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Are foundation officers more courageous risk-takers than other people? Some new research says: Evidently not. Then again, should they be?

Speaking at Duke last year, John R. Ettinger, CEO of the Helmsley Trust, shared some preliminary hypotheses about risk tolerance — or, more precisely, risk-aversion — in philanthropy. He cited research in behavioral economics showing that people tend to be more daring in the face of a possible loss than when given a chance to improve on success. Given that foundations often venture into areas of social difficulty, where disappointments abound and the chance of defeat is always looming, might it be that their avowed willingness to take big risks is not as great as advertised? Might human nature be creating a powerful drag on the risk tolerance of foundation officers?

At the time, he was still in the midst of his research, and he raised these questions purely to solicit help in guiding his inquiry. He has now come back with a provocative but careful analysis, co-authored with his son, John T. Ettinger, which you can read in its entirety here. At its core is a survey of 73 employees of a major foundation, 32 of whom were in program-management roles and the remainder in executive or administrative positions. The survey’s conclusion — in unfairly brief, broad strokes — is that foundation staff members are no more accepting of risk than the rest of us in their personal lives, and that this risk-aversion does apparently carry over into their professional work.

In response to one question, for example, respondents split evenly on whether they would make a grant with a 50 percent likelihood of success — just about what one would expect in normal life, though perhaps a bit tame for the swashbuckling image of high-risk philanthropy. However, a significant minority turned out to be exceptionally risk-averse: “one in five would not proceed if [the chance of success] is 60-40 in favor.” A remarkable 10 percent of respondents wouldn’t make a grant even with a 70 percent probability of success!

Mr. Ettinger deadpans: “Whether the implied levels of certainty required by a material portion of the staff to proceed with a grant is consistent with innovative grantmaking is at least a reasonable question.”

The findings are not as black-and-white as this synopsis might imply. For example the authors acknowledge that there are many kinds of unsuccessful outcomes in philanthropy that are not necessarily failures, or at least need not be seen that way. A grant for medical research, for instance, may not lead to a treatment or cure, but may nonetheless have supported the necessary elimination of some infertile line of inquiry. When prospective losses are framed merely as not-gains, the survey showed, foundation employees tend to be less cautious.

Other parts of the survey reveal a philanthropic weakness for the sunk-cost fallacy — “we’ve put so much money into this that we can’t stop now”— that is at least as powerful as in the rest of the population. And the tendency to take a foolhardy risk in pursuit of a gigantic gain (akin to buying a lottery ticket) likewise seems to be as prevalent in foundations as in society at large. But in general, philanthropy may not be the hot zone of courageous risk-taking that leaders and boosters sometimes claim.

Is that a bad thing? On that subject, the Ettingers keep an open mind. “Do we prefer adherence to an Expected Value risk-neutrality, or should philanthropies aim to be ‘risk-takers’ so as to do the more uncertain, more innovative steps that other sectors such as business and government will not undertake?” Good question. Yet no matter which norm you prefer, as they succinctly conclude, “neither of these views suggests that risk aversion is a desirable characteristic” (emphasis added).

The paper continues an intriguing conversation and picks up some important threads from John R. Ettinger’s talk last year. The issue is ripe for more research, both as a way of understanding foundