In three consecutive issues of Philanthropy we are presenting wisdom from America’s leading experts on public-policy philanthropy. This niche —where donors aim to nudge national opinion and lawmaking in constructive directions—is a difficult art, but one that can have large payoffs for those who understand its mysteries.
In this installment, our authorities take up the broad subject of investing in ideas. Why would a donor want to? How can he or she succeed?
The second installment, in our Winter issue, will zero in on the nuances of investing in litigation and court challenges. Installment three, published next spring, will look at the last generation’s most successful public-policy philanthropy effort: school reform.
These expert testimonies are condensed from the new Philanthropy Roundtable book Agenda Setting: A Wise Giver’s Guide to Influencing Public Policy.
When Kim Dennis started as a program officer at the John M. Olin Foundation in 1980, the body of funders and nonprofits trying to influence public policy from the right “was a very small universe. They were working on economic policies, but it wasn’t fine-grained down-in-the-weeds empirical studies. It was more about the broad principles of free-market economics. The principles weren’t practiced in policy at that time; people were rediscovering them.”
“By the end of the ’80s, people came to understand that free markets were much more efficient and produced more prosperity and freedom than redistributed socialistic ways of organizing. The disappointment for a lot of us now is that society seems to have forgotten much of what it learned.” But at least there is much more expertise on the power of markets. “I’ve seen a huge proliferation of research groups. We have a lot more niche players focused on specific issues.”
“Olin invested broadly in people and institutions where it saw potential. The foundation was never a micromanager of the groups or individuals it funded. It was trying to build a movement, a broad-brush effort to expand and strengthen conservative ideas across a wide range of cultural and economic issues.”
Now Dennis leads the Searle Freedom Trust, endowed by the late Dan Searle with proceeds from the sale of the G. D. Searle pharmaceutical company. Like Olin, the Searle Freedom Trust concentrates on academic research. “Our grants are focused on certain people and projects, and we avoid bureaucracies. We deal directly with the faculty we want to work with. A lot of donors think that you need to go through the university foundation, but that’s not true.”
It’s crucial to choose the professor wisely. “Academics have a trail of work and research, so it’s pretty easy to read the papers they’ve done and know what you’re dealing with. We also get a lot of information from talking to other academics we trust, or people in the policy world who are good judges of their work.”
“It’s very hard to find academics who want their work to be read by more than 100 specialists, who really want to make a difference in the world. When we find ones with motivation, we work with them.”
Agreeing on research agendas can be tricky. “There’s a bit of push and pull. We’re always looking for where we can make a difference right now. For example, at this current time there’s not much going on in tax policy—one of our big economic interests—just because of the political stalemate. But regulation is also an interest, so that’s an area we’re focused more on now. These things shift as political opportunities come along.”
“Even when we don’t see a lot of potential for policy movement on certain issues, it’s not like we drop the priority. If you stop supporting all the tax economists, where will we be when there’s an opportunity? So you tread water on some issues while you’re pushing others.”
“We also respond to what’s out there. We see someone talented who is driven to work on a subject, and we say, ‘Let’s support it and see what comes of it.’”
“It’s often impossible to track progress in policy work. We do look at things like the number of citations of a study, and how many times it was downloaded. But how does attention translate to enacted policy? And even when policies that have been promoted in studies get enacted, who gets credit? When cap-and-trade legislation was defeated in Congress, every single group and researcher we funded on that topic claimed credit for it. And a lot of them did play some role.”
“The process is very serendipitous. Often the best studies we fund don’t get much traction, while some lesser study catches a wave at the right time. A lot of it is timing that you can’t predict.”
“One frustration for lots of new donors is how slow, indirect, and fuzzy policy change can be. They think they can apply their business talents to charitable giving and get quick results.”
“Dan Searle did this at the start. When I began working for him, he would fund what he thought was a great study on, say, Social Security reform. It would be released, and he would say, “This makes such sense. Why don’t we have reform? Why hasn’t it happened?”
“For donors who go into this area, it helps if they understand from the outset that it’s very hard to track what their investments produced. Major reforms rarely flow in direct linear fashion out of any particular intervention.”
Gara LaMarche leads the Democracy Alliance— America’s savviest network of liberal large-scale policy and politics donors. Roughly 100 of the country’s wealthiest left-leaning philanthropists, like George and Jonathan Soros, Tom Steyer, Chris Hughes, Weston Milliken, and others, participate. They collectively channel around $70 million per year of donations to nonprofits anointed by the Alliance as carriers of the progressive torch.
“Democracy Alliance was organized around the idea that there were institutions on the progressive side of the spectrum that needed to be created or built up,” LaMarche explains. “To a great extent we were inspired by people on the right who had invested over a period of 30 or 40 years in key institutions that were policy-focused. The Bradley Foundation or the Olin Foundation, for instance. We saw donors giving multiyear support to organizations like the Federalist Society and the Heritage Foundation. The right really understood the need for infrastructure-building.”
“On the progressive side we saw gaps in think tanks, media work, and leadership development. So the Democracy Alliance looks for investments that can build policy and politics infrastructure. Our donors agree to be advised by us on key investments and give to causes and institutions that we identify. We are like a venture-capital organization for progressive institutions. And we also work with recipient groups on their business plans, funding needs, and metrics.”
“The organizations we recommend for donors are a mix of 501(c)(3) charities and 501(c)(4) advocacy groups. For instance, the progressive counterpart to the Federalist Society is the American Constitution Society. It’s a (c)(3) operation that runs campus chapters for students very similar to the Federalist Society’s. Organizations like the Center for American Progress, on the other hand, have both a (c)(3) and a (c)(4) action arm.”
Prior to becoming president of the Democracy Alliance, LaMarche was a top executive at two of the largest left-wing foundations: Chuck Feeney’s Atlantic Philanthropies and George Soros’s Open Society Foundations. “Soros’s early philanthropy was to promote democracy and independent media in Eastern Europe and the former Soviet Union, so he had many conservative allies circa 1993-1994.” Then Soros took up domestic issues like euthanasia and drug legalization.
On drugs, Soros felt that “the costs associated with the war on drugs were arguably more harmful than the drug problem itself. For many years, we faced opposition from all parts of the political spectrum. We funded a social movement to enable communities of color and families of people incarcerated to agitate for change. We supported organizations like Families Against Mandatory Minimums and the Drug Policy Alliance. Now we have a bill, the REDEEM Act, sponsored by Rand Paul and Cory Booker together.”
“The general lesson in any significant social change is that it is a long-term proposition. Immigration reform has slipped from our grasp for the moment. The last significant immigration reform was almost 30 years ago. It’s a long-haul proposition which involves steady investment.”
“When Atlantic Philanthropies put $27 million into advocacy for health-care reform, we were following the failed efforts of the Clinton administration. We made a grant to launch a coalition of labor, civil rights, and religious groups backing what became the Affordable Care Act. We were holding town hall meetings, advertising, and meeting with legislators. A member of Congress might be greeted at the airport by people congratulating his vote on health care. There was polling. There were all the elements of a modern campaign.” (Because Atlantic Philanthropies is based in Bermuda it was able to fund direct lobbying and some other activities forbidden to U.S. foundations.)
“Once you pass a major piece of social legislation, you can’t just go away. You have to focus on the implementation. Obamacare shows that very clearly. We stayed involved for a couple of years afterward in defense of the act.”
In the war of ideas, LaMarche is somewhat skeptical of shortcuts. “One of the things those of us on the left admire about conservative policy philanthropy was that it took a long view. It was very ideas-focused, and it didn’t expect change to happen tomorrow. More recently, though, there has been a lot of focus on elections.”
“It’s a false dichotomy—if you’re interested in politics of course you need to be electorally engaged, but electing the right people is only a predicate for change, not sufficient. Politicians need to be held accountable or pushed. The idea that you can short-circuit movement-building and idea-building and just elect the right person and go home doesn’t really work.”
When Roger Hertog retired as a leader of one of the world’s top investment firms in 2000, he launched a second career as a philanthropist. His donations—through both his personal philanthropy and his chairmanship of the Tikvah Fund, founded by his late business partner Zalman Bernstein—have included many unusual investments in ideas: supporting think tanks, newspapers, magazines, scholars, and students. By the end of 2014 he had given away roughly $200 million to various intellectual causes and institutions, ranging from the free-market Manhattan Institute to the Jewish Review of Books to his own Hertog Political Studies Program seminars that unite promising students with outstanding teachers and great documents.
Hertog understands firsthand the power of ideas. He grew up in a one-bedroom apartment with a single mother. The first book he recalls reading at a library was The Autobiography of Benjamin Franklin. He has early memories of searching for titles about Franklin Delano Roosevelt—wanting to know why the wartime President had not done more to prevent the Holocaust, which claimed many of Hertog’s relatives. (His parents left Germany in 1938 and he was born three years later in the United States.)
Nowadays, Hertog aims to fuel good ideas by investing in the people who generate them and the institutions that promote them. “It’s a lot like investing in a business,” he says. “Sometimes you see returns right away. But it can also take years before the investment pays off. If you invest in a magazine or a think tank, you quickly get a sense of the scholars. You have to have quality before you can have impact. You may not see the impact right away.”
Having impact in the philanthropy of ideas and public policy is tricky, says Hertog. “A few big rules apply to idea-driven philanthropy in particular. First, you have to know what you believe in. You have to have a strategic vision, and you need the clarity of mind to describe what it is. Aristotle said that a small mistake at the beginning of a journey is a large error at the end. You need to think about this early.”
Next comes people. “At the organizations you support, you need the best people in leadership, and you must broadly agree with their worldview. Don’t be too impressed by intellectual pedigrees. That can be a good place to start, but often what matters more is what’s in the heart and soul and mind of an individual.”
Then there’s the board. “This is about good people too,” he says. “Great board members don’t need to be area experts. They should have common sense and life experiences. Sometimes that can lead to argument. That’s good. You need to stay sharp, and competitive discussions can help.” Too much collegiality can actually pose a threat to excellent philanthropy. “When you’re giving away money, people will agree with you even when you’re making a mistake. You want principled board members who will warn you when you’re wrong.”
“Anything that furthers intellectual debate can be a part of the philanthropic package,” he says. “Often that means giving to a nonprofit group, but on some occasions it makes sense to invest in a venture organized instead as a business. Even if it will lose money, when the people are strong and the vision is consistent with your own, that can be an excellent donation.”
In his own career, Hertog has put cash into nominally for-profit organizations like The New Republic (a political magazine) and the New York Sun (a New York City daily newspaper), recognizing that they were unlikely to make any returns but could still be considered successes as philanthropy. Of course, “you have to use private funds. You can’t do this through your foundation.”
In 2010, he created the Hertog Political Studies Program. “We’re trying to build a new generation of leaders,” he says. The program pays some of America’s best college students to attend its courses, putting them into classrooms with first-rate teachers who lead them in lectures and conversations about great books, political theory, and the good life.
“We began with the observation that the academy is increasingly politicized and narrow,” says Hertog. “Political science keeps dealing with smaller and smaller questions. Our idea is to take a different approach, bringing together theory and practice.” Students read the texts of Machiavelli, Tocqueville, and others, then hear from practitioners such as Supreme Court Justice Antonin Scalia, columnist Charles Krauthammer, or Harvard professor Harvey Mansfield. “Our idea is to catch students at the start of their careers and prepare them for writing, advanced degrees, the diplomatic corps, and so on.”
Hertog won’t live to see the full return on this investment—a complete measure of the impact of these programs won’t be possible until the students have finished their careers. Did any of them become great American statesmen? Did they develop policies that met new challenges? “As time moves on, new problems and solutions emerge. This is especially true in philanthropy that’s oriented to ideas.”
From 1986 to 2008, Chris DeMuth presided over the blossoming of the American Enterprise Institute into one of Washington’s most influential think tanks. From that work, and his other experience in government, academe, and corporate life, he has become an expert in how good national policy is made—and thwarted—and the vital role that private donors play in nudging debates toward productive ends.
“Think tanks produce different kinds of work than universities,” he notes, work “that is more applied than theoretical. The first think tanks were seeking a better here and now.”
This mission created its own funding strategies. “Universities will go after donors by implying, ‘this school made you everything you are, and now you should help the next wave succeed.’ Historically, think tanks went after people who had a concern with politics, people who thought America needed a policy revolution. Brookings mostly went after liberals. It got a lot of money from the Ford Foundation, for example. AEI and Heritage went after successful entrepreneurs and businessmen worried about the fate of the private-enterprise system.”
“There are many areas where the contributions of think tanks have been distinct from anything in university research, and dramatically influential. For instance, the antitrust revolution of the late 1970s and ’80s, the movement abolishing regulation of airlines and trucking, and the reform of financial markets were essentially researched out of Brookings and the American Enterprise Institute. Donors like Smith Richardson and Searle were staunch supporters.”
“Important entrants keep coming in, like the state think tanks. The Goldwater Institute, for example, has been doing terrific work in Arizona. It’s easy for people with distinctive ideas to hang up a shingle and go to work on strategies for government reform.”
The donors willing to write checks to think tanks have changed over time. “When I first came to AEI we did not have any endowment to speak of, but we did have regular annual support from many corporations. If you look up the speeches on government policy made by the presidents of big corporations in the ’50s and ’60s, they were fierce, unabashed champions of the private-enterprise system. Today, CEOs are likelier to be apologetic about their work.”
“Fortunately, advocates for refreshed public policies are emerging from other sectors. We now have a very strong entrepreneurial culture that produces people of great energy and principle. Finance has changed also. In the past, it was heavily concentrated in the big money centers and a couple of investment banks. Today we have hedge funds and widely scattered investment vehicles of various kinds. A lot of people in finance have done well and have strong political views—on the left as well as on the right.”
DeMuth sees many opportunities for donors to guide public policy in innovative ways today—especially the nimble entrepreneurial givers. “They’re spending their own money. They’re not bureaucratic. And they are successful businesspeople who understand real-world problems.”
DeMuth hopes that these Americans won’t shy from the difficult work of keeping our governance on track. “Preserving a large sphere for civil society and private institutions is important to keeping us free and self-reliant. We need to relieve government of the tendency to want to solve every problem itself, to convert every micro-group into clients and every policy issue into an electoral strategy.”
“Contriving new institutions that preserve limited government and prevent the bureaucratic state from encroaching further on private life is imperative. Politicians and corporate executives aren’t going to lead that crusade. Private donors might.”