givers tend to be generous in other aspects of their life. It's not a stretch to conclude that generosity would be a trait that employers and colleagues find desirable, and that that could result in higher overall pay and success generally.

What you can do today
Giving makes you wealthy. That's a powerful conclusion, and it's one we're paying close attention to at Foolanthropy, The Motley Fool's philanthropic campaign.

Aligning our charitable efforts with our core philosophy -- that with the right tools and information, every American can take control of their financial destiny and make sound decisions with their money -- Foolanthropy is focused on curing financial illiteracy among the young, the poor, and the needy.

This year we have partnered with a tremendous organization called DonorsChoose. I encourage you to read about our mission to eradicate financial illiteracy, and I also strongly encourage you to donate -- not only will you get the intangible value of having done some good, you'll get a heckuva tax break (no doubt a key motivation for billionaires' generosity).

Who knows -- perhaps giving will even stimulate prosperity in your own life.

Click here for more information about our Foolanthropy campaign.

An earlier version of this article was published Dec. 21, 2007. This version has been updated.

Brian Richards is trying to be like a billionaire, so he recently made a donation to DonorsChoose. Brian owns shares of Microsoft, but no other company mentioned in this story. Berkshire Hathaway, Dell, and Microsoft are Motley Fool Inside Value recommendations. Berkshire and eBay are Stock Advisor recommendations. The Fool owns stock in Berkshire Hathaway. The Fool has a disclosure policy.