Transparency Talk

The Givers: Wealth, Power, and Philanthropy in a New Gilded Age
May 10, 2017

(Daniel Matz is manager and content developer for Foundation Center’s Glasspockets.org portal. This review was first published in Philanthropy News Digest.)

Daniel X MatzThe mega-wealthy have long been celebrated in American culture. Even in the first Gilded Age, when the likes of Carnegie, Mellon, Rockefeller, and Sage were scorned as robber barons, their wealth — and power — were much admired. In their time, these titans of America's burgeoning industrial might determined the economic destiny of millions and set the course of the nation. And their philanthropy — more than a century on — continues to echo with all the force that money can buy.

Today, as we celebrate the dynamos of a new gilded age — their fortunes, in many cases, made younger, growing faster, moving at the speed of light — we're witnessing a second philanthropic boom. And that seemingly inexhaustible river of "private wealth for public good" brings with it the ideas and voices of those who, having made vast fortunes, are now determined to put that money to use. How society responds to and channels that torrent of money while making sure the ideas it funds best serve the interests of the American people is of broad concern.

“Giving by the mega-wealthy is going to be bigger, more sophisticated, and more focused on influencing public policy debates.”

In The Givers: Wealth, Power, and Philanthropy in a New Gilded Age, David Callahan gives us a grand tour of the philanthropic landscape in the opening decades of the twenty-first century while opening a window on how today's economic winners — having proved themselves in business — are eyeing philanthropy as the ultimate opportunity to convert wealth into power. But where a Matthew Josephson might have distrusted such a development, in Callahan's telling, these masters of the universe are thoughtful, broad-minded, and, yes, even likable. He's not interested in taking them down, criticizing their often rapacious business practices, or pointing out the role played by fiscal and tax policy in cementing their status as the .01 percent. Instead, his is a book about the giving away, not the getting, of great wealth.

Founding editor of the Inside Philanthropy website, a founder of public policy think tank Demos, and a former fellow at the Century Foundation, Callahan has a reputation as a keen observer of philanthropy and civil society and it serves him well here. Not only does he know his subject, he's also interviewed many of the people in his book — Priscilla Chan, Eli Broad, Melinda Gates, and John Arnold, to name a few — and is able to support his own judgments with their words. And what both he and they see is a future in which giving by the mega-wealthy is going to be bigger, more sophisticated, and more focused on influencing public policy debates.

David CallahanDavid Callahan

Of course, many of today's mega-wealthy, people like Warren Buffett and Michael Bloomberg, have indicated they have little interest in leaving much of their wealth behind. (In a recent 60 Minutes interview, Bloomberg joked with correspondent Steve Croft about "a guy on his death bed in a hospital with the rails around and his family looking down like vultures. And he looks up and says, 'I know I can't take it with me, but I can take the access code'.") Indeed, in the next decade alone, some $740 billion is likely to be distributed in the form of private philanthropy. And if the Giving Pledge — the Buffett and Gates effort to encourage the uber-rich to commit the majority of their wealth to philanthropic causes — is any gauge, we could see another trillion dollars in private wealth making its way to nonprofit organizations and causes over the lifetimes of the 158 current "pledgers" who have signed on. (Learn more about that campaign and its signatories at the Foundation Center's Eye on the Giving Pledge feature.) How all that money will be used over the coming decades is what former Secretary of Defense Donald Rumsfeld might call a known unknown, but it undoubtedly will have important and lasting effects, and that — as well as who will decide what its impact might be — is at the center of Callahan's inquiry.

In the book, Callahan examines the collision of two fundamental American values — freedom and equality — and how the wealthiest Americans have been able to leverage their money (for better or worse) to gain advantage in the marketplace of ideas. Sure, money in politics is as American as apple pie: for proof, look no further than the Supreme Court's ruling in Citizens United, the flood of cash swirling around political campaigns, and K Street lobbyists and super PACs. But much less is heard about the ways in which the mega-wealthy are using their philanthropy to influence public policy and (intentionally or not) drown out the voices of average Americans. We're not talking about eight-figure gifts for museums and the like; we're talking about philanthropy that shapes national agendas and priorities and promotes policies that affect Americans where they live — from promoting school vouchers, to hobbling the Johnson Amendment, to pushing for repeal of the Affordable Care Act.

It's one thing, for instance, for the average American to make a $100 donation to a cause she believes in, and it's certainly noteworthy when a wealthy donor trumps that with a gift a hundred thousand times larger; it's something else entirely when a donor puts up the money for a think tank to develop a public policy recommendation, hire researchers to provide intellectual cover for the policy, and disseminate the results through a report and a media campaign. The Brookings Institute has been around since the 1910s, the American Enterprise Institute since the 1930s, the Heritage Foundation since the 1970s. All are tax exempt, and all have been the beneficiaries of substantial philanthropic largesse over the years. What's different in 2017 is the full-throttled way in which such bounty has become another weapon in the ideological clash that defines our time: Left vs. Right, liberal vs. conservative, cosmopolitan vs. populist. What we are seeing, Callahan notes, is the mega-wealthy using their philanthropic dollars to define the terms of the debate and dominate the public square in areas and on issues that a generation ago were the purview of academics, technocrats, and policy makers.

The Givers - Book JacketSome might argue that this isn't necessarily a bad thing, and Callahan is quick to note that the mega-wealthy have no agreed-to set of interests and, as a group, are as ideologically and politically pluralistic as the country itself. If at times they can seem like gods throwing thunderbolts at one another, the diversity of ideas and approaches they represent seems to balance out: for every wealthy advocate of school vouchers and charter schools, there's an equally wealthy and committed advocate eager to double down on public education.

In a perfect world where government is more or less trusted to do the right thing, that might be okay, argues Callahan. But in an era of widening inequality and growing political polarization (exacerbated by our addiction to social media), government and traditional institutions are losing their ability to absorb those thunderbolts and forge compromises that satisfy the majority of Americans. It's not that the public square is empty; it's that the platforms from which the plural voices of American democracy typically are heard have been roped off and posted with "Do Not Enter" signs. For Callahan, it's no coincidence that the outsized influence on public policy of the mega-wealthy comes just at the moment when both institutional and government effectiveness appear to be in terminal decline.

With a nod to French economist Thomas Piketty, Callahan sees this decline as a by-product of mounting economic anxiety, driving broad disaffection with both major political parties and a loss of faith in the ability of government to materially affect the lives of those who have lost their livelihoods to globalization, automation, and de-industrialization. Into that vacuum has stepped the wealthy, with states and local governments increasingly looking to foundations and nonprofits to join forces in public/private partnership, and fund everything from education initiatives to homeless services to public parks. Every time a philanthropist gives $100 million to bankroll a new reform effort in a struggling school district, or convinces a city to spend a portion of its parks budget on a whimsical project, or provides millions for a campaign to convince the public to support/oppose an international climate agreement, writes Callahan, we are seeing a new kind of philanthropy in action. And there's no reason to believe the trend won't continue, or that it won't happen in ways largely beyond the ability of the public to control.

