Money Well Spent (2nd Edition) Forum

Money Well Spent in Historical Context

Editors’ Note: Continuing HistPhil’s forum on the second edition of Paul Brest and Hal Harvey’s Money Well Spent (2018)David C. Hammack places the book’s first and second publications, respectively in 2008 and 2018, within a sweeping 300-year history of philanthropic manuals in the United States. 

With the 2008 publication of Money Well Spent: A Strategic Plan for Smart Philanthropy, Paul Brest (former Dean of Stanford Law School and president of the William and Flora Hewlett Foundation) and Hal Harvey (an advocate and foundation leader in the environmental field) joined the impressive list of writers whose notable service has conferred authority on manuals for philanthropic donors. (The selected list is provided at the end of this piece).  This essay is a response to Maribel Morey’s request to put the book into the context of the relevant literature; hence it will refer to quite a few titles.

Manuals for philanthropists appropriately begin with the understanding that some people have large means.  “Get me to the rich man,” wrote Massachusetts sage Cotton Mather in 1710.  But earlier manuals assumed that in the United States the rich man had to work through a larger group.  They accepted Alexis deTocqueville’s famous celebration of collective action: “Wherever at the head of some new undertaking you see the government in France, or a man of rank in England, in the United States you will be sure to find an association.”  Unlike its predecessors, Money Well Spent placed its greatest emphasis on the will of the individual donor, and made the donor  personally responsible for making a very large difference in human affairs and for developing a “theory of change” to achieve that outcome.  To accomplish these daunting tasks, the book insists, the donor should rely not on associations, institutions, or expertise, but on an independently developed “philanthropic strategy.”

In their new edition Brest and Harvey refine but do not change their stance. The approach they champion, they write, has “taken root” in some “larger foundations” and “in the practice of an increasing number of high-net-worth individual philanthropists.”  This and the fact that their own “knowledge has deepened” lead them to offer a second edition, an edition that reinforces their initial description of strategic philanthropy:

“Strategic philanthropy” is synonymous with “result-oriented,” “outcome-oriented,” and “effective” philanthropy.  It refers to philanthropy in which donors seek to achieve clearly defined goals, they and their grantees pursue evidence-based strategies for achieving those goals and both parties monitor progress toward outcomes in order to make appropriate course corrections and ultimately evaluate their success.” (second edition, p. 9).

In advocating strategic philanthropy, Brest and Harvey departed in several ways from the long and still-vital tradition of the American “almoner,” the advisor who seeks to help potential donors do good rather than ill. Traditionally concerned with alms, or religious giving, in the twentieth century the almoner increasingly became a scientific or academic leader (John D. Rockefeller’s chief advisor, Frederick T. Gates, had religious training but increasingly focused on science; not a few current advisors lead religious communities). Authors of past philanthropic manuals had relied on long-established notions of charity, mercy, humility, selflessness, self-control, community, and mutuality.  And they often emphasized giving through institutions, new, established or reformed.  In its first edition, Money Well Spent emphasized self-discipline, but chiefly to shape individual initiative.  It acknowledged the uses of institutions, but only in passing.  As Brest and Harvey write in the second edition, they personally like the “warm feelings” that come from giving to organizations. But they do not see supporting institutions as a way to accomplish what they think ought to be the aim of philanthropy: “to change the world (second edition p. 20).

Past authors had written for a general audience.  Brest and Harvey, by contrast, chiefly address the tiny number of people who “inherit or amass the fortunes that make large-scale philanthropy possible” (second edition, p.7).  They do note the existence of donors with limited means and, in passing, mention some ways for them to give.  But they focus on American foundations whose assets exceed several hundred million dollars.  The new edition affirms this emphasis at the outset by celebrating the philanthropies of several of the richest “tech” billionaires –Steve Jobs’ widow Laurene Powell Jobs, the Chan-Zuckerberg Initiative, Facebook-derived Good Ventures, and the effort of Bill Gates and Warren Buffett to persuade other exceptionally wealthy people to donate “a majority of their wealth” (second edition, p. 4).

Though their examples emphasize certain kinds of giving, Brest and Harvey, unlike the authors of most earlier philanthropic manuals, stress their neutrality and devote almost no pages to recommending particular charitable purposes or particular communities.  “Our goal,” they wrote in their first edition, was to help “make the world a better place according to your own lights. We do not presume to tell you either how much to give or what passions to pursue” (p. xiii).  Yet their book’s reliance on notable Hewlett Foundation efforts – especially to confront climate change and other environmental problems, but also to improve community support for youth in two Northern California communities and to improve reproductive health – suggested priorities.  Their thoughtful, though undocumented, accounts of these Hewlett initiatives are all the more welcome because despite its highly praised work the foundation has seen very few rigorous independent studies.

Brest and Harvey first published Money Well Spent at a high point in the reputations of tech billionaires, when Moore’s Law was at the height of fame, after the first large-scale tech stock crash had done no more than weed out (large numbers of) weaker players.  They emphasized philanthropic interventions into critical environmental, health, and civic challenges, like those they had directed at the William and Flora Hewlett Foundation.  They clearly shared a widespread feeling that existing business, political, and nonprofit institutions were failing to address such challenges.  In the face of these perceived failures and in the context of Silicon Valley’s celebration of heroic individual initiative, their focus understandably turned to the possibility that extraordinarily able and wealthy individuals might “make the world a better place.”

A book that debuted at the beginning of the Great Recession of 2007-2009 and the subsequent decade of demoralizingly high unemployment appears in the very different cultural and political context of 2018.  Piketty and Saez have risen to fame for measuring the great rise in inequality.  Digital media are widely reviled for the political, financial, and social abuses they enable.  Heavily promoted books critique Mark Zuckerberg’s Newark Public School initiative (Russakoff), the destructive role of “dark money” in American politics (Mayer), and the “charade” of elite philanthropy (Giridaharadas).

In the perspective of ten years’ hindsight, Money Well Spent inevitably encounters new questions.  We would not expect a book on how to use wealth to critique the sources of wealth.  But previous philanthropy manuals sought to help donors both do useful things and respond effectively to contemporary religious and political critics.  They warned against giving arrogantly and without adequate attention to relevant knowledge or respect for others. And they sought to show how even very big gifts could be made acceptable if directed through associations or institutions.  Money Well Spent focuses instead on its distinctive advice to the richest donors.  By departing earlier advice to work with others, it may well be asking philanthropists, tech and otherwise, to reach too far beyond their grasp.

In its first edition, Money Well Spent offered a dozen and a half short, clear, engaging, and thoughtful chapters on their chief topics: selecting precisely defined, measurable goals; developing a personal “theory of change” based on “a valid understanding of how the world works;” finding grantees whose “activities are aligned with your own goals and strategies;” monitoring the performance of grantees and initiatives; measuring the “impact” of philanthropic actions precisely and over time; and taking into account ways of combining “social impact with the possibility of financial return” – using investments as well as grants and gifts (1st edition p. 2).  The authors noted the challenges throughout, and described the difficulties a new donor might encounter as she undertook to define and achieve her philanthropic purpose.  They recounted learning gained by thinking hard about failed philanthropic efforts.  Citing a strong statement by current Hewlett leader Larry Kramer (p. 126), they focused not on individual grants (as studies that rely on Foundation Center have been constrained to do) but on sustained efforts entailing diverse initiatives.  As they noted, such efforts generally embrace competent, continuing, and open-ended research; multiple grants; periodic conferences; and collaboration among diverse funds and other actors.  In a self-effacing acknowledgment of the privilege and the temptation that can distort a well-funded grantmaker’s self-understanding, Brest cited “a Yiddish proverb” – “With money in your pocket, you are wise and you are handsome, and you sing well too.” (p. 83).

