The number of immensely wealthy individuals and couples with publicly declared philanthropic intentions has grown steadily since 1990, and new vehicles for charitable giving by persons of even less wealth have come into being and are now being regularly utilized by larger numbers of people. Moreover, what individuals, foundations, nonprofits, and corporations do with their charitable dollars has taken significant leaps forward with more frequent engagement in public policy advocacy as well as with more collaboration among funders, with the goal of achieving greater, longer-lasting impact. Those are the topics explored in this chapter.
Staggering amounts of personal wealth are being created and accumulated today, especially by individuals in the high-tech, biotech, and financial investing fields. The new golden age of philanthropists is upon us. Bill Gates, Warren Buffett, Mike Bloomberg, Charles and David Koch, George Soros, Jeff Bezos, Eli Broad, David Rubenstein, Mike Milken, Mark Zuckerberg, Dustin Moskovitz, Jeff Skoll, Pierre Omidyar, Tom Steyer, Marc Benioff, Laurene Powell Jobs, Elon Musk, Sean Parker, Bernard Marcus, and Stephen A. Schwarzman: these people are now virtually household names. All the evidence suggests that there are far more philanthropic billionaires today, often deploying more philanthropic dollars individually, than there were in the age of Rockefeller and Carnegie.
While John D. Rockefeller Sr. started tithing at age 16 and Andrew Carnegie decided at age 36 to spend the rest of his life giving away the money he had already accumulated, the current generation of young philanthropists has raised the ante considerably. As of this point, certainly the most memorable example is the 2015 publicly released letter, written by Mark Zuckerberg and his wife, Dr. Priscilla Chan, to their newborn daughter announcing their determination to give away 99 percent of their Facebook shares, then valued at $45 billion. More recently, Dr. Chan and Mr. Zuckerberg announced the first allocation of their promised gift—$3 billion over the next three years “to cure, prevent, or manage all diseases in our children’s lifetime.”1 Their startling generosity highlights two powerful and poignant points. The couple is celebrating their good fortune at the same moment that they have been blessed with a newborn daughter, which underscores their youth. In addition, unlike wealthy parents in most other countries who are dynastically driven, they are deliberately not passing along to their progeny the great wealth they have created. Instead, they are dedicating it to the alleviation of some of the critical social problems facing humankind. As dramatic as was the Zuckerberg-Chan decision, it is hardly unprecedented, either in history or in contemporary times. About 125 years ago, Andrew Carnegie made public, in The Gospel of Wealth, his determination to give away all of his wealth to philanthropic causes during his lifetime. In contemporary times, Zuckerberg’s Facebook associate Dustin Moskovitz, whose net worth is estimated by Forbes to be about $8 billion, and his wife, Cari Tuna, pledged in 2010 to give away most of their wealth for philanthropic purposes during their lifetimes.2
The public declarations of many of these individuals, especially those in their 20s, 30s, and 40s, to give away most or all of their wealth while living is striking indeed.3 Controlling such phenomenal wealth at such a tender age, they must find it difficult to imagine how that wealth would best be used, or the causes on which it ought to be spent, 30 or 40 years into the future—a time when they would have just crossed into retirement age—much less 100 or more years from now. Having made so much money in such a short time, and as a direct consequence of rapid economic and technological change, such young philanthropists might well conclude that their giving should be concentrated on the present and the near future, under circumstances that are known, and for needs that are clearly visible, rather than held in reserve for a future they can scarcely imagine.
Whether that is true or not, it seems likely that the existence of vast philanthropic fortunes in the hands of very young entrepreneurs—creatures of the tech age and reared in a climate of sudden, unpredictable developments—will lead to a future of charitable giving that is markedly different in pace and tenor from those of past generations. That cultural shift, if it happens, could be as consequential for philanthropy as anything that has happened since today’s great foundations were created more than a century ago.
But even the older among today’s wealthy have done something that has never been done before in America: to create a “club,” membership in which is acquired by vowing to give away at least half of one’s wealth. Founded by Warren Buffett and Bill Gates in 2010, the Giving Pledge remained an American-only club until it started attracting givers from other countries in 2013. As of June 30, 2016, it still predominantly comprises Americans, but there are now pledgers from Australia, Brazil, Canada, England, Germany, India, Indonesia, Malaysia, Russia, South Africa, Scotland, Taiwan, Turkey, Ukraine, United Arab Emirates, and the United Kingdom—157 people in total, as of the writing of this book. (See Appendix B for the complete list.) While the pledge may have started in America, its greatest impact is likely to be outside the United States, because philanthropy on any scale comparable to what is found here simply does not exist elsewhere. Why do the non-US pledgers sign up? Brad Smith, president of The Foundation Center, a nonprofit clearinghouse of information, data, and analysis on philanthropy, explains:
Billionaires are a culture unto themselves—As much as they may be African, Asian, European, or Latin American, [these people] are also part of a growing, global culture of the ultra-rich. They are densely networked through business and investment ties and “hang” together in places like Davos, Aspen, and at the Clinton Global Initiative. In deciding to join something like the Giving Pledge they are more likely to look to the example of their fellow billionaires, wherever on the globe they may be from, than to pay credence to the skeptics in their own backyard.
Philanthropy is an aspiration—Whether the Giving Pledge billionaires started out poor or were born into wealth, they see their fortune as a form of immense privilege. And, as their public pledges reflect, they recognize that they are in a position to do something about things in the world they feel could be better. As the ranks of the world’s billionaires grow, we have the Giving Pledge to thank for elevating philanthropy to the level of a higher calling to which they can aspire.
The Giving Pledge is a social movement—When the Giving Pledge was first announced, I blogged about it being akin to a billionaire social movement. Several years later, it has become one. Its ranks have swollen to over a hundred, it has its own website, an independent resource in the Foundation Center’s “Eye on the Giving Pledge,” and periodic gatherings where pledgers share their experiences in philanthropy. As a movement, the Giving Pledge provides identity, recognition, and—above all—a network through which philanthropists can learn from one another. When you think about it, as wealthy as they are, the only place Giving Pledge members can turn for advice without being sold a service or pitched a project is probably to each other.
The most surprising thing about the globalization of the Giving Pledge is that anyone should be surprised that it is happening. Information is global, technology is global, many of the world’s most pressing challenges are global, and ultra-wealth is global.4
While I continue to believe that the greatest impact of the Giving Pledge will be outside the United States, the Zuckerberg and Chan’s decision to give away the bulk of their assets, which was likely influenced to some degree by their experience from having signed the Pledge, has forced me to reconsider. They, along with Dustin Moskovitz and Cari Tuna, Sean Parker, and Bill Gross, are the only pledge members I know of who have committed to give away virtually all of their wealth. If their example raises the bar for other pledgers (or for wealthy non-pledgers) or, perhaps even more likely, for other young billionaires, their actions could have very significant consequences within the United States.