As much as The Givers pulls back the curtain on this reality, it's also a call to change how philanthropy in America is regulated. Readers of Callahan's posts on Inside Philanthropy will not be surprised by his prescriptions — chief among them a call for greater transparency and accountability in the sector (principles Foundation Center has long championed through our Glasspockets initiative). Here, though, Callahan has something more specific in mind: changing the rules to require wealthy individual donors, donor-advised funds, private foundations, and nonprofits to disclose more information about their giving, more quickly. He also calls for the creation of an independent Federal Reserve-style commission to oversee the nonprofit and philanthropic sectors; the establishment of formal metrics to assess charities' effectiveness; and for the IRS to be given more resources — and greater latitude — to audit more than the tiny fraction of nonprofits and foundations it currently reviews. Callahan also favors limiting the tax-deductibility of contributions to nonprofits that are not working to alleviate poverty or address other urgent social problems, and he wants to see foundation boards be more independent and representative of the communities they are charged with serving.

For Callahan, these are small changes — a somewhat Pollyannaish take that seems to ignore our current political climate and the treasured prerogatives of many large, important foundations and nonprofits. Yes, philanthropy needs more transparency and accountability, it probably needs new rules, and the public needs more and better information about how foundations and individual donors are spending their tax-advantaged resources.

But we also need to find the will, and a way, to restore the public square to something like its imagined heyday so that the voices of the rich and powerful are not the only ones heard in statehouses and the halls of Congress. As Callahan puts it, Alexis de Tocqueville didn't esteem America for its robust nonprofit sector; he admired it for its egalitarian ideals. Nurturing and sustaining those ideas over the coming decades should be something we can all agree on.

-- Daniel Matz

Eye On: Airbnb Co-Founders Joe Gebbia, Nathan Blecharczyk, and Brian Chesky
April 26, 2017

(Melissa Moy is special projects associate for Glasspockets.)

Two friends were struggling to pay their rent when they realized they could earn much-needed funds from travelers.  In 2007, they charged their first three customers $80 a night to sleep on an air mattress in their San Francisco apartment when local hotels sold out during a conference.

And the rest is history.

Joe Gebbia and Brian Chesky, friends and former Rhode Island School of Design classmates, expanded their enterprising idea.  With Gebbia’s former roommate, Nathan Blecharczyk, the trio founded Airbnb in 2008 and revolutionized the art of renting home space.  As Gebbia explained in a TED talk, Airbnb designs for trust to create a “culture of sharing… that brings us community and connection instead of isolation and separation.”

Within 10 years, the trio has groomed Airbnb into a $30 billion tech giant, a disruptive and controversial force that has transformed the travel and tech industry and popularized the idea of the “sharing economy.”  As Airbnb has grown, so have controversies and debates over its impact in already tight rental markets.  Criticism that the company has contributed to community displacement and a reduction in available long-term rentals have led to ongoing legal battles. Yet, despite the regulatory struggles, even hotels are rallying to find ways to imitate the trendsetting Airbnb.

 

Entrepreneur - Airbnb Trio
The Airbnb co-founders are among the youngest to join Warren Buffett and Bill and Melinda Gates in the Giving Pledge. It also marked the first time all of a company’s co-founders committed at the same time. Credit: Entrepreneur


Now the entrepreneurial trio – who are each worth an estimated $3.3 billion and among the youngest on the 2016 Forbes 400 billionaires list – have started making visible strides in the original sharing economy by engaging in philanthropy. 

The Airbnb co-founders are among the youngest to join Warren Buffett and Bill and Melinda Gates in the Giving Pledge, whereby wealthy individuals pledge to give away the majority of their wealth within their lifetime.  When they joined the Giving Pledge last year, it also marked the first time all of a company’s co-founders committed at the same time.

In a Fortune interview, the entrepreneurs credit Warren Buffett and Bill Gates with their decision to join the Giving Pledge.  Gebbia touted Buffett as a “Jedi master of philanthropy.”  And Chesky said Buffett’s argument resonated with him – wealth beyond a certain point has zero utility, and such wealth could have a greater social impact.

Still relatively new to philanthropy, the trio acknowledge they are taking their time to give away their wealth.  However, openness is at the heart of the sharing economy, and the Airbnb co-founders understand a public expectation of openness in philanthropy exists.

“I’ve always believed that you should [be public about giving], such that you can be very public about your values and what you stand for,” Chesky said in a Fortune interview.

Corporate Philanthropy

As the Airbnb co-founders design their philanthropic strategy, the company is experimenting with different ways to use its platform for good. 

The San Francisco-based company has created a disaster response platform that brings together hosts and community groups to provide free temporary housing for individuals and families displaced by disasters, as well as relief workers.  When a disaster occurs, Airbnb contacts local hosts who may volunteer to provide free housing; if no hosts are available, Airbnb will subsidize the housing cost.

“I’ve always believed that you should [be public about giving], such that you can be very public about your values and what you stand for.”

Airbnb connects hosts to help support local and national disaster relief efforts, and arranges disaster preparedness training.  Airbnb also contributes travel vouchers to support advance teams and large groups of relief workers for major national and international disasters.

More recently, the company has pledged to use its disaster response platform to aid refugees affected by President Donald Trump’s executive order. Over the next five years, Airbnb has committed to provide short-term housing for 100,000 refugees and those barred from entering the United States.  Airbnb also pledged $4 million to the International Rescue Committee over the next four years to support the most critical needs of displaced people worldwide.

Airbnb also recently announced a scheduled launch of a humanitarian division next month focusing on global issues such as displaced populations, rural flight and bias against strangers.

Given that building community is one Airbnb’s central philosophies, the company’s platform supports a number of opportunities for Airbnb hosts to make a positive social impact via global volunteerism and “Open Homes,” which provides housing at free or reduced costs for medical treatments, college visits, or family gatherings.

Through a “social impact experiences” program, Airbnb guests enjoy culture and learn about local causes in the cities they are visiting.  Local community leaders and volunteers are invited to create an opportunity that brings people closer to their work.  Nonprofit leaders and Airbnb hosts lead the experience, and the nonprofits receive 100% of the social impact experience fees. 

Airbnb hopes this will connect guests to issues they care about or introduce them to new causes.  The social impact experiences run the gamut, from visiting a local artist or animal shelter to attending a dinner and theater event, or spending a day with an urban gardener to create green space in Los Angeles. 

Airbnb has committed to fighting homelessness in New York City, where the company recently settled a lawsuit involving legislation that would fine Airbnb hosts up to $7,500 for renting out certain types of apartments and homes for less than 30 days.  Last year, the company donated $100,000 to WIN (formerly Women In Need), a group that helps homeless women and their children.  Additionally, Airbnb pledged to recruit volunteer hosts and guests to assist WIN clients with professional skills training, such as resume building and interviewing for jobs, and increasing children’s literacy.

Personal Giving 

The trio’s individual giving appears to be driven by a spirit of entrepreneurship; they want to give others the opportunity to achieve their dreams and support “future creatives and entrepreneurs.” 

Joe Gebbia

Joe GebbiaIn Joe Gebbia’s Giving Pledge letter, he described his hope to help other entrepreneurs: “I want to enable as many people as possible, especially in underprivileged communities, to experience this magic firsthand… and achieve their dreams.”

The 35-year-old Georgia native added, “I want to devote my resources to bring the moment of instantiation, when someone who has an idea sees it become real, to as many people as I can.  It can unlock the understanding that they can make things happen, that they can shape the world around them.”

