The Ford Foundation is a perfect example of an institution that has likely radically diverged from what its actual founder would have wanted … but I would think all foundations are doing this, in more subtle ways. They have to be. There are too many degrees of separation, and there’s too little accountability in a perpetual institution.

If I tried to express all the values I believe in now, and instructed someone to carry them out in perpetuity, across generational and personnel changes … what would this institution be fighting for 200 yrs down the line? Would it have anything to do with what I really believe in? Would it be a better bet to align with my true values than a randomly chosen smart person? I think it’d be worse, because of the lack of accountability I’d be creating.

I just don’t think it makes any sense to create a job that will exist forever, with nothing to guide or select the person who does the job except a mission statement.

3. Influence — the ability to convene non-conventional people to problem solve a critical social issue like the poor quality of inner city education or lack of good afterschool programs.

4. Leverage — of a long standing foundation’s reputation happens everyday to spark or sustain collaboration, information sharing or just dialogue that leads to action.

5. Ideas — progressive institutions foster and provide support for progressive people and ideas. I maintain it is a huge assumption to think the next generation of foundations would pick up key issues like human and civil rights from a preceding generation of donors. Each benefactor has her\his own interests which may or may not dovetail those of peer donors. The impact of some of a philanthropists contributions can be measured in real time and some require assessment over time to determine effects.

On the rest - I agree that money isn’t everything, and that foundations have a lot else to offer. But I see their non-money contributions as falling into two categories:

1. Contributions that don’t depend on particular people - “institutional knowledge” that has been written down and formalized. This knowledge should be publicly shared, obviating the need for the foundation itself to continue existing.

2. Contributions that do depend on particular people. People don’t last forever, and neither should foundations.

That’s why I think a 10-20 year time horizon is appropriate. Past this, you just can’t count on retaining anything of what you originally created - except what you don’t need the institution to retain.

For example, the convening role foundations can play at all levels of society is, indeed ‘priceless’. The ability to gather elected officials, business leaders, community organizers and concerned residents in a room to problem solve joblessness, environmental degradation or some similar matter is a unique role for foundations which has little to do with the size of their purses but rather the credibility and respect many have earned over the years.

The suggestion that several large national foundations have over stayed their welcome is also curious. Is it possible that precisely because of their staying power that there is a counterweight to substantial cuts in public spending for good and effective social programs and public investment in ideological programs with no track record of success? Is there value in their exisitence to sustain work over the decades prior to the philanthropy generated by tech millionares and billionares? What of the contributions that would have been lost by their absence over the intervening years? For example, I would not have been content with saying to women and students of color “sorry no college opportunity for you the _____ Foundation closed its doors and we no longer have funding for our fellows program.”

Could the large national foundations give more than 5%? Sure, and as your math exericse shows on average they do give closer to 7%. Is it time to revisit the issue of payout? Perhaps, but along with that conversation consider the wide ranging implications for global philanthropic leadership provided by many U.S. foundations (new and old).

Weigh the importannce of U.S. foundation initiatives which are investing millions of dollars in building philanthropic infrastructure in developing countries throughout the world and providing models for developed countries in Western Europe. Embedded in these investments are both monetary and non-monetary factors like relationships, leadership, knowledge sharing. I submit these and otherr elements are priceless and would likely be lost in the absence of stalwart institutions who readily share and constantly engage with peers new and old.

To be sure, the ability to make such large scale investments in fighting HIV on a global scale or building philanthropic capacity would be impaired by a dramatic increase in payout. Further, to responsibly manage larger payouts requires commensurate levels of bureaucracy so as to be efficient administratively, monitoring progress and measure effectiveness. Such costs have to be absorbed as well.

You state that funding existing organizations can be more effective, and give a few ways to do so. I tend to agree with you - but if this is true, then that’s just one less excuse for holding onto all this money for so long, isn’t it?

However, many private foundations discourage program staff from “creating programs” or initiating nonprofits. After being on staff at two such national foundations I have come to understand two basic reasons for this disposition.

First, foundations, particularly national foundations, generally desire to avoid being accused of “kingmaking” or “annointing” organizations in a field. The “creation” of organizations exacerbates this concern as it highlights gaps in the capacities of existing organizations and raises questions about why foundations wouldn’t simply invest in building the capacity of groups in the field.

A second rationale is private foundations prefer not to be seen as the a funder in perpetuity of any single organization. The start up costs and capacity building costs of new nonprofits are not cheap and do not immediately result in improving people’s lives or addressing root causes (which is a false dichotomy in my mind but that’s another post for another time). While this may seem contradictory to foundation’s desire for perpetual operation, the reality is in many instances it is simply more efficient to support existing organization.

Besides there are multiple strategies for wringing innovation out of a field; including,but not limited to competitive grant processes like RFPs; partnering with local and regional funders to build capacity and support new ideas in a traditionally under-attended to region; and connecting research to practice to ensure the best available knowledge is informing and shaping effective practice that produces results for people and root causes.

But - it’s hard for me not to chalk that up to some combination of overly narrow mission statements and insufficient proactiveness. The world’s problems are huge enough that it should be possible to find good uses for all that money - the question is whether current nonprofits are doing it. If none of them are, then I’d posit that foundations ought to do two things:

1. Share their insight that no current charities are worth giving to, along with their reasons for believing so. They could save the rest of us a lot of trouble (and cash).

2. Build the programs that should exist. Why not? If it’s hard to figure out how to spend the money, and no one else has good ideas, then spend a ton of the funds on research, administration, and program design. Take 10 years to design a good 10-year game plan. That seems like money well spent - certainly a better strategy than hanging around for centuries, waiting for good programs to come along.

2) Another issue is the question of foundations’ capacity to get money out the door well. From the folks at very large foundations that I speak to, their biggest perceived problem is finding quality places to put the 5% that they absolutely have to pay out. Recently had a conversation with one that was deeply concerned about the quality of their grantmaking falling dramatically as the foundation has grown — they simply can’t maintain standards of quality while giving out $10 million a year in line with the funder’s goals.

While I also don’t think foundations should exist in perpetuity, there are equally bad problems on the other side of the equation (foundations giving out money faster). As the US Government has conclusively demonstrated, having vast amounts of money to distribute is far more likely to generate ridiculous waste than good outcomes.