Interview with Leo Linbeck

In Leo Linbeck’s office in Houston, Texas, is a long table, and on that table are scores of white baseball hats. Placed evenly in rows, each hat has black lettering on the front, with its own unique word. “Dad.” “Son.” “Husband.” “Donor.” “Boss.” “Programmer.” “Teacher.” And the list goes on. Linbeck says he uses the hats for a class he teaches on family business. They represent the various “hats” he wears in life.

A third-generation leader of his family’s business, Aquinas Companies, Linbeck oversees three ventures: a construction company, a real-estate development firm, and a bioscience studio that commercializes technology coming out of Texas Medical Center. He’s busy, but his harried schedule hasn’t prevented him from getting deeply involved in Houston’s booming charter-school sector and other charitable causes.

Philanthropy sat with Linbeck to learn more about his hometown and perspective on local giving. 

Philanthropy: Are you a Houstonian?

Linbeck: Yes, I was born and raised here. The greatest thing about Houston is its openness to newcomers, which might be a little bit weird for someone who’s from here to say. But it’s not a status-driven place. The culture is, “If you’re productive, and you participate, and you are engaged and do things, you’re welcome.” I love that—for a city of this size to still have that ethos is really exciting. We’re all about opportunity and upward mobility. Part of the reason we keep growing is that you can afford, on a middle-class salary, to buy a house here. And so we attract people for whom having a homestead is an important thing. That creates a family culture, and a culture of faith.

You also see that spirit in the strength of civil society. When a hurricane blows through, people wander around helping their neighbors. Everyone gets back on their feet. And if there are people who have persistent problems, there’s a lot of community support. It’s the result of a lot of good fortune, and decisions that were made early in the life of the city.

Houston was built on the oil industry, which was built by wildcatters. A wildcatter was someone who would go and lease land thinking there was oil on it, but they didn’t have sophisticated tools. They would just go out and sign a lease and drill a well. If they hit oil, they were wealthy beyond your imagination. If they didn’t, they lost every penny. Some of them would make a fortune and lose a fortune, and then make a fortune and then lose a fortune. Because those were the people who were driving the growth of the city, they developed an attitude where you never want to pull the ladder up when you reach the pinnacle of success—because the next guy who needs it might be you.

That kind of sentiment has informed the way the city has grown and been governed. That’s why we don’t have centralized land-use control or zoning here. That control is left in the hands of landowners and neighborhoods. That’s allowed us to continue to grow and keep housing affordable, which brings in more people who are interested in having a home and the American dream.

Philanthropy: What was Houston’s response to Hurricane Harvey?

Linbeck: It was an unprecedented amount of rain dumped over a three-day period. It had never happened in the continental United States. But the people in Houston were quite resilient and communal in their response. There was no central organization. It was people with boats. We walked around our neighborhood with chainsaws, cutting trees to move them off the road. It was neighbors doing this together. Within a week or two, most of the city was back on its feet and functional. That said, people along the bayous who were hit hard, those people are still struggling.

I think there’s some overreaction to the storm now. The city has passed an ordinance saying new construction has to be built two feet above the 500-year floodplain. The unfortunate thing is that the rule will basically take money from working-class and middle-class people; it will devalue their property. It will add a lot of expense to building a home. I don’t think there’s a full appreciation for who bears the brunt of these things. It sounds great: “We’re going to make sure that people don’t get flooded out.” But most people didn’t get flooded out in Houston.

There are things that were definitely broken, like the reservoirs that were filled with silt because they had not been dredged for decades. There’s more infrastructure to fix. But this notion that we’re going to fix this by saying you have to build up higher is going to force people out of the city and make it more expensive to build.

Philanthropy: This relates to the goals of your nonprofit, the Center for Opportunity Urbanism.

Linbeck: I worked with Joel Kotkin to found COU to create an alternative narrative around community and urban planning, as opposed to all the assumptions of central control, expert-driven, top-down planning you usually hear. It creates more discussion around the importance of family formation, and single-family homes, and the challenges with housing costs, the disproportionate impact on minorities of high housing costs—themes we’ve been hitting on for years.

One thing we have been very critical of is high-speed rail in California. It’s a boondoggle, it’s too expensive, it won’t have the riders. Lo and behold, the new governor decides maybe to not build high-speed rail. We see that in a lot of places where there is local pushback against top-down planning solutions that disempower local communities and neighborhoods, and really strip out the middle class.

Philanthropy: How do you give? Through a donor-advised fund, a foundation?