Increasingly, wealthy philanthropists are choosing not to limit their philanthropic efforts to tax-exempt foundations but are engineering new kinds of vehicles for giving and investing for social purposes. The first signal that a new form of philanthropic enterprise was emerging came from Pierre Omidyar, the cofounder of eBay. In the early days of his philanthropic efforts, he established a tax-exempt foundation, but, within a few years, realized that such a structure unnecessarily constrained his opportunities to support a variety of undertakings, especially investments in for-profit ventures created for the purpose of solving social problems or achieving certain kinds of public benefit, such as changes in public policy. In 2004, he created what he calls a “philanthropic investment firm,” the Omidyar Network, consisting of a grantmaking foundation and a social-purpose investing arm.
In the early 21st century, significant experimentation with hybrid for-profit/not-for-profit/governmental initiatives was already under way, including social-impact bonds and “pay-for-success” undertakings. Quickly, Omidyar seized on these ideas and incorporated both for-profit and not-for-profit ventures in the Omidyar Network. The Network’s website describes itself as being “structured to support the notion that philanthropy is more than a type of funding. In its truest sense, philanthropy is about improving the lives of others, independent of the mechanism. Consequently, we work across the social and business sectors, operating both a Limited Liability Company (LLC) and a 501(c)(3) foundation.” That website also explains that “We invest in entrepreneurs and their visionary ideas that create opportunities for people to improve their lives, their communities, and the world around them.”5 Significantly, the website is a “.com,” not a “.org,” which is the designation for a tax-exempt organization.
Laurene Powell Jobs, the widow of Apple founder Steve Jobs, has done something similar by establishing The Emerson Collective, an organization that supports education and social-justice initiatives, as an LLC rather than a foundation. Such an LLC can advise Ms. Jobs in making charitable gifts for which she can receive a charitable deduction, while also investing in for-profit ventures with a social purpose that would not offer such a deduction. An intention to make both kinds of expenditures is clearly the reason that the Zuckerberg–Chan initiative has been established the same way. The criticisms that were leveled by some when it was announced were clearly unfounded, based on a lack of knowledge about the new possibilities now available for philanthropists to achieve their social change objectives whether by for-profit or nonprofit vehicles of change.
Another example of the “network” framework for philanthropy, while not specifically so described, are the philanthropic initiatives of Jeff Skoll, the other cofounder of eBay. The center of his network of organizations is the Skoll Foundation, which is the leading worldwide foundation focusing on the advancement and support of social entrepreneurship. In addition to that foundation, Jeff Skoll’s other initiatives include the Centre on Social Entrepreneurship at Oxford University’s Said School of Business and the Institute for Social Entrepreneurship at Zhejiang University in China, which together organize an annual World Forum on Social Entrepreneurship. In addition to the not-for-profit components of his network, Skoll created a for-profit corporation, Participant Media, for the purpose of producing “entertainment that inspires and compels social change.”6 This company has produced over 70 films since its founding in 2004, including An Inconvenient Truth, about Al Gore’s efforts to combat climate change, and Spotlight, about The Boston Globe’s investigative reporting on clerical sex abuse. Many of Participant Media’s films have been nominated for major honors in the film world. The company uses traditional and social media to inform and activate citizens interested in many areas of social change.
The growth of these complex hybrids of for-profit/nonprofit social investment vehicles is a major advance that builds on the simpler, straightforward 20th-century models of philanthropy. Moreover, such a hybrid “network” form has an additional value for living donors in giving them the freedom to engage in advocacy and lobbying initiatives, which, if their philanthropic efforts were confined to a charitable foundation, would be either prohibited by law or much more difficult to achieve. Such unlimited lobbying and advocacy initiatives cannot be done through foundations, but foundations can play an important role in social-change efforts in which the lobbying and other restricted activities are funded separately by a donor or a non-tax-exempt institution using after-tax dollars. Foundations can, for example, support extensive research and public information on social issues, provided they do not fund appeals for specific legislation or campaigns for or against candidates for office. The more directly political activity can be funded separately with after-tax dollars. The two efforts, if harnessed to the same cause, can be far more effective than either would be on its own.
The structure can be very effective in enabling living donors to coordinate the strategies of their tax-exempt foundations with non-tax-benefited political entities that can engage freely in lobbying and that support candidates in elections. It is no longer unusual for wealthy individuals to coordinate their personal, individual giving with that of the foundations they have created, in order to achieve greater impact for their social policy aims. Julian Robertson, the pioneering hedge fund manager, has done so by personally paying the salary, with non-tax-benefited dollars, of his foundation president. That person can thus engage in lobbying, primarily on environmental issues, which he would not have been permitted to do if he were on the foundation’s payroll. Pete Peterson, founder of the Blackstone Group, has used the same structure but with a focus on reducing the US national deficits and cumulative national debt.
Business entrepreneur and former mayor of New York City Michael Bloomberg has created Bloomberg Philanthropies, which encompasses his foundation giving, the charitable work of his company, Bloomberg LP, and his personal giving (including to political advocacy). This umbrella arrangement lets Bloomberg tackle complicated problems (such as climate change, tobacco control, gun safety, and obesity prevention) through multiple approaches, which allow him to capitalize on his unique status as a global figure, both in business and politics, to build both domestic and international coalitions around issues of concern.
George Soros has likewise combined his personal giving and that of his tax-exempt Open Society Foundations on a variety of subjects, as has hedge fund manager Tom Steyer with the TomKat Foundation on environmental regulatory matters. These mixed models offer a different version of ambitious innovation in philanthropy than the sole focus on a charitable, tax-exempt foundation as one’s philanthropic vehicle. The flexibility is giving givers a new and wider reach.
The history of foundation collaboration in the United States is brief. Prior to 1990, in fact, it is difficult to identify any significant true collaborative partnerships among foundations. When I wrote The Foundation in 2006, I could name fewer than five of any consequence. I noted then that every foundation “is happy to have its favorite initiatives supported by others, but few are eager to volunteer support to programs launched by others. Blame it on ego, politics, turf, or desire for control, basic factors of human motivation that make partnership-creation unusually difficult.”7
As of this writing, however, the number of such partnerships is clearly growing, which suggests that the urgency of the socioeconomic and environmental problems facing America have finally caused at least a temporary—one hopes rather a permanent—breach in the preexisting psychological and practical barriers to such collaborative decision-making.
Consider, once again, the Grand Bargain that eased Detroit out of bankruptcy. It was catalyzed by CEOs Darren Walker of the Ford Foundation, Rip Rapson of the Kresge Foundation, and Alberto Ibargüen of the Knight Foundation, at the urging of the bankruptcy court’s chief mediator. It is certainly the most dramatic of such recently established collaborations.8
As often happens when foundations decide to pool their resources, the three institutions came to the Grand Bargain for different (though not conflicting) reasons. The largest single contribution to that collaboration—$125 million—was given by the Ford Foundation. The size of that figure may be partially explained by the fact that Ford was incorporated in Michigan and still remains a Michigan corporation under the supervision of that state’s attorney general. In fact, Ford has a long history of fraught relationships with Michigan attorneys general and other officials who have felt, rightly or wrongly, that the foundation has not been generous enough to the state where it was founded in 1936 and where it still maintains its legal domicile. In any case, Ford has a legal and historic connection with Michigan, which made it possible to justify a grant of such magnitude for a single city in distress while also discouraging other troubled American cities from hoping for comparable Ford largesse.
