Winter 2016 – Big Bets and the Aspiration Gap

Lots of donors say they're interested in social change. Most don't act.

When Don Fisher stepped down as chief executive of Gap Inc. in the mid 1990s, he and his wife, Doris, looked for ways to improve public education. With the help of an expert adviser they found the Knowledge Is Power Program, which at the time consisted of just two charter middle schools in Houston and New York City. After lengthy scrutiny, the Fishers committed $15 million to bring KIPP’s results-oriented methods to many more communities and students. That amount was roughly three times KIPP’s annual revenue at the time. “Their gift gave us permission to think big,” says KIPP CEO Richard Barth. “We would not have 183 schools today if Don hadn’t encouraged that kind of thinking.” KIPP’s success has been a major factor in the popularity of charter schools, and a spur to ambitious school reform. The Fishers bet big, and they had a major effect.

Research by the Bridgespan Group shows that, like the Fishers, many of today’s largest donors aspire to ambitious social change—providing better educational opportunities for people in need, for example, or eliminating disparities in health care. Among donors who have committed to the Giving Pledge or been listed as Forbes 50 Top Givers, 60 percent cite a form of social change as their main philanthropic objective; nearly 80 percent include one among their top two or three priorities. Yet only a modest proportion of today’s biggest gifts focus on social change. Excluding the Bill & Melinda Gates Foundation (more on that below), U.S.-based donors devote only 20 percent of their commitments of $10 million or more to social change. The other 80 percent of large gifts go to what are best described as traditional institutions— primarily universities, hospitals, and cultural centers.

Those institutions are hugely important to society, and our taxonomy is not meant to characterize any gift as more or less worthy. But the discrepancy between where donors say they wish to give and where they actually give is striking. Many generous and ambitious philanthropists say, “I can’t find enough opportunities to put large amounts of my money to work on the issues I really want to change.” After years of searching fruitlessly for such defining opportunities, there’s frustration—and concern that they’re not making the difference they could.

This “aspiration gap” between ambition and action has global import. If it were to close, billions of additional big-bet dollars could flow to the world’s thorniest problems—the results of which might change the lives of millions of people for generations to come.

The flow of big bets

To better understand big bets, we built a database of every identifiable philanthropic commitment of at least $10 million by U.S. donors between 2000 and 2012. We studied the share of those gifts going to organizations or initiatives focused on social change.

While everyone’s definition of social change will differ, we built our categorization around the missions that donors themselves identify, including a broad range of activities covering human services, the environment, social movements, and health care. We considered most giving to universities, hospitals, and cultural institutions to be “institutional” support. We did, however, include big university gifts that specifically focused on social change, such as Robert and Dorothy King’s gift of $150 million to found the Stanford Institute for Innovation in Developing Economies, which aims to fight poverty in the poorest parts of the world.

Between 2000 and 2012, the total dollar volume of all announced philanthropic big bets averaged $8 billion a year. Nonprofits addressing social change received approximately $1.6 billion a year—a fifth. This proportion was roughly constant across the 13 years. The rate was even lower among “giving-while-living” donors: just 16 percent of big bet dollars from this set of philanthropists went to social change, compared to 28 percent from institutionalized philanthropies.

We excluded the Bill & Melinda Gates Foundation from our analysis because of its exceptional size. It gives away more money—by a factor of nearly six—than the second-largest foundation in the U.S., and more than the next 12 foundations combined. During our 12-year study period, Gates gave almost as many big-bet dollars to social change as all other donors combined.

The book Forces for Good profiles some of today’s most successful nonprofit organizations. The authors screened hundreds of groups to identify a dozen standouts. Their “winners” were entities like the Environmental Defense Fund, City Year, Share Our Strength, and the Heritage Foundation. Of these dozen, 11 received a critical big bet.

Bridgespan identified 14 widely accepted social-movement successes in recent decades. These included the Green Revolution of the mid-twentieth century, the rejuvenation of conservatism in the 1970s and ’80s, and the expansion of gay rights in the past decade. Over two thirds of these successes received at least one pivotal big bet from a donor.

Big bets on social change often dramatically alter the organizations or movements they support. Building leadership teams, launching new services, expanding to new locations, or birthing advocacy campaigns are common innovations. Big bets can create a leap in their recipients’ abilities or long-term ambitions.