Gebbia serves on the Board of Trustees at his alma mater, the Rhode Island School of Design (RISD).  In 2014, he pledged $300,000 to RISD for a $50,000 term scholarship and an endowed fund for talented students in need of financial aid.

Nathan and Elizabeth Blecharczyk

Nathan and Elizabeth BlecharczykIn Nathan and Elizabeth Blecharczyk’s Giving Pledge letter, the couple said they are in a “unique position to have significant positive impact” by giving away their wealth.  “We feel a responsibility to share our good fortune, and we pledge to dedicate the majority of our wealth over time to philanthropy,” the Blecharczyks said.

Nathan Blecharczyk, 33, who developed Airbnb’s website, demonstrated his entrepreneurial spirit early on.  When he was 12 years old, Blecharczyk learned how to code and wrote customized programs for clients; he developed popular programs for e-mail marketing.  By age 14, he founded an Internet software business and funded his Harvard University tuition with the sale of his business. 

The San Francisco residents cited their upbringing – his parents taught him to be inquisitive, confident and motivated, and her parents and teachers taught her to be self-aware and use her strengths to help others – as the reason to direct their philanthropy toward the “potential of children” and “transformative ideas.”

“Airbnb went from an off-the-wall idea to a transformative company as a result of assembling the right team – cofounders, mentors, investors, and later employees – and now we want to help others pursue unconventional ideas that can make the world a better place,” the Blecharczyks said in their letter.

The couple said their interests are in the areas of education, scientific research, medicine, space exploration, environment and effective governance.  “Our philanthropic approach will be reflected through the lens of our own passions and experiences but rooted in analysis to ensure we are choosing wisely,” the couple said.

Brian Chesky

Brian CheskyBrian Chesky, 35, wants his philanthropy to spur youth entrepreneurship.  “We all live with unknown potential.  The younger you are, the more unknown it is,” Chesky said in his Giving Pledge letter.  “But the clock ticks by each day of your life.  And each day someone young isn’t exposed to what is possible, their potential slowly dims.”

The New York native credited a high school teacher and RISD professors for helping him to dream and see that he could “design the kind of world I want to live in.”

“You can have a lot of impact on someone just by showing them what is possible,” Chesky said.  “With this pledge, I want to help more kids realize the kind of journey I have had.  I want to show them that their dreams are not bounded by what they can see in front of them.  Their limits are not so limited.  Walt Disney once said, ‘If you can dream it, you can do it.’  I would like to help them dream.”

To learn more, visit Foundation Center's Eye on the Giving Pledge feature and check out individual profiles for Joe Gebbia, Nathan and Elizabeth Blecharczyk, and Brian Chesky.

-- Melissa Moy

New Online Portal Opens Up Ocean Conservation Philanthropy
April 20, 2017

(Amanda Dillon is Knowledge Services Manager for Foundation Center. A version of this article was first written for Alliance magazine.)

Amandadillon-150x150_125_125_s_c1Ocean conservationists and their supporters can now easily track funding for marine protection activities through a new online portal, FundingtheOcean.org.

The site aims to break down knowledge barriers and democratize access to critical information needed to drive ocean conservation philanthropy worldwide by centralizing access to essential data, resources, and tools.

With funding support from six major foundations, Foundation Center unveiled the portal this month. It offers free access to data on philanthropic, U.S. federal, bi/multilateral aid grants, and crowdsourced information about grassroots marine conservation organizations, enabling users to see data on who is working on ocean conservation around the world.

TW_General_440x220_v4Current figures indicate that while the ocean covers 71 percent of the earth's surface, less than one percent of all philanthropic funding has gone to support it since 2009. 

“This is a critical moment for the ocean,” said Bradford K. Smith, president of Foundation Center. “The decisions we make now will shape the ocean’s future, and the future of the lives and livelihoods of those that depend on it.”

With FundingtheOcean.org, users will be able to find funders, recipients and grants conveniently displayed by geographic area.  This data can help spur collaboration and maximize conservation efforts.  For example, users could potentially benchmark open data on marine protection funding to help them learn from the successes and failures of their peers; identify new ideas and approaches; and increase access to and awareness of conservation efforts.

Additionally, the website features eight case studies and a curated report collection featuring major conservation funders, including the Walton Family Foundation and the Packard Foundation, so that users can learn more about what’s working and what we’re learning about funding the ocean.

For more information: www.fundingtheocean.org

--Amanda Dillon

How Engaging Conversations Build Better Strategic Plans
April 11, 2017

(Michelle Hunter is Director of Strategy and Alignment for The Chicago Community Trust. A version of this blog first appeared in The Chicago Community Trust’s blog.)

MichelleMartinHunterBW-150x150“How did The Chicago Community Trust create its strategic plan?”

This is a question we hear frequently from our colleagues in the nonprofit and philanthropic sectors who are working on their own strategic plans, and it’s easy to see why.

Strategic planning can be a complex business: cumbersome, messy and time-consuming. In fact, the very words “strategic planning” are often enough to draw sighs of despair from the most dedicated staff and board members.

Despite the challenges, though, it is critical for organizations to have clarity of vision for what they want to accomplish and how they’ll know if they’ve succeeded. And when creating a strategic plan, process is almost always as important as the final product.

For the Trust, our highest priority as we developed our new plan was to ensure that we were listening to the voices of our diverse body of stakeholders as much as possible.  We viewed opening up the Trust’s work as an opportunity to cultivate transparency, participation, learning and dialogue. 

“Opening up our work has helped build trust and collaboration with our stakeholders, and served to improve our processes.”

As a community foundation, the Trust exists to improve the quality of life for all who call the Chicago region home. If we were to create a plan that had a strong chance of succeeding, we needed to find a way for our process to include the input of many, not just a few.

Fortunately, we didn’t have to wait long for an opportunity to present itself: the year that we launched our strategic planning process was also the year of the first On the Table. 

On the Table is an annual Trust initiative. On one day a year, we invite residents of our region to come together with friends, colleagues and acquaintances to share a meal and to talk about what matters most to them and their communities.

How it works is simple: individuals and organizations sign up to host conversations on any topic of their choosing. The Trust provides a host toolkit  and a follow-up survey to learn what participants discussed.

The inaugural On the Table on May 12, 2014 drew about 11,500 participants from throughout metropolitan Chicago. We knew that the conversations would have a significant impact, not only on our region and the people who participated, but also on the direction of the Trust’s strategic plan. We eagerly awaited the results of the survey to learn what community members saw as the most pressing issues facing Chicago.

When the survey responses had been fully compiled and analyzed by the University of Illinois at Chicago’s Institute for Policy and Civic Engagement,  we saw that the most frequently discussed topics at that year’s On the Table were:

  1. Education & youth development
  2. Community engagement
  3. Equity and social inclusion

It was uplifting to see that these and other topics that had been top of mind for us up to that point in our strategic planning process were also high priorities for community members.

Trust_logo_horizontal_CMYKIn addition, On the Table gave us the essential feedback from nonprofits we serve that the Trust’s grant application process was overly complicated, burdensome and derailing nonprofits from their missions. This input directly contributed to the launch of the Trust’s general operating grants program also known as GO Grants. The GO Grants program features a streamlined application process so that nonprofits can spend less time on the administrative work of seeking grants and more time on the vital services they provide to our region.