But the main reason that Ford decided to join this collaborative effort when it did was because of the passionately held values of its then new president, Darren Walker. Walker had taken office in June 2013, just months before the Detroit bankruptcy began to emerge as the nationally urgent crisis it ultimately became. He believed that Detroit’s festering socioeconomic and racial problems were an opportunity for Ford to reaffirm its historic commitment to struggling cities and their residents, as well as for him to signal his own priorities for the foundation. I think it is also likely the case that, once the Kresge Foundation’s president Rip Rapson and its board of trustees expressed a willingness to commit $100 million to the Grand Bargain, Ford, with a fortune founded and based in Michigan, could not be seen as doing less and indeed had to do more. As a matter of size, Kresge’s commitment is much heftier in relation to its $3.5 billion endowment than Ford’s $125 million is to its endowment of $11 billion.
The Knight Foundation, too, had a long history in Detroit by virtue of Knight Newspapers’ purchase of the Detroit Free Press in 1940 (Knight later merged with Ridder Publications to form the Knight Ridder chain, which was in turn sold to the McClatchy Company in 2006). Since its founding, that foundation has had a policy of focusing the bulk of its giving on the metropolitan areas in which Knight Ridder–owned newspapers, so its leadership in the Grand Bargain was fully consonant with its history and mission, even though a significant departure from its usual grantmaking procedures and priorities.
A word here about Rip Rapson’s philanthropic leadership is also appropriate. In my view, he has not received the credit fairly due for leading the way in envisioning, implementing, and nurturing the antecedents of the Grand Bargain. Rapson is widely admired for his many prior initiatives to improve the financial, transportation, and socioeconomic circumstances of Detroit from the moment he first arrived in Michigan as president of Kresge on July 1, 2006. The Grand Bargain is hardly the first of Kresge’s efforts under Rapson to rebuild Detroit, much less the only one. Kresge’s commitments to Detroit’s schools, arts scene, small businesses, transportation, neighborhood redevelopment, and civic leadership ballooned dramatically when Rapson took the reins of the foundation. Nor is the effort in Detroit the first comparable initiative for Rapson, who led similar initiatives as leader of Minneapolis’s McKnight Foundation before coming to Kresge.
The Grand Bargain was a major event in the slender history of foundation collaborations, mainly because of its size and its powerful effect in hastening the end of the Detroit bankruptcy while protecting most of the pensions of Detroit’s municipal retirees. Still, it was essentially a one-time arrangement, brought about under extraordinary circumstances and designed so as to rule out any expectation that it would be repeated elsewhere. Although less spectacular in their origins or (thus far) their outcomes, other multifoundation collaborations are becoming both more numerous and more durable. If it lasts, the trend is as welcome as it is overdue.
Partnerships among foundations are now sprouting with regularity. They include the Energy Foundation, launched in 1991, which focuses on building “a strong, clean energy environment”9 globally. It grew out of a project of The Trust for Public Land. The original foundation partners were The Pew Charitable Trusts, The Rockefeller Foundation, and the John D. and Catherine T. MacArthur Foundation, which together provided a $20 million endowment. Joining the founding foundation partners later were the Mertz-Gilmore Foundation in 1996, the McKnight Foundation in 1998, the David and Lucille Packard Foundation in 1999, and the William and Flora Hewlett Foundation in 2002. Subsequently, about a dozen other foundations have joined in supporting the Energy Foundation and one or more of its five initiatives, one of the earliest of which was an effort targeted at enabling China to reduce its energy use. As of 2016, the Energy Foundation has assisted China in announcing a plan “to reduce its energy use per unit of GDP by at least 40 percent from 2005 levels, and increase the share of renewable energy to 15 percent.”10
There’s also Living Cities, which was conceived in 1991 by Peter Goldmark, then president of The Rockefeller Foundation, as a partnership of foundations and financial institutions to help provide capital for community economic development in cities. The initial funds of $62.5 million contributed by the partner institutions were originally distributed by the nation’s two leading sponsors of community redevelopment: the Ford Foundation-founded Local Initiatives Support Corporation and Enterprise Community Partners, which was cofounded by James Rouse, the much-admired real estate developer, city planner, and urban activist. Originally called the National Community Development Initiative, it changed its name to Living Cities and broadened its mission to focus on the transformation of urban governance, planning, and development. As of 2015, its members included roughly a dozen private foundations along with nine large corporations and corporate foundations, mostly from the financial industry.11
Another example is ClimateWorks, a global partnership to combat climate change, which was founded in 2008, initially by the Hewlett and Packard Foundations, each of which committed around half a billion dollars over five years. The combined $1 billion commitments made ClimateWorks by far the largest foundation collaboration ever, but, as other foundations joined, it grew even larger. Thereafter, the MacArthur, Oak, and KR Foundations joined as core funders. As of 2017, both Hewlett and Packard have renewed their support for another seven years, and, with other donors’ contributions, ClimateWorks’ annual expenditures are about $400 million.12
In August 2013, The Kavli Foundation spearheaded the creation of The Science Philanthropy Alliance, the purpose of which is to increase the flow of financial resources from individuals, foundations, corporations, and government to basic scientific research conducted by those in universities and elsewhere in the United States. The Alliance includes nine member institutions as of 2016, with three more as associate members.13
In March 2014, the Hewlett Foundation launched the Madison Initiative, a three-year exploration to identify possible ways to overcome the polarization that is plaguing American politics and governing institutions, especially at the federal and state levels. Hewlett committed $50 million toward grants focusing especially on Congress but also sought to recruit other foundation partners from across the political spectrum to work with it on specific components of the problem. Sixteen others have joined as of the time this is written.14
The five-member Improving Foundation Effectiveness Collaborative was launched in 2015 with the two $1 million general-operating support grants, mentioned earlier, to the Center for Effective Philanthropy and Grantmakers for Effective Organizations.15
The Freedom Fund to End Slavery in the World, established in 2013, describes itself as “the world’s first private donor fund dedicated to identifying and investing in the most effective front-line efforts to end slavery.” It was conceived by Humanity United, The Legatum Foundation of Dubai, and the Walk Free Foundation, three private funders dedicated to antislavery initiatives. As of this writing, seven foundations are participating.16
In response to the recent conflicts over police shootings of African Americans spread across the country, and as the drumbeat of alarms over racial, ethnic, and socioeconomic inequality grew louder and more frequent, foundations and nonprofits have begun to collaborate, sometimes formally and sometimes informally, to identify and pilot possible ways of mitigating the problems. In April 2013, led by Robert Ross, president of the California Endowment, a group of foundations established the Executive Alliance to Expand Opportunities for Boys and Men of Color. About a year later, President Obama established a national public-private initiative called My Brother’s Keeper to bring together foundations, corporations, and government at all levels to improve education and opportunity for young African American males.17 The California Endowment pledged $50 million to that effort over seven years, and 42 other foundations have made pledges to bring the present total to more than $300 million. Other foundations have made gifts to organizations that are affiliated with My Brother’s Keeper, and many foundations have revisited their program priorities to focus, to one degree or another, on such inequalities.
