Pick Battles Big Enough to Matter and Small Enough to Win
—Jonathan Kozol, author of Savage Inequalities: Children in America’s Schools1
A spend-down foundation’s capacity to achieve impact in a fixed period of time varies inversely both with the size of the problem it aims to solve and with the scope of the community or geographic area on which it focuses. A foundation’s decision to focus on a narrowly defined place, field, or group of people significantly improves the odds. But that is not all that is needed; being relentlessly strategic in attacking a problem or set of problems is also necessary.
A good example of this generalization is the Brainerd Foundation’s concentration on land conservation in the Pacific Northwestern United States and in British Columbia. (A fuller description of the Brainerd Foundation is in Appendix A.) It chose a specific problem on which to focus in a constrained geographical area, which increases the likelihood of achieving impact. In this case, it was also helpful that the purchase and protection of land constitute discrete activities that can often be accomplished in a relatively predictable period of time—an essential factor for a foundation facing a time limit. ClearWay Minnesota, a foundation created from the proceeds of the 1998 settlement of a lawsuit against tobacco companies, also benefited from a clear geographic and strategic focus. It has targeted the reduction of tobacco use and secondhand smoke in its home state.2 The Hagedorn Foundation had a similar advantage in focusing on social equity on Long Island, New York.3
Then there is the Gill Foundation, which focused part of its philanthropy on enriching education in science, technology, engineering, and math (the so-called STEM disciplines) in Colorado. On the national level, that foundation has been perhaps the nation’s most strategically focused foundation advocating on behalf of lesbian, gay, bisexual, and transgender Americans. Its efforts are widely regarded as having paved the way for the change in American attitudes on same-sex marriage that led to the 2015 US Supreme Court decision in Obergefell v. Hodges, which invalidated state restrictions against such marriage—21 years after the foundation launched its crusade.4
A narrow substantive, rather than geographical, focus can be equally effective in conducing greater impact achievement. The AVI CHAI Foundation’s strategy in North America is an impressive example of such a focus. As noted above, that foundation’s overall mission is to strengthen traditional Judaism, which conceivably could be accomplished in many different ways. The trustees of AVI CHAI, however, carefully honed strategies in its North America Program for achieving that mission by focusing only on two narrowly defined program areas—national infrastructure for Jewish day schools of virtually all Jewish denominations and overnight Jewish camping. Those two fields were selected because careful research findings suggested that, of all possible experiences influencing young people’s choices of religious observance and affiliation, the two most influential are Jewish day school attendance and summer experiences in overnight Jewish camps. By relentlessly focusing on those two avenues of strengthening the likelihood of Jewish continuity from generation to generation, the AVI CHAI Foundation achieved far more than it would likely have done had it spread its financial support over a wider variety of interventions. Carefully selected focus unquestionably increases the likelihood of greater impact.
Beyond hewing to a tight focus on a particular community or place, limited-life foundations are striving to achieve impact in several other ways, which we should consider one by one.
Foundations facing a time limit often identify a gap in fields to which they are committed or in which they have some special expertise and then set about investing in things that will fill the gap. The Julius Rosenwald Fund provided good schools for African American children where there were none.5 As we noted in the preceding chapter, the Aaron Diamond Foundation changed the standard treatment for a deadly pandemic.6 ClearWay Minnesota developed a science-based program, called “Quitplan,” to help people who had little or no source of information, medical care, and peer support in their battle against nicotine addiction. More than 100,000 Minnesotans have since used the plan’s free services.7 The John M. Olin Foundation determined that the emerging American conservative movement lacked a national infrastructure of economic, legal, political, and social policy thinking to inform public discourse, and the foundation set about with a few key partners to build one.8
As this book was being prepared for publication, the Edna McConnell Clark Foundation became the latest institution to declare that it would expend its full endowment—in this case, close to $1 billion—over the coming decade. It will focus squarely on a field of work in which it has developed a national reputation over the previous 15 years: strengthening top-performing organizations so they can manage better, accomplish more, and use data to monitor and improve the quality of what they achieve. The major part of this effort has been devoted specifically to organizations serving children and youth, a field hobbled by undercapitalized, thinly staffed organizations and a desperate need for better data and performance-measurement to guide their decisions. The foundation has been attracting capital from across the philanthropic world to fill this gap, most recently through its creation of Blue Meridian Partners, discussed at greater length in Chapter 2 of this book. Now, with its strategic eye trained squarely on this one specific need in a narrowly defined field of interest, the Clark board has chosen, in the words of Hays Clark, one of its founders, to “bet the farm” on a compelling idea that it considers worthy of a final, all-out effort.9
The Andrea and Charles Bronfman Philanthropies, which funds organizations in North America and Israel, devoted much of its effort in its final years to strengthening the fundraising and management of its grantees in order to ensure, as the foundation’s leaders put it, “that the missions of the organizations that the ACBP has incubated will continue.”10 In the same spirit, the Jacobs Family Foundation of San Diego set out to create what it calls “social and economic enterprises that will pass into community ownership”11 after the foundation is gone.
