Impacting investing: trends, issues and capabilities
Two days after arriving at Stanford University, I found my way to the School of Education by the clock tower at the heart of campus. As a visiting practitioner I was there to co-teach a course on ‘Theories of Civil Society, Philanthropy and the Nonprofit Sector’ with Bruce Sievers a Visiting Scholar and Lecturer and former head of the Walter and Elie Haas Fund.
Since its inception 11 years ago the course, offered by the Center on Philanthropy and Civil Society, has become a forerunner in the emerging field of philanthropy education. It combines historical and theoretical analysis of philanthropy, including the origins of modern European civil society, with experiential grant making. Remarkably, students receive $100,000 to distribute to local nonprofits from the Texas based ‘Once Upon a Time Foundation’.
Following nearly a decade as Chief Executive of the Pears Foundation in London the prospect of facing a classroom full of enquiring undergraduates, rather than hard-nosed fundraisers, on a sunny morning on the beautiful Stanford campus, was one of the more enjoyable culture shocks I have experienced.
What stood out?
Two things immediately caught my attention. First, the composition and previous experience of students were varied. The students were from a wide range of disciplines including political science, ethics and – curiously – human biology. Whilst this exemplifies the American college system it also symbolises the amorphous and interdisciplinary nature of philanthropy. The debate about whether philanthropy is rooted in the arts or sciences, business or humanities and especially whether it is something to promote or study, are some of the big and unresolved questions in philanthropy education. At the Pears Foundation, I had grappled with these questions in the context of our Business Schools Partnership and the school based Youth and Philanthropy initiative.
Interestingly, all the students had previous engagement with the nonprofit sector: almost entirely as volunteers and fundraisers rather than donors. So for the students, the opportunity to assume the role of philanthropist proved paradigm shifting.
Second, I wondered whether giving students $100,000 to distribute to nonprofits was a good idea. Why? The process is fraught with hazard, both moral and practical, and required careful oversight. For example, donating large sums of money can confer significant power over a nonprofit, and the logistical challenges of creating a functional, student-driven grants process within a 10 week term are also significant. But, done carefully, such a programme can offer significant educational benefits. This programme works because it is based on three interlinking components: it is grounded in historical and theoretical texts about philanthropy; it is linked to reality through regular guest speakers, including the donor; and, perhaps the most important element, it is practical: the grant-making forced students to make real funding decisions based on philosophical reflection, utilitarian reasoning and opportunity cost. Each component runs alongside the other, thus increasing the potential to create a transformative pedagogical experience.
What about beyond the classroom?
My Stanford experience provided a remarkable window into the world of contemporary American philanthropy and in particular that of the philanthropists of Silicon Valley.
You do not have to look far to see their influence. Nearly every building on the Stanford campus is named after a donor, including many recognising the substantial contribution of the Arrillaga family. Notably, Laura Arrillaga-Andreessen, author of Philanthropy 2.0, and founder and chair of Stanford’s Center on Philanthropy and Civil Society. Last year, Stanford University raised more money than any charity in the world, approximately $1 billion, and the imposing Arrillaga Alumni Center surely played a big part in that success.
The University’s endowment is almost $17 billion, second only to Harvard and Yale, and its board comprises philanthropic luminaries such as Jeff Raikes, CEO of the Gates Foundation. There is a two-way street as Stanford’s President sits on the board of Google whose founders also count among the university’s alumni and donors. It is not only the buildings, which are philanthropically funded, but so are the trees - palm trees actually, if the campus myths are to be believed.
So what are we to make of this white-hot cauldron of silicon philanthropy?
On one level, it provides a living embodiment of what the students learned on the course: the vibrant power of civil society, the Tocquevillian ideal of American associational life, geared towards generating public goods.
But is there another side? In recent years The New Yorker has devoted several major articles probing, some would say knocking, this West Coast phenomenon. Whilst this could be simply East versus West Coast rivalry, the criticism goes well past palm tree philanthropy posing questions such as whether the cult of hi-tech ‘solutionism’ – the belief that every problem has a technology based solution – and its application by philanthropists, can address intractable social issues. The New Yorker pieces deliver a sharp prick into the Silicon Valley bubble, and they were often discussed during my time at Stanford.
Alongside this critique, other battles are looming which may change the size and scope of the American nonprofit sector. Early in 2013, the US Internal Revenue Service (IRS), which regulates and confers nonprofit status and lucrative tax benefits to 501(c)(3)’s and (c)(4)’s, was accused of political meddling in the way it determined nonprofit status. It is alleged to have rooted out, or at least subjected to greater scrutiny, those applicants with the words ‘tea party’ and ‘patriot’ in their titles. The backlash continues and a root and branch reform is ongoing that could have significant implications for the definition of the modern American nonprofit.
The Stanford campus proved to be a great vantage point onto the world of American philanthropy. And if that was not enough, back in the classroom, there was always plenty of grading. Having now returned to the UK, one clear lesson is the potential to develop philanthropy education in Europe. The beginnings have already been established with courses on philanthropy at Cass Business School, Kent University and SciencePo amongst others. My aspiration is to build on these initiatives to make high quality philanthropy education the norm rather than exception at universities across Europe.
This is an exciting challenge and one I hope to combine with further research on political theories of philanthropy, teaching and consulting. Over time, these efforts will broaden and deepen our understanding of this age old, but still mercurial, subject.