Global Ocean Legacy Collaborative, which was catalyzed by The Pew Charitable Trusts in partnership with the Sandler Foundation and the Tubney Charitable Trust, has established “the world’s first generation of great marine parks by securing the designation of large, fully protected reserves.” Its website reports that “To date, our efforts have helped to safeguard 5.2 million square kilometers of ocean—an area 10 times the size of Central America.”18 Six foundations were participating in the collaborative as of 2015.19
Since 2007, the Edna McConnell Clark Foundation has been attracting individual philanthropists and other foundations as investors in Growth Capital Aggregation Funds, which, according to its website, have “leveraged $155 million of the Clark Foundation’s funds to add nearly $487 million in additional private and public funding for 14 youth-serving organizations.”20 Some 18 foundations have been partners in these funds. But then, on January 29, 2016, the Clark Foundation took the idea to unprecedented scale. It announced a new $1 billion partnership, called Blue Meridian Partners, the members of which have already committed $750 million to “invest in high-performance nonprofits that are poised to have truly national impact for economically disadvantaged children and youth.” In her letter announcing Blue Meridian, Clark President Nancy Roob wrote that the partnership would make “big bets. They will be flexible, unrestricted, long-term (5–10 years), tied to performance, and total up to $200 million for each grantee. They will help grantees to expand their impact directly, by allowing them to strengthen their work, grow and serve greater numbers of youth, as well as indirectly, by helping them increase their influence on the child welfare, educational, judicial, and other systems that affect children’s lives.”21
Each of the six general partners in Blue Meridian has committed $50 million. Four limited partners have pledged a minimum of $10 million each. To have assembled a mix of so many individual philanthropists and private foundations, at such a high minimum level of financial commitment, to tackle so huge and complex a social problem, is nothing short of pioneering.
Then, on December 13, 2016, the chair and CEO of the Edna McConnell Clark Foundation announced that they had “decided to ‘sunset’ the Foundation itself and spend all of its resources (approximately $1 billion) over the next decade,” including topping off Blue Meridian Partners, the goal of which was to raise $1 billion in all.
The Fund for Shared Insight, initiated in 2014 by the William and Flora Hewlett Foundation’s Effective Philanthropy Group, is a collaborative effort aimed at improving the functioning of philanthropy itself. It is the first effort I know of to seek ways of eliciting reliable and meaningful feedback from philanthropy’s ultimate beneficiaries: those who are served by the nonprofits that foundations support.22 The fund’s eight founding partners note, in their mission statement, that “Private foundations with two or more paid staff control nearly $40 billion of giving. We believe we can make an even bigger difference in the world with that $40 billion dollars if foundations encourage and incorporate feedback from the people we seek to help; understand the connection between feedback and better results; foster more openness between and among foundations, grantees, and those we seek to help; and share what we learn with one another and the field.”23
The lure of collaboration has now extended even to film and sports celebrities. For example, in September 2015, two celebrities—the actor Kevin Spacey and the Baltimore Orioles Baseball Hall of Fame shortstop Cal Ripken Jr.—announced that their respective foundations would organize a joint fundraising event and divide the proceeds between the two organizations. In doing so, they pointed out that both of their foundations aim to benefit at-risk children, Kevin Spacey’s through theater and film and Cal Ripken’s through sports.24
While many of the collaborations discussed here were formed in the early 2000s and thus are of fairly recent vintage at the time this is written, the State Priorities Partnership (SPP) is much older. It was founded in the early 1990s by the Ford Foundation, one of whose program officers, Michael Lipsky, was the primary catalyst, along with the Annie E. Casey Foundation and the Charles Stewart Mott Foundation. Its mission is to support research and advocacy to make state governments more responsive to the needs of their less-advantaged citizens, in areas such as education, health care, criminal justice, and the environment. In recent years, it has achieved a steady annual budget of $20 million, contributed by 8 national and about 400 state and local foundations from across the country. In 2009, the Council on Foundations honored SPP with its award for Distinguished Grantmaking Through Collaboration.25
The evolution from virtually no partnerships in 1990 to today’s cooperative environment involving many foundations, individual philanthropists, public charities, financial institutions, and government is an important change in the way foundations conceive of their role and increasingly do their work. Moreover, the list of formal partnerships described here does not include the many arrangements in which a single foundation works with multiple individual donors who wish to piggyback on its expertise by donating funds to be spent on specified initiatives. This is, in effect, what Warren Buffett did with the Gates Foundation and what several other funders have done in joining initiatives of The Pew Charitable Trusts, which has attracted more than half a billion dollars in this kind of arrangement. Nor does the list include the pioneering Social Innovation Fund established by the Corporation for National and Community Service with funds appropriated by Congress. The Innovation Fund has used $241 million in federal funds to leverage $516 million from private philanthropy and other civic-sector organizations working on innovative solutions to major social problems, including a major component of pay for success experiments. Around a dozen foundations and philanthropic funds have received grants from the fund.26 Also omitted are the partnerships between individual for-profit corporations and foundations for particular purposes, such as the partnership between the Kaiser Family Fund and National Public Radio to support NPR’s coverage of various health policy issues affecting Americans.
The need for collaboration among foundations ought to have been glaringly obvious all along—and to many scholars and outside observers it has been. Among many simple, irrefutable arguments for working together is that few foundations are large, and none is as large as the problems it seeks to solve. The American foundation sector in its entirety, applying every penny of every endowment, could not fund the federal government’s health care budget for even nine months before running out of money and vanishing. To tackle gargantuan problems of poverty, inequality, disease, inadequate education, an imperiled environment, or pick any other serious challenge, any one foundation’s resources—even those of the mighty Gates Foundation, the largest in history—would meet only a tiny fraction of the need. For foundations, the failure to pool effort and money is a dangerous step toward insignificance.
Yet as Hodding Carter III, a former president of the Knight Foundation, acknowledged in a 2010 interview, for most foundation leaders, collaboration has long been “just an unnatural act, frankly.” “At all times and in all ways,” he explained, “the various pressures of just doing your own business, focusing just on your own mission, your own staff’s capabilities, your own opportunities—all that is hard enough” for leaders of most foundations. The extra effort required to get to know other funders, understand their interests, blend one’s own priorities with theirs, and create mechanisms to share control of one another’s resources has, for most foundations of the 20th century, consistently been seen as prohibitive.27
If that has now begun to change—and the evidence presented here strongly suggests that it has—then something genuinely remarkable is afoot in philanthropy. All the centrifugal “pressures of doing your own business” that Carter described remain in full force, and yet an emerging generation of donors and foundations is finding ways to overcome them or at least to counterbalance them with incentives to join forces and share leadership. (It should be noted that Carter managed to overcome these pressures himself, having been an early participant in Living Cities as well as other collaborative efforts while at the helm of the Knight Foundation.) If that trend continues, foundations will not only be operating differently in the coming decades, but they will also be achieving much more and inspiring new donors to follow suit.
