coming up, why the super rich pay a lower tax rate than you do. we'll try to explain it using a kid's lemonade stand. alexa caldwell wonders why millionaires don't give more locally. and the difference between man and women on the iphone. with martin giles and fortune this week, on "press here." good morning, i'm scott mcgrew, silicon valley has more billionaires per capita than anywhere on earth and also some of the most underfunded schools in the united states, meaning

parents, the people who work forffor millionaires are digging into their own pockets to pay for the school's music teacher. >> that's in wealthiest neighborhoods, schools and non-profits in east palo alto, a short work from stanford and facebook, really struggle to make ends meet. strangely enough, as the economy has recovered in silicon valley, the disparty between the haves and have nots have increased. a study found local charitable foundations and philanthropists rarely give their money to local causes. >> a firm which advises the wealthy on where and how to donate as well as visiting practitioner at stanford's study

on philanthropy and martin giles of the economist. before we get started, let me note some exceptions to the rule. these are happy exceptions, work to disprove our authority that millionaires don't donate locally. gave $100 million to ucf hospitals and mark zuckerberg gave 18 million shares of facebook to the silicon valley community foundation and joined with larry page, milner and the rest to create a science prize as well. talking about taking those rule breakers aside, we can come back to them if we wish. as a general rule, our millionaires are not contributing enough or locally or both? >> well, i think one could argue they aren't contributing enough. it's not going to the pressing local needs and causes. so some of the money that does

stay here is going to higher education in places like university hospitals and research centers but what in the study, not going to people living in poverty in the region which is one in four residents, the people who need food or access to the kind of education that would prepare them to take advantage of the amazing opportunities we have here in the valley. >> let me get out here, all giving is good giving. you can't -- you can't -- if you give a dollar to a hungry person, whether local or disstant, now it becomes a matter of arguing which is more important. for those people who give thank you for that, let's let continue with that. >> why is that? why isn't more money going to the local sort of area and residents? you would imagine with people working in an office and commuting to and from home and seeing everything, they would somehow be affected, more

inclined to invest. >> people in the valley don't understand that the valley has tremendous social challenges. in my study i interviewed community leaders non-profit leaders and government leaders and they told the same story, people aren't aware, 250,000 people a month use the food bank to splimt food. >> in silicon valley. 100,000 children are accessing a subpar education, going to schools not getting them to even basic proficiency, let alone to the kind of four-year colleges. >> the parent of two school age children, this annoys me, high tech saying we don't educate our children well enough and sacramento has to solve some of that but i also want to say and set it in the setup piece, why are we passing the hat to pay for the music teacher? >> we have tremendous social problems but also have jobs. this isn't a community where we have huge need and no jobs.

we have jobs. we need people to fill those jobs. why would we not be focused on building a world class educational system and prepared them for these kinds of jobs? it's just not known. people are unaware of issue and san jose alone, we have more low income kids than san francisco and oakland combined. more low income kids than san francisco and oakland combined. people aren't aware of it. i think if they were aware, they would both be globally minded, which is great for the valley, they are far reaching, but wouldn't be it great if they marked a piece for local needs and causes. >> there's clearly a disconnect between these wonderful companies being built and in the surrounding community, but i think it's quite easy to jump to conclusions and point fingers because there are companies

here. >> no, no, yes, right. >> what's going on. when you look at entrepreneurs, they look at fill philanthropy these organizations and say inefficient. i want to create my own solution, a start-up corp, sort of crowd funding and that connects to the local charities and works through them. isn't there a real opportunity in harnessing the know how of silicon valley and perhaps we're seeing a lag and perhaps it's going to be a year or couple of years and then the real benefits start through. >> i think you have a great point. wouldn't it be great if we can use these technology innovations to actually create schools where kids were prepared for science and engineering and math and types of endeavors and jobs that are here? i think you're also making a

really astute point about the capacity of non-profits. people need food and basic services and sometimes the social service infrastructure that non-profits deliver are the solution for a piece of that have. >> i'll set up a straw man and it seems to me, it's so obvious, if your food bank down the street from the office needs food for hungry people, that's where the money should go. is it because of a hipster startup, kind of a field mouse, much more cool, have you heard about the field mouse, they are endangered -- not as it is a bad project but it lacks a coolness that maybe going down and giving money to the food bank doesn't. >> i think martin is right. people are very visionary in the valley and think about scale. maybe sorting oranges as a family activity on sundays isn't

sexy or appealing. there are these needs and you can help solve that problem with a contribution. you can also focus on these larger scale solutions with some of the technology innovations and things that fit your skills and experiences. i don't think it needs to be both and don't think we need to criticize people for what they are currently focused on. my argument is think about a portfolio of activities that might include contributions to the most needy and most worthy kind of local causes that are providing the basic services. >> thank you for being with us this morning. >> up next, can you explain a complicated economic issue using a kid's lemonade stand? we're going to find out when "press here" continues.

