Silicon Valley: Wealth Redistribution, One-Percent Style

The Puente de la Costa Sur community center sits at the end of a quiet street in Pescadero, an isolated farming town of about 5,000 nestled amid green hills just inland from California’s Pacific Coast. It’s a beautiful, lively place to be at sunset, right before the kids will be picked up from day care.

Rita Mancero is the petite program director who assists local immigrant and migrant farm workers with learning English and preparing tax returns; the center also offers college scholarships, helps with writing resumes, getting children vaccinated, applying for citizenship, even with Zumba classes. Mancero, who holds a master’s degree in education from Universidad YMCA in Mexico City, is a Red Cross instructor certified in CPR, a paralegal, a trained tax preparer. And a ham radio operator. Her biggest priority?

“The famous ‘Education Gap,’” she says. Her affection for the children in her care is direct and immediate.

Some of the grant money that funds the Puente de la Costa Sur center comes through the Silicon Valley Community Foundation, the largest such foundation in the country. Its assets have ballooned in recent years, from just over $2.9 billion in 2012 to more than $6 billion today. But the foundation’s direct grants to Silicon Valley’s surrounding communities last year amounted to just $8 million.

Surely in 15 years, all those billions might have constructed enough shelters to house the local homeless population safely, instead of consigning them to all-night buses paid for on the public dime. Whither the infinite sagacity of private enterprise?

There have been many news stories about the vast sums contributed to philanthropy by Silicon Valley tech tycoons. Where does this money finally wind up? The short answer is that most of it stays put. Most of that $6 billion in assets at the Silicon Valley Community Foundation isn’t under the foundation’s real control, nor should the money be understood as even remotely intended to provide direct assistance to the residents of Silicon Valley. It might not even be money: It might be real estate, or stock, as in the case of the Zuckerbergs’ recent donation of 18 million Facebook shares, then valued at $991 million, according to the Wall Street Journal.

Donations like this one are, first and foremost, a wealth management tool: Assets are parked at the designated charity in order to obtain tax breaks, and these days they generally stay under the control of the donor. That is, the donor can’t take the money back, he’s “given” it, but he can direct its granting and its investment.

In January 2000, the San Jose Mercury News published an article by Jane Lii regarding the all-night bus that runs from Menlo Park to San Jose. “They call it ‘Motel 22,’ the latest refuge for Silicon Valley’s homeless wanderers,” Lii wrote, describing the relief of passengers on entering the toasty warmth of the all-night bus on a winter night.

Fifteen years later, Motel 22 is still running, and was the subject of a recent documentary film.

Surely in 15 years, all those billions might have constructed enough shelters to house the local homeless population safely, instead of consigning them to all-night buses paid for on the public dime. Whither the infinite sagacity of private enterprise? Shouldn’t that much, at least, have “trickled down”?

Facebook itself just announced the purchase of 56 acres in Menlo Park for an estimated $400 million; the company will soon move into its new Frank Gehry-designed offices across the street from its current massive, insular corporate workplace, or “campus,” as it is called.

I attempted many times to meet with any donors—even one donor—to the SVCF, but was rebuffed each time. They value their privacy, I was told. They are very busy. And perhaps also, they are disinclined to answer questions regarding the exact nature and disposition of this money. In fact, these people are employers, and thus they are the direct authors of economic policies that have created systemic problems here.

The matter is not without its complexities: While the SVCF does much valuable and inspiring work, its management is beholden to the worldview of Silicon Valley elites, whose quasi-libertarian outlook is at odds, to say the least, with traditional philanthropic goals.

I asked Rafael Morales, an affable, bespectacled thirtysomething who leads SVCF’s Economic Security portfolio, whether his organization had taken any public policy positions. He mentioned two: The implementation of Common Core standards and immigration reform. Both of these can be seen as entirely self-serving, exploitive “workforce development” positions of the tech industry. The latter is particularly questionable: Tech firms have long chafed at their inability to hire cheap engineering talent from China and India owing to H-1B visa quotas, as the Apple wage collusion case clearly demonstrated. It is deeply troubling to a visitor to this community to learn that the SVCF has not come out publicly in support of an increase in the minimum wage.

Last year Morales, who was born in Puerto Rico and raised by a single mom in western Massachusetts, was in charge of distributing a portfolio of $840,000 to 29 grantees involved in a variety of initiatives, such as free tax assistance for low-income families and small business advice for sustainable farming. This involves finding worthy projects, doing research and due diligence and presenting the resulting plans to a board of directors for approval. It was he who introduced us to Puente’s Rita Mancero and to another grantee, Kitchen Table Advisors.

Anthony Chang, the group’s founder, told me how he helps sustainable farmers grow and improve their businesses. One of his clients is Fifth Crow Farm, in Pescadero.

“We grow about 25 acres of certified organic vegetables, mainly for farmers’ markets,” says John Vars, the Fifth Crow’s bearded, soft-spoken proprietor. “It’s a complicated system that we’re managing, with conflicting goals, sometimes. For example, we want to pay our employees as much as we can. But we also want to be able to work less ourselves, and actually be able to start putting away money for our own retirement. So how can we make all these things happen? Anthony has helped us think through these things.”

One hour’s drive north from Pescadero, the Silicon Valley Community Foundation continues to sit on its $6 billion, doling out tiny grants to grateful organic farm advisors and community centers. But as Rafael Morales observes, there are different strategies and motives at play in the world of charitable giving. “In a donor-advised fund, those assets will be under the donor’s name in perpetuity,” he said. “It’s a money management tool that also allows those funds to be directed toward charitable purposes.”

The millions of entrepreneurial dollars being diverted from local tax coffers to the SVCF may be Silicon Valley’s most disruptive innovation yet: The charity that keeps on taking.

This post originally appeared on Capital & Main, a Pacific Standard partner site, as “Silicon Valley: Wealth Redistribution, One-Percent Style.” It is part of a month-long series exploring how economic inequality is transforming California, and what can be done to rebuild our vanishing middle class.