The Blog Briefly Known as "Democratizing Philanthropy?"

At the Independent Sector conference last week, we had the privilege of seeing Wynton Marsalis speak and perform. I was excited for the latter, but came away floored by the former. His manner of speech and thought were so distinctive and insightful, it felt like an implicit reproach to the generalities in which big-tent conferences traffic.

All of Marsalis’ statements were grounded in a place and a time. To understand the origins of jazz, he explained how in the late 19th and early 20th centuries, English, French, Spanish, Creole, and African cultures converged in New Orleans to create the conditions for a new form of music. When introducing his talented backing band (piano and upright bass), he referred to them by name, age, and place. It matters that the pianist is 31 and from Milwaukee, and that the bassist is 19 and from Jamaica. Their generational and place-based experiences shape the music to which they’re exposed, the musicians with whom they can collaborate, and therefore how they play.

Marsalis went on to describe jazz as a metaphor for democracy: players learn to collaborate around a common theme, improvising within a structure. Mastery comes not just from technical skill but from deep knowledge of history and diverse modes of expression that have come before and exist now.

What would it mean for foundations to operate as part of a jazz trio, in the Marsalis mode, with nonprofits and government? (All right, it should be a quartet that involves business.) Above all, good jazz players are skilled listeners. They know the qualities of their instrument, and how it blends with the other instruments. The drums don’t carry the melody. The trumpet doesn’t play rhythm. But everyone gets a solo – for a certain amount of time. The players look at each other and listen to each other to understand when it’s time for the solo to end and the song to continue.

Funders need to learn how to listen better to the other players in the social change quartet, and how to ground themselves in the strengths and limitations of their “instrument” – grantmaking, convening, advocacy, research, field-building, etc. The more they understand what their instrument is and isn’t good for, the more collaboratively, fluently, and beautifully they can play.

Innovation comes through a thorough grounding in tradition, so that when you repeat themes that have been heard many times before – the “standards” – you can bring a new flavor to them while recognizing the work that’s gone before. So when funders indulge in what I call “zombie philanthropic ideas that won’t die“, they should remember Wynton Marsalis and ask themselves – and their fellow players – “where have I heard that one before?” And a new song can be born….

Over the past three years, I’ve become a big fan of European football, aka soccer, following the major leagues in England, Spain, and elsewhere, especially my beloved FC Barcelona. As a newcomer to this kind of fandom, I’m continually bemused by the sheer volume and breathless tenor of commentary around “the transfer window”, i.e., the two times of the year when teams can buy and trade players. Things can get very complicated because you’re trading across international lines, and often until the very last minute of “Deadline Day,” which was this past Monday. The big news of Deadline Day was Mesut Ozil, a German of Turkish extraction, moving from Real Madrid in Spain to Arsenal in London. My passport hurts just thinking about that! Not to mention my wallet: pounds, euros, dollars – the figures are reported multiple and confusing ways.

What’s interesting is how the hype machine processes trades, and how the “right” or “wrong” decisions can shape how teams are perceived in the local and international media, and how much leeway managers, particularly new ones, have to find their way. This has been a season of unusually high managerial turnover at the major clubs, the biggest of which was David Moyes succeeding Sir Alex Ferguson after 26 years at Manchester United. That’s right, one manager led that club for twenty-six years. Imagine the expectations for the new guy! The succession was scrutinized all summer, more so because there weren’t games to talk about. Since the league only starts up in late August, the media and fans judge managers early on in the season through their team’s activity in the transfer window. Never mind that there’s usually a general manager-type figure who makes personnel decisions, it’s the coach/manager who takes the blame for transfer activity perceived to be subpar.

For the last several years, Arsenal manager Arsene Wenger, an impossibly urbane and dignified Frenchman who favors tailored grey suits and an Arsenal-red tie, has been pilloried for his lack of boldness in the transfer window. Arsenal, one of the richest clubs in the Premier League, based in North London, as recently as ten years ago had an undefeated season. But the “Invincibles” of 2004-05 were the last Arsenal side to bring home a trophy, and the pressure on Wenger has grown with each passing year. Missing out on a big signing during successive transfer windows has eaten away at his reputation. Unlike other major clubs that rack up the debt in pursuit of trophies, Arsenal’s management – including Wenger – have been fiscally prudent, content with being a consistently playoff-caliber club with a clean balance sheet. But its fans expect more, they remember the Invincibles.

