IKEA Is the Largest Charity in the World

A month ago, in an article about Bill Gates philanthropic impact, I plotted the size of the largest charitable foundations in the United States. The Bill and Melinda Gates Foundation dwarfed all of the other charities on the graph. Days later I learned about another outlier in the world of charitable foundations: Stichting Ingka Foundation, a relatively unknown charity with a less than heroic founding story.

In 1982 Ingvar Kamprad, the founder of IKEA started Stichting Ingka Foundation in an effort to avoid Sweden’s notoriously high taxes. Using a combination of shell companies and charitable organizations, Kamprad created a complex relationship of subsidiaries that enabled IKEA to pay one of the lowest tax rates in Sweden. It also made his company immune from hostile takeover.

The strategy enabled Kamprad and IKEA to amass a huge amount of wealth over the last 30 years. So much so that his foundation was the largest in the world at the end of 2014. Estimating the value of a private non-profit is tricky. But IKEA releases its earnings each year and we can use comparable global retailers like Target to determine the price to earnings (p/e) ratio that investors might use to value the company if it were public. In 2014 IKEA made $3.79B in net profit and Target’s p/e ratio was 31.68. That means that IKEA was worth an estimated $120B. The Stichting Ingka Foundation owns IKEA, therefore they own the assets.

In the second part of my article I attempted to put Bill Gates charitable contributions into perspective. I highlighted the tremendous impact in world health The Gates Foundation has had, contributing to the decline in AIDS and Malaria related deaths between 2005-2012. It’s reasonable to expect the same results from a charitable organization as large as Stichting Ingka Foundation. But in reality, The Gates Foundation puts the flat packers in Sweden to shame. The Gates Foundation has given $36.7B worth of grants through 2015. In comparison, the most generous estimates put Stichting Ingka Foundation donations in the hundreds of million range. Up until 2011 — a time following The Economist’s original investigative report into the odd charity — the organization didn’t release annual reports.

The Swedish foundation’s unimpressive track record leaves many to suspect that it is simply a tax avoidance strategy by Kamprad. According to 2011 research conducted by Swedish television channel SVT, the foundation allowed Kamprad to save between 2.3 and 3.2 billion euros in taxes over the course of the last 20 years. If measured as a charitable foundation, that amount of tax savings alone would rank somewhere between the 23rd and 39th largest charity in the world.

One can argue that Kamprad's tax avoidance strategy may well lead to a larger amount donated to charitable causes if and when he and his family decide to give the wealth away. Had he been taxed, the money would have gone to Swedish government expenditures. Instead — assuming his wealth managers were aggressive and successful — his wealth could have grown 5-20% compound each year since he set up the shell companies in the 1980s. It’s impossible to verify whether Kamprad did this. At any rate it is not the popular choice, especially amongst the Swedish: a population known for its trust in the government.

According to recent annual reports by the Foundation it appears that most of the money is going to international issues instead of domestic ones in Sweden. Kamprad’s fans could also argue that this move promotes global equality by moving money from Sweden to poorer countries. If the money is ever given away, it is certain to spark an ethical debate as to the role of philanthropists in solving the world’s problems.

 

Sources

"Flat-pack Accounting." The Economist. The Economist Newspaper, 13 May 2006. Web. 23 June 2016.
"Foundation Fact Sheet." Bill & Melinda Gates Foundation. N.p., n.d. Web. 23 June 2016.

Financial data found at the following websites:

https://ycharts.com/companies/TGT/pe_ratio
http://www.statista.com/statistics/241806/gross-income-of-ikea-worldwide/

Bill Gates' Philanthropic Impact Put in Perspective

In 2000 Bill and Melinda Gates founded The Gates Foundation. As of writing it is 4x larger than the next largest charitable foundation in the US (Ford Foundation). 

But the amount of money Bill and Melinda Gates are giving away is pennies compared to the charitable donations they have inspired.

In 2010 the Gates', along with Warren Buffett, organized a series of dinners amongst the United States' richest people. At their secret dinners they inspired a small group of billionaires to donate 50% of their wealth or more by the time they die. As of writing more than $365 billion has been pledged. To put that in perspective, consider that all charitable foundations in the US gave $53 billion in 2014. 

The Gates Foundation is by far the largest private contributor in the fight against AIDS. Since 2005 -- roughly the same time that The Gates Foundation began donating large sums to AIDS research -- deaths from AIDS have fallen dramatically. 

The Gates Foundation work to eradicate Malaria has been profound as well. Between 2007-2011 the foundation was the largest private source of AIDS R&D funding (25% of total funding).

He's also a DJ. 

Don’t Listen to the Millennials: We Need Career Politicians

This year I’ve heard the following statement frequently said:

I don’t want to vote for a career politician (emphasis of disgust on “career politician”)

At first I nodded in agreement when I heard this resentment towards politicians. In the back of my mind were statistics proving congress is more polarized than ever before, and other cynical measures of America’s state of political affairs. But as I thought about it more, I realized there was something irrational about this line of thinking.

The current resentment towards the political profession — popular in my generation especially — is deeply unfounded. “Politicophobiacs” ignore the fact that some of America’s most productive and progressive presidents were career politicians. They fail to consider that politics is a profession, like any other, that requires skill, practice and knowledge of theory. And most troubling, the resentment funnels energy and focus away from the more important issues that need to be resolved in Washington.

A history of career politicians

44 Presidents have been elected in America’s history. Only 6 have done so without any prior experience in elected office — one of which was George Washington who had no elected office to run for prior to his first election. The other five presidents lead various divisions of the military. To say that America has a history of career politicians in the White House is an understatement.

The Politicophobiacs will tell you that this is the issue. But history and data suggest some of our best presidents were career politicians.

To answer the question, “Who was the best president of all time?” is of course a difficult task. The answer is ridden with bias and subjectivity. But that hasn’t stopped pollsters from searching for the data. Between 2008–2011 four research firms polled presidential historians on this question. And in 2013 Nate Silver averaged the results and published them to the New York Times blog:

  1. Abraham Lincoln
  2. Franklin D. Roosevelt
  3. George Washington
  4. Theodore Roosevelt
  5. Thomas Jefferson
  6. Harry Truman
  7. Woodrow Wilson
  8. Dwight D. Eisenhower
  9. John F. Kennedy
  10. Ronald Reagan
  11. James K. Polk
  12. Lyndon B. Johnson
  13. Andrew Jackson
  14. James Monroe
  15. James Madison
  16. John Adams
  17. Barack Obama
  18. Bill Clinton
  19. William McKinley
  20. John Quincy Adams
  21. Grover Cleveland
  22. George H.W. Bush
  23. Ulysses S. Grant
  24. Gerald Ford
  25. William Howard Taft
  26. Jimmy Carter
  27. Calvin Coolidge
  28. Chester A. Arthur
  29. Richard Nixon
  30. James A. Garfield
  31. Martin Van Buren
  32. Rutherford B. Hayes
  33. Zachary Taylor
  34. Benjamin Harrison
  35. Herbert Hoover
  36. John Tyler
  37. Millard Fillmore
  38. George W. Bush
  39. Andrew Johnson
  40. William Henry Harrison
  41. Warren G. Harding
  42. Franklin Pierce
  43. James Buchanan

The five best presidents in this ranking system — Lincoln, FDR, Washington, Jefferson, and Roosevelt — averaged 30 years in politics throughout their lives. George Washington — again the outlier, for obvious reasons — was in politics for the shortest amount of time (8 years officially, before retiring after his second term). Jefferson holds the top spot with 40 years of political experience.

Career politicians have not only been prominent throughout American politics. They’ve been successful, and some of the most politically productive.

A profession like any other

In Politicophobiac logic there’s an underlying argument that politics is not a profession. Rather, it is something that every citizen can take up at a whim. But while every citizen born in America has the legal right to run for public office, not everyone has the skills or merits required to succeed in the political sphere.

Overconfidence is a well-establish human bias, and politics is one such display of this human ineptitude. Researchers have consistently proven that humans subjective confidence in their judgement is reliably greater than the objective accuracy of those judgments. Put simply, humans think they are smarter than they actually are. My hypothesis is that this extends to confidence in presidential candidates and their ability to govern.

In Thinking, Fast and Slow author Daniel Kahneman introduced a concept called “What You See Is What There Is” (WYSIATI). He proved that when the mind makes decisions, it deals primarily with Known Knowns, phenomena it has already observed. The mind, Kahneman wrote, rarely considers Known Unknowns, phenomena that it knows to be relevant but about which it has no information or experience. And it appears oblivious to the possibility of Unknown Unknowns, unknown phenomena of unknown relevance. Humans fail to take into account complexity and the fact that their understanding of the world consists of a small and necessarily un-representative set of observations.

It’s unlikely that a digital marketing manager in Denver understands the effects of wheat prices in India on the US economy. Specialization of labor solves this problem. She doesn’t have to know about those effects, whilst a congressmen on the subcommittee for international trade does. Americans elect public officials to specialize in fields ranging from the tedious, like corporate tax policy, to the highly complex, like foreign relations in the Middle East. These fields require years of study, experience, and — more than likely — mistakes, which we should be more empathetic towards before criticizing. The most important issues in politics require more than intuition and a savvy business mind.

The wrong scapegoat

Besides being illogical, the argument to remove career politicians from Washington is harmful. For every breath and primetime news hour wasted on this argument, Americans’ attention is diverted from more pressing issues that, if solved, have the potential to make a larger impact.

Today, politicians are heavily influenced by special interest groups like the NRA. This is one of the main contributing factors in America’s inability to properly regulate guns as other developed countries have. This is a problem.

Campaign spending has risen dramatically in recent years and threatens the integrity of America’s democracy. This is a problem.

Congress is in a constant state of gridlock because of partisanship unlike any other period in American history. This is a problem.

Career politicians? Not so much.

Replacing political professionals with business leaders and people that “know how to get things done” would be unprecedented and irrational. It would come with consequences many of us couldn’t predict — for the very same reasons we couldn’t predict the Financial Crisis of 2008 in the face of unknown unknowns. However unlikely ousting career politicians might be, the discussion itself is distracting from more important challenges that need voter awareness. It’s a scapegoat of our irrational creation. And it’s a waste of our attention.

Is Religion Fading Away?

When I moved from Colorado to British Columbia to California in the span of two years I noticed something surprising: in every place I lived the majority of people I spoke with regarding religion expressed doubt. Before I moved from Colorado I thought my small group of agnostic friends was a coincidence. But when I arrived in BC, and then California, I began to wonder if the world was less religious than I’d imagined. 

Recently I decided to find the answer to a question that has rattled around in my head for years: is religion fading away?

In the 1950s just about everyone practiced religion. However, in the last 50 years religion in America has seen a steep decline if you measure the portion of the population that practices religion. The percentage of Americans who don’t practice religion has grown from 2% in 1965 to 17% in 2015. And projections by Pew Research Center suggest the trend of religions decline will continue for the next 50 years. So it would seem the answer to my question in America is a resounding yes.

Percentage of Americans Who Don’t Practice Religion

However, looking at global trends, a different picture emerges. There are an estimated 1.1 billion people in the world that aren’t affiliated with any religion. And while that group is estimated to grow by 100 million people by 2050, the actual percentage of humans in this group will decrease from 16.4% to 13.2% according to Pew Research Center.

Christianity and Islam, on the other hand will both grow, picking up an additional 750 million and 1.1 billion people respectively. So it would seem that a more worldly answer to my question is this: while religious affiliation is on the decline in America, it is growing globally. 

Why is religion fading away in America?

There are two main causes for the decline of religion in America.

The first reason is what researchers call “generational replacement.” Put bluntly, old people that went to church are dying and young people aren’t taking their spot in the pew. Someone born in the Silent Generation (between 1928-1945) is 3 times more likely to be religiously affiliated than a Millenial (between 1981-1996). 

Some people argue that Millenials will become more religious as they age. But data suggests otherwise. Pew Research Center conducted a survey in 2007 and found 25% of millenials didn’t affiliate with religion. 7 years later that number grew to 34%.

In addition to generational replacement, a trend of “religious switching”can be blamed. Nearly one-in-five (18%) US-adults were raised in a religious faith and now identify with no religion. 

Former Christians represent the largest group of converts in the United States. In fact, the number of former Christians exceeds the population of California and my home state of Colorado combined, with an estimated 47 million people.

Why is the rest of the world getting more religious?

There is no single reason why the rest of the world is becoming more religious. But the most telling data point to look at is fertility rates by religion. 

Fertility rates are a great indicator of population growth. They describe how many children a woman is likely to have in her lifetime. In countries with high fertility rates, such as Niger a woman is likely to have about 7 children; therefore the population is growing quickly. In countries with lower fertility rates, like Singapore, a woman is expected to give birth to one child in her lifetime; therefore the population is declining. 

Generally a fertility rate of 2.2 results in zero population growth. Anything above it means that the population will grow. And anything below it means the population will recede. For this reason analyzing fertility rates by religion is a great way to predict the future of religious populations. After all, religion is cultural which means that children adopt the faith of their family and surrounding community. Therefore if we want to predict how religious the world will be in 50 years it is most useful to look at population growth by country and then each country’s dominant religion.

Today most of the world’s population growth is taking place in Africa and the Middle East where Christianity and Islam are the dominant religions. Populations in North America and Europe — where skepticism is becoming increasingly popular — are growing slowly or receding. 

If you only had 60 seconds to tell someone why more of the world’s population is becoming religious this is the simplest answer.