“This Is Not Charity”

How Bill Clinton, Ira Magaziner, and a team of management consultants are creating new markets, reinventing philanthropy—and trying to save the world
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Young African AIDS patient
A YOUNG AIDS PATIENT is treated at an orphanage in Kenya. Among its other activities, the Clinton Foundation negotiates with pharmaceutical companies to bring down the prices of generic HIV/AIDS drugs in the developing world.

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Slideshow: "The Clinton Effect"

The former president describes his philanthropic journey

In His Own Words Click here to read excerpts from Jonathan Rauch's interview with Bill Clinton

He is a business consultant, seemingly typical of the breed. Height and build average, hair a graying brown, age 51. His name is Stephen Crolius, and he has worked for 21 years as a strategist at a series of high-priced consultancies. There is not a boardroom in the country where he would look or feel out of place. His suit and tie are sharp and pressed, but he looks tired, and with reason: He and a handful of colleagues have effectively launched a new business in just six months. His travel itinerary has been killing, and when I ask about his work habits, he says, “On any given day I get up and I start to work, and I work all day until I’m able to feel like nothing bad will happen if I stop working. If possible, I try to go a bit beyond that. I eat dinner, I go to sleep, I get up the next morning, and I do the same thing again.”

At a press conference tomorrow, his boss will announce the first fruit of these labors, a business deal involving five banks, four industrial companies, and cities on several continents. It is mid-May, and Crolius and I are sitting over drinks (nonalcoholic) in the lobby of a Manhattan hotel. A colleague of his, Jamie Russell, approaches. He is younger, British, with glossy brown hair and a model-fresh, collegian face. He has the precocious self-assurance of a man who, at 32, has already obtained a bachelor’s degree from Harvard and an M.B.A. from Stanford, worked for McKinsey & Co. in London, New York, and Silicon Valley, and was among the first employees of a London-based investment bank that specializes in carbon trading. When I ask him to explain the deal he just helped put together, Russell produces a pencil and draws a cost graph. Perhaps catching my quizzical look—I have never even taken a business course—he says, “It’s a piece of McKinsey analysis, really.” This does not help me all that much.

The lobby is a forest of pinstripe suits and smart skirts. Crolius and Russell and several dozen colleagues have gathered from around the world for the next day’s announcement. The hotel has become their impromptu headquarters. Conducting a meeting from a nearby armchair is a tall, elegant man of 61, who has broken the pinstripe dress code by wearing a sports jacket. This is Göran Carstedt, of Gothenburg, Sweden. He can safely be numbered among Europe’s most accomplished executives: In the 1980s he headed Volvo’s operations in France and Sweden, and in the 1990s he built Ikea’s fledgling U.S. business into a blockbuster success before going on to head IKEA in Europe. Clustered in a corner are younger staffers newly hired to oversee operations in five cities. Anyone not engaged in conversation is hunched over a BlackBerry. Some are engaged in conversation and hunched over a BlackBerry.

The scene could be mistaken for a convocation at any cutting-edge business consultancy or investment-banking house or money-management firm. But all of these people are working for a fraction of what they could be earning. Crolius took a pay cut “north of 50 percent.” Carstedt draws a “minor” salary that “somewhat” covers his expenses.

And their business plan is not to trade derivatives, or launch a hedge fund, or consult on outsourcing, but to stop global warming.

And the chairman of their firm is Bill Clinton, who, somewhat to his own surprise, aims to repurpose business methods and business culture to solve the world’s problems—and who hopes to reinvent philanthropy while he is at it.

It was in the spirit of an experimenter, rather than a visionary, that Clinton established a foundation. What would become the Clinton Foundation’s signature initiative, an HIV/AIDS program, began fortuitously.

The story is one he enjoys telling, and tells often. I heard it in April, in his office in Harlem. The room is long and narrow, decorated in warm beiges, its walls and shelves lined with pictures and mementos. A portrait of Winston Churchill glowers from behind the former president’s desk, which Clinton left unused during our interview. Instead he gestured me to a sofa, sank into an armchair, and slung his left leg over one of its arms. He began the interview in this laid-back mode but gradually grew animated, sitting erect, leaning forward, punctuating with his hands.

Getting in to see him was not difficult: He said he was “thrilled” that I wanted to write about his foundation’s work. “I’m just so glad you’re taking this seriously,” he told me. “What I long to do is to see this integrated into every philanthropic activity from now on, where it’s appropriate.” I met with him on the day Boris Yeltsin’s death hit the news, a busy day, but as our interview stretched on past the hour mark, he showed no sign of taking the hint from aides who stood, paced, glared at wristwatches, and finally resorted to whispering into his ear. “Go ahead,” he told me. “Keep goin’. I’m too wordy about this. I care a lot about it.”

The story he tells is that in July 2002, when the foundation had only 12 employees (it now has hundreds working on HIV/AIDS alone), he and Nelson Mandela went to an AIDS conference in Spain, where the prime minister of Saint Kitts and Nevis, a small Caribbean country, said to him, “You know, we don’t have a denial problem, we don’t have a stigma problem. We have a money and an organizational problem.” The foundation began its AIDS efforts that year in the Bahamas, and immediately discovered that the government there was paying $3,600 a year per person for generic drugs whose list price was about $500. It turned out that middlemen were taking steep markups, which the foundation eliminated by making a deal with the manufacturer. “It got me to thinking about how once more we had a public-goods market that was not only underfinanced; it was disorganized,” Clinton says.

Clinton can and certainly does raise money, but he didn’t have enough to endow a major grant-making foundation. What he did have was an ex- presidential bully pulpit, a deep Rolodex, the power to attract attention and talent, and an inkling that those assets might be used to do for public goods something like what entrepreneurs and investment bankers do in the corporate world: midwife new markets or scale up underdeveloped ones. The idea is to identify markets that aren’t supplying enough socially beneficial goods or services to meet the potential demand, and then to lead them to a new equilibrium. “What we tried to do,” Clinton says, “was to get them to go from what I call a ‘jewelry-store model’ to a ‘grocery-store model’—from a high-profit, low-volume, uncertain-payment business to a low-margin, high-volume, certain- payment business.”

None of that was clear in the summer of 2002, when Clinton made the decision that may do more than anything to shape his postpresidential legacy. To launch his HIV initiative, he turned not to a philanthropist or public-health doctor or development professional. “It was a system thing,” he says. “It’s the absence of effective systems that I believe is the primary factor holding a lot of these countries back. We wanted people who could operate efficiently in the nonprofit field in the same way they had in business.” So he called a business consultant named Ira Magaziner.

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Jonathan Rauch is a contributing editor of The Atlantic and National Journal and a senior fellow at the Brookings Institution.

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