Finally, this year, Wenger and Arsenal made that longed-after big signing. On Deadline Day, they swooped in for Ozil, one of the stars of the 2010 World Cup and still only 24, his best years ahead of him. The reaction on social media and in the football press was sudden and raucous. Momentum was Arsenal’s at last. And this was the day after they beat their North London rivals Tottenham Hotspur on the road. From also-rans to top of the class in the course of a long weekend.

What I’m getting at is the power of talent to shape expectations, and the importance of managing the narrative – particularly when the story you have to tell goes beyond what gets reported in the press or discussed on social media. We’re really not good at this in philanthropy. A while back, I wondered what the “political arts” might be, and how foundations can learn from them. Shaping the narrative has to be one of those arts. The infrastructure of comment in philanthropy is nowhere near as developed as the football press, but word still travels fast. I’ll be watching Wenger this season as Ozil integrates into the side, and thinking about talent, narrative, and momentum.

I’m pretty sure that it’s a spam account, but one of my Twitter followers seems to exist to spew out random questions about fundraising and the nonprofit sector, and solicit people to contribute answers. At the risk of further spam, I’ll take the bait and answer a question that showed up in my feed and piqued my interest:

“What if every company were non-profit including Wal-mart?”

My favorite kind of question, one that invites consideration of an alternate reality, in a way that questions the premises of our current reality. Lot of good sci-fi out of that conceit. (RIP Fringe, so good until the last season.)

There are different ways to answer this, but I’ll choose this approach: what if every company, instead of returning value to shareholders, were obligated to reinvest surplus in the mission?

To start with, would all companies be private? Would there be any reason to take a company public? There would if you thought that other people might like to share the risk of ownership with you because they believe in the mission. They might risk losing their money if the business goes belly-up. But wait – how is that any different from receiving donations from individuals? They don’t expect to get a financial return – in essence, they’re sacrificing that money, in return for the hope of social impact. (See last week’s post on the three returns and “third heat” of impact investing.)

Are we just talking about membership organizations, where people pay a certain amount to belong to an institution, like a film society or a museum? No, they’re not assuming any risk for anything other than their own money. Someone has to be accountable for the assets of the organization.

So a public non-profit company would be…just a regular non-profit. What would a private non-profit company be? A foundation? No, those have particular obligations to pay out 5% of their assets. And they’re insulated from market pressures other than on their endowments. A private non-profit company would have owners who would directly assume the risk of failure if expenses exceed revenues to the point where all assets are depleted.  It would have beneficiaries, and purchasers of its services, but only a relatively small number of owners assuming the risk. And they would do so without expecting value returned to them from a surplus.

So this seems to come down to ownership and risk. What’s different about a world where all companies are non-profits is that, at first blush, it’s not clear why anyone would start a company, or try to grow it. But I suspect if we look beyond the profit motive, there would be other reasons to do so. For another post….

I’m wondering whether the key to “strategery” isn’t found in the wisdom of Kenny Rogers: “You’ve gotta know when to hold ’em, know when to fold ’em, know when to walk away, know when to run.”

The song is about a card player, who’s observing a series of numbers, but also a group of people. It’s said successful poker players read their opponents, not the cards.

This strikes me as a useful metaphor for strategy in philanthropy, particularly at a time when “metrics mania” has taken hold. To me, it becomes “mania” when metrics are driven by superstition: DATA take on a totemic power and aren’t understood either in themselves or in relation to their context.

It’s not enough to gather data, you have to know how to use them. Which means being clear about why you’re gathering them. Which means being clear about what you’re hoping to accomplish through the use of data.

Strategy in this respect is about the judgment of when to use different kinds of data, and how to balance them against each other. Context is everything. Decision-making is strategic when it’s data-driven, but even that phrase is a bit deceptive. It’s not the data doing the driving; they’re the fuel – you have to be the driver. But all too often we act as if we’re in one of those Google self-driving cars and try to have the data “speak for themselves.” Ain’t no such thing, my friends.

So think about Kenny Rogers the next time you’re wondering how to be more strategic in your giving. Read the numbers on the cards and do your calculations, but only as you read the players and the table.

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.