Similarly, The Atlantic Philanthropies, in its final round of grants, established a number of organizations that will continue to serve different aspects of the foundation’s mission after its sunset. One of them, the Social Change Initiative, has been funded with about $15 million and will continue identifying and nurturing high-quality leadership for social justice nonprofits after Atlantic ceases grantmaking. Another one, the Civic Participation Action Fund, with $50 million, has been charged with “supporting advocacy aimed at diversifying democratic voices that inform and influence public policy.”12 In these and several other final initiatives, Atlantic aims at fortifying “strong, sustainable institutions” to continue promoting its priorities, improving coordination among organizations in the field, funding “communications to confront biased narratives,” and building a network of new leaders to guide the next generation of reform.13
Among many efforts to strengthen its grantees and ensure their continuity, the AVI CHAI Foundation took steps to combine into one organization five national infrastructure support organizations for Jewish day schools that the foundation had been supporting separately for about 10 years. These five organizations offered programs and services for heads of school, board members, development directors, teachers, curriculum developers, and others key to day school success. Given that many of these efforts had relied heavily on the foundation’s support for their expansion during this time, AVI CHAI’s impending sunset means that some consolidation in the field would be all but inevitable. The foundation therefore sought to play a constructive role in that development before it left the scene and succeeded in attracting other philanthropies to partner with it in that effort. A year of intensive work among AVI CHAI staff and the board members and professional leaders of the five organizations generated a consolidated organization, now known as PRIZMAH: Center for Jewish Day Schools. What is especially significant about AVI CHAI’s achievement in catalyzing PRIZMAH is that the consolidated organization serves day schools serving all of the Jewish denominations—Orthodox, Conservative, Reform, and Community day schools. If it succeeds in achieving its mission, PRIZMAH may help greatly to ease the cross-denominational tensions and facilitate more extensive cross-denominational collaboration.
Finally, the S.D. Bechtel Jr. Foundation expressed a major commitment to strengthening grantees’ infrastructure by creating an Organizational Effectiveness team to work with all significant grantees in enhancing their effectiveness and resiliency.
Before ceasing their operations, some foundations have created spin-offs or supported existing organizations to continue all or part of the foundation’s mission, or to recruit, train, and motivate leaders who will fortify the field in the years ahead. Atlantic has done this with organizations such as the ones described above, and AVI CHAI plans to continue supporting a prominent cultural and educational center in Jerusalem called Beit AVI CHAI. Such successor organizations are, in a sense, a midpoint between perpetuity and spending down: they prolong at least some of a foundation’s activities, even after the foundation itself has ceased to exist as a grantmaking institution.