The most distinctive aspect of the first edition of Money Well Spent was its insistence that every donor should develop not only a general purpose, but should also specify a clearly defined and realizable outcome and an explicit, “valid empirical understanding of how the world works” and a “theory of change” to achieve that outcome.  Also distinctive was its argument that a donor should insist grantees adopt the donor’s understandings, theories, and ways of measuring activities and impact.  Considered from another perspective, this was to insist that grantees subordinate their thinking to that of their richest donors.  Problematic in cases where the donor is paying all expenses, this demand is more and more troubling and difficult to enforce in the great majority of cases where other grantee-funders and earned income are essential to the budget.

Clear goals and clear ideas about how to reach them are certainly important, and no doubt Brest and Harvey are right to quote Lucy Bernholz’s phrase, “knowledge is an asset.”  But to ask every donor to commit to a personal “understanding of the way the world works” and to a “theory of change” is to depart sharply from previous authors in this field.  Consistent with tech’s great enhancement of data-management, and also with flattering wealthy donors, this approach rejected longstanding understandings and assigned to donors a very heavy burden.

Unlike Money Well Spent, earlier philanthropic manuals emphasized the value of working with existing institutions and of respecting expertise developed within each field of philanthropic action.  Institutions and vetted expertise, earlier writers proposed, could provide important understanding of competing perspectives about ways to understand and address challenging problems.

Into the 1970s, most philanthropic advisers had emphasized that the advancement of good purposes required entire communities of people dedicated to the highest ideals shared by the donor.  Common to all great religious traditions, this notion is emphasized in Judaism, Christianity, and Islam, and also in science and the applied professions.  In this view it is philanthropic to provide funds for the training and the financial as well as the moral support of pastors, teachers, care givers, government service workers, and leaders of charitable and government service agencies and institutions of all kinds (Kaufman’s study of forest rangers is a classic on this topic).  In this view it was also philanthropic to provide funds to build, equip, and maintain houses of worship, burial grounds, schools, libraries, seminaries, clinics, orphanages, and homes for the disabled and the elderly. Writers from Maimonides in the 11th century to John D. Rockefeller’s advisor Frederick T. Gates also held that it was philanthropic to invest so as to provide employment as well as profit.

Money Well Spent assumes, in both editions, that earlier philanthropy directed through institutions lacked careful planning, close monitoring, or careful attention to outcomes.  The boards of nineteenth-century religious, educational, and social-care institutions, like the boards of twentieth-century institutions of all kinds, would have rejected such criticisms.  Nineteenth-century religious mission, social care, school, and college boards paid close attention to ways to reach people and to build and staff orphanages, old-age homes, houses of worship, schools, and seminaries with limited funds; they focused their efforts on the most promising opportunities and mobilized many kinds of resources beyond money.  These institutions relied not only on gifts small as well as large, but also on fees for their services, loan repayments, work (sometimes to the extent of several years’ service as a teacher or other service provider) accrued in return for tuition and for room and board, rents, and investment income.  They often counted on relief from some taxes.  Government payments for services were not unknown.  Gifts funded small loans, work-study, subsidized housing, scholarships, retirement annuities, and prizes as well as salaries and buildings and equipment that met the requirements of governments and fee-payers and where appropriate, religious authorities (For this overview see Hammack, (1998) and Hammack and Anheier 2013).

In the last decades of the nineteenth century and the first of the twentieth, Andrew Carnegie not only paid for many hundreds of public library buildings large and small; he also joined a large movement that developed a considerable cadre of professional librarians and persuaded thousands of American communities to sustain libraries with permanent taxes (Van Slyk).  Carefully-focused philanthropy enabled leaders of many colleges and universities, many individual researchers, and teachers to work together to lay the basis for modern American science, medicine, public health, and a more-or-less national system of K-12 education (Geiger, Lagemann, Wheatley).  Scholarships and other philanthropic subsidies underwrote the several professions which, like librarianship but unlike medicine and law (Coquillette and Kimball, Ilchman et al.), offered modest salaries that would not justify substantial investment in education.  During the same period, under the sharply constrained material circumstances of the post-Civil War and early twentieth-century South, regrettable yet creative philanthropy rebuilt the religious and educational institutions that kept southern white society apart from the national mainstream and established racial segregation (Anderson and Moss, J.D. Anderson, Hammack 2018).

