Press "Enter" to skip to content


October 31, 2013

Philanthropy tends to pride itself – not always accurately – on being society’s big risk-taker. Whenever I hear the claim, I find myself asking (silently): Is that true? What’s more, is it even desirable?

Robert Gallucci, president of the John D. and Catherine T. MacArthur Foundation, one of America’s ten largest by asset size, posed those questions out loud at a recent session of the Sanford School’s Foundation Impact Research Group. Here’s what he said, in part:

Whenever I’m on a panel about philanthropy, somebody always wants us to talk about risk, because we love risk. We embrace risk. All philanthropists want risky stuff. “Go do something risky.” The Board is always telling the CEO “Take a chance! Take a risk!”

“But don’t fail.”

… We’re also told we are “social venture capital.” Ask a venture capitalist, “What’s your percentage of success? What percentage of those puppies come in?” One in ten. Do you think anybody’s Board wants to hear, “One in ten of my grants works out”?

… I don’t think that we’re particularly bold in the philanthropic sector. And I include us [the MacArthur Foundation]; I’m not pointing at them. … We mini-max, to use game jargon. We avoid going for the best outcome by betting on avoiding the worst outcome. And that way, we do good stuff, but maybe not the best stuff.

It’s an admirably candid assessment, and it rings true. He did not pass judgment on this phenomenon, but he might well have asked: Is mini-max actually such a bad thing? Philanthropic dollars are scarce and tax-privileged. While there’s a certain romance in the idea of foundations taking bold shots with one-in-ten odds, is that actually the best way to use a tightly limited resource? I’m not sure, but it’s a discussion worth having.

Gallucci went on to point out, speaking only for himself, that he finds reputational risk the more interesting part of the foundation’s risk-return calculation, more than the prospects of financial loss. Often, very successful philanthropic efforts – ones that achieve truly important things beyond the abilities of government or private industry – can nonetheless bring down an avalanche of criticism and controversy. And that, he suggested, is the point at which a foundation’s real tolerance for risk, and its appetite for playing a unique role in society, becomes crystal clear.

You can see the whole of Bob Gallucci’s reflection on this topic here.

Tony Proscio