Linbeck: It’s a complicated and fairly unique arrangement. First, our family has three businesses. One is construction management. We build complicated buildings for institutions: hospitals, university buildings, cultural facilities, museums, performing-arts centers, laboratories. My grandfather started it, and I came up through that business. We also have a real-estate group. And then we have a bioscience-innovation studio. We start companies based on medical bioscience, biotechnology that comes out of the Texas Medical Center, which is the largest medical center in the world.

These are all grouped under the entity Aquinas Companies. This company is organized so that the economic benefits flow to charity. We are in the process, now about 30 percent complete, of transferring economic ownership of the company—though not governance and control—to public charities such as the Linbeck Family Charitable Trust, a donor-advised fund at the Greater Houston Community Foundation. So the family has governance responsibility, but we don’t receive the profits.

Currently, 90 percent of every dollar we make is reinvested into the company, with 10 percent distributed to charity. The family decides where to donate those dollars. What we’ve tried to do is create a different, alternative way of thinking about stewardship and ownership within the context of a business. There’s a philanthropic component to it, a business component to it, a philosophical component to it. It’s a new and different model for how to think about intergenerational long-term governance, and family, and wealth.

We also still have the responsibility to give individually, and we do.

Philanthropy: You were an early supporter of KIPP, right here in Houston where it all began.

Linbeck: My friend, the late Shawn Hurwitz, called me one day and said, “There’s this charter school that I’m the board chair of. We’re looking to build a high school and a lower school. Would you look at our plans from a construction standpoint?” I said, “Sure.” So Shawn brought Mike Feinberg to meet with me.

I said, “Okay. Here’s what you have in your plan. It’s about five million bucks.” And they said, “Well, that’s a problem, we don’t have five million bucks.” I said, “Yes, I can see that’s a problem.”

But then I said, “I have a more fundamental question. Why are you building a lower school? You don’t currently have a lower school. You don’t know what size the classrooms should be. You don’t know what programs you’ll be running. You do have a middle school, and you have a really clear idea of what you need in the middle school. But they’re in trailers, and you want to build twice as much building for a lower school that you haven’t started yet. What you ought to do is build a middle school, which you can do for about half the price, and then start the lower school and the high school in the trailers. You own the trailers. And then once you’ve figured out what you’re going to do, you could then build the lower school and you’ll know exactly what you need.” I talked them into spending half as much money on construction.

I kept asking questions. “What’s your biggest concern?” “We have a lot of kids on a waitlist.” “What do you mean on a waitlist?” “We have more applicants than spaces. Families have to win a lottery to get in.” “So why aren’t you growing?” “We’re not sure how.” So I worked with them to develop a growth plan that would allow them to replicate what they were doing, and then helped them raise the capital. Then the financial crisis came, and a lot of our plan was predicated on being able to get to the bond market, which went squirrelly, so we needed a bigger name to help us sell bonds. The Gates Foundation volunteered to help, and so we worked out a credit-support program. That enabled us to sell more bonds to make good on the commitments made to kids. Later, when trying to figure out how to prepare more school leaders, I helped start a principal-training program at Rice University.

Most recently, I worked with Mike Feinberg’s wife, Colleen Dippel, to start a group called Families Empowered. We’ve now got 35,000 families in our database who applied to charter schools and were not able to get in. We help them look for alternative school options: magnet programs, other public schools, Catholic schools, private schools. Last year, we put in place a common application program for all the charter schools in Houston. We don’t make decisions for parents. We don’t control where they go. We just give them access to options and information. We run a big call center. We call thousands of families and send out a lot of communication to help them navigate the process.

Philanthropy: What are some of the biggest challenges facing the charter system in Houston?

Linbeck: The biggest issue is scale. Scale is the enemy of innovation. Innovation comes from small groups of people trying something new and risky and likely to fail. The successful charter programs in Houston are growing bigger and quickly approaching their maximum efficient scale. Economists sometimes talk about minimum efficient scale, but in something like education, which is built around human development, scale and routinization don’t make things better. It can create some economic efficiencies for a while, but eventually, those catch up. The secret of education is love—great teachers truly love their students—and love doesn’t scale.

This is why really big districts are bad compared to small districts. And so the challenge in Houston is that the big programs, which draw in a lot of gifts, probably shouldn’t grow anymore.
 
The Houston Independent School District is about 200,000 kids. If KIPP grew to be 200,000 students in Houston, it would have similar problems to HISD. There’s this myth that somehow, if we could just make HISD act like KIPP, we’d be fine. The way to make HISD act like KIPP is to break it up into a bunch of little pieces and give local neighborhoods more influence, and give families choice about where they want to send their kids to school. But if you make KIPP as big as HISD, it will not be innovative. It will be centralized. It will be bureaucratic. It will be everything that KIPP was created not to be.
 