The experience of On the Table gave us the assurance that we needed to continue on our path of creating a strategic agenda for the Trust through 2020. And as many On the Table participants told us, the initiative provided a critical opportunity to tell their community foundation what was important to them. Opening up our work has helped build trust and collaboration with our stakeholders, and served to improve our processes.

No matter how you choose to engage your stakeholders in strategic planning, the important thing is that you engage them. It’s much easier to build full understanding and buy-in for a strategic plan among stakeholders by including them in the process as early as possible. And the plan itself will be much richer and stronger because of their contributions.

On May 16, the Trust will host its fourth On the Table and once again invite thousands of Chicagoans to engage with one another around mealtime conversations.

On the Table is a terrific opportunity to build deeper connections with your supporters and clients and to make progress together on shared priorities. If your organization is going through any kind of strategy development, you might consider using On the Table as a tool for connecting with your stakeholders. Visit www.onthetable.com to learn how.

--Michelle Hunter

Open Yourself Up to New Solutions
April 5, 2017

SAVE THE DATE: April 13, 1:30-3:00 p.m. EST.  Like this blog series?  Attend our Inside Innovation Funding event in person in San Francisco, or virtually via livestream in San Francisco.

(Christie George is the director of New Media Ventures, a mission-driven venture firm and donor collaborative supporting progressive startups.  New Media Ventures supports companies and organizations that – through the use of new media and technology – build advocacy movements, tell new stories and drive civic engagement.)

This post is part of the Funding Innovation series, produced by Foundation Center's Glasspockets and GrantCraft, and underwritten by the Vodafone Foundation.  The series explores funding practices and trends at the intersection of problem-solving, technology, and design. Please contribute your comments on each post and share the series using #fundinginnovation. View more posts in the series.

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If you’ve been following the headlines since the 2016 election, you’ve probably thought about the growing polarization in our country. You may share my worry about filter bubbles and political echo chambers, or you might have recommitted to sparking conversations with friends across the aisle. At New Media Ventures (NMV), we see the same need in the funding world. From our perspective, most people fund people and organizations they already know, moving money through referrals and established networks. But if we’re going to solve the big problems facing our world, we need to move beyond our personal echo chambers.

As a mission-driven venture fund that invests in both for-profit and nonprofit startups, NMV stands with one foot in the venture capital world and one foot in philanthropy – driving change at the intersection of technology, media, and civic engagement. When we first got started, we found ourselves sourcing opportunities in all the traditional ways – using our personal networks and attending conferences – but we quickly realized that we needed to try something different to ensure that we were actually identifying new approaches to the problems we wanted to solve. In 2014, we launched the NMV Innovation Fund with two main goals: 1) increase the number of investable projects crossing our desks (our deal flow); and 2) break through the bias for “the usual suspects” to fund more diverse entrepreneurs.

In the simplest terms, the Innovation Fund is an open call for world-changing innovations. Twice a year, we ask our network, and our network’s network, and their networks (you get the idea: we cast a wide net) to send us the best opportunities they’ve seen for how technology can catalyze progressive change. This year, in response to our “Resist and Rebuild” Open Call, we received nearly 500 applications – a new record – and we are blown away by the creativity of the applicants.

“...If you haven’t tried an open call, you might be missing out on amazing solutions beyond the usual suspects.”

While it may sound overwhelming to sort through hundreds of applications, we have developed a methodology for doing this work efficiently.  This process includes recruiting a volunteer screening committee of funding peers, simplifying our application as much as possible, asking more detailed questions only to the applicants who rise to the top, and using a technology platform to easily manage all of the applications in one batch. Ultimately, New Media Ventures makes the final funding decision, but the screening committee is one of the most powerful aspects of the process – many heads are better than one – and working collaboratively with other funders allows us to leverage different domain expertise in evaluating opportunities. 

Here are two takeaways from our experience opening ourselves up to open calls, and the reasons why we hope other funders will consider similar approaches:

1) Big problems require new solutions (and diversity is not a “nice to have”). Funding exclusively through referrals can limit what funders see and increase the risk of confirmation bias – one of the reasons white men are so much more likely to get venture capital funding in Silicon Valley. By having an open and transparent application process, heavily marketed to ensure we’re getting outside our own bubbles, we’ve made a tremendous
impact on the diversity of our portfolio. Our website, blog, social media platforms, and partners broadcast details about the open call, allowing us to
reach new audiences who may be deterred by less transparent philanthropic opportunities. We’re proud that 65% of Innovation Fund applicants have New Media Ventures logoat least one female and/or trans founder, and 30% have at least one person of color on the founding team. We still have a long way to go, but by comparison 8% of venture capital goes to women founders and 13% to founders of color.

However, focusing on diversity is not a “nice to have” and it’s not just about the numbers – it’s a core part of our strategy. Our societies and systems are facing entrenched problems, and solving them will require new and bold solutions. We need all hands on deck. Women, trans people, and leaders of color have much-needed perspectives and expertise, but often lack access to capital, networks, and traditional philanthropy. For example, news platform Blavity, founded by a young black woman, has grown to reach 7 million readers by creatively combining pop culture content with thoughtful coverage of race and gender issues. We might never have identified this opportunity were it not for our open call.

2) Less control over outcomes leads to more welcome surprises. When funders issue a request for proposals (RFP), we essentially define the terms of the discussion: we’ve often developed a strategy, and we’re looking for organizations to execute that strategy. Unlike a traditional RFP, the Innovation Fund Open Call process has very broad parameters by design. We’ve found this requires us to be comfortable with uncertainty and develop the humility to stay in a learning mindset. The approach isn’t without risks. What if you open the gates for a broad range of applicants, and don’t find anything you want to fund? What if you keep your parameters flexible and only get applications that aren’t in your wheelhouse? But with careful planning and a good process, we have developed strategies to mitigate the risks, and find we gain real value from being able to scan the field and identify gaps as well as opportunities. It has paid off in delightful and unexpected ways.

For many of our portfolio organizations, NMV is their first institutional funder, and our early investment gives our grantees the validation and runway they need to go on to great things: CoWorker.org hosted the Summit on Worker Voice with President Obama; Blavity went on to participate in 500 Startups; Vote.org got into Y Combinator and scaled up quickly to send SMS voting reminder messages to more than 1 million people in swing states leading up to the election. And that’s just a few examples.

To sum it up, if you haven’t tried an open call, you might be missing out on amazing solutions beyond the usual suspects. If boosting innovation is one of your goals, we recommend starting small and collaborating with others to share the work. Consider carving out a portion of your grantmaking budget to fund projects selected through an open process, and remember that you don’t have to reinvent the wheel. NMV and other similar groups have developed deep expertise around open calls and we’re excited to partner with other funders. In fact, we did just that when we worked with the Pluribus Project on a democracy-focused open call last year.

So go ahead, open up and let yourself be surprised. It worked for us.

--Christie George

 

Transparency Talk Welcomes Arcus Foundation to Glasspockets
March 29, 2017

(Melissa Moy is special projects associate for Glasspockets.) 