Consider the impact of the late  Robert Wilson’s very large gift to The Nature Conservancy. “Bob was maybe the best donor ever,” says Mark Tercek, TNC’s current CEO. “He was looking for bold ideas, and he had confidence in the organization’s leadership—the kind of confidence private sector investors usually need before they’ll invest big in a company.”

In the 1990s, TNC was already a large organization, with a strong network of domestic donors. The challenge was that while some of the highest impact work to be done was outside the U.S., the donor network centered on TNC’s state chapters. Wilson initiated a powerful challenge to change that. Beginning in 1997 with a $10 million commitment, which ultimately grew to a total of $100 million over the next decade-plus, Wilson matched any U.S. donor’s international gift with a gift to the donor’s state chapter. TNC raised $150 million from other donors as part of this challenge, enabling the organization to expand its international work dramatically. A second challenge grant followed. And even though these challenge grants are over, the beneficial effect on TNC’s international fundraising endures. Compared to its starting point of $12 million in 1997, TNC’s annual international funding stood at more than $140 million in 2014.

Why the aspiration gap?

If roughly 80 percent of today’s largest donors publicly aspire to social change, and there’s evidence that big bets can be a powerful tool, why are only a fifth of all big bets going to social change? Here are some of the challenges to structuring a successful big bet: 

Limited ready opportunities. A donor wanting to make a big gift to a university or hospital will have no trouble finding an impressive institution with capacity to make use of a large investment. But capacity can be a real barrier for donations to social change. “There’s a relatively small number of organizations that can effectively metabolize seven- and eight-figure checks,” says James Jensen of the Jenesis Group.

Prospective donors exacerbate this problem if they define their area of interest so narrowly that they end up with few organizations or initiatives on which they can sensibly make a big bet. “As we’ve increased the ambition of the work,” notes Edna McConnell Clark Foundation president Nancy Roob, “we’ve needed our partners’ help to expand what we’re willing to consider.”

Even if the “right” social-change organization does exist, a fully developed opportunity for large-scale action may not. Among social-change nonprofits, donors often have to roll up their sleeves and get deep into the design of something that can achieve meaningful results. These realities put a premium on genuine collaboration between donor and nonprofit.

Lack of personal relationships. Whether in the nonprofit world or in business, serious deals often hinge on personal relationships and trust. Most major donors emphasize the importance of their confidence in a nonprofit organization’s leader. For institutional gifts, there is often a personal connection: the donor went to that prominent university, was a patient at that respected hospital, or attends concerts or exhibits at that impressive cultural institution. Development officers know how to nurture those relationships into big gifts. On the social-change side, the strong donor attachment tends to be more to the issue—preventing hunger, helping kids succeed in school—and less often to an organization or its leader.

Barbara Picower of the JPB Foundation tries to get to know promising leaders over several years before she bets big on their work. She became a major supporter of the Harlem Children’s Zone only after meeting its founder Geoffrey Canada in a small office over sandwiches when the organization was still in its early stages, and deepening a relationship from there. The leaders of Teach For America, KIPP, City Year, and other nonprofits that have successfully secured big bets have typically found ways to build strong personal relationships with their donors. Youth Villages, a Memphis-based organization that has benefited many kids in the foster care system, has received multiple big bets, allowing it to grow from serving 40 children to more than 22,000, partly because its leader Patrick Lawler aggressively courts mentors from the business world.

Difficulties of measuring social change. For institutional gifts, results are often easy to see: the new wing is completed, the concert hall opens, or you get to shake hands with that distinguished professor whose chair you endowed. With social-change bets, defining and measuring what a big gift is supposed to achieve can be one of the most challenging aspects. It often takes years, sometimes decades, to see the full effects. Even then, attribution is difficult, given the multitude of factors that contribute to social change. Barbara Picower has noted these measurement challenges in her grantmaking: “We care a great deal about results, and it has taken a lot to get clear on the effects of our poverty-fighting investments. We have frequently made additional grants above our programmatic ones to support measurement and evaluation of these programs.”