The great challenge today in education is not scale—it’s scope. We don’t need to grow the big systems bigger; we need new, small-scale programs to serve kids’ different and diverse needs. For instance, we need to reach the kids who aren’t best suited to go to college. The real need in our society and the education system is not college-readiness anymore. The big need is kids who can go out and work. The purpose of public education is to prepare young people to be productive participants in a self-governing republic. Public education needs to focus more on character development, whether that’s a path that takes a student into a four-year college, takes them into a job, some kind of hybrid, prepares them in some way for civic participation.
 
There are also big unmet needs in segments of certain communities. There are not a lot of great options for kids who are on the autism spectrum, for instance. What we need is more choices. Kids are different and they need different things at different times. Schools that are responsive to that are necessarily going to be smaller scale. But those schools don’t attract attention, and a lot of them don’t have good access to philanthropic support.
 
Recently I was involved in launching a Texas School Venture Fund to help start local, specialized, small-scale charter schools serving underserved demographics and underserved themes and interests. We’re starting two neighborhood schools with KIPP graduates who had other careers and now are coming back into the neighborhood where they originally lived. This venture also supports specific, local offerings in vocational and technical education to serve the kids left by the wayside by the current system’s single-minded focus on college. We try to bring some of the benefits of scale to educators who are trying something different.
 

Philanthropy: You describe yourself as a conservative communitarian and advocate of the “self-governance movement.” What do you mean by that?

Linbeck: The conservative part goes to the idea that most new ideas are bad. I believe human beings tend to choose things that work over time, not unlike natural selection. The bar is pretty high for finding something else that will work better.

The communitarian piece is built around this idea that we’re social animals. We’re built to live in communities, to relate to people. Centralized, top-down authority structures tend to destroy what is human in us.

Self-governance means that everyone participates in decisions that shape the commons. But if I have no say in those decisions because they’re made 1,500 miles away by a group of people I’ve never met, never will meet, don’t know who I am, and know nothing about me or my neighbors, how’s that going to work? Self-governance means that we don’t have other people impose their vision on us.

Philanthropy: What does philanthropy have to do with this?

Linbeck: Scale is a big issue in philanthropy. Doing the good is not necessarily having the largest impact. Sometimes the best thing you could do is really small-scale stuff.

There’s this British anthropologist named Robin Dunbar who spent his early career studying gelada baboon clans. Once the clan got to a certain size, it became unstable and there would be fights. A group would leave and it would split into two smaller clans. Each of those would grow, but then when they reached that point, they would split. He found that researchers who studied different species were seeing the same thing, and figured there had to be some kind of physiological explanation for it. He found that if he looked at how much of an animal’s brain was neocortex in relation to the rest of the brain, it was a very good predictor of clan size. If an animal had a large neocortex, it could store a lot of social relationships.

He took this graph and extrapolated it out to where a human neocortex ratio is. The group size of humans is 150, what he called Dunbar’s number. This number is everywhere. It’s the size of a Neolithic farming village. It’s the size of a military unit of an army since Roman times. It’s the size of Congress at which political parties emerged. At the first three Congresses, there were no formal political parties. There were factions, but parties emerged when the House reached about 160. Dunbar also looked at social media and found that you could have millions of Twitter followers and Facebook friends, but you consistently interact with only about 150 people—the upper limit on the number of authentic relationships a person can have.

Philanthropy: Sometimes we hear that a big problem calls for an equally large solution. How do you respond to that?

Linbeck: The way to solve a big problem is to break it up into a bunch of smaller problems, each of which is tractable, while also understanding what makes all those parts relate. It’s rare you could really reduce a problem into completely separate and independent things. Usually there’s a lot of interconnectedness. But that interconnectedness is less of a challenge at small scale.

Take poverty. If you spoke with people who really know poor communities, you could probably make a list of hundreds of contributing factors. If you want to address those things, you do so on a small-scale basis.

There’s a fundamental difference between replication and scale. Replication is taking something that works and a governance structure that’s small, and trying to reproduce it somewhere else. It’s not taking that same solution and doing a cookie-cutter thing. That’s scale.

Philanthropy can have a role to play in dismantling monopolies. It’s always an external threat that forces a monopoly to change. So when people say, “The school districts are big monopolies. But we can just elect the right people, get the right superintendent, or the right consultant, and we’ll be able to fix it,” I say, “No, you won’t.” If you want a monopoly to reform, you put it under competitive pressure. Then it will have to change or die. In some sense, what’s going on in education reform with the charter movement and voucher programs has created competition to force school districts to adapt.

My encouragement to philanthropists would be to focus on the community where you live, and find the people who you can get to know who are committed to addressing something that’s in front of you. If it’s in your own backyard, you’re much more likely to have a positive impact.