Arcus foundation logoWe are pleased to welcome Arcus Foundation to our community of foundations that have publicly commited to working transparently. By taking and sharing the “Who Has Glass Pockets?” (WHGP) self-assessment, Arcus is contributing to a growing collection of profiles that serve as a knowledge bank and transparency benchmarking mechanism.

Arcus, with its offices in New York and Cambridge, United Kingdom, advocates for global human rights and conservation movements: “Together, we learn from each other and take bold risks on groundbreaking ideas that drive progress toward a future of respect and dignity for all.”

“We strive to apply a high level of transparency in our operations and in our relationships with grantees, partners and other stakeholders.’”

This month, Arcus became the 87th foundation to join WHGP.  As a way of welcoming Arcus to the Glasspockets community, we’d like to highlight some of the ways in which this foundation openly shares its environmental and social justice work.

First, Arcus has pledged a rare commitment to openness in its transparency statement that is part of the website’s introduction to Arcus’ work.

The foundation uses its website to explain its grantmaking process,  shares expectations for grantees, and offers a searchable grantee map and database.  A short video invites and informs prospective grant applicants.

Other ways that Arcus lives up to its transparency statement is by opening up its knowledge via  grantee impact stories, reports, and a foundation blog.  Additionally, the foundation discloses more than a decade of its financial information

Enjoy exploring the work that Arcus is doing for social justice and the environment.  Perhaps it will inspire your foundation to become #88!  Does your foundation have glass pockets?  Find out

 --Melissa Moy

Warren Buffett Has Some Excellent Advice for Foundations That They Probably Won't Take
March 16, 2017

(Marc Gunther writes about nonprofits, foundations, business and sustainability. He also writes for NonprofitChronicles.com. This post also appears in Nonprofit Chronicles.)

This post is part of a new Transparency Talk series devoted to putting the spotlight on the importance of the 990PF, the informational tax form that foundations must annually file.  The series will explore the implications of the open 990; how journalists and researchers use the 990PF to understand philanthropy; and its role, limitations, and potential as a communications tool. 

Marc GuntherWith a collective $800 billion in assets under management, America’s big foundations spend vast sums of money to buy investment advice. They’re getting little, if anything, of value in return.

Their own investment offices, and the Wall Street banks, hedge funds, private equity firms and consultants they hire, when taken together, deliver investment returns that lag behind market indexes, all evidence indicates.

These foundations would do better to call an 800 number at Vanguard or Schwab and buy a diversified set of low-cost index funds.

So, at least, argues Warren Buffett, one of the great investors of our time. In his latest letter to investors in Berkshire Hathaway, Buffett writes:

When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.

The limited data available about foundation endowments bears him out.

It’s not possible to prove that Buffett’s advice would enable foundations to improve their returns–and thus have more money to devote to their grant-making. Most foundations don’t disclose the financial performance of their endowments.

Of the 10 largest grant-making foundations in the US, only two — the MacArthur Foundation and the W.K. Kellogg Foundation — publish investment returns on their websites. MacArthur’s disclosure is exemplary. (So is its performance, perhaps not coincidentally.) I emailed all ten and got nowhere with the rest.

The best evidence about how foundations are managing their endowments comes from an annual study published by the Council on Foundations and Commonfund, a nonprofit asset management fund that serves foundations, colleges and nonprofits. Their most recent survey, which covers the 10-year period from 2006 through 2015, found that returns averaged 5.5 percent per year for 130 private foundations and 5.2 percent per year for 98 community foundations.

Further insight can be gleaned from Cambridge Associates, an investment firm whose clients include foundations, universities and wealthy families. Cambridge tracked the performance of 445 of its endowment and foundation clients and found they generated average annualized returns of 4.97 percent for the 10-year period ending June 30, 2016. (These returns should not be considered Cambridge’s performance track record, a spokesman told me.)

High pay for money managers does not necessarily translate into superior returns for foundations.

By contrast, Vanguard’s model portfolio for institutional investors, a mix of passively invested index funds, with 70 percent invested in stocks and the rest in fixed income securities, delivered 5.81 percent over the 10-year-period through 2015, and 6.1 percent for the 10-year period ending on June 30, 2016, according to Chris Philips, head of institutional advisory services at Vanguard. (All figures for investment returns are net of fees, meaning fees are taken into account.)

That may appear to be a small edge for Vanguard. But when institutions are investing hundreds of millions, or billions of dollars, small gains compounded over time add up to big money. Money, again, that could be better spent on programs.

Actually, it’s worse, because the figures reported by the Council on Foundations and CommonFund do not include the salaries that foundations pay to their in-house investment offices. The chief investment officers are often the highest-paid executives at foundations, and their deputies do well, too.

Why, then, do foundations continue to pay high salaries and high fees in the pursuit of market-beating returns, when so many fail?

They should know better. It’s no secret that passive approaches to investing outperform most active money managers, once fees and trading costs are taking into account. In 2005, Buffett wrote that “active investment management by professionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still.”

Taking aim at hedge funds, with their high expenses, Buffett then offered to bet $500,000 that no investment professional “could select a set of at least five hedge funds – wildly-popular and high-fee investing vehicles – that would over an extended period match the performance of an unmanaged S&P-500 index fund charging only token fees.”

Only one — one! — investment pro took the bet. Not surprisingly, Buffett will win the bet, by a very comfortable margin. And yet foundations and those who advise them are pouring more, not less, money into hedge funds.

Everyone Wants to Be Special

Buffett has a theory about why those in charge of foundations entrust their endowments to active money managers and hedge funds:

The wealthy are accustomed to feeling that it is their lot in life to get the best food, schooling, entertainment, housing, plastic surgery, sports ticket, you name it. Their money, they feel, should buy them something superior compared to what the masses receive.

In many aspects of life, indeed, wealth does command top-grade products or services. For that reason, the financial “elites” – wealthy individuals, pension funds, college endowments and the like – have great trouble meekly signing up for a financial product or service that is available as well to people investing only a few thousand dollars.

Vanguard’s Chris Philips has a similar theory:

There is this perception that by going index you are ceding that you do not have any skill and you are going to be average in the marketplace. That doesn’t feel good. As humans, we want to be good. We don’t want to be average.

Foundation executives may be especially prone to believe that they deserve better than “average” investment advice. By dint of their position, they are often told that they are wiser, funnier and better-looking than average.

Jeffrey Hooke, a senior lecturer at the Johns Hopkins Carey Business School and a former investment banker, says the trustees of foundations who serve on their investment committees are likely to favor active asset management.

The people on the boards tend to be in the business. They’re private equity executives, they’re stockbrokers or they’re in hedge funds. They’re totally biased in favor of active managing because that’s how they’ve made their living.

Hooke has researched public pension funds and found that they, too, underperform the markets by choosing active managers. Investment officers don’t want to talk themselves out of a job, he says:

They are never going to walk into the boardroom and say, ‘Hey, it just isn’t working.’ They’ve got wives, they’ve got mortgages they’ve got kids.

These investment officers aspire to be the rare bird who can consistently outperform the market, like David Swensen, the storied portfolio manager at Yale. (I profiled Swensen in 2005 for the Yale Alumni Magazine.) But Swensen, like Buffett, says that identifying the best asset managers is exceedingly difficult. In a 2009 interview, Swensen told me that investors who rely on “low-cost, passively managed index funds” and rebalance regularly will “end up beating the overwhelming majority of participants in the financial markets.” Buffett has said that in the course of his lifetime he has identified only about 10 investment professionals who can beat the markets over time; there are about 87,000 foundations in the US.

