"Philanthropic cakeism" is changing how the wealthy give

Zoom out: Cakeism is a philosophy espoused by former British prime minister Boris Johnson, who famously said that "my policy on cake is pro having it and pro eating it."

• In its philanthropic form, cakeism involves giving money away while receiving something of significant value in return.

Driving the news: Over the weekend, ABC News, a subsidiary of Disney, agreed to donate $15 million to a registered charity associated with Donald Trump's presidential "foundation and museum."

• In return, the corporation not only curries favor with the president-elect, but also will see him drop his defamation lawsuit against them.
• The settlement includes a specific provision ensuring that the monies will be held in escrow until the IRS has officially recognized the museum as a 501(c)(3) charity.

Zoom in: Elon Musk, a sophisticated navigator of the nonprofit landscape, transferred more than 5 million Tesla shares to his personal foundation in 2021, thereby reducing a tax bill he had estimated at more than $11 billion.

• Musk has said he wants to control a stake of at least 25% in Tesla, which surely helps explain why his foundation held onto those shares rather than converting them to cash.
• The foundation is obliged to give away 5% of its assets every year, but it has consistently failed to meet that obligation. Last year, it donated $137 million to a Texas charity, confusingly called The Foundation, run by close Musk associates.
• There's no evidence the Tesla shares that were part of that donation were ever sold, which means Musk can continue to be confident they'll be voted according to his desires.
• Charities like The Foundation are easy to create. Recognition as such by the IRS is "virtually automatic" if you apply using the Form 1023-EZ, per the agency's Taxpayer Advocate Service. At that point any individual or corporation can claim a tax deduction for donating to the organization.
• Musk's personal foundation has also donated millions of dollars to Musk's donor-advised fund, which similarly counts as a charitable donation even as the assets continue to be controlled by him.

The other side: While red-blooded capitalists use charitable donations to help advance their individual or corporate goals, philanthropists are increasingly moving away from gifts, grants, and donations and toward vehicles that allow them to retain their wealth.

• Billionaires like Mark Zuckerberg, Melinda French Gates, John and Laura Arnold, and Laurene Powell Jobs tend to use for-profit companies rather than charitable foundations to achieve their philanthropic goals.

By the numbers: In the latest Billionaire Ambitions Report from UBS, 28% of billionaires say they're "investing in impact investing opportunities," more than double the 13% who said they were doing so ten years ago.

• One such billionaire, Jean Case, told Axios at a Giving Tuesday event this month that it doesn't make sense to focus her philanthropy on giving money to charity when "there's this amazing group of entrepreneurs who are bringing new companies forward to address the same issues."
• Sarah Salomon, who runs philanthropy services at UBS, explains to Axios that when it comes to billionaire philanthropy, "now there are ways to put that into investment portfolios" and "have that capital continue to grow."
• At the margin, that probably means less of a focus on Giving Pledge commitments to reduce wealth, and more of a philanthropic focus on what Salomon characterizes as a desire "to flourish for generations."

The bottom line: Rather than act as a vehicle of wealth redistribution, philanthropy is increasingly aligning itself with the direct financial interests of the nation's wealthiest individuals.