Are Foundations Inept, Boring and Afraid of Failure? Part II

After her interview on the Tactical Philanthropy Podcast, Cheryl Dahle posted a “rant” about why she felt that foundations were not generally worthy of press coverage. I think very highly of Cheryl. She understands the evolving field of social enterprise very deeply and speaks fluently about philanthropy and the challenges that face it.

Howard Marks is the founder of Oaktree Capital Management. In a 1993 article in the Financial Analyst Journal, Marks discussed non-consensus forecasting (predicting a future that is different from conventional wisdom). In the article, he wrote:

“…being too far ahead of your time is indistinguishable from being wrong.”

I think Cheryl is deeply wrong in her opinion about the state of private foundations… or too far ahead of her time. Much of what she wants will come to pass, but the trends she wants to see are still emergent.

In her rant, Cheryl suggests that foundations do not get more press coverage because most foundations do not engage in innovation. We currently live in a society that celebrates innovation very highly. Certainly, I agree that innovation is a worthy topic for press coverage. But what Cheryl is missing is that we have a robust business media culture, even though the bulk of for-profit companies are not innovative. An “innovation” is defined as “something new”. For something to be new, most people must not be doing it.

In the for-profit world, successful innovation generates higher sales, the company grows and over time, the innovators come to dominate their market. Think Google, Starbucks and Apple. What happens when a foundation is successfully innovative? The social return on its grantmaking goes up. Since foundations don’t fundraise, generating higher social returns should be met with higher payout levels (the foundation giving out more of its endowment). Over time, this will drive the foundation out of business. Ironically, one of the “innovations” that Cheryl calls for in her rant is more “spend-down foundations”. While there is a very legitimate argument for foundations to not exist in perpetuity, it must be recognized that from a Darwinian standpoint, this “innovation” would quickly decimate the ranks of innovative foundations.

Much of Cheryl’s complaints rest on the idea that foundations are unaccountable and unresponsive. What she is missing is that there is not a market or regulatory framework to encourage foundations to act in the way she would like. While it is all fine and good to complain about people not being the best they can be, her rant really boils down “if people would just be better people, the world would be a better place.” And if everyone was more polite, thoughtful, caring and ate their fiber the world would be a better place too. Rather than complain that foundations aren’t striving to be the best they can be, let’s encourage them to reach for that goal through the mechanism of societal appreciation of the actions we desire. In other words, press coverage!

The media continuously focuses their attention on the biggest grants and the biggest endowments. In the for-profit world, this focus would be similar to Exxon, General Electric and AT&T dominating the business press because they happen to be some of the largest companies.

Why isn’t the mainstream media spending more time covering NetSquared, The Packard Foundation Nitrogen Project, The Peace Primary, the Nonprofit Primary Project, B Corporations, Paul Brest’s call for an online information marketplace for philanthropy, the Robert Wood Johnson Foundation’s experimentations with video games and health care, the work of the X Prize Foundation, The MacArthur Foundation’s conference in Second Life, the transparency of the Irvine Foundation,, the F.B. Heron’s deep commitment to mission related investing, the Ford Foundation’s hiring of a business consultant as their new president, the Case Foundation’s “citizen centered” focus, and the Edna McConnell Clark Foundation’s work in venture philanthropy?

If every foundation was engaging in innovation it wouldn’t really be a news story would it? But there are tremendously exciting trends bubbling in the foundation and broader philanthropic community. I hope Cheryl continues to cover them and that editors can get over their view of philanthropy as a “do gooder” beat that a reporter shouldn’t want to cover.

The flip side of all of this is reflected in an email I received from another reporter who covers philanthropy. Responding to Cheryl’s comments, the reporter told me that the issues that Cheryl raised were reasons to cover foundations, not to ignore them.


  1. Holden says:

    OK, those are some cool things you point to foundations doing …

    But none of them get me excited the way a business or sports story gets me excited, because all of them are about process, and none of them are about RESULTS.

    If a business experimented with Second Life or community-powered voting or the like … boring. If that led to more profits or even just a better mousetrap, I’m interested.

    Show me a foundation that figured out the best way to fight malaria and eliminated it from some part of a country. Then I’ll get excited. It’s that kind of thing that could win a foundation fame forever, even if it goes out of business in the process. On the flip side, a foundation failing to dent malaria for some unforeseen reason is interesting too (maybe even more interesting).

    I do agree with you completely that press coverage is a potential key to the behavior we want. But rather than covering the things you point to, which even I find “sorta interesting,” not “exciting,” the press coverage I want to see would make a scandal out of the fact that foundations are so opaque. (Along the lines of your last paragraph.)

  2. And so my question to both Sean and Holden, is then “So What?” More press coverage and the outcome of that is …? To me it’s like some famous world-ranked tennis players, some of which if they spent less time in front of the camera for sponsor promos, may have had a better year on the court.

    The point is to be great not big. Sorry, I don’t think more press coverage is the answer to what you think they should try to be accomplishing.

  3. Holden says:

    Maggie, I don’t follow you. Sean and I are arguing for different kinds of press coverage, which may be behind the confusion.

    Foundations are more opaque than they should be. They’re rewarded for this with the absence of controversy and accountability. I’d like to see the press make a scandal out of their opacity and embarrass them into telling us what they heck they do. The outcome of that, hopefully, is that we find out, and then we can have a real conversation about how good it is.

  4. Maggie says:

    Yes, I followed what you meant. My thought was that I don’t think that tactic is the best way. I find the approach a bit bully-ish.

  5. I will retract the word bully-ish from my previous comment as it is a strong word. In response to Holden’s comment “… to embarrass them into telling us what they do…” What I am sayig is, I just don’t think using the media “to stick it to em'” is the way to get the information.

  6. Holden says:

    OK, what’s a better approach? Or do you disagree that there’s a problem?

    There are people in need (clients) and people not in need (foundation staff). When discussing how to improve outcomes for the former, I hate hearing concerns about “bullying” the later.

  7. Holden says:

    I do not accept your retraction of the word “bully.” What’s wrong with a strong word when you have a strong feeling? I accept the “bully” label with pride, if you mean that I’m bullying foundation people in order to help the poor and disadvantaged. It’s true, I’d go further than public embarrassment, I’d give em noogies and chocolate swirlies if I thought it would help.