Pay for Performance?

In fairness, the foundation trustees and investment officers labor under a peculiar burden. They are obligated by law to give away five percent of their assets every year. So if they want to exist in perpetuity, they must earn in excess of five percent on their investments, which is a tall order. Of course, no foundation is entitled to live forever. If some spend down their assets, well, new foundations come along all the time.

Most foundations, though, aim to survive in perpetuity, and chase superior returns, at a cost. Consider, for example, the Ford Foundation, which, with assets of $12.2 billion (as of 12-31-2015), is the second-biggest foundation in the US, behind the behemoth Bill & Melinda Gates Foundation.

In 2015, the Ford Foundation’s highest-paid employee was vice president and chief investment officer Eric Doppstadt, who was paid $2.1 million. He was followed by  director of public investment Michael Walden at $1,017,061, director of private equity Sherif Nahas at $972,362 and director of hedge funds William Artemenko at $955,479. All were paid more than Darren Walker, Ford’s president, whose compensation was $788,542, according to Ford’s Form 990-PF filing,

Then there were Ford’s outside asset managers. In 2015, they included Silchester International Equity Management which was paid $2.2 million, Wellington Energy Investment Advisor, which collected just under $2 million and Eagle Capital Management, which got $1 million.

How did they perform? “Sharing the investment returns is outside of our policy,” says Joshua Cinelli, Ford’s chief of media relations, by e-mail.

In this, Ford is typical. At the David and Lucille Packard Foundation, chief investment officer John Moehling was paid $2.3 million, and three other investment professionals earned more than $1 million. All were better paid than Packard’s chief executive, Carol Larson. Packard, too, will not disclose its returns.

The Robert Wood Johnson Foundation, William and Flora Hewlett Foundation, Gordon and Betty Moore Foundation and MacArthur Foundation all pay their chief investment officer more than their top executives. The argument for doing so, presumably, is that these investment professionals could make as much money or more in the private sector.

But, again, with the exception of MacArthur and Kellogg, the foundations won’t say whether their investment officers and their outside asset managers are delivering market-beating performance.

What we do know is that high pay for money managers does not necessarily translate into superior returns. Interestingly, when pension-fund critic Jeff Hooke analyzed data from 33 state pension systems, he found that the 10 states with the highest fee ratios achieved lower return rates than those that spent the least.

Transparency and Accountability

Foundation endowment returns could probably be calculated by going through years of IRS filings. Unfortunately, the Form 990-PF tax form for foundations is “seriously flawed,” “unwieldy” and “unintelligible to the many lay readers, including trustees and journalists,” according to longtime foundation executive John Craig.

In a 2011 blog post for the Foundation Center, Craig lamented the fact that investment performance is not solicited on the Form 990:

Since their endowments are the only source of income for most foundations and effective endowment management is a challenge for many foundations, this is an egregious omission—equivalent to not requiring for-profit corporations to report their earnings on tax returns and financial statements.

I asked Brad Smith, president of the Foundation Center, which promotes transparency through its laudable Glasspockets initiative, why foundations won’t disclose their investment returns. “They don’t report it because it’s not required,” he said, “to state the obvious.”

Smith went on to say that foundations may be “worried about perverse incentives that could be created by a ranking.” If foundations compete to generate the best investment returns, he explained, they could feel pressured to take on risky investments. During the Great Recession, some foundations that pursued aggressive investment strategies had to sell highly-leveraged, illiquid investments at a loss. 

Still, I wonder if there’s a simpler explanation for the lack of disclosure: Foundation staff and trustees don’t want to be held accountable for mediocre results.

If MacArthur and Kellogg are exemplary in their disclosure — Kellogg kindly arranged a phone interview with Joel Wittenberg, its chief investment officer —  the Gates and Bloomberg foundations are unusually opaque. Gates Foundation money is housed in a separate trust and is reportedly managed by Cascade Investments, which also manages Gates’ personal fortune. (Buffett is a trustee of the Gates Foundation, and presumably keeps an eye on the endowment.) Bloomberg’s philanthropic and personal wealth are reported to be managed by Willett Advisors. Cascade and Willett have access to some of the world’s top money managers, and may have a shot at outperforming the averages.

This isn’t a new issue. Testifying before Congress in 1952, Russell Leffingwell, the chairman of the board of the Carnegie Foundation, famously said:

We publish our investments. We have to be very careful about our investments because we know that others, some others, take investment advice from our list of investments. Well, that is all right. We think the foundation should have glass pockets.

The bottom line: America’s foundations, as a group, are taking money that could be devoted to their programs – to alleviate global poverty, to improve education, to support medical research or promote the arts — and transferring it to wealthy asset managers. They should know better, and they do.

--Marc Gunther

Apocalypse Later? Philanthropy and Transparency in an Illiberal World
March 6, 2017

(Brad Smith is president of Foundation Center. As recently reported by Nonprofit Quarterly, the National Council of Nonprofits has launched a campaign to get nonprofits to sign a Community Letter in Support of Nonpartisanship that calls for preservation of the Johnson Amendment in its current form. This blog also appears in PhilanTopic.)

This post is part of a new Transparency Talk series devoted to putting the spotlight on the importance of the 990PF, the informational tax form that foundations must annually file.  The series will explore the implications of the open 990; how journalists and researchers use the 990PF to understand philanthropy; and its role, limitations, and potential as a communications tool. 

Brad Smith PhotoHow long will it be before nonprofit transparency takes its place alongside diceros bicornis on the endangered species list? Hopefully never, but in a world that's growing more technologically sophisticated and more illiberal, I'm beginning to think that if it's not Apocalypse Now, maybe it's Apocalypse Later.

The value of transparency

Transparency has been a boon to the philanthropic sector, making it possible for organizations like Foundation Center, Guidestar, the Urban Institute, Charity Navigator, and others to create searchable databases spanning the entire nonprofit and foundation universe. Our efforts, in turn, contribute to responsible oversight, help nonprofits raise funds to pursue their missions, and fuel online platforms that enable donors to make better giving choices. Transparency also enables foundations to collaborate more effectively, leverage their resources more efficiently, and make real progress on critical issues such as black male achievement, access to safe water, and disaster response. The incredibly rich information ecosystem that undergirds the American social sector is the envy of others around the globe — not least because it gives us a clear view of what nonprofit initiative can accomplish, how it compares and contrasts with government, and how social, economic, and environmental issues are being addressed through private-public partnerships.

Where we are today

Federal law — U.S. Code, Title 26, Section 6104 — stipulates that public access to Form 990, a federal information form that tax-exempt organizations are required to file annually, must be provided promptly on request at the exempt organization's office or offices, or within thirty days of a written request. However, exempt organizations don't have to provide copies of their Forms 990 if they make these materials broadly available through the Internet, or if the IRS determines that the organization is being subject to a harassment campaign.

“ The social sector is about hope and the unshakable belief that the world can be made better by our efforts.”

