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July 6, 2010

It has never been easy to explain the practice of philanthropy to the uninitiated. Confusing philanthropy with charity, many people tend to wonder what can be so hard about giving money away. (Most of us have made donations, after all, and we’ve derived nothing but pleasure, certainly not fatigue, from the experience.) To my eye, the greatest contribution of Joel Fleishman’s book The Foundation: A Great American Secret, is that it shines a light on the complexities of real philanthropy—diagnosing causes, sifting through possible solutions, taking and mitigating risk, and persevering through difficult explorations, trials, demonstrations, and setbacks.

But if it’s hard to explain the complexities of giving away five percent a year from a big endowment, it is even harder to explain why giving everything away, in a fixed period of time, is far more complicated, and may even be a different kind of challenge altogether. Describing why that is true, and chronicling the difficulties that an all-out foundation faces as it moves toward the finish line, is the purpose of a multiyear research project that Joel and I are conducting under a grant from The Atlantic Philanthropies, which is spending out its endowment in the current decade. Joel’s first annual report on the progress of spend-down at the AVI CHAI Foundation was published in April and is available here. (To read Joel’s blog post on the Intrepid Philanthropist about spend-down, click here.)

My first year’s report, on spend-down at The Atlantic Philanthropies, titled Winding Down The Atlantic Philanthropies: The First Eight Years: 2001-2008, is now available here.

The idea of all-out philanthropy is that it can make a big difference—and for donors, can be both invigorating and reassuring—to apply a sizable fortune to a concentrated, now-or-never assault on present-day problems. The goal may not be to solve those problems outright, which is rarely possible. (“Problems you can literally solve in six years,” one Atlantic trustee told me, “would be very boring. And there would be very few of them.”)

Instead, the all-out philanthropist’s goal would be to have a far greater and swifter effect on social problems than might be possible over a longer period. In an all-out effort, the size of annual outlays can be much bigger, the sense of finality tends to breed intellectual focus and strategic acuity, and the dangers of mission creep and institutional torpor are vastly reduced. Or anyway, that is the all-out donor’s reasonable hope.

But with the bigger opportunities come bigger pressures. Finality may be intellectually stimulating, but it can also be merciless. As an Atlantic insider put it, the foundation’s decision to spend down to zero meant instantly that “the bar was higher. From now on, you would get a chance to fail only once. In most public-sector and voluntary organizations, you get to fail several times. You just redefine the problem, adjust the model, pat yourself on the back for learning a lot, and then try again. But here, it’ll be just once. And therefore if you fail . . . well, that would be your epitaph. Because you wouldn’t have any way back.”

True, perpetual foundations end programs all the time. They make terminal grants, commission evaluations, declare victory or (less often) defeat, and move on to new theories and fresher challenges. But their end dates are adjustable, some activity from old programs can always continue, and disappointments can be put to use as cautionary lessons for the future. Even an embarrassing failure is just a chapter in a longer story, where success on some other front, at some later date, can rebalance the scale.

In an all-out foundation, there is no future. Your work—right now—will be your legacy. There will be no do-over.

Along with our related research project with the AVI CHAI Foundation, the Atlantic study provides an unusual window on the actual decisions a foundation has to make, and the exhilaration and difficulties it encounters along the way, while it moves toward what it hopes will be an orderly conclusion. For both institutions, the final grants still lie far enough ahead so that almost no staff members are yet thinking seriously about other jobs, and most grants still carry the possibility of renewals, adjusted expectations, or both. But it won’t be long—three or four years at most—when those things will cease to be true. And the stakes, already far above average, will by then be bending steeply upward.

Tony Proscio