In the early 1990s, when the Robert Wood Johnson Foundation spent millions of dollars on prime-time television advertising to counter the insurance industry’s campaign attacking the Clinton health care plan, everyone in the foundation world was surprised. Foundations simply did not do that. Now, 20 or so years later, independent philanthropists, foundations, and quasi-foundations (institutions that raise and regrant money rather than spending the proceeds of an endowment) do this all the time. As many foundations focus their substantive programs on public policy change, especially in education or environmental protection, they are devoting large proportions of their program expenditures to public policy advocacy.
As with collaboration, the impetus behind this trend has to do with money and with the relative size of the foundation sector compared to government. A typical foundation can invent and test a new way of educating children or treating disease, but only federal and state governments can afford to deliver that innovation to large numbers of actual students or patients. For a good part of the 20th century, governments tended to pay close attention to foundation programs and to adopt the most successful ones, often in close cooperation with the foundation. Since the 1980s that has become much less common, and the appetite for philanthropic influence among government agencies has waned. As a result, foundations have discovered that it is no longer good enough to produce compelling ideas and promising innovations; they must promote their ideas to an often-unheeding public sector. Hence, a growing embrace of public policy advocacy. According to a recent study informed by anonymous interviews with program officers of four leading foundations heavily involved in education, from 2010 to 2015 the Gates Foundation spent 20 percent of its education budget on advocacy efforts, and the Broad Foundation, founded by Eli and Edythe Broad, is now allocating 40 percent to 50 percent of its budget to policy-related expenditures.28
Other examples abound. The Atlantic Philanthropies, which since 2001 has been on a path to spend itself out of existence during the lifetime of Charles Feeney, its donor, devoted $25 million in 2008 in support of advocacy efforts to achieve the enactment of the Affordable Care Act.29 In addition, between 2008 and 2014 it devoted some $60 million to a multifoundation effort to end the death penalty in the United States. Although that goal has not been achieved, the effort contributed significantly toward a dramatic reduction in executions nationwide and abolition of the death penalty in 11 states. Moreover, the Gates Foundation established the Race-to-the-Top competition, eventually supported by the US Department of Education, to encourage state governments to adopt long-stymied desirable education reform initiatives.
For over 25 years, the Gill Foundation and the Evelyn and Walter Haas Jr. Fund have collaborated with a group of other foundations on efforts, ultimately successful, to legalize same-sex marriages.30 Bloomberg Philanthropies’ obesity prevention, road safety, tobacco control, and education reform programs are heavily concentrated on advocacy, and its $50 million self-described “Counterweight to the NRA” effort in 2014 was explicitly aimed at making more stringent the laws regulating background checks for gun ownership.31
In 2004, The Pew Charitable Trusts changed its legal form from that of a private foundation to a public charity, with the result that it is now permitted to lobby and otherwise advocate on matters of public policy within specified dollar limits.
Considering all of these advocacy initiatives, it should not be surprising that some living foundation founders are using their own money, without the benefit of tax exemption, to establish 501(c)(4) “social welfare” organizations, which have a much freer hand to engage in advocacy, lobbying, and electoral politics than do private foundations, which are 501(c)(3)s. In 2014, The Atlantic Philanthropies announced that among its final gifts would be the establishment of a Civic Participation Action Fund, a spinoff 501(c)(4) organization that would make grants for lobbying and for political campaigns on issues that had been central to the foundation’s mission over the past 30 years.32 The Eli and Edythe Broad Foundation, which is deeply engaged in K–12 education reform, has created such a 501(c)(4) and, just as some of the Robertson Foundation’s employees who engage in lobbying are paid with the founder’s non-tax-benefited dollars, so are some of the Broad Foundation’s officers who engage in lobbying and other advocacy.33 Because of the Broad Foundation’s energetic national role in supporting charter schools, it has increasingly become a target for the many critics of such schools, as documented in considerable detail by Motoko Rich on the front page of the New York Times on March 5, 2016, under the headline “Oakland Is Flash Point in Billionaire’s Push for Charter Schools.”34
It must be acknowledged that, given the heated partisan and ideological battles that are commonplace today, the freedom that foundations and philanthropists now enjoy to engage in advocacy is hardly guaranteed for the future. Tony Proscio, a highly knowledgeable consultant to foundations and my colleague as Associate Director of the Duke Center for Strategic Philanthropy, offers the following caution:
Twice in the 1990s, members of Congress threatened to provoke an IRS review of the Robert Wood Johnson Foundation’s tax exemption because of its support for two controversial causes: health care reform and antismoking policies. The foundation’s grants were entirely, scrupulously legal. They involved research and public information on issues central to the foundation’s charitable mission: improving health and health care in the United States. They did not pay for lobbying, or for encouraging others to lobby, nor did they support or oppose any candidate for office. The political assaults on RWJF were unsuccessful and not even very vigorously pursued, but they cost the foundation a lot of time and money in defensive legal maneuvers. The lesson of this story is that staying within the law is no protection for foundations and nonprofits that insert themselves into hot public controversies. They still emerge with a target on their backs. That may explain why this kind of activity has been slow to develop, why it tends to be undertaken only by the most fearless and politically passionate donors and institutions, and why many utterly guiltless foundations will speak candidly about this only on deep background.35
In recent years, charitable operating nonprofits have also been engaging in much more direct advocacy initiatives than in the past, often using general operating funds provided by foundations—a practice permitted by the relevant tax law.36 For example, the recent spread of state and local $15-an-hour minimum wage laws has been powered by the National Employment Law Project.37 That organization is a nonprofit with support from many foundations, including The California Endowment, Annie E. Casey Foundation, the Ford Foundation, The Joyce Foundation, Charles Stuart Mott Foundation, Open Society Foundations, Public Welfare Foundation, and The Rockefeller Foundation.38
In addition, more foundations are supporting lawsuits on matters affecting public policy.39 Given the partisan paralysis of the US Congress, more and more social issues in the 21st century have been making their way through the judiciary rather than through the legislative process. These cases come from both the right and the left, and foundations of both persuasions have become more sophisticated and aggressive in backing legal organizations that can identify potent cases, formulate winning arguments, and battle their way successfully through the courts.
Although not for the faint of heart, supporting advocacy to change public policy is a potent philanthropic tool. When employed on the national stage, it can produce effects that influence millions of lives, as Gates has done in education, Gill and Haas in gay rights, and Bloomberg and Robert Wood Johnson on smoking and other public-health issues. But taking a creative and influential role in public policy is not only a national strategy. In fact, foundations at the community and regional level have in some cases been the earliest and most successful practitioners, though their stories are less well known outside their communities. Let’s now look more closely at some of them.
Until 1914, when the Cleveland Foundation was established, there were no community foundations in either the United States or elsewhere in the world. From their founding, the primary purpose of such foundations has been to provide a group of citizens in a specific geographical area a vehicle for receiving contributions from donors who wish to improve the circumstances, public-benefiting institutions, and the environment in the locality in which they live. Their ability to aggregate the contributions and civic leadership of many local donors and to speak with an authoritative voice in the public interest has made them a powerful—and popular—presence in local civic life. Over the past 100 years, America’s pioneering creation of community-focused foundations has spread to about 800 metropolitan areas nationwide and, more recently, to many other countries as well. The idea has proved so attractive to The Bertelsmann Foundation, one of Europe’s largest philanthropies, that it has adopted an initiative to seed community foundations in several countries in Europe and elsewhere.
