The Chronicle, 4/19/2001: Putting Venture Philanthropy Into Perspective

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From the issue dated April 19, 2001

Putting Venture Philanthropy Into Perspective

By VARTAN GREGORIAN

In recent years, the United States has witnessed unprecedented prosperity. In 1999, there were an estimated 7.2 million millionaires, more than double the number five years earlier. In 2000, American households held more than $50-trillion in assets, up from just over $30-trillion in 1990 and $20-trillion in 1980, according to Hudson Institute estimates.

With this instant wealth, we have witnessed growing demand for instant philanthropy, as well. But philanthropies must not fall prey to demands for instant solutions, hurriedly "solving" problems and moving on.

Difficult problems, by definition, resist quick and easy solutions. Searching for cures for cancer, trying to reduce racism, or deterring ethnic violence abroad are the kinds of problems that require long-term, patient attention, multiple approaches, and risk taking that may result in failure. As urgent as such problems are, we must be patient because progress is not always readily measured.

Philanthropies have to make long-term investments in the creation of knowledge, both theoretical and applied. Our impatient society might like to skip the "theoretical stuff," but theory often precedes practical knowledge. And the big ideas generally evolve from small ideas, and small ideas from smaller ones still. So there really is no such thing as useless knowledge.

Foundations are in the business of investing in social capital; hence, the necessity of taking risks. Therefore, we must be fearless about risks, even failure. Unanticipated failure is often to be expected as an inevitable part of the discovery process, part of learning what not to do again and, thus, part of making progress.

In his instructions to trustees almost a century ago, Andrew Carnegie exhorted them to be iconoclastic: "Remember you are pioneers, and do not be afraid of making mistakes; those who never make mistakes never make anything. Try many things freely, but discard just as freely."

In this discovery process, philanthropies must often invest in countless efforts, experiments, and model programs before anything can be attempted on a larger scale.

In 1959, John Gardner, a former president of the Carnegie Corporation, described the torturous path of the search for knowledge: "The bright new idea may prove to have more novelty than validity; the 'pioneering' venture may bog down; the research program may yield negative results, but foundations which engage in support of such efforts must be prepared to take these chances. It is in this sense that they regard their funds as 'venture capital.'"

Today, some newcomers to philanthropy actually come from venture-capital companies and are applying their business acumen to what they call venture philanthropy. Although new to philanthropy, they are following in the footsteps of Carnegie, Rockefeller, Ford, and Morgan, who also infused their philanthropic enterprises with the expertise, energy, and imagination that served them so well in business.

Venture philanthropy brings a welcome new set of strategies to grant making. Unlike traditional philanthropies, which make grants to a great many capable organizations with promising proposals, the new philanthropists work intensely with relatively few nonprofit organizations.

Traditional foundations support projects and give free rein to the experts to develop their ideas independently; new foundations often join the boards of directors and may provide day-to-day financial and management support.

And while established foundations commonly invest in creating knowledge that may not pay dividends for years or even decades, venture philanthropies tend to restrict their investments to worthy causes with outcomes that can be readily measured.

Some of the excitement surrounding venture philanthropy has boiled over, creating unrealistic expectations for it and setting up a false competition between "new" and "old" philanthropies. But in philanthropy, as in all fields, solutions of one size do not fit all problems. At the same time, both new and old philanthropies have much to learn from each other. Rather than allowing themselves to be pushed into a competition, they should initiate cooperative and collaborative relationships.

Such interplay encourages renewal in all institutions and prevents them from ossifying -- today's new philanthropy, after all, is tomorrow's old establishment. Philanthropies, new and old, have an obligation to share information about where they have succeeded and where they have failed so others can avoid waste and invest more wisely.

Speaking of "old philanthropy" as though it were a monolithic enterprise is, of course, simplistic. American philanthropy's strength, after all, does not lie in its uniformity, but in its diversity.

Such differences are necessary and healthy, especially since they all reach for the same goals: namely, they all want to advance knowledge, promote understanding, and improve the human condition. They all want results, short term or long term. They all believe in accountability. They all believe in revitalizing their communities, engaging their communities, and participating in their communities' future. All of this strengthens our democracy.

As Robert Louis Stevenson wrote, "Don't judge each day by the harvest you reap, but by the seeds you plant."

Vartan Gregorian is president of the Carnegie Corporation of New York. This article is excerpted from the fund's latest annual report.

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