I’ve always been interested in the behind-the-scenes aspects of collective creative endeavors (film, TV, music, theater). For example, the person with the job title “producer” has very different jobs in film, TV, music, and theater. In film, they’re often the person who comes up with the idea, hires the writer and director, and sees the project through filming to editing to release: Scott Rudin, Jerry Bruckheimer, etc. In TV, the executive producer, or the “showrunner,” is often the creator and the head writer: Joss Whedon, Chuck Lorre, etc. The director in film is lauded as the auteur; in TV, they’re a hired hand who are there to implement the showrunner’s vision. In music, the producer helps the artist or group find a particular expression of their “sound.” The complicated nature of capturing performance in digital bits (I was going to say, “on tape”) makes them part arranger, part sound engineer, part motivator, part songwriter. In theater, the producer is the money, plain and simple.

So I wonder, what kind of industry is philanthropy? Is it perhaps a creative industry? If so, the grantmaker may in some ways be like the producer. But as we’ve seen, that role can take on many aspects. Are different kinds of grantmakers like different kinds of producers – TV vs. film vs. music?

In future posts, I’ll consider this question further. I’ll also look at other industries that philanthropy might be an example of; such a list might include:

• Financial services
• Service (as in, “a service industry”)
• Knowledge

To be continued….

So it’s been a year since I started blogging. I read over my posts from that past year last night, and thought about threads I’d like to continue in the coming year, and those that I’d like to summarize and try to say something more definitive on.

To continue:

• Five zombie philanthropic ideas that won’t die
• What are the hard problems in philanthropy?
• Philanthropy in the CIVETS countries (Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa)

To summarize:

• “Varieties of capitalism” and varieties of philanthropy
• Agriculture vs. engineering as a metaphor for social change
• Analogies between nonprofit fundraising and political campaigning
• The privileging of local knowledge as a bipartisan concern
• Democracy, markets, and freedom (or, Homer Simpson and the rule of law)

To possibly begin exploring:

• The role of philanthropy in a democratic society based on prior international experiences like Eastern Europe and Latin America, amid the lessons they hold for the Middle East.

And there’ll be more in the last category, for sure….

Sounds like a plan!

I’ve been making my way through a pile of back issues of the New Yorker, and came across this interesting piece from Atul Gawande, their great medical writer, from last winter about the analogies between health care reform and agricultural reform a century ago.

Part of the reason OMB couldn’t estimate cost savings in the healthcare bill was that so much of it was made up of pilot programs, the expected savings of which it was very difficult to calculate.

While this might seem like a problem given the crippling effect of healthcare costs on the economy, Gawande argues that a pilot-heavy approach is actually good, because that’s in essence how agriculture was reformed in the early 20th century, through piecemeal “agricultural extension” (educating farmers about more efficient practices) efforts that gradually helped bring food prices down.

I’ve written about agriculture vs. engineering as metaphors for social change, so this analogy is fascinating to me. Here’s Gawande:

The history of American agriculture suggests that you can have transformation without a master plan, without knowing all the answers up front. Government has a crucial role to play here–not running the system but guiding it, by looking for the best strategies and practices and finding ways to get them adopted, county by county. Transforming health care everywhere starts with transforming it somewhere.

This is where local knowledge becomes important. Gawande has a nice vignette about the agricultural extension agent in his hometown of Athens, Ohio, and his quiet, patient efforts to help farmers by providing access to technical knowledge that can mean the difference between survival and insolvency. That person knows the terroir of Athens, in the sense of its folkways, climate, and culture, so he can adapt technical knowledge to local needs, and find a practical, short-term solution.

Malcolm Gladwell talks about “Connectors” within a network in The Tipping Point (HT Fast Company for the term). I wonder if people like Gawande’s agricultural extension agent aren’t another kind of node, an informational one that allow for the localization of general knowledge. (I think of the Spanish verb aterrizar, to come down to earth or to land.) Rather than propagating a trend virally, they stay in one place and bring the rest of the world to that place.

I’m reminded of what my charming, mustachioed Austrian poli sci professor Kurt Tauber once told me about Marx: his conception of a “rich man” is someone who has access to and can enjoy all forms of human creativity. (This tells me I’m not completely misremembering that idea.) What he didn’t say is, “while staying in one place,” but agricultural extension is kind of about that, bringing the world to your door and helping you get the most out of your local context.