As of the end of 2015, American community foundations have endowments aggregating almost $80 billion and give out about $5.2 billion a year. While these foundations vary widely in their individual missions, what they share is an imperative to identify and give high priority to the civic problems that can be addressed with concerted community action, and then to tackle those problems by utilizing financial resources that they raise locally from individuals, private foundations, and corporations. In the metropolitan areas in which community foundations have been most effective, their staffs have come to be recognized as the central node of the communications and activist networks focusing on the social good of the region, providing objective advice and financial resources with which to tackle the area’s most important problems. The original pattern of activity, charted by the Cleveland Foundation, was to identify the community’s problems; commission evidence-based studies about their nature, extent, and possible solutions; and recommend courses of action which the community might pursue to solve or mitigate them. The Cleveland Foundation also supported community organizations regarded as important contributors to the Cleveland area, such as the world-renowned Cleveland Clinic, and often those with the potential to help ameliorate or solve the city’s problems in following up the studies.
During the past 25 years, many community foundations have received major infusions of unrestricted endowment assets that have multiplied the worth of their endowments. Most of that growth has been in the form of donor-advised funds, such as the $1 billion gift by Mark Zuckerberg and Dr. Priscilla Chan to establish a donor-advised fund at the Silicon Valley Community Foundation. At some community foundations, such funds represent an overwhelming proportion of their assets. In the case of the Greater Kansas City Community Foundation, for example, that figure is greater than 90 percent. Other community foundations have been more fortunate in attracting large unrestricted endowment gifts from wealthy local citizens, such as the $200 million given to the California Community Foundation upon the 2006 death of Los Angeles resident Joan Palevsky.40 More recently, in 2015, the San Antonio Area Foundation received a donation of $605 million, 90 percent of the income of which is unrestricted, by the estate of John L. Santikos, a wealthy San Antonio movie theater owner.41
Until recently, it was rare for a community foundation to undertake publicly a course of action to solve a particular problem in its community, especially one that called for political or legislative change. The reluctance to do so stemmed from the hesitancy of the community foundation leadership to appear less than impartial on what often were, or might become, controversial proposals for change. That reluctance is understandable. After all, since community foundations depend on raising endowments or current operating funds from their local communities, taking a controversial stand might well have a negative impact on those sources of funding. As a consequence, most community foundations played low-profile roles in their communities, content with doing as much social good as possible without unnecessarily stirring the waters. The few exceptions, such as the Cleveland Foundation’s championing of neighborhood redevelopment in the 1980s, under successive CEOs Homer Wadsworth and Steve Minter, stood out starkly against an otherwise gray backdrop.
But things are changing. Consider The Boston Foundation, which was founded in 1915. Like the Cleveland Foundation, TBF has won admiration for its long service to the area it assists—in this case, metropolitan Boston. With an endowment of over $1 billion, The Boston Foundation (TBF) is now one of the wealthiest community foundations in the country. Over its 100-year history, it has made grants totaling about $1.6 billion. But its conventional pattern of operation, involving intentionally low visibility and a tendency to deflect attention and controversy, changed in 2000 when a new president, Paul Grogan, was named. Grogan had been president of the Local Initiatives Support Corporation, now America’s largest nonprofit investor in urban development and community revitalization, for 13 years. Grogan emphasizes that the transformation he led occurred under the guidance of the directors of TBF, who strongly articulated the need to rethink their methods of operating before they chose him. He quotes one of TBF’s directors as asking: “If we want to have impact and want to be influential, just exactly how does it help us that nobody knows who we are or what we are doing?”42 Now, 16 years after Paul Grogan took the helm, many Bostonians definitely know what TBF is and what it does.
The foundation has become a public convener on some of the most controversial issues affecting the city. To the traditional low-key community foundation model it has added an in-house think tank, which does objective, evidence-based research on public problems. As Grogan points out, the objectiveness of the data “allows leaders to cross ideological boundaries and have one conversation about common problems.”43 TBF instituted a Boston Indicators Project hosted at the foundation, which continuously tracks change and progress in 10 sectors across 150 specific measures. As Grogan described it in 2015:
The Indicators Project not only provides large amounts of data in one place, but it also helps create a story line about the region’s challenges and opportunities. Moreover, it provides important legitimacy to the Foundation, justifying our involvement in the public discourse and stances on sometimes controversial issues. Beyond the Indicators Project, we regularly commission research into specific areas that we are interested in.… TBF Media staff vigorously market to the media and [to] both the elite and wider public the results of the think tank studies. We seek to drive the conversation and keep key issues in public view.… [W]e also bring together key stakeholders and convene coalitions to create momentum for change on key issues. This is not just hosting meetings—it is serial mobilizations of civic, business, and community leaders.… We see it as our contribution not only to lead the group, but to handle back-office support to make the engagement possible for busy individuals. We can either complement work done by the public sector or challenge the practices and offer alternatives. In doing so, we can help create better choices for the public sector… and embolden our leaders to make difficult or controversial decisions. At TBF, we work closely with all three levels of government. We have three lobbyists on staff and work on a wide range of issues.44
Grogan’s explanation makes clear how the civic leadership model radically differs from the traditional low-profile community foundation model of operating. In February 2016, TBF published a summary of the progress of its new initiatives from 2009 to 2015, highlighting its achievements as well as its shortcomings. The report underscores the extraordinary changes in foundation practice during those years, such as nearly doubling its median grant size from $40,000 to $75,000, raising the percentage of funding going to general operating support grants from 20 percent of all grants to between 70 percent and 80 percent, and the percentage of funding going to multiyear grants from 0 percent of the grants budget to between 50 percent and 80 percent. Those are remarkably impressive changes in crucial indicators of behavior by any kind of foundation with regard to the way in which a foundation deals with its grantees!45
While The Boston Foundation has been a pioneer in such civic leadership, it is no longer alone. A number of other community foundations have reached out to Grogan and TBF to understand firsthand how this foundation has been operating and are beginning to follow suit, including the Baltimore Foundation, the Buffalo Foundation, the Boulder Foundation, the San Francisco Foundation, the Rhode Island Foundation, the Greensboro Foundation, the Foundation for the Carolinas (based in Charlotte, NC), the New Hampshire Foundation, and the Miami Foundation.
The changes sparked by Paul Grogan and The Boston Foundation have reached almost half way around the world to the Honolulu headquarters of the Hawaii Community Foundation and its president and CEO, Kelvin Taketa. In his own words, these are some of the foundation’s exceptional initiatives in civic leadership, involving such controversial issues as the environment, education, and voter participation:
We convened a panel of experts and stakeholders, many of whom had been adversaries in the courts for years, to work for 16 months [on] a blueprint to create a stable and increasing source of fresh water, the precursor to any hopes we have of building a more sustainable food and energy economy in the face of climate change. The blueprint has been completed, and most of the panel has committed to working on a number of policy and investment strategies in Phase II.
