Philanthropy, stock-picking, and Presbyterian frugality

December 2, 2013

I love the story of Jack MacDonald, which is only becoming public now, after his death. The short version: MacDonald inherited a substantial fortune from his parents, the proprietors of MacDonald Meat Co. in Seattle. But he made the classic promise to himself, that he wasn’t going to let the money change his life — and he kept it. He worked as a government lawyer for 30 years, he clipped coupons, he wore tatty sweaters, and even at the end of his life he was imploring his doctor to treat him only with generic drugs. He died a happy man, and bequeathed his fortune to three charities: the law school from which he graduated in 1940; Seattle Children’s, a pediatric research institute beloved of his mother; and the Salvation Army, in memory of his father.

Or rather, he bequeathed the income from his fortune equally to all three charities. The fortune itself — valued at $188 million — will remain fully invested.

MacDonald did not like to spend his money, but he loved to invest it:

When it came to picking stocks, “he was amazing,” said his stepdaughter, Regen Dennis, of Utah. “He didn’t trust a lot of other people to do his research; he directed what he wanted bought, and he really knew what he wanted.” …

MacDonald and his wife moved in 1997 to the Horizon House retirement community, where Mary died in 1999. In the retirement home, MacDonald continued to keep his hand in the stock market while nurturing his image as a man without means, even wearing sweaters with holes in the elbows…

Picha, of Children’s, often visited MacDonald at Horizon House, where copies of The Wall Street Journal and Forbes magazine were stacked on both sides of his favorite chair. His routine included an early-morning workout, a visit to the grocery store and a walk to his stockbroker to check on his accounts, Picha said.

There are three things going on here of note. Firstly, there’s the idea of stock-picking as a hobby for men. MacDonald was a devotee of this particular hobby, and clearly loved it. His stepdaughter says that he was very good at it, too — but without knowing how much money he started with, or when the inheritance took place, it’s hard to tell exactly how good he was. MacDonald might not have been spending his money on consumption, but he was still getting pleasure from it.

Secondly, there’s the deeply Scottish/Presbyterian idea that saving is something you do in perpetuity — an idea which lies at the heart of the thousands of endowments which dominate the non-profit sector in the US. MacDonald was a steward for his parents’ savings, and, at the end of his life, he created a structure which attempted to ensure that those savings would remain intact for generations to come. This is, at heart, a deeply futile stance, a little bit like hoarding bitcoins and never spending them. I’m reminded of the story told by Mary Ann Glendon:

Bostonians still tell the story of the respectable society matron who was crossing the Common one day and ran into an old college chum she hadn’t seen for years. The matron was dismayed to see that her friend was obviously engaged in the world’s oldest profession. “My dear,” she said, “whatever has happened to you?” “Well,” said her friend, “it was either this or dip into capital.”

From a philanthropic perspective, the point here is that as a rule it makes sense to front-load donations, not to back-load them. I don’t know when MacDonald first inherited his fortune, but it might well have been 50 years ago. That’s 50 years’ worth of children who haven’t received the benefit of his generosity. What’s more, the world and Seattle have been getting richer and healthier all the while, which means that the future recipients of MacDonald’s money will be less needy than the hypothetical past recipients would have been.

And yet, even now that MacDonald has died, Seattle Children’s Research Institute will receive, annually, just 5% of its share of the bequest. That’s the bare minimum, under US law, that MacDonald can give away and still be counted as a charitable trust. I’m sure that if the law allowed the trust to give away even less than 5% per year, MacDonald would have chosen an even lower number. There’s lots of self-congratulatory back-slapping going on around this bequest, but the fact is that MacDonald isn’t really giving his money away: he’s controlling it, to the maximal extent possible, from beyond the grave.

Finally, it’s worth noting that Doug Picha, president of the Seattle Children’s Foundation, cultivated MacDonald for 30 years before finally achieving this donation. I’m sure that his motives weren’t entirely mercenary, and that the two men were genuine friends. But if you’re in the fundraising business, and you’re looking for really big donations from incredibly rich individuals, that means you’re going to be playing a very, very long game — and, quite possibly, having to wait until those individuals die.

MacDonald reportedly said he “wanted to be remembered as a philanthropist” — and he’s certainly less self-effacing now that he’s dead, slapping his name all over the central square of Elora, Canada, as well as the Jack MacDonald Endowed Chair at the University of Washington. But the fact is that if he were really philanthropically inclined, he would have given much more money away many decades ago. And he wouldn’t be giving away only the barest minimum now that he’s dead.


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