So if agriculture is a metaphor for social change, agricultural extension may be a metaphor for the kind of learning that needs to happen to make social change possible. Agriculture suggests that you have to start by understanding the land on which you stand, as well as the seasons (which go beyond the moment you happen to be in) and what kinds of crops grow well under those conditions. Agricultural extension is about bringing scientific and technical knowledge to bear in a bottom-up fashion – to solve a specific problem you have (why aren’t my crops growing) rather than to answer a general question that you may or may not have (what makes X crops grow fastest?). The thing to notice is the role of the extension agent, the person whose job it is to know the climate and the people, and to have access to the right kinds of knowledge.

“I just try to help make farming better in Athens County,” says Gawande’s extension agent. Such a simple goal, so easy to state – and that involves so much….

As I’ve been saying, I think the privileging of local knowledge is a bipartisan issue, or a cross-cutting cleavage, one that elements of left and right can agree on.

From the right: lefty-liberal plans for social engineering are based on the fallacy that human nature is perfectable, and subject to rational planning and persuasion. But the truth is man is flawed by nature (or by original sin), and top-down approaches don’t take into account local realities. “Unintended consequences” are the inevitable byproduct of social engineering, and can be avoided by greater reliance on market dynamics. It’s hubris and folly for a central government to try to plan an economy, much less dictate cultural norms that have developed idiosyncratically over time in local communities. As Ronald Reagan said, “The ten most dangerous words in the English language are, ‘Hi, I’m from the government, and I’m here to help.'” (Quote from this New Yorker article, toward the end.)

From the left: the corporatization of culture, food, and everyday life are a homogenizing force that threaten to erase the diversity that make our communities and nation great. “Grassroots community organizing” is a way to empower everyday people to make their voices heard and have a positive impact on the conditions of their lives through obtaining changes in policy, whether local, state, or federal. To be a locavore is to reject the evils of factory farming, which is an environmental disaster, an animal-welfare nightmare, and a public-health time-bomb. Eat local, know your farmer, avoid GMOs, celebrate the diversity of a specific place.

What they agree on: Top-down solutions are bad, bottom-up initiatives are morally and practically preferable.

What they disagree on: When to go against these principles (or preferences). For many on the left, federal enforcement of rights trumps local practices. For some on the right, the sphere of government action should be absolutely minimal, and there might not be a time when local norms (states’ rights?) should be abrogated – except perhaps in the protection of private property.

The upshot for philanthropy: Foundation grantmaking has an almost inherently top-down tendency. Many on the right and the left would be in favor of promoting greater involvement of local stakeholders in the learning, and maybe even decision-making, processes of foundations. Community foundations, with their collection of individual donor-advised funds that let a thousand flowers bloom, might appeal to the right, while funding collaboratives, where individual donors try to overcome collective-action problems to coordinate and amplify their grantmaking, might appeal to the left. The question becomes, when if ever should central oversight trump local norms. (Hint: it starts with a “D,” ends with a “y,” and rhymes with “Shmaversity.”)

In a previous post, I wondered if agriculture might be a better metaphor for social change than engineering.

Amy Sample Ward has a nice piece in SSIR about gardening vs. landscaping as metaphors for building communities online. That’s an interesting alternative. The way she describes landscaping sounds akin to what I’m getting at with engineering, the idea that there’s a pre-determined schema that’s being implemented. And of course the term “social engineering” is one that’s used to express skepticism about trying to intentionally shape social outcomes (like, through government).

So, gardening, landscaping, and agriculture. Agriculture is gardening writ large, tied to a purpose beyond an individual family or community. It’s also a livelihood: people are professional landscapers or farmers, but gardening is usually a hobby. (Right?) Agriculture requires inputs and technology, and it’s connected to a supply chain. Hmm, starting to sound more like engineering. But there’s something inherently unpredictable that, while it’s present in engineering because complex systems have their own dynamics that we can’t always understand, sets agriculture apart. Also, the cyclical nature of the growing cycle and the idea of crop rotation and soil management I think are powerful metaphors for what it takes to cultivate (hey, guess where that word comes from) social change.

It’s funny, because agriculture isn’t really about change, it’s about constancy and regular renewal. Cyclical, not linear. Is agriculture an inherently conservative metaphor – not progressive because it goes around in a cycle rather than moving forward? Is agriculture a better metaphor for social continuity than social change?

And of course, there’s always the possibility that I’m making a mountain out of a molehill. But I suspect not.