In 2015, Carl Malamud, the Don Quixote of open data, dragged transparency into the digital age when he brought suit against the Internal Revenue Service to force it to make the 990s of a handful of organizations that had been filed electronically available as machine-readable open data. Malamud won, and, somewhat surprisingly, the IRS then did more rather than less to comply with the order: as of June 2016, all Forms 990 filed electronically by 501(c)(3) organizations are available as machine-readable open data through Amazon Web Services. As such, they can be downloaded directly in digital form and processed by computers with minimal human intervention. The development represents a victory not only for Malamud but for the Aspen Institute’s Nonprofit Data Project, which has toiled for years to make 990s more accessible. The idea, of course, is that free, open data on nonprofits will enable more innovators, researchers, and entrepreneurs to use the data in ways that help make the sector more effective and efficient. Since Malamud won his case, the IRS has posted some 1.7 million Forms 990 as machine-readable open data.

Philanthropy in a shifting world

The increasingly illiberal world in which we find ourselves was not made in America: it is a worldwide phenomenon born of globalization, income inequality, technology-driven unemployment, the unprecedented movement of migrants and refugees, and the specter of terrorism. The democratization of information driven by social media and the Internet also has been accompanied by distrust of traditional media, the narrowing of the space in which civil society organizations operate, and growing attempts to restrict thought and behavior. Author William Gibson (credited with inventing the term "cyberspace") presciently (if darkly) described a world we probably all recognize today in his 2003 reflections on George Orwell: "A world of informational transparency will necessarily be one of deliriously multiple viewpoints, shot through with misinformation, disinformation, conspiracy theories and quotidian degrees of madness. We may be able to see what's going on more quickly, but that doesn't mean we'll agree on it any more readily." Indeed.

The bitter, divisive 2016 presidential election in the United States saw information from the 990s of the Clinton and Trump foundations used to support allegations of influence peddling, self-dealing, and the like. The resulting bad press and subsequent investigations by the New York State Attorney General's office caused both foundations to eventually announce that they planned to wind down their activities.

At the same time that foundations are being subjected to more scrutiny, we see a growing number of high-net-worth individuals turn to alternatives that require little or no transparency in exchange for the tax advantages they receive for their charitable giving. The most common of these are donor-advised funds administered by community foundations or investment firms such as Fidelity, Vanguard, and Schwab. Community foundations do file 990 tax returns, so information about each grant they award is reported and made available to the public, though without the identity of the donor. With the charitable gift funds sponsored by investment funds, however, information on individual grants remains invisible. Then there are newer, hybrid structures like the Chan-Zuckerberg Initiative, the LLC formed by the co-founder of Facebook and his wife, Priscilla Chan, to "advance human potential and promote equal opportunity." There is no public disclosure requirement for the tax returns of LLCs, which means that any details we learn about the grants made by CZI will be what Zuckerberg, Chan, and their colleagues choose to tell us.

The first step?

So what are the implications of all this for the social sector in the Unites States? The media (traditional and social) has been on fire with stories about the Trump administration's intent to remove information on issues like climate change from government websites. In response, universities and others are rushing to download as much of that data to non-government servers as possible. In the same vein, it would not be difficult for the IRS to suddenly stop posting 990 tax returns as open data, especially given all the "trouble" they caused during the presidential campaign. This might be met by another Malamud-style legal challenge but that would take time to unfold. And if successful, this time around the IRS might comply by releasing only a handful of specific 990s rather than all those that have been digitally filed.

"Destroying" the Johnson Amendment

President Trump also has announced his intent to "destroy" the Johnson Amendment, a 1954 provision (named after then-Sen. Lyndon Johnson) in the U.S. tax code that prohibits all 501(c)(3) non-profit organizations from endorsing or opposing political candidates. Repeal of the provision could open the way for huge amounts of so-called dark money — donations from corporations, unions, and individuals aimed at influencing the outcome of elections — to find its way into 501(c)(3) organizations. Unlike 501(c)(3) nonprofits and foundations, the current recipients of such funds — primarily 501 (c)(4) and (c)(6) nonprofits — are not required to disclose their donors.

I am not a lawyer and may be out on a limb here, but overturning the Johnson Amendment would require an act of Congress, and would not be easy. Yet, if Congress decides to do so, it is not inconceivable that the administration, with the assent of Congress, could then remove the public disclosure requirement for Forms 990 in order (depending on your point of view) to: 1) protect donor privacy as an exercise of the First Amendment right to free speech; or 2) make it more difficult to "follow the money" when it comes to political campaigns.

If this were to happen, it is not entirely clear which constituencies would emerge to fight for the continued provision of Forms 990 as public information. Foundations, in particular, are not universally enthusiastic about having their grants and other information in the public domain for a variety of reasons (including privacy, journalistic scrutiny, and wariness of being swamped by applications for funding). What's more, in recent conversations with foundation leaders, I've heard concerns that when it comes to controversial issues such as immigration or charter schools, having their information made more visible could make them targets for harassment. And, of course, neither nonprofit organizations nor foundations enjoy filling out 990s, which like a lot of tax forms are long, time-consuming, and expensive to complete. Yes, organizations like the National Council of Nonprofits, Independent Sector, the Council on Foundations, and the Philanthropy Roundtable might rally to defend broad public access to Forms 990, but only if their members were firmly behind them.

Transparency and hope

Born in 1956 out of hostile McCarthy-era hearings accusing foundations of supporting "un-American activities," Foundation Center has worked for many years with the Internal Revenue Service and other organizations to build a public information system for philanthropy. GuideStar has done much the same for nonprofit organizations. The cornerstone of these systems has been data contained in the Forms 990. If access to these forms were reduced or eliminated, the transparency of the entire social sector — and with it the promise of greater efficiency, effectiveness, and innovation — would be an obvious casualty. It also would strengthen the position of those in government and the social sector, both here and abroad, who, for whatever reason, believe the need for donor privacy outweighs the value of transparency. Russell Leffingwell, a Republican banker and trustee of the Carnegie Corporation of New York, said it best in 1952 in his testimony to the Cox Commission declaring that his foundation "should have glasspockets." Leffingwell went on to say:

"I think [foundations] are entering into the most difficult of all fields....They are going right straight ahead, knowing that their fingers will be burned again, because in these fields you cannot be sure of your results, and you cannot be sure that you will avoid risk. If the boundaries of knowledge are pushed back and back and back so that our ignorance of ourselves and our     fellow man and of other nations is steadily reduced, there is hope for mankind, and unless those boundaries are pushed back there is no hope...."

At the end of the day, the social sector is about hope and the unshakable belief that the world can be made better by our efforts. We live in an age, illiberal or not, in which our mission to serve the public good to the best of our ability is powered by technology that allows us to share knowledge as never before. And knowledge is rooted deeply in transparency. Apocalypse later? We can't let that happen.

-- Brad Smith

Glasspockets Find: “Dear Warren” Accounts for Impact of His $30 Billion Gift to the Gates Foundation
March 3, 2017

Buffet Bill MelindaBill & Melinda Gates recently posted their foundation’s annual letter, sharing progress from their work.  This year's letter had a personal twist, revealing how the world's largest private foundation accounts for its progress to a key stakeholder.  The letter, a great example of donor stewardship at the highest levels, details the impact of Warren Buffett’s historic gift to the Gates Foundation. 

In 2006, Buffett’s $30 billion gift to the Gates Foundation was the largest single gift ever made, and it was intended to fight disease and reduce inequity.  Buffett’s gift doubled the foundation’s resources, and helped expand its work in U.S. education, support smallholder farmers and create financial services for the poor.

In “Dear Warren,” Bill and Melinda Gates personally let the Berkshire Hathaway Inc. Chairman know how the Gates Foundation was using his money. 

“To make sure your investment keeps paying higher returns, the world has to save more lives in the future than we’ve saved in the past.”

The couple jokingly reminded Buffett of his penchant for wise spending, such as the time Buffett treated Bill Gates to a Hong Kong McDonald’s meal and used coupons.  With handwritten notes, photos and infographics, the couple showed Buffett that they too were wisely investing Buffet’s money to make an impact on global health and improve childhood mortality rates, which contributes to healthy families and stronger economies.  

The letter shows how data and metrics can be used to tell a powerful narrative.  The Gates are careful to say that they are not doing this work alone, and that most of the numbers reflect how many global organizations, including the Gates Foundation, are contributing to saving and improving lives.

“If we could show you only one number that proves how life has changed for the poorest, it would be 122 million—the number of children’s lives saved since 1990,” Bill Gates said in his letter.

Economist1
Source: The Economist via the Bill and Melinda Gates Foundation

Over a 20 year-period since 1990, the rate of childhood mortality has been cut in half, Melinda Gates said.  The Gates Foundation has helped contribute to improved global health through its investment of increasing access to vaccines in poor and developing countries. 

“For every dollar spent on childhood immunizations, you get $44 in economic benefits. That includes saving the money that families lose when a child is sick and a parent can’t work,” Bill Gates said.  

The foundation’s other global health initiatives include reducing newborn mortality, ending malnutrition, family planning and ending poverty.

Bill and Melinda Gates shared how they felt both inspired and compelled by Buffet to wisely and strategically make a philanthropic impact of Buffett’s life earnings.  They affectionately called him the most generous person they know, as well as one of the most competitive people.

Melinda Gates said the Gates are not using Buffet's money for “a grant here and a grant there.”  Rather, the Gates are using Buffett’s gift to build “an ecosystem of partners that shares its genius to improve lives and end disease."

"[You are] counting on us to make good decisions.  That responsibility weighs on us,” Melinda Gates said.  “To make sure your investment keeps paying higher returns, the world has to save more lives in the future than we’ve saved in the past.”

--Melissa Moy

Innovation at the Speed of Change: Exploring Knight’s Tech Innovation Portfolio
March 1, 2017

SAVE THE DATE: April 13, 1:30-3:00 p.m. EST.  Like this blog series?  Attend our Inside Innovation Funding event in person in San Francisco, or virtually via livestream in San Francisco.

(John Bracken is vice president for technology innovation at Knight Foundation.)

This post is part of the Funding Innovation series, produced by Foundation Center's Glasspockets and GrantCraft, and underwritten by the Vodafone Foundation.  The series explores funding practices and trends at the intersection of problem-solving, technology, and design. Please contribute your comments on each post and share the series using #fundinginnovation. View more posts in the series

John Bracken - Knight PhotoIt’s become a truism to say that the world is changing, and that the pace and scale of change is ever accelerating. “It’s not just technology that’s moving at an exponential pace, but change itself;” write Joi Ito and Jeff Howe in Whiplash.

Even the world of grantmaking, often criticized for its slow pace, is adapting to these rhythms. For example, last month, we at Knight Foundation helped launch a fund on ethics and artificial intelligence. The fund itself came together quickly over the course of a few weeks, and we plan to announce our first grants in the coming weeks, but more on that later. As I talk to people involved with the creation of the tools, a single note keeps coming up: the technology is developing faster than we had anticipated even a year ago.

The recent news of Libratus, an artificial intelligence created at Carnegie Mellon that defeated four champion humans in Texas Hold ‘Em poker, demonstrated that “the best AI’s ability to do strategic reasoning with imperfect information has now surpassed that of the best humans,” said Libratus’s co-creator Tuomas Sandholm. This feat of reasoning, coming on the heels of Google Deep Mind’s victory over the world’s preeminent Go player last year, came much earlier than most in the field had anticipated.

These developments are happening at a rate that outpaces our ability to process them, and yet it’s becoming the new normal. Millions of us are now living with smart personal assistants like Amazon Echo and Google Home in our living rooms and Internet-connected televisions and thermostats. As a society, we’re still not sure just how to handle these devices, as the debate over how to use audio evidence collected by Amazon Echo during a 2015 murder and the hacking of unsecure home appliances to take down much of the Internet last fall demonstrated.

Knight Foundation Logo
Our inability to appreciate the depth of the change even as we experience it reminds me of how the French military struggled to adjust to modern warfare at the outset of World War I. As described by Barbara W. Tuchman in her classic The Guns of August, French generals prepared for German tanks and aerial bombings by sharpening their swords and donning their traditional brightly colored uniforms adorned with plumage. Even after the battle was joined, and a decade after the emergence of modern warfare in the Russo-Japanese War, the French leaders stuck to their old tactics. Tuchman wrote, “The impetus of existing plans is always stronger than the impulse to change.”

Part of our mission at Knight Foundations is to ensure that the civic institutions upon which our democracy depends-- libraries, museums, news organizations, cities-- do not follow in the footsteps of those 1914 French commanders. How do new and old civic enterprises sustain themselves as traditional fundraising approaches like mass mailings hold less appeal for new donors? How do organizations adjust their cultures to attract and retain talent and audiences who bring with them different expectations and needs from their predecessors?

Given this new world of accelerating technological advancement, and the expectation that all of our work at Knight will be impacted by future advancements, our grantmaking will focus on the ways in which digital technologies could impact our fields. Knight has always been interested in technology’s potential for strengthening the ways in which Americans learn about and participate in community. In the ’80s, the Knight brothers’ company, Knight Ridder, invested in and experimented with early interactive tools such as Viewtron and Dialog Information Services. A decade ago, we built on this interest by creating the Knight News Challenge in an attempt to better understand the potential of the Internet for transforming journalism. This year, we’re focused on two topics:

  • We are co-founders of a fund on the ethical aspects of artificial intelligence. AI has shifted from a future prospect to a present reality, and has the potential to impact every aspect of society. That’s why we’ve helped to craft the Ethics and Governance of Artificial Intelligence Fund to take an applied, multidisciplinary approach to AI, exploring its potential benefits and ill effects.
  • As part of the NetGain Partnership, a collaboration between five foundations to explore public interest issues around new technologies, we are exploring how connected devices (the Internet of Things) might impact cities. In the coming months, we’ll be making some grants designed to strengthen cities through technology.

The change we have been living through is only going to increase-- adjusting our work incrementally isn’t going to cut it. To thrive, we as individuals and institutions need to develop our comfort with insecurity, with failing, with risk, and be ready to pursue routes we may not anticipate.

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About Transparency Talk

  • Transparency Talk, the Glasspockets blog, is a platform for candid and constructive conversation about foundation transparency and accountability. In this space, Foundation Center highlights strategies, findings, and best practices on the web and in foundations–illuminating the importance of having "glass pockets."

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