By the end of the twentieth century America’s philanthropically-subsidized institutions, many of them indeed now heavily supported by taxes (necessarily so, given the continuing inadequacy of philanthropic resources), had proliferated in almost every part of the U.S.  This was notably true on the West Coast, where, in a process Brest and Harvey had themselves advanced, such institutions had had much assistance from the William and Flora Hewlett Foundation and other tech-based funds.

No thoughtful observer would argue that America’s existing institutions of education, medicine, health care, and public or population or environmental health are doing everything the nation might ask.  Although there are many examples of effective institutional reform, reform is difficult.  The existing systems of institutions are highly developed, have very large and varied sources of revenue, have built up vast populations of employees and supporters who object strongly to changes that threaten their interests, and in many cases have the strong support of people who prefer existing inequalities of race, class, and gender and the privileges of the best-supported religious communities.  (Compare Ginzberg and McCarthy, and consider Bowen and Bok and their anti-integration critics).  It is also true that by late in the twentieth century every system of institutions was operating on a scale that dwarfs even the resources available to Bill and Melinda Gates, as Bill Gates himself has repeatedly emphasized.  Surely Brest and Harvey well knew that no single donor could hope to transform an entire field in the ways that Carnegie, Rockefeller, Rosenwald, the Guggenheim funds, and a few others had seemed to do early in the twentieth century (Hammack and Anheier 2013).  They might have argued that donors could work through institutions to magnify their influence, but they placed their emphasis elsewhere.

Strikingly, at least to an historian who has paid attention to social science, Money Well Spent directed almost no attention to the best of the history and social science that has examined philanthropic initiatives, and that might well inform efforts to devise theories of change to guide philanthropic efforts.  This is another area in which Money Well Spent differs from its predecessors (Keppel, Jenkins, Flexner, Weaver, and Cuninggim; for an extended discussion of the literature, see Hammack & Anheier 2013, Appendix B).

Such research can offer the key lesson that it is not easy to devise effective theories of change.  American economists have surely had more financial support and more demand for results than other social scientists.  Yet despite the urgency of the question for both domestic and foreign policy, economists are very far from understanding the sources (technology? resources? population? education? slavery? women’s work? trade?) of economic growth (Atack and Passell, https://pseudoerasmus.com, Mokyr, Engerman, Goldin).  Prominent historian Joel Mokyr concluded, for example, that the “political economy of technological change is only dimly understood.”  Not a few foundations seek to reduce poverty.  Yet despite sophisticated and assiduous study that topic equally resists understanding (Canzian and Danziger, O’Connor).  The same is true of efforts to reform America’s schools (an excellent overview is by Brest’s Stanford School of Education colleagues Tyack and Cuban).  Studies of sex education continue to fail to agree about purpose (fivethirtyeight.com).

In all these cases, close examination reveals fundamental disagreements over problem-specification, a topic Brest and Harvey emphasize but which demands much fuller discussion.  Close examination also reveals fundamental disagreements over social and political priorities, topics missing from Money Well Spent.  Endemic disagreements among lay and professional leaders, and within nonprofit boards, reflect the disagreements among researchers Seeley, Sills).  Every honest history of a significant institution reinforces that conclusion.  The best social science and the best history can help both newcomers and veterans of philanthropic fields gain insight into such persistent conflicts.  Such discussions can also help the philanthropist decide whether what is needed is more research, clearer specification of objectives, acknowledgement of fundamental disagreements within society, or what Guido Calabrese (another former law school dean) has termed the “tragic choices” that arise in conflicts over scarce resources.