We partnered with 14 funders on an $8 million, three-year effort to work with a cohort of public schools and the department of education to develop successful strategies to increase the number of at risk middle school kids who complete 9th grade on track (as an early indicator for high school graduation). Still underway.…
We also organized a funder collaborative during the great recession to help stave off foreclosures and increase access to government benefits.… Working with a number of nonprofit partners, we increased their capacity to help those families and the $3 million deployed resulted in over $20 million in benefits alone. We have several other civic initiatives in the design phase right now: civic engagement focused on turning around an abysmal voter participation rate, launching a statewide effort for prenatal screening and referrals (Hawaii has one of the highest rates of substance use by pregnant women) and a system of screening, referral and treatment for early childhood developmental and behavioral health and an initiative to advance nonprofit excellence.
All of these efforts share a couple of key design elements (learned the hard way): 12–24 months of strategy development with key stakeholders and outside expertise, a group of funders who pool resources and are willing to think long term, a network of actors (funders, public policy and government leaders, nonprofits) who have a shared goal that lends itself to measurement to assess progress, accountability and performance improvement. [What is challenging is] extracting useful and timely data from government.46
In 2005, with support from the Charles Stewart Mott Foundation and the Ford Foundation, Lucy Bernholz, Katherine Fulton, and Gabriel Kasper, three highly regarded researchers/writers on nonprofit and philanthropy matters, published a major report, entitled “On the Brink of New Promise: The Future of US Community Foundations,” which documents some of the changes that are under way among the US community foundations and which encourages emulation by others. Among other trends that echo the examples cited here, the authors foresee among community foundations “a shift in focus from the institution to the community,… from managing financial assets to long-term leadership, [and] from competitive independence to coordinated impact.”47
Because of the growth in the number of community foundations already committed to civic leadership, a new freestanding nonprofit called “CF Leads” was established in 2006 and now advocates the adoption of varying forms of that model by other community foundations.48
An entirely new form of community-focused philanthropy was created in New York City in 1988 by Paul Tudor Jones, a wealthy hedge fund visionary, who first saw the possibility of raising large sums of money from a local area’s financial community to deploy and using that money to support metropolitan nonprofits that seek to solve or ameliorate some of the problems of poverty-stricken citizens. The fund would adopt state-of-the-art venture philanthropic giving principles as described above in Chapter 1, including the exacting use of performance benchmarks and outcome metrics. Jones’s creation, the Robin Hood Foundation, has proved its success dramatically over the past 28 years by amassing huge sums of money primarily from large benefit dinners attended by wealthy financial sector stars and entertained by celebrities. In 2015, the Robin Hood fundraising dinner yielded $101 million in a single night. Four thousand wealthy donors packed the Javits Center, Manhattan’s convention center, while 2,000 wealthy but younger people from the world of finance attended two parallel events, both of them sold out. The foundation’s fundraising might is matched by its skill in deploying its philanthropic assets to support metropolitan New York nonprofit organizations serving disadvantaged members of the community in such fields as education, health, housing, and employment.49
This model—drawing large contributions from the local financial community, depending at least in part on one or more big fundraising dinners, and using the proceeds for general operating support to nonprofits with outstanding track records based on performance metrics—is slowly spreading to other cities. Daniel Lurie, a San Francisco native who worked for two years at Robin Hood, returned home and launched The Tipping Point Community in 2004. Its first gala raised about $400,000; 10 years later, after steadily increasing the take at its dinners year after year, it raised $12 million at its May 2014 gala, for an annual 2014 total raised of $20.9 million. In 2015, the Tipping Point annual dinner raised $14 million, and the total raised in the 2015 fiscal year was $21.6 million.50 Because of his impressive entrepreneurial track record with Tipping Point, Lurie was tapped by the mayor of San Francisco to chair San Francisco’s committee to attract the 2016 Super Bowl. When the site selection committee chose San Francisco over South Florida, Lurie guided his committee to put a philanthropic overlay on Super Bowl 50, called “50Fund.org.” It promised to return 50 percent of all funds raised by Super Bowl 50 back to San Francisco nonprofits and fulfilled that promise with grants totaling more than $13 million.51
As noted above, other cities that have launched initiatives similar to Robin Hood and Tipping Point, although not yet as well-established as either of them, are Chicago (A Better Chicago); Washington, D.C. (Lever Fund); and Detroit (The Detroit Children’s Fund, an affiliated organization of The Skillman Foundation).
All of the above organizations are committed to identifying and nurturing “high-performing” nonprofits, with a track record that suggests their greater effectiveness in fighting poverty than other organizations with similar missions.
Similar to the Robin Hood Foundation but different from it in important ways is Venture Philanthropy Partners (VPP), a collaborative launched in 2000 by Mario Morino, a wealthy software pioneer. He succeeded in attracting 29 wealthy individuals, foundations, and corporate leaders in Northern Virginia and the Washington, D.C., area to invest more than $30 million in VPP’s first fund to provide both financial support and consulting advice to strengthen and grow high-performing organizations that serve low-income youth and children. VPP launched fundraising for its second fund in 2007 and began investing in recipient organizations in 2009.
VPP is like the Robin Hood Foundation and Tipping Point Community in its state-of-the-art practice of giving strategically to organizations with a track record of achieving impact, but unlike them it attracts financial support from a wider and more diverse group of investors. It is also different in having recruited four major organizations to work with VPP as strategic partners: The Community Foundation for the National Capital Region, Community Wealth Ventures (a nonprofit-owned management consulting firm that provides services to nonprofits on ways of achieving financial sustainability), the McKinsey & Company Social Sector Office, and Mario Morino’s own Morino Institute, which is dedicated to spurring entrepreneurship. VPP is also different in how it follows through on its initiatives. It actively uses publications and social media to spread word about the successes of the model organizations it supports in hopes that activists in other locations will be inspired to follow suit in their respective localities.
Morino has a thoroughly admirable zeal for intelligently evangelizing about what VPP is doing and how it is doing it through the energetic writing of well-crafted, reader-friendly publications and an imaginative use of social media. His book, Leap of Reason: Managing to Outcomes in an Era of Scarcity, has attracted many enthusiastic reviews, and his regular short essays, which appear on the VPP website, have a wide following among foundation professionals, nonprofit leaders, and philanthropists. Early on, Morino recruited a talented and knowledgeable writer, Lowell Weiss, the founder of Cascade Philanthropy Advisors, to be coeditor of the Leap of Reason initiative, which publicizes and updates the examples from the book. Weiss is also an advisor to Venture Philanthropy Partners.52
The transformations previously described regarding foundations are mirrored by comparable changes in the ways that corporations seek to tackle important social problems facing the nation. The two corporations that exemplify that change most markedly are IBM and Goldman Sachs. At IBM the corporation uses its most significant assets, the time and talent of its employees, to create innovative solutions to societal problems and then brings them to scale and makes them sustainable. The 25-year continuity of Stanley S. Litow’s leadership of IBM’s corporate engagement, which began in 1993 when Louis V. Gerstner became CEO and which has continued through the administrations of the two CEOs who succeeded him, has undoubtedly contributed to the sustained trajectory of IBM’s high quality and innovativeness.
