Putting Wealth to Work: Philanthropy for Today or Investing for Tomorrow?

Joel L. Fleishman

311 pages, PublicAffairs, 2017

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Perpetuity is so yesterday. Or so it sometimes seems, as many high-profile philanthropists make clear their intention to do their “giving while living,” rather than establish endowed, perpetual institutions. The once-multibillion-dollar Atlantic Philanthropies is in the final stages of winding down operations. The Bill & Melinda Gates Foundation plans to spend down within 20 years of its founders’ deaths. And donors such as Sean Parker (of Napster and Facebook fame) have announced that their foundations will be time-limited.

Parker has gone so far as to publicly deride perpetual organizations. “The executive directors of most major private foundations, endowments, and other nonprofit institutions are dedicated, first and foremost, to preserving the resources and reputations of the institutions they run,” he wrote in a 2015 Wall Street Journal essay. “This is achieved by creating layers of bureaucracy to oversee the resources of the institution and prevent it from taking on too much risk.” The best way to avoid “philanthropic decay,” Parker argued, is “spending down all of your philanthropic assets during your own lifetime.”

But in his persuasive new book, Putting Wealth to Work, Duke University’s Joel Fleishman, formerly an executive at the Atlantic Philanthropies, argues that Parker has it wrong. While limiting the life of a foundation sometimes makes sense, it should not be the default, any more than perpetuity should be. Fleishman—who I should note played a key role as a funder and then board member in establishing the organization I lead, the Center for Effective Philanthropy (CEP)—challenges the central arguments for limiting the life of foundations.

Chief among these arguments is that long-lived foundations may drift from the founder’s original intent. The animating cautionary tale is the Ford Foundation, which has been portrayed as having moved so far from Edsel Ford’s intent that his son Henry Ford II stormed out of a board meeting and resigned in disgust. But this is actually a well-cultivated myth: The storming out “manifestly never happened,” Fleishman writes. Moreover, the historical record, according to Fleishman, suggests that donor intent was not very clear at the foundation’s founding, and that Henry Ford II, once he took over early in the foundation’s life, actually was “the dominant force in shaping the Ford Foundation’s first 33 years of existence.” When Henry Ford II stepped down, he cited the foundation’s “magnificent record” in a 1976 resignation letter.

Fleishman argues that perpetuity, in fact, offers many advantages in creating impact. This point is particularly interesting because, at least in my discussions with donors, many assume the reverse: that more spending, more quickly, equals more impact. When CEP studied the approaches of 11 limited life foundations, “the opportunity to have greater impact” was the most frequently cited motivation for spending down.

To be sure, impact is sometimes served by spending down. The Aaron Diamond Foundation, for example, “injected enormous resources into AIDS research” in the 1990s at a time when others were not, spending itself out to create the so-called AIDS cocktail of drugs that saved countless lives. But Fleishman argues that these instances are “as rare as they are thrilling.” The search for solutions to our most vexing challenges is typically “a long slog.” It was partly this realization that led Andrew Carnegie, who had famously urged his peers to give away their fortunes during their lifetimes, to ultimately create a perpetual foundation. Solving or even mitigating tough problems—especially ones that have defied market or government solutions—requires patience, and institutions gain skills and competencies over time.

Touching on examples from his 2007 book, The Foundation, as well as some new ones, he illustrates the many contributions of perpetual foundations—from the Robert Wood Johnson Foundation’s work on teenage pregnancies, teen smoking, and childhood obesity to the Rockefeller Foundation’s efforts to produce a yellow fever vaccine. These are not undertakings of the risk-averse bureaucrats depicted in Parker’s caricature.

Clearly, there is no single right duration for a charitable foundation. And I wonder whether Fleishman’s worry about the balance tipping away from perpetuity is perhaps a bit overblown. Data is hard to come by, in part because foundation donors and boards change their minds. (See, for example, the Open Society Foundations, which made an about-face from a previous declaration of limited life—a reversal that Fleishman clearly hopes Gates and others will follow.) The fact is, perpetuity remains the timeframe for the overwhelming number of larger foundations, according to our research at CEP, and the total amount held in US foundation endowments now totals more than $700 billion, according to the Foundation Center. Still, there is no doubt that, especially among the young donors of Silicon Valley, spending down is hot and perpetuity is not.

So Fleishman’s book is a welcome entrant into the debate. In a time when it sometimes seems that every other book or article about American philanthropy laments its failings and calls for a “reinvention,” Fleishman helpfully reminds us of how much philanthropy has, in fact, achieved. In Fleishman’s telling, perpetuity need not be the selfish choice of those seeking immortality. It can instead be the humble and selfless approach of those aware of their limits—and eager to ensure that institutions with wisdom and experience exist to serve generations to come.