lots of things to do on a sunday morning, read the "new york times" in bed or coffee on patio. i feel bad when we talk about tax. taxes on carried interest and those who help people invest in the business, we use an lemonade stand as an example may pay far less in taxes than the entrepreneur that created the actual business. gary whitfield manages the money of the super rich for the whitfield group part of morgan stanley. >> you went to oxford? >> yes. >> you have an mba? >> i do. >> you're the expert here along with him and we'll try to put this in lemonade language. my understanding of carried interest and it can be controversial, is the person the money manager, the private

equity that brings money in that helps a business, is able to benefit in a way that is he's paying a lower tax rate than he would be if the fees he charged were considered regular income. is that a fairly good understanding of what carried interest is? >> i think that's pretty close. pretty accurate. the thing to remember is that in private equity or venture capital investments, the general partner or the gp is managing the investments by and large and contributing up to 5% of the investment capital. >> they have some skin. >> they have some skin in the game. >> the rest of the investment capital is contributed by the limited partner. >> the money people? >> the money people not managing investments but making and contributing capital to make investments. in our lemonade analogy, the lp's are the neighbors. the gp, the one who is going to

take advantage of this as far as carried interest goes is the one who's coordinating? >> that's right. >> the carried interest is really the profit interest that the gp has in the investment returns of the capital attributable to what the limited partner invested. they are getting up to 20% of the profit. >> right, when the lemonade stand is sold and this kid grows to 20 lemonade stands and it's lemons r us. you're not -- you went to a fancy school and everything. >> why should he pay 15, 20% i think it is capital gains as opposed to order income? >> what he did was work. he had 5% in it. he should get a fee but should probably pay income tax, right? >> i think when you go back to

the original intention it was to reward those taking risks with their economic capital, promoting economic growth and job creation. it would be a difficult argument to make the private equity and venture capital managers weren't doing that and then some. >> we want to put in capital and risk the capital. certainly they are putting in capital. they get the capital gains and which is much lower than income. why should the money manager itselfthe general partner? >> i think that's the rub, right? >> right. >> if you don't have capital at risk, right, you shouldn't be afforded the preferential treatment. when you start down a slippery slope from a partnership standpoint when you try to change, hey, look, these gains are long-term capital gain in nature and that's the character of the game. if you suddenly say, we're going to keep the character for the lp's but change the character of that game for the gp, that's

sort of a slippery slope. >> certainly i mean, that makes silicon valley, partners investors in startups, weren't there situations where you have a loophole? >> i don't know it's -- it wasn't an intended loophole per se. but there is a -- there is a benefit that accrues to the money manager who really isn't having that capital risk. so in a sense, some people look at that as a loophole and that performance or profit interest to the extent it exceeds a or is considered access return, as opposed to ordinary -- >> there's nothing wrong with trying to bring your taxes down. tax aversion is completely legal. tax evasion is not. under carried interest they are paying less and that's how they want to keep it. when people watch the elections, this is how mitt romney got so

rich, right? i mean -- that's how warren buff s et got so rich, has a low are tax rate than his second. >> scott, you have a house, right? when you buy your house you take out a loan and put money in but the bank puts most of the money in. when you sell your house, hopefully you make a profit. that profit i think $250,000 is capital gain. would you like that to be taxed -- >> i see what you're saying because -- >> the money is locked up for a long way. you've worked on the house i assume and improved it, that is what a money manager or bench capitalism will say we do. >> great analogy, the bank took most of the risk and i took a smaller risk, a down payment. >> that's a risk to me. >>y know we were talking about my money. that's an entirely different --

>> what happens to silicon valley if this carried interest goes away? >> you know, i think it would be like a speed bump or bump in the road. i think when you think about the culture of silicon valley, it -- private equity investoring and venture capital investing is the culture of the valley. and the private sector adapts and private capital adapts, as long as there are successful hedge funds and private equity funds and venture capital funds providing excess return to investors, there's going to be a high demand and their services will be in demand. i think that it's nothing more than a speed bump. it's not going to change the culture of silicon valley. >> is it going to be a mass walkout if you have to pay ordinary income tax? no. some would argue i put in -- it's a long term risk the capital is locked up. but we'll keep doing this.

we don't have to -- even if we have to pay ordinary income tax. >> and yet though, this is more for both of you, mike harington of tech crunch. >> nice piece about that. >> he did. he took a contrarian view. >> he benefits from it. >> he benefits from it because he invests in startups now but he has said that he and other valley figures feel it's unfair. >> what i like about the piece was that whether you agree with this sort of tax break or not, he was able to talk about it and explain it. and say, listen, folks, this is what they are arguing about in washington. i think this is something that a lot of people -- this idea is that something that a lot of people are not familiar with. >> i would agree. a lot of people are unaware it exists. but at the end of the day, these venture capital managers and private equity managers are promoting economic growth and creating jobs and doing things

that are in line with the spirit of why preferential tax treatment was created in the first place. >> gary whitfield, we did it. we talked about carried interest -- on a television show and for that i thank you for your patience and your knowledge as well. gary whitfield of the whitfield group. coming up next, how internet entrepreneurs can learn from rock stars when "press:here" continues.

four square is an app to check into various locations, awe way of saying world, i am here. it turns out 70% of frequent four square issues are men. my next guest says that behavior reminds her of the way male dogs mark their territory she worked to create a more female friendly

interpretation. this is called posse, got a lot of attention at this year's south by southwest. it allow s people, mostly women to recommend salons and other businesses and locations to her friends. rebecca camp bell came from the music industry where she managed bands in australia. let me ask you about men versus women. this is a dangerous subject, but it does strike me and i thnk you discovered the same, with men it's a competition. and with women in apps, it can be more cooperation, is that stereo type sometimes work? >> i think what we interviewed lots of responsible users and women go a different way. we did interview a lot of four square users. >> why not, yeah. >> and we found that, users

would talk about broadcasting where they were and i remember one guy talked about how he drove out of his way home every day and checked in at a supermarket so he would -- what, such a weird thing to do but we couldn't find a woman that did the same -- >> i see where the dog analogy comes. >> me too. >> but what we found, we wanted to understand why people liked to share places. we interviewed lots of women, talk me about your favorite strau restaurants and bars, they would spend hours, let me tell you about when -- >> talk about this amazing bakery they found in boston. this was clear that what was behind it, it was still competitive about more status or singling left out status than it was about gaining points. when you talk about your favorite places, favorite bars in new york and create and share my list of favorite bars in new

york, this says a lot about me. i go to new york and look at the lifestyle i live and that is more the way women seem to compete than guys. >> what's the breakdown of women users on posse versus men. >> 72 -- >> flipped the four square ratio. >> it was almost perfect. if yelp says this restaurant is good and 6,000 people have given it a review, what makes it different? >> talking to users that use yelp or looking for a restaurant, they didn't trust the reviews. >> 6,000 people. >> who are those 6,000 people? paid to write reviews and also that was one problem, didn't trust the reviews. the other problem was what motivates you to write a review on yelp. a tiny people write a review. a lot of reviews are negative, 35% are negative. so because such a tiny bracket

of people write reviews, they can't show you what your friends think, because it's unlikely they are writing reviews everywhere on yelp. we tried to come up with a way of encouraging everyone to make lots of reviews. that's why posse is about creating a virtual street of your favorite places that you can show it off to your friends and it's fun to make. so for that reason, that average person on posse makes five recommendations. >> your tapping into a very sort of powerful trend. i call it the matriarch, you see pinterest, you pin up images and share images. you've got a number of other companies where women are really the driving force. of course, women spend most of the money or sort of control the spend in the household. the question is, in your band days, one of things you learned was that the thing that took off when it was delightfully original.

well, location based services, there are tons of them out there. is this really delightfully original or are you following a copy of four square or dweller and everything and making it for women? >> i think like four square is different than pinterest or where you're cure ating content you love. it's just this is not product or pictures or places. what's delightful about it, it's all hand drawn. when you create a street, you'll see your representations of your favorite places that we actually made. it's delightful in visual presentation and also we bring in the shops. when you recommend some of your favorite, if you recommend your favorite restaurant or yoga studio, we call out -- if we don't have that in our system, we'll call them up and tell them up and tell them you recommended them and share information every time someone wants to visit them and they can interact with

customers. you all of a sudden built a street of favorite places and just because it's really fun and you like to share with your friends, then you start getting thank you gifts from stores like unexpectantly and that is a delightful experience. >> let me ask you, if yours is the more female focused four square, four square sort of historically has been having trouble monday tiesing. i'm curious to hear where the money aspect is for you. >> sure. once you recommend a place, we tell that place you recommends them. the stores have their own dashboards and they can see everyone that loves them and lots of information about them. >> they have to pay for that? >> they get the dashboard for free. say you recommended your favorite restaurant. we send an e-mail saying scott loves you and it's got your photo and what you said about them which is always lovely. the owner of the restaurant probably like, i've seen that guy in there a few times. now i know that's scott.

i'll send them a gift. they build a relationship with you. >> so we get, it's a -- we give a store a certain amount of -- for free then they start to need paying. they'll still see someone loves you. >> what towns are you -- and i realize you're worldwide, where all of a sudden you have enough recommendations and checkins that businesses are saying, yes, i want to pay for the rest of it? >> we've done well -- sidney is a great example where we have 5,000 or so active shops. but we have lots of cities in australia that are working. now got 4,500 stores and new york and stores in san francisco. worldwide we've been going four and a half months and there's 35,000 active shops. >> thanks for making the very long trip to seattle. we'll be back in just a moment.

that's our show for this week. my thanks to my guests. thank you for being part of our sunday morning.

keep making history. >> the blackhawks are stanley cup champions! >> announcer: welcome to the "u.s. bank nbc sports report." here's your host, jimmy roberts. >> and hi, again, everyone. coming up in just a moment, the tour de france 100th edition, taped and edited coverage of today's second stainige, but fi, other sports news. we start with the just-concluded formula 1 race, the british grand prix. quite a day, starting with the local favorite lewis hamilton blowing his rear-left tire right