Starting with significant initiatives and IBM leadership in US education reform, IBM itself planned and managed three widely admired national education summits, which included the nation’s governors, many corporate CEOs, and leaders in education as well as President Bill Clinton, all of them hosted at IBM. Those widely representative conferences led to a consensus on the need for higher standards and the creation of a new national organization, ACHIEVE, which was chaired by IBM Corporation, to put its weight behind specific education reform initiatives chosen by the conferees.
In 2008, IBM established its Corporate Service Corps, which has often been referred to as the corporate version of the Peace Corps. It sends teams of IBM employees to help developing-world communities and NGOs solve pressing social problems. As of 2016, approximately 3,000 IBM midcareer and younger employees had participated in over 1,000 team projects across 37 countries, tackling challenges such as reducing mother-to-child AIDS transmissions in Ghana and creating management systems to expand food bank programs in Latin America.
In 2010, IBM launched “The Smarter Cities Challenge,” a $50 million competitive grant program to provide teams of IBM employees to 130 cities around the world to help them become more efficient in providing public services and more effective in solving their problems. An IBM “Smarter Cities” challenge team in Memphis used data analytics to help transform the city’s 911 system. IBM also created a virtual supercomputer called “World Community Grid,” which pulled power from millions of computers so as to provide hundreds of millions of dollars of free computing power to fuel important research studies on health challenges such as treating Ebola and the Zika virus.
Yet another example of IBM’s creativity and commitment has been the establishment of a new kind of high school known as P-Tech (Pathways in Technology Early College High School), first in Brooklyn, New York, and now in six states. The P-Tech schools run from 9th grade through what the program calls “14th grade”—ending in a two-year associate’s degree. They are established within the public school systems as collaborations among IBM, the school system, and individual corporate partners. The students, all from disadvantaged backgrounds, are given technology education that equips them to fill tech-intensive jobs in business. Successful graduates are then first in line for jobs at IBM and other companies. P-Tech results are exceeding the national average for college completion and have resulted in a push to alter the distribution of federal funding for career and technical education programs across the United States consistent with the P-Tech design.
Such schools have spread rapidly since they were first launched by IBM in September 2001, with 60 in operation at the start of the 2016 academic year.53 In addition, IBM has launched a new effort to use its Watson supercomputer to help physicians diagnose difficult health problems by loading all the relevant clinical trial results into the computer and enabling physicians to have access to the data by apps for smartphones. The company is now using the Watson supercomputer to provide to school teachers, again via smartphone apps, materials on discrete subjects that they wish to use in their classroom instruction. Beginning with elementary school math, the Watson technology becomes a personalized coach to assist teachers with finding the best academic course materials, customizing them for use in their classrooms, and answering questions about the best teaching strategies. In each case, IBM frames a solution to a critical problem using Watson technology and cloud computing, as well as data analytics and mobile technologies, to develop innovative solutions and then bring them to scale and make them sustainable.54
Since 2008, Goldman Sachs has committed more than $1.6 billion in high-impact, strategic philanthropic initiatives. That was the year it launched the aforementioned 10,000 Women initiative, the first of its two major strategic programs to drive economic growth and opportunity. The company started by identifying women-owned small-and medium-sized enterprises as a “white space” in need of investment. Based on Goldman Sachs’s research demonstrating the significant economic and social benefits to investing in women’s education—published in reports such as “Womenomics” (2005)55 and “Women Hold Up Half the Sky” (2008)56—10,000 Women was established as a five-year, $100 million program to identify and train women entrepreneurs in developing countries. Goldman Sachs partnered with educational institutions in 56 countries to provide high-quality business and management education to the women entrepreneurs, as well as technical assistance and the opportunity to access working capital in accordance with their business plans.
By the end of 2013, the 10,000th woman had entered the program. Babson College released an independent evaluation in 2014 and determined that “training and education for women entrepreneurs positively affect emerging economies by increasing revenues and creating jobs, expanding women’s contributions to their communities, and informing their leadership styles.”57 Within 18 months of graduating, nearly 70 percent of graduates increased revenues, 60 percent added new jobs, and 90 percent were “paying it forward” by mentoring other women in their communities.58 Graduates’ sustained growth was significant. However, many confronted challenges accessing capital to take their businesses to the next level, highlighting the massive credit gap that exists for women entrepreneurs in developing countries.
To address this market need, in 2014, Goldman Sachs, in partnership with the World Bank Group (through the International Finance Corporation), created the first-ever loan facility for women entrepreneurs to enable up to 100,000 women around the world to raise capital for their enterprises.59 This partnership was also driven by research: IFC estimates a $285 billion global credit gap for women entrepreneurs, and Goldman Sachs’s research publication “Giving Credit Where It Is Due” (2014)60 found that closing this gap in many developing countries could increase per capita income by up to 12 percent by 2030 and as much as 25–28 percent in Brazil and Vietnam.
With an anchor investment of $50 million from the Goldman Sachs Foundation, the facility has attracted coinvestment from commercial and public institutions, including a $100 million commitment from the Overseas Private Investment Corporation, announced by President Obama in July 2015.61 Two years later, this public-private partnership, spurred by for-profit-sector innovation, has continued to attract new funders and highlighted the increased interest in investing in this space to close the gap and make progress. As of 2016, the facility has committed $420 million to financial institutions in 15 countries, making capital available to more than 25,000 women entrepreneurs. Among the major new investments are those from commercial investor AP2, the Second Swedish National Pension Fund, demonstrating the evolution of the women’s economic empowerment space from a philanthropic investment to an impact investment.
Incorporating the lessons learned from 10,000 Women, Goldman Sachs launched 10,000 Small Businesses in 2010, a $500 million initiative to support small business owners in the United States and the United Kingdom with access to education, capital, and business support services.62 With an advisory council cochaired by Goldman Sachs CEO Lloyd Blankfein, former New York mayor Michael R. Bloomberg, Berkshire Hathaway chairman and CEO Warren Buffett, and the founder of Initiative for a Competitive Inner City, Michael Porter, 10,000 Small Businesses has also seen remarkable results, as detailed in a 2016 progress report released by Babson College in May 2016, which found that “10,000 Small Businesses participants consistently increase revenues and create jobs over a longer period of time. Six months after completing the program, 47.9 percent of participants reported adding new jobs. This number increased to 55.7 percent at 18 months and to 60.9 percent at 30 months after the program,” significantly exceeding the extent of new hiring among small businesses generally.63
Other corporations, including Coca-Cola, have followed suit with similarly ambitious plans that are related to the business activities of those companies. In the case of Coca-Cola, the focus is on creating clean water in the countries in which Coca-Cola is using water to produce its beverages.
In the past, corporate social responsibility mainly consisted of writing checks to nonprofit community groups in the vicinity of the company’s manufacturing plants and offices. The difference between that and the robust, cutting-edge initiatives of some of today’s corporations, as exemplified by IBM and Goldman Sachs, could not be more striking. Today’s pioneering efforts are bold, strategic, and measured by impact data.