Highly successful business leaders meet great challenges not only when they undertake philanthropy but also when they move into a new field of business.  In his classic critique of conglomerates, business historian Alfred D. Chandler observed that when their firms acquired operations in widely differing industries, “top managers” too often found that they “had little specific knowledge or experience with the technological processes and markets of the divisions or subsidiaries they had acquired.”  They lost contact with “the middle managers who were responsible for running the operating divisions and battling for market share.”  Lacking the knowledge and background necessary to “evaluate the proposals and monitor the performance” of subsidiaries, senior executives increasingly relied on data that they did not fully understand, often with disastrous results.

Whether a donor turns from one investment field to another, or from building or inheriting a fortune to a philanthropic field in which he or she has little or no prior experience, the same task of adjustment arises.  In philanthropy, as in any field, newcomers must learn how to identify and avoid the nostrums interested parties, and of quacks.  Given the difficulties that specialists have failed to overcome, earlier writers of philanthropic manuals may have had good reason for encouraging donors, who may never have thought systematically about such matters, to take both institutions and peer-reviewed research quite seriously.

-David C. Hammack

David C. Hammack is Haydn Professor of History Emeritus at Case Western Reserve University.  He has held a Guggenheim Foundation fellowship, is former President of the Association for Research on Nonprofit Organizations and Voluntary Action (ARNOVA), and received ARNOVA’s Distinguished Achievement Award.  Author of POWER AND SOCIETY: GREATER NEW YORK AT THE TURN OF THE CENTURY and editor of the widely-used reader MAKING THE NONPROFIT SECTOR IN THE UNITED STATES, he is most recently the co-editor and substantial writer of three books assessing the contributions of US charitable funds: AMERICAN FOUNDATIONS: ROLES AND CONTRIBUTIONS (2010), a VERSATILE AMERICAN INSTITUTION (2013) (both with Helmut Anheier), and (with Steven Rathgeb Smith) AMERICAN PHILANTHROPIC FOUNDATIONS: REGIONAL DIFFERENCE AND CHANGE (2018).

List of Sources:

Selected List of Writers of Notable Philanthropic Manuals and Closely Related Works, with Dates of Initial Publication:

Cotton Mather 1710

Benjamin Franklin 1784

Leonard J. Ayres 1911

Frederick P. Keppel 1930

Shelby Harrison and F. Emerson Andrews 1946

Edward Corbin Jenkins 1950

Abraham Flexner 1952

Marion R. Fremont-Smith 1965

Warren Weaver 1967

Merrimon Cuninggim 1972

Waldemar Neilsen 1972

Frank Emerson Andrews 1973

Richard Magat 1979

William G. Bowen et al. 1994

Joel Fleischman 2007

References:

Eric Anderson and Alfred A. Moss, Dangerous Donations: Northern Philanthropy and Southern Black Education, 1902­-1930 (University of Missouri Press, 1999)

James D. Anderson, The Education of Blacks in the South, 1860­-1935 (University of North Carolina Press, 1988.)

Jeremy Atack and Peter Passell, A New Economic View of American History, second edition (New York: W.W. Norton, Inc., 1994)

https://pseudoerasmus.com

William G. Bowen and Derek Curtis Bok, The Shape of the River: Long-term Consequences of Considering Race in College and University Admissions (Princeton University Press, 2000, 2016)

Guido Calabresi, Tragic Choices (Norton, 1978)

Maria Cancian and Sheldon Danziger, editors, Changing Poverty, Changing Policies (Russell Sage Foundation, 2009)

Daniel R. Coquillette and Bruce A. Kimball, On the Battlefield of Merit: Harvard Law School, the First Century (Harvard University Press, 2015).

Alfred D. Chandler, “The Enduring Logic of Industrial Success,” Harvard Business Review, March-April, 1990, p. 139

Stanley L. Engerman, “Review of The Business of Slavery and the Rise of American Capitalism, 1815-1860 by Calvin Schermerhorn and The Half Has Never Been Told: Slavery and the Making of American Capitalism by Edward E. Baptist,” Journal Of Economic Literature, Vol. 55, No. 2, June 2017, pp. 637-43)

https://fivethirtyeight.com/features/what-arguments-about-sex-ed-are-really-about/

Frederick T. Gates, “Recollections on the Origins of the Institute,” in George Washington Corner, A History of the Rockefeller Institute, 1901-1953: Origins and Growth (Rockefeller Univ. Press, 1965)

Roger L. Geiger, To Advance Knowledge: The Growth of American Research Universities, 1900-1940 (Oxford University Press, 1986).

Lori D. Ginzberg, Women and the Work of Benevolence: Morality, Politics, and Class in the Nineteenth-Century United States (Yale University Press, 1990)

Anand Giridharadas, Winners Take All: The Elite Charade of Changing the World (Knopf Doubleday, 2018).

Claudia Goldin, Understanding the Gender Gap: An Economic History of American Women (Oxford University Press, 1990).

David C. Hammack, Making the Nonprofit Sector in the United States: A Reader (Indiana University Press, 1998)

David C. Hammack and Helmut Anheier, A Versatile American Institution (Brookings Institution Press, 2013)

David C. Hammack and Steven R. Smith, American Philanthropic Foundations: Regional Difference and Change, (Bloomington: Indiana University Press, 2018), chapters by Howard and Anheier and by Silverman et al.)

David C. Hammack, “Nonprofit Organizations, Philanthropy, and Civil Society,” in Christopher McKnight Nichols and Nancy C. Unger, eds., A Companion to the Gilded Age and Progressive Era (John Wiley & Sons, Inc., 2017), pp. 215-228

Warren F. Ilchman, Alice S. Ilchman, and Mary H. Tolar, The Lucky Few and the Worthy Many: Scholarship Competitions and the World’s Future Leaders (Indiana University Press, 2004)

Herbert Kaufman, The Forest Ranger: A Study in Administrative Behavior (Resources for the Future, 1960)

Ellen Condliffe Lagemann, Private Power for the Public Good: A History of the Carnegie Foundation for the Advancement of Teaching (Wesleyan University Press, 1983), and The Politics of Knowledge: The Carnegie Corporation, Philanthropy, and Public Policy (University of Chicago Press, 1992)

Kathleen D. McCarthy, American Creed: Philanthropy and the Rise of Civil Society, 1700­-1865 (University of Chicago Press, 2003)

Jane Mayer, Dark Money: How A Secretive Group of Billionaires Is Trying to Buy Political Control in the US (Knopf Doubleday, 2016)

James M. McPherson, The Abolitionist Legacy: From Reconstruction to the NAACP (Princeton University Press, 1975)

Joel Mokyr, A Culture of Growth: The Origins of the Modern Economy, Princeton University Press, 2016

Alice O’Connor Poverty Knowledge: Social Science, Social Policy, And The Poor In Twentieth-Century U.S. History (Princeton, N.J.: Princeton University Press 2001)

Thomas Piketty and Emmanuel Saez “Income inequality in the United States, 1913–1998.” The Quarterly journal of economics 118.1 (2003): 1-41

Dale Russakoff, The Prize: Who’s in Charge of America’s Schools? (Houghton Mifflin Harcourt, 2015)

John R. Seeley, Community Chest: A Case Study in Philanthropy (University of Toronto Press, 1957)

David L. Sills, The Volunteers, Means and Ends in a National Organization (Free Press, 1957)

David B. Tyack and Larry Cuban, Tinkering toward Utopia: A Century of Public School Reform (Harvard University Press, 2009)

Abigail A. Van Slyck, Free to All: Carnegie Libraries & American Culture, 1890-1920 (University of Chicago Press, 1998)

Steven Wheatley, The Politics of Philanthropy: Abraham Flexner and Medical Education (Madison: University of Wisconsin Press, 1988)

 

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