The End of Big Philanthropy
Old-guard philanthropic institutions are eager to tell rich kids how to spend their money. They should be looking in the mirror instead.
A friend of mine was recently given direction on how best to secure grant money from a foundation:
“If you ask for funding, they give you advice. If you ask for advice, they give you funding.”
It’s funny because it’s kinda true. It also connotes an (unintentional) arrogance with how traditional grant-makers develop and execute their strategies. They take a foundation-centered approach — “let’s fund what we care about” — rather than a problem-centered approach — “let’s do what it takes to solve big challenges.” This may appear to be a subtle difference, but it’s significant.
A foundation-centered approach to social change is born out of very specific incentives and constraints. It’s necessarily wedded to particular financial instruments, like charitable grants, geared to get money out the door (each has a five percent minimum payout requirement). Program officers focus on making their individual grants successful instead of, as Darren Walker wisely suggests, organizations and movements. Short-term incentives dominate, leading to equally near-sighted strategies and outcomes.
Heads up to traditional philanthropic folks: the market is headed towards taking a problem-centered approach to solving the world’s biggest challenges. And this new world is filled with motivated people doing whatever it takes to solve them.
These problem-centered outfits are wide-ranging in their shape and size. They invest in for-profits, non-profits, and spin up their own ground-breaking initiatives. They are shirking tax benefits in favor of flexibility, and it’s setting a new stage for how big challenges are identified and tackled in our world today.
Solutions to big social ills like financial inclusion and homelessness know no prescriptive financial instrument, no tax status, and no IRS reporting requirements (though I do believe transparency to be a good thing).
There are dozens of ways people are trying to “do good” outside the world of Big Philanthropy. Mark Zuckerberg and Priscilla Chan created an LLC structure for their philanthropic activities — and were both lauded and lambasted for it. (Others have gone down the LLC path long before, notably Laurene Powell Jobs and her Emerson Collective.) Meanwhile, venture capitalists like Obvious Ventures, Village Capital, and Unitus Impact are moving the nebulous field of impact investing forward. Rob Solomon’s GoFundMe and GiveDirectly have demonstrated that just directly giving people money can often lead to better outcomes than overly-managed development projects. Acumen’s Jacqueline Novogratz approach to investing “where markets have failed and aid has fallen short” has set new standards.
And of course you have “hacker philanthropists” like Sean Parker attempting to upend the tired tropes of giving, even if in name and perception only (Mr. Parker believes his approach to be innovative, when in fact it’s quite traditional).
It’s worth noting that the majority of these organizations are less than five years old. All of them were founded post-2000. None of them, save the last two, hold 501(c)3 status.
Instead of looking inwards in reflection, many foundations are attempting to steer how this new breed of philanthropists and investors go about their business. I know this anecdotally. Three major foundations have approached me about constructing a dialogue on Medium for this young class of Silicon Valley rich kids and how they should spend their philanthropic dollars.
This reeks of hubris. It’s dangerous. And it distracts from the real issue: foundations are caught in a time loop, attempting to uphold the influence of their namesakes, based on preservation of an existing system in the name of disrupting others.
Instead, these older institutions might first consider changing themselves — their culture, investments, organization structure, and possibly even their entire raison d’être. Instead of advising the youngins on the do’s and don’ts of do-gooding, they might — dare I say — learn a thing or two from them. If done well, they stand much to gain, as do the very people they are aiming to serve.
A few words of advice on how to begin that journey, from someone who doesn’t know any better:
Diversify Your Ranks.
Our world, and the challenges we face, are more interconnected than ever. These are best tackled with people of diverse backgrounds and skill sets. Instead of amassing seas of specialized talent, use your size to your advantage by convening an interdisciplinary mix within your ranks. Or hire agencies to help. You are uniquely positioned to do this.
Convene Strange Bedfellows.
Leadership here now requires divergent thinking and inclusive dialogue with players across private, public and social sectors. If you’re the Robert Wood Johnson Foundation, consider working not only with The First Lady and local non-profits but with the likes of Rock Health, Fitbit, Obvious Ventures, and McDonald's. The results of these gatherings, and dare I say collaborations, could yield compelling and unexpected results that might not be otherwise borne from echo chambers of old.
Get Nimble.
We all know how challenging the grant process has been historically (I’ve personally been both grant-maker and grant recipient; it’s terribly painful on both sides). You can make it easier to attract new types of grantees without sacrificing rigor. Adopt new mindsets and modes of operation that positively change the flexibility with which you award grants. The Knight Foundation Prototype Fund, the Kenneth Rainin Foundation Innovator Awards, and the Michelson Prize & Grants are all great examples.
Humble Yourselves.
Challenge your carefully crafted theories of change (and the problems associated with them) by enabling your grantees to look at underlying assumptions with fresh eyes. Or revisit them yourselves, in partnership with grantees and the constituents you’re looking to serve. (Check out what Nadia Roumani, the Stanford d.school and Stanford PACS pulled together here.)
The new guard — young tech philanthropists, social entrepreneurs, and impact investors — have grown up in a time of radical transparency, lean business methodologies, and positive social change embedded in their everyday philosophies and actions. The idea of top-down, RFP-driven projects and silo-ed philanthropy simply don’t make sense to them.
Some program officers are keenly aware and thoughtfully reflecting on these very issues (check out this perspective from David Sasaki), and many of the examples above should prove as hope that the big ships can steer themselves away from the precipice of irrelevance.
Ultimately though, these questions should fall at the doorstep of foundation CEOs and boards. My question to them is: what are you going to do about it?
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