The Beldon Fund, created by John Hunting, heir to the Steelcase office-furniture fortune, devoted much of its 10-year life to strengthening organizations promoting stronger environmental and conservation policy. The foundation also devoted considerable energy and resources in drawing these organizations into stronger alliances for greater impact.14 The Hagedorn Foundation, created from the Miracle-Gro plant food fortune, has funded highly regarded efforts to defuse tensions over immigration in the suburban counties of Long Island, New York, and to make it an immigrant-friendly region.15
In one of its four programs, the John Merck Fund, based in Boston, has supported efforts “to promote the development of a clean-energy economy in the six-state New England region, and to enable that region to become coal-free within ten years.”16 To that end, its advocacy initiatives include calling for “state and regional policies aimed at reducing greenhouse gas emissions and dramatically increasing investments in energy efficiency and clean energy.”17 The Brainerd Foundation was instrumental in bringing about the North Fork Watershed Protection Act in December 2014, the Rocky Mountain Front Heritage Act in December 2014, and the decision of the Yukon Supreme Court overturning a Yukon government ruling that would have opened up the 17-million-acre Peel River Watershed to mining and resource development.18 ClearWay Minnesota has supported the development of a Minnesota state law that ensures a smoke-free environment for the nearly 8,000 children in Minnesota’s foster care system. The same foundation “led a coalition that successfully supported keeping tobacco prices high in Minnesota after a cigarette tax increase in 2013 as an effective way to deter youth smoking.”19
Foundations can use some of their capital assets as well as income earned to invest in companies that contribute to a foundation’s causes—such as enterprises that produce clean energy or otherwise contribute to a more sustainable environment, or those that improve agriculture in poor countries or deliver health or education to remote areas. Foundations that are spending down are, by definition, using their capital as well as earnings each year; some of them have chosen to do so with investments as well as grants. For example, The Eleos Foundation, a small, $7 million foundation based in California, spent a few years making modest grants to local nonprofits before deciding that it could be much more effective as an investor than as a grantmaker. With relatively modest amounts, the foundation has provided early-stage risk capital to companies with market-based solutions to extreme poverty in East Africa and Central America. By seeding the field in this way, it has helped those enterprises attract other investors with greater resources, thus multiplying its dollars and extending its impact well beyond its planned sunset in 2020.20
The techniques described above suggest that it is possible to spend down a foundation and still ensure that its work does not cease with its last grant. But they also provide excellent cautions about the indispensability of narrow focus, right-sizing one’s ambition to align with the availability of one’s resources, and the imperative of patience. The foundations mentioned as examples were all careful to adopt these techniques years before they spent down (although several of them wish they had started even earlier) and to keep a clear and persistent focus as they moved toward concluding their work.
Moreover, with the exception of the largest of the above foundations, such as Atlantic Philanthropies, AVI CHAI, Bronfman, and Olin, the small size of the rest of them in relation to their chosen mission and goals suggests a particular rationale for spending down in their case: the smaller the amount of financial resources available to achieve any substantial goal, the less likely it is that a foundation can achieve significant impact while preserving its capital in perpetuity. The income on its limited assets will almost certainly be insufficient to support any results-producing grantmaking over the long run. The only realistic option for such foundations is to choose a modest focus and pour their assets into achieving impact in the one area about which it cares the most.
By contrast, the larger institutions mentioned in the previous section, such as Olin, Bronfman, Atlantic Philanthropies, and AVI CHAI, would have a realistic possibility of achieving significant impact as a perpetual foundation, even if that choice would have required cutting back the amount of their annual expenditures. In their case, a limited life is not a necessity, dictated by a fear of having too little to spend. It is a strategic option, presumably chosen for reasons that go well beyond simply enlarging the annual grants budget. It may be helpful, therefore, to take a closer look at the largest two foundations to declare a limited life thus far and see what their experience can teach us.
The Bill and Melinda Gates Foundation is the wealthiest grantmaking foundation in history, both in endowment size and in annual grantmaking awards. Paying out at the 5 percent minimum annual spending rate prescribed by federal law, the foundation endowment, recently valued at approximately $42 billion, generates about $2 billion a year, a spending rate of $5.5 million per day, including weekends. In addition to those earnings on its own endowment, it receives another $1.25 billion to $2.15 billion annually in Berkshire Hathaway stock. These are payments on Warren Buffett’s 2006 pledge of $32 billion, which carry the stipulation that the proceeds from the sale of such shares must be spent within a year of their receipt. As a result of these combined sources of funds, the Gates Foundation’s annual required grantmaking came to about $3.9 billion in 2015—more than the total grantmaking of the dozen next wealthiest foundations in the United States combined. Between its inception in 2000 and the end of 2015, the foundation has awarded approximately $34.5 billion in grants.21
When the Gates Foundation was first established, it was declared to have an intended life that would terminate 50 years after the death of the survivor of Bill and Melinda Gates—he was born in 1955, and she was born in 1964. In 2012, the foundation announced that it had reduced that expectation to 20 years after the death of the second of the founders to die. It is thus not only the largest grantmaking foundation in history but also will be the largest foundation to have deliberately spent itself out of existence.
Absent serious financial market downturns, at its current spending level it is unlikely any time soon that the Gates Foundation endowment profile will begin to show decline in value caused by spending from its endowment. Therefore, the size of its spending pattern for the foreseeable future will continue to look much like that of the legacy perpetual foundations, which characteristically remain close to the 5 percent minimum payout required by federal law. Of course, if Bill and Melinda Gates wish to start spending from the foundation’s endowment, there is nothing to prevent them from doing so. The fact that the foundation chooses not to spend more than the combination of what the law requires and what Warren Buffett’s annual gifts stipulate is likely attributable to several facts. First, $3.9 billion is a great deal of money to spend well annually, and many critics have questioned whether any foundation could spend that much money efficiently and effectively. The jury is still out on that question, although most close observers of the US foundation scene express admiration for the Gates Foundation’s gutsiness and persistence in reaching for solutions to very large and significant problems, as well as its apparent success in doing so expertly. Its one large self-described failure—the initiative to create small high schools that succeeded in outperforming larger schools—is an early exception. However, even in this case, many of the schools it created succeeded in outperforming larger schools, with promising implications for future variations on the model. But it was indeed an expensive experiment, in which the foundation invested nearly $1 billion before declaring its disappointment and ending the program.
Second, on at least one recent occasion, Bill Gates was quoted as having remarked that the foundation is having trouble identifying more objectives of high priority to it. In a New York Times article published on May 25, 2014, the reporter noted that Gates had slowed the pace of his contributions to the foundation’s endowment, largely because its size “has tested its ability to give away money at the pace required both by law and by the fast-rising contributions of another donor, Warren E. Buffett. John Pinette, a spokesman for Mr. Gates, declined to address specific reasons for the change of pace in his giving, but he did point to the challenges of distributing large amounts of money where it can be most effective.”22
The Gates Foundation looks like a perpetual foundation, not only in the size of its grantmaking relative to its endowment value but also in the substantive style of its grants. In the approximately 15 years since it began spending massive amounts of money annually, it has set forth goals and strategies to solve complex problems, which, if ameliorated significantly, would be large enough to constitute a quantum leap in benefiting many millions of human beings, and which promise to lend themselves to measurable, incremental change that seems likely to cumulate if steadily tackled with well-financed, focused strategies that aim toward true solutions.
The Gates Foundation has already built an impressive track record commensurate with both the magnitude of the problems it has chosen and the financial resources it has been able to deploy over a comparatively short period of time. The case study of that foundation in Appendix A includes a brief description of some of the foundation’s significant achievements, from eradicating polio in most nations to combating malaria. Yet, despite having spent $3.5 billion to nearly $4 billion a year for most of the past 10 years, one can reasonably ask whether the foundation’s track record in solving significant problems is commensurate with the amount of money it has spent on those problems. There is not the slightest doubt that the Gates Foundation has done a great deal of good, but remember that the rationale offered to justify spending down by foundations is the felt imperative of solving critical problems by spending a great deal of one’s capital over a short period of time. The Gates Foundation’s experience doesn’t lend support to the realism of that rationale. On the other hand, by the standards of impact achieved by perpetual foundations, to which the Gates Foundation’s grantmaking practices seem similar, the Gates Foundation appears to be among the most impactful of all of them.
In short, despite massive expenditures, a decade and a half of effort, and considerable impact along the way, the foundation’s work is nowhere near completion. On balance, Gates’s experience so far should serve as a caution to donors who have much less money to deploy but are nonetheless choosing to give it all away in the belief that they can solve a pressing social problem by the time their money runs out.
The bottom line is that the above accomplishments are sufficiently persuasive that the Gates Foundation can be sincerely lauded for achieving significant impact. One cannot fail to admire the determination of Bill and Melinda Gates to use their wealth to make a major difference in the world, but it seems clear that it will take many more years and many more dollars before they will have solved any of the complex problems that they have chosen as their targets.
If I am correct in that judgment, then the Gates Foundation should be viewed at this point not as a foundation that has a limited life but as very much like the foundations that are presumably perpetual. They exist to work on solving big problems over many years, step-by-step, in an iterative way that allows them to fine-tune what they are doing based on what they are learning about their progress by trial and error. A long life and deep pockets give them the opportunity to learn how to adjust when they make mistakes and otherwise stay the course until they find the silver bullet that solves the problem.
With problems as large, daunting, and intractable as those that the Gates Foundation is tackling, there simply is no other way to solve them, barring one or more divine miracles. One might conclude, therefore, that, for those wealth-holders who wish to solve a problem, they have to right-size their choice of problem to fit the assets they have in their power to deploy. Otherwise, they should accept the fact that the best they can do is to contribute to achieving a better understanding of a problem they care about, which will pave the way for others to succeed in solving it after much trial and error.
Moreover, having a long runway before the lights-out date provides an indispensable learning period for foundations that plan to give away sizable amounts of money before they close up shop. If the Gates Foundation sticks with its declared intention and schedule of spending down, the knowledge it will have gained about the strengths and weaknesses of those working around the world on its chosen problems, especially their likely capacity to deliver on their commitments, will be indispensable when the foundation begins to make its ultimate spend-down grants.
Of course, it is also possible that, after a reasonable period of time, Bill or Melinda Gates may decide to change his or her mind about the desirability of spending down. Given the ambitious and venturesome reach that characterizes their selection of problems, and given the likelihood that there will be no end to the comparable or related problems requiring solution, I would bet that there will be at least as insistent a need for the expertise and financial resources of the Gates Foundation over the indefinite future as there is today. Speaking only for myself, I hope that its founders will keep their minds open to the possibility of ultimately transforming their institution into a perpetuity.
As for those wealthy and impatient philanthropists who want to tackle comparably complex and difficult problems as fast as they can, the risk of failure and loss is exceedingly high if they have not had the advantage of educating themselves by means of a trial period of philanthropic giving that is not buffeted by the urgencies of the moment. Moreover, they must also recognize that, to solve their problems of choice, they will need significant financial reserves to be able to make use of what they have learned during their early years. The Beldon Fund’s challenges in going from birth to death as a spend-down foundation in 10 years, seeking to make a difference in the complex world of environmental policy, should be a strong cautionary lesson. It found that it had to reset its objectives twice within its 10-year life in order to achieve any desired impact. (The Beldon Fund’s experience is described more fully in Appendix A.)
With Atlantic—the largest foundation yet to give away all of its assets and come to a close, decades before the envisioned end of the Gates Foundation—the lesson is the same as from Gates. So far as I can discern, the grants that The Atlantic Philanthropies is making during the last two years of its grantmaking life are thematically similar to, or at least build upon the foundation of, most of the grants it made during its earlier years. Its grants are focused on institution-building and leadership development in the program areas the foundation cares about—building capacity in human rights, in biomedical knowledge, and the like. Grants during the period of active spending down of its assets are much larger than had been typical in prior years, but even these greater amounts could have been distributed year by year while the foundation continued to exist, learn, and adjust course as needed. It is hard to discern anything about these final grants that benefited from the disappearance of their source of funds.
If that is true, then what is the great advantage gained for society by spending all of one’s assets over one’s lifetime? If Atlantic Philanthropies, in its concluding years, is doing more or less what it was doing during its earlier 20 years—or in any case, continuing the values and aspirations that motivated all those years of work—and by all accounts doing it well, why should it assume that spending its entire endowment and going out of business can create greater social benefit than continuing its grantmaking indefinitely?
If donors are determined, like Atlantic’s Chuck Feeney, to spend all of their philanthropic dollars during their lifetimes, that may lead them or their successor trustees to feel obliged to make a substantially counterproductive decision—a decision to spend down—that actually prevents or hinders their foundations from achieving their philanthropic intentions. Let me reiterate that I would not question founding donors’ or their successor trustees’ decision about whether or not to spend-down in principle. I believe that such donors’ and trustees’ choices about whether or not to spend down should be respected in virtually all cases, depending on their motivation for spending down. The one exception on which I do feel free to criticize their choice to spend down is when two conditions are met: their decision to spend down is motivated by their fear that the successor trustees whom they select cannot be trusted to be faithful to the founder’s vision and values, and the founder’s and/or trustees’ mission for the foundation seems unlikely, after their foundation sunsets, to attract the support of other foundations or philanthropists necessary to continue serving the mission for which their founder created the foundation. I characterize such a combination of factors as one in which the founder and his or her present trustees permit the fear that successor trustees will be unfaithful to the founder’s mission for the foundation to trump the likely need for the foundation’s time-unlimited existence in order to be alive to continue to further the donor’s chosen mission of the foundation in the probable absence of other sources of financial support for it. Among the spend-down foundations discussed in Appendix A, such a counterproductive decision seems to me to characterize one in particular—the AVI CHAI Foundation.
Zalman Bernstein’s strong commitments to Judaism, Jewish literacy, traditional Jewish observance, and the continuity of the Jewish people motivated his decision to create the AVI CHAI Foundation. Once established, it became one of the tiny handful of national foundations in the United States that support the vital national infrastructure of Jewish day school education and one of the larger handful of national foundations that support Jewish overnight camping. The reason that Bernstein, the program staff, and the trustees chose those objectives is that attendance at Jewish day schools and participation in overnight summer camps were found to be the most important predictors of continued meaningful affiliation over time with the Jewish religion and involvement with Jewish institutions.
With perhaps one exception, no other foundation at the time of this writing is so significantly supporting, at the national level, efforts to strengthen the infrastructure of Jewish day schools in North America, and at this point no other foundations are on the horizon to do so. AVI CHAI has devoted much time and energy over almost a decade in specific efforts to recruit other foundations and philanthropists to join it in supporting some of the Jewish day school infrastructure organizations that it has been supporting, with only a few successes to show for the effort. When AVI CHAI ends its grantmaking after December 31, 2019, it seems unlikely, therefore, that there will be any other significant sources to which day schools can turn to fill the gap left by this foundation’s demise as a grantmaker.
Of course, that conclusion is a conjecture that may yet prove to be incorrect, just as is the fear that successor trustees may be unfaithful to the vision and mission that Zalman Bernstein bred into AVI CHAI. However, the present absence of like-minded prospective donors open to supporting national infrastructure for Jewish day schools is a fact, not a conjecture, and perhaps, in weighing fear against likely need, is therefore worthy of being given greater weight than the conjecture that successor trustees will be unfaithful stewards of Zalman Bernstein’s philanthropic legacy.
The funding environment for overnight Jewish camping, on the other hand, is much different. More than a few philanthropies have been attracted to that program area, primarily because overnight Jewish camps are seen as a less expensive means of reaching Jewish youngsters than are the day schools. Indeed, AVI CHAI has found several large national funding partners with whom it has worked closely for the past decade or more and that are likely to continue to provide support for overnight camping after AVI CHAI sunsets. The quality of overnight Jewish camping and the camper participation numbers have grown steadily over the past decade.
By contrast, virtually all North American Jewish day schools are struggling financially, and some of them are being forced to close for financial reasons. Because the commitment to send children to day schools differs among the various denominations of Judaism, so far the closures have been primarily among schools serving children from Conservative and Reform backgrounds, whose families tend to regard a day school education as optional, and schools in shrinking Jewish communities. Among most Orthodox families, Jewish education continues to be virtually mandatory, and those parents will do what it takes to dedicate the funds necessary to cover tuition.
Virtually all of the philanthropic support for individual day schools is provided by generous individuals, foundations, and Jewish federations within the local communities served by particular day schools, but despite strenuous efforts by AVI CHAI to persuade some of them to help shoulder the burden of the national infrastructure that trains teachers and administrators and develops curriculum for such local schools, very little support has proved to be forthcoming. The result is that AVI CHAI has been forced to provide the lion’s share of support for the national day school infrastructure organizations, and the likely consequence of AVI CHAI’s spend-down is that North American Jewish day schools will suffer the loss of at least some of the benefits now provided by that infrastructure.
Is that the outcome that Zalman Bernstein would have been comfortable in bringing about? I have no doubt that some, if not all, of the AVI CHAI trustees would insist that Mr. Bernstein would not only be comfortable with that outcome but indeed would regard it as far preferable to even the remote possibility that was his greatest fear—that his philanthropy would be corrupted by the decisions of unfaithful successor trustees and administrators.
As will be clear from what I have written in this book, I respectfully disagree.
As many founders of perpetual foundations have succeeded in proving, foundation founders can, with foresight, meticulous care, and good legal advice, protect the future integrity and fidelity of their vision and mission even after they have passed away. In Chapters 8 and 9, I have listed a large number of such foundations, and the evidence they provide is that wise foundation founders who are troubled by fears about the future alignment of their foundations with their own values and vision need not, for that reason alone, feel forced to opt for the spend-down route simply because of such uncertainty about future trustee fidelity.
In discussions about this point with some of the AVI CHAI Foundation leaders, they have insisted that the likely effects of AVI CHAI’s closure on its field of focus are little different from the likely effects of the end of grantmaking by other life-limited foundations such as the Bill and Melinda Gates Foundation or the Marcus Foundation of Atlanta. In such discussions, they acknowledge that the causes and grantees that they have been supporting will suffer the loss of funding, but that other philanthropies will come along to cushion the loss and perhaps fill the gap.
Of course that is entirely possible, and, indeed with respect to both the Gates Foundation and the Marcus Foundation, that outcome is in fact probable because many other foundations and individual philanthropists in the United States and abroad are even now backing many of the same kinds of initiatives that those two foundations have been supporting. As I have noted above, however, that fact is starkly different from AVI CHAI’s position relative to the field of national infrastructure of North American Jewish day school education. While AVI CHAI is not entirely alone in that field, it is virtually alone!
Let me underscore how greatly I admire Zalman Bernstein’s devotion to his heritage and his determination to do all within his means to help perpetuate it. The leadership of AVI CHAI—Arthur Fried, Mem Bernstein, and their fellow trustees, as well as the highly talented program officers and program executive directors for North America, Israel, and the Former Soviet Union—continue to do all within their power to strengthen the future of the Jewish people in their respective locations. The trustees have been determined to be faithful to Zalman Bernstein’s vision for the Jewish people and have done all things possible to increase the likelihood that the foundation’s grantees will be able to continue their good work after AVI CHAI closes down.
I congratulate them for exerting themselves mightily to that end but remain convinced that, given the particular mission for which Bernstein created the AVI CHAI Foundation, a wiser course of action would have been to encourage his trustees to allow AVI CHAI to continue its grantmaking for as long as possible. In following its founder’s apparent preferences, the foundation is in essence short-circuiting its ability to achieve its mission, primarily because of his and their fears about the likely fidelity of their successors.
The AVI CHAI Foundation is a clear example of a founder’s trustees “choosing lifetime first,” but it is not alone in this regard. Consider The Atlantic Philanthropies, which is another, much larger example of the same scenario. A strong argument can be made that, despite the quite different missions to which each has been dedicated—religion and cultural heritage in one case, advanced research and social change in the other—both of them, in my estimation, could likely achieve greater results in their fields by not spending down and continuing their grantmaking as they had been doing theretofore.
The Whitaker Foundation, created from the fortune of Uncas A. Whitaker, founder of AMP Incorporated, is a good example of “choosing mission first” and tailoring its life so as to achieve significant results by spending down. Journalist Deanne Stone, an astute observer of family philanthropy, ably describes its story:
The Foundation was a pioneer in funding biomedical engineering. After years of slow growth, the field was finally poised to take off. Technological advances in the 1980s had created new opportunities, but few universities had departments of biomedical engineering. In 1991, the Whitaker Foundation board set aside time to rethink its grantmaking strategy. At the time, the Whitaker Foundation was adhering to the legal minimum of a 5 percent payout. It determined that funding just one new biomedical engineering department would have cost several million dollars and would have consumed much of the foundation’s entire annual grants budget at the time. Doubling the annual payout to 10 percent wouldn’t have provided enough money to make a significant difference in the biomedical engineering field. If the field were to develop, the Whitaker board decided, several departments would have to be created simultaneously. After a year of discussion and consultations with top researchers, the board concurred that the foundation could make a bigger impact on its chosen field by spending out than by continuing in perpetuity. It worked out a plan to distribute the foundation’s entire assets—at the time $350 million, and later to grow to $450 million—in 14 years.23
The lesson of the Whitaker Foundation’s sunset is that sometimes a short, intensive burst of large-scale grantmaking—of a size that requires a foundation to spend out everything it has—does make sense as the best route to achieving a particular mission. In this case, three conditions were essential for reaching that conclusion: The foundation determined, first, that it needed to fund a great deal of activity at once—in this case, the simultaneous creation of several centers of research and development—or else the changes it was seeking would be unlikely to take root. Second, the foundation’s consultations in the field led it to believe, with reasonable confidence, that such a “Big Bang” would in fact set the desired ripples of new activity in motion. And finally, the price tag for this great, catalytic first step was both small enough to fit within the foundation’s means and large enough to demand all of those means in a fixed period of time. With those factors firmly established, the decision to spend everything on a large, present-tense goal made sense for the foundation because of its mission—and doing otherwise would not have set as clear a course to the foundation’s goal line. That is not a common set of circumstances, but when the stars align in just this way, the best decision may well be to spend down. A similar bet was made by the Franklin Olin Foundation in deciding, after years of supporting engineering programs across dozens of colleges and universities, to dedicate the foundation’s entire corpus to building a new engineering college, focused on an innovative engineering curriculum. In investment terms, the trade-off of diversification for one big “swing for the fences” represents the zenith of “high risk, high reward.”