For Good, Measure

Monday, March 10, 2008

Philanthropy?s largest problem these days probably isn?t a lack of big gifts. Over the past few years, new records have been set in the number of individual donations of $100 million or more, and talking with those in the philanthropic community who advise potential donors reveals a sense of widespread anticipation that many billions of dollars, earned during the recent boom in the hedge-fund and private-equity markets, will soon pour into the social sector. At a moment of widespread economic distress, philanthropy is a growth industry, its golden age, at least in terms of dollars spent, almost certainly yet to come. Last year, America?s top giver, according to The Chronicle of Philanthropy?s rankings, was William Barron Hilton of the Hilton hotel chain, who pledged $1.2 billion. The financier George Soros was No. 4 ($475 million), Mayor Michael Bloomberg of New York was No. 7 ($205 million) and Pierre Omidyar, the founder of eBay, and his wife, Pam, finished at No. 21 ($98 million).

The question that troubles many of the newest philanthropists, though, is whether their bequests will have a notable impact. Much of their money either goes into or comes out of private foundations, those largely opaque institutions with huge endowments that, in the jargon-rich environment of philanthropy, differ from charities like the Red Cross in their tendency to engage in long-term ?strategic grant-making.? Such foundations do not exist to give emergency aid during crises arising from war or natural disaster; instead, their purpose is to attack social and scientific problems at the root, a process that sometimes requires substantial allocations of grant money over 5, 10 or even 20 years. That?s a long time to wait before you know whether your money is doing any good. As Judith Rodin, the head of the Rockefeller Foundation since 2005, puts it: ?Critics have talked about the field of philanthropy and said: ?Has it really made a difference. And how would you know?? ? To Rodin, these are perfectly legitimate questions, even when they?re posed indiscreetly by business titans who only recently entered the genteel world of charity. ?If we really want to do work that makes a difference, work that has some effect, then we have to know whether it is working,? she told me recently. ?And if you really do it well, you don?t only want to know what works; you want to know how it works.?

It?s not a simple task. As far back as the late 19th century, John D. Rockefeller anguished over where his charitable donations might make the biggest difference. In recent years, one guiding idea behind strategic grants, whether from old-money institutions like the Rockefeller Foundation or new-money outfits like the Bill and Melinda Gates Foundation, is that they fill gaps in the modern economy opened up by the neglect or failures of the marketplace. ?They?re the only unrestricted pool of funds to finance innovation in the social sector and to facilitate major social change,? says Joel Fleishman, a professor at Duke who recently wrote a book on the role of private foundations in American life. Fleishman explains that foundations can take risks that private companies might shun and can also finance programs that governments might be unable (or unwilling) to support. Foundations can thus experiment with cures for poverty or disease that are largely unproven, with the hope that evidence of success will entice private enterprises, politicians or other foundations to follow suit.

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Source: The New York Times Magazine (link opens in a new window)