Risking controversy. Generous donors can get lots of negative press if their grants aimed at societal improvement don’t succeed strongly. Consider the pummeling that Facebook CEO Mark Zuckerberg has received in the aftermath of his $100 million gift that aimed to improve teaching in the Newark public-school system. Though the funds achieved some clear educational benefits, including a recent study showing that the city’s charter schools had the second highest gains in student performance of any system in the country, opponents generated negative feelings on this particular big bet that are likely to stick.

In contrast, funding a new building or faculty chair typically brings nothing but praise. Naming rights are often a fringe benefit that offer donors prestige for generations. Reporting generally identifies top philanthropists just by how much they give—not by what they support or whether they took a risk.

A high bar for success. Joel Fleishman, who has administered and studied large grants to both higher education and social-change organizations, says that “donors expect a level of outcomes from a gift to social change that they simply do not in support of a cherished institution,” or in search of a business success, for that matter. One executive director who works for a driven, results-oriented donor mentions spending many months and dozens of phone calls refining a potential five-figure grant to a promising yet scrappy social-change organization. The grant is much better because of that work. As that diligent effort neared completion, though, a campaign at the donor’s alma mater required only one phone call to convince the donor to make a seven-figure gift. These double standards in levels of expectation and review have profound effects.

Underinvestment in foundation-laying. We all want philanthropy to fund actual programs, not the mechanics of finding and structuring the deals themselves. Yet, for all the reasons above, it takes time and care to put effective social change into motion.

Donors need to be willing to put some resources into determining what issues are important to them, which leaders are most promising, the kind of initiatives that can really be effective, and how philanthropy can make a crucial difference. In a private-equity firm, a partner might do well by finding one great deal every two years. “Serious due diligence is one of the biggest missing ingredients in philanthropy today,” says Herb Sandler, who along with his wife, Marion, helped launch the nonprofit media organization ProPublica. Unwillingness to lay this kind of groundwork for success can be especially pointed where donors insist on lean teams and are not willing to put significant time themselves into planning effective action.

Finding organizations that are big-bet ready

What will it take for donors to jump these barriers to making big bets on social change? Organizations that have been especially successful attracting big bets offer some lessons. We identified 28 “frequent flyers”—nonprofits that received four or more big bets from at least two different donors during our study period. These organizations represented only about 5 percent of the social-change big-bet recipients, but accounted for nearly 30 percent of big-bet dollars. Their commonalities suggest some ways to find arenas and organizations that are ripe for big bets.

Give through intermediaries. Specialized intermediary organizations that collect and re-grant philanthropic funds made up 43 percent of our frequent flyers. An example is the Robin Hood Foundation, created in 1988 by a group of bold and results-oriented businessmen, and now New York City’s largest poverty-fighting organization. Donors to Robin Hood don’t have to conduct an extensive search for an organization that might be capable of using their gift effectively, figure out how such a deal might be structured, and create and track metrics that would tell them if their gift was making a difference. That’s what Robin Hood does for them. The group also invests in research to find the kind of solutions and groups that might be hard for individual donors to uncover on their own.

Invest in fields with the capacities of strong institutions. Some social-change fields can more naturally mimic the attributes that make universities, hospitals, and the arts such big-bet magnets. And some gifts to major institutions may be specifically directed to ambitious social change.

Consider prior big-bet recipients. Naturally, one of the best ways to find an organization capable of handling a big bet is to look for those that have already absorbed one. The frequent flyers we interviewed consistently told us that landing one big bet is one of the best ways to attract more.

Get involved. During the six years when they were building up the KIPP network from its embryonic beginning, the Fishers visited every new KIPP school. “For KIPP staff who have been with KIPP more than a year or two, there is a good chance they actually met Don,” recalled Barth at the time of Fisher’s death in 2009. “He loved seeing our new schools and was thrilled with the increasing reach of our network.” KIPP and its schools and its teachers and its students were as tangible to Don and Doris Fisher as any research institute or museum wing. This not only gave them confidence to keep investing; it also gave KIPP the benefit of a lifetime of business experience. 

William Foster presented this argument at The Philanthropy Roundtable’s Annual Meeting in October. Gail Perreault is a senior director at Bridgespan and co-authored a version of this for the Stanford Social Innovation Review. Alison Powell and Chris Addy contributed reporting.