Who Wants to Live Forever

Privacy

Autonomy

Perpetuity

As I’ve talked about the last two times, these are the tenets of the archetypal charitable foundation in the U.S. How does perpetuity interact with autonomy and privacy?

Of the three tenets, perpetuity is the one experiencing the greatest change. A growing number of funders are seeking to spend down during their lifetimes. There are examples big and small. Warren Buffett’s gift to the Gates Foundation is in $1 billion tranches, with the disbursement of each tranche contingent on entirely spending down the previous one. I don’t want to say that’s literally unprecedented, but that’s kind of unprecedented. Atlantic Philanthropies is another well-known large spend-downer. (Spender-down?) On the medium to smaller side, the Beldon Fund chose to spend down entirely and even wrote a case study about it. The Center for Philanthropy & Civil Society at Duke even has an online library of studies of spend-down.

What’s the big deal? Current tax law, which dates from the ’60s, mandates that private foundations have to pay out at least 5% of assets in exchange for those assets being exempt from tax for the donor. Turns out that over the past forty-odd years, if you stuck to that level and managed your investments wisely, you could make grants out of the interest on the endowment and not have to touch the principal – in fact, the principal could grow. And many did. The law – and the stock market – therefore, if not encouraged perpetuity, at least made it relatively straightforward to achieve. No surprise then that many private foundation boards spend much of their time focusing on their investment performance and policies.

The argument for perpetuity is that it allows the foundation to be a community resource over time, something reliable. In a world of ever-shorter time horizons – elected officials are thinking about the next election, corporate leaders are thinking about the next quarter’s earnings report, nonprofits are thinking about next year’s sources of revenue – foundations that exist in perpetuity can afford to take the long view. Along with universities, religious denominations, and the Federal Reserve, they’re among the few entities in American life that can. And if political science taught me anything, it’s that it’s remarkably hard to build a coalition for social change without someone having an incentive to take the long view, and sacrifice current gain for longer-term welfare.

The argument against perpetuity is that current needs are urgent and require more than 5% payout. This argument comes up especially strongly during recessions. And indeed, as the Foundation Center was admirably quick to document, during the last (current?) recession, many private foundations increased their payout levels to meet their existing grant commitments, even as their endowments took a big hit.The other side of this argument is about donor intent – “giving while living,” to quote the title of the aforementioned Beldon Fund report, ensures greater control for the donor. Lawsuits over alleged trustee mismanagement of donor intent crop up periodically in the philanthropic and even mainstream press. The Philanthropy Roundtable has an online library of resources on donor intent.

This desire for greater control bespeaks a broader erosion of trust in institutions. The notion of the private foundation as a permanent community resource harkens back to a time when institutions were more reliable and relied upon. There’s a fascinating piece about George Romney’s failed 1968 presidential campaign in a recent New York magazine, the gist of which is that Papa Romney’s version of Republicanism flowed from his Mormon faith, which taught him that the institutions of civil society (rather than government) are the means to ensure social harmony. To the extent that Mitt inherited his father’s vision, he’s “an organization man without organizations” – our world continually erodes the institutions that undergirded the postwar consensus that made the mid-’40s to the mid-’70s a time of unprecedented economic growth and stability. That world, which created the conditions for the legislative components of the civil rights victories of the ’60s, is gone.

But the private foundation in perpetuity, one of its products, and in a way, one of its avatars, is still with us? For how much longer? The thing about the three tenets I’ve laid out in this series – privacy, autonomy, and perpetuity – is that they’re all under perpetual and sustained attack in contemporary life. Or rather, they’re all gradually eroding.

Transparency

Interdependency

Finitude

These are the forces that shape contemporary life. The archetypal private foundation is a throwback, is retro, is old-school. But there are lots of good reasons why retro sells, and not all of them have to do with nostalgia. I love my turntable because it acts as a time machine; I find physical artifacts of a bygone era – used records – and repeat an experience that my younger self – or a version of me now thirty years ago – had in the same way: spindle, needle, groove, crackle. It’s not perpetuity, or at least not entirely, because the record player is new – but the record is old. I wonder if there aren’t ways of preserving the longer time horizons that the archetypal model affords in different organizational forms. Those old records still play, and they still sound great – even if they’re on a brand-new turntable.

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One Response to “Who Wants to Live Forever”

  1. The Blog Briefly Known as "Democratizing Philanthropy?" » Blog Archive » Dream a Little DREAM Says:

    […] makes me think about philanthropy, winning, and perpetuity. When a campaign wins, on some level it faces an existential crisis – we got what we wanted, […]

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