Philanthropy and Risk Taking

If you were to grant me one wish to change the philanthropic sector, it would be that we would trade in our habits of self-preservation and exchange them for an approach marked by audacious risk-taking.

We’ve created an entity — a foundation — that is tasked with reconciling a contradiction at the center of its model. On one side, this entity exists to create impact, solve problems, and step in to market failures. On the other side, it’s responsible for preserving itself so it can live on forever. Those sides are not in perfect balance: the side that is charged with creating impact gets 5% of the endowment to spend every year while the self-preservation side keeps the remaining 95% to reinvest and grow in traditionally non-impact related investments. What other organization is only using 5% of its available resources to advance towards its mission? This seems like the equivalent of trying to be dexterous to handle a complex task, but then only using 50% of one of your fingers, while the other nine fingers are perpetually resting up to be used later.

I could go on about this, but I’m actually more interested in how the structure (these contradictory sides united in one entity) influences decision-making. The psychology on the self-preservation side of the business can seep into the impact-creating side of the business, and some philanthropists are hesitant to make big bets and pursue upstream, intersectional, systems-level approaches.

I’ve admired the progressive thinking of the foundations that are thinking differently and removing these competing influences by choosing to “sunset” in which they spend down all their money over a period of time (like the Gates Foundation and others). Others are making big bets (like the MacArthur Foundation), while others are changing their posture with grantees by funding general operating budgets. Some of these changes are nibbling away at the conservative risk appetite in philanthropy, but I wonder what impact would be possible if we could embrace a mentality of “highest and best use” that is anchored in a perspective of viewing our time and our dollars as finite. What would be possible today if we didn’t hold out hope in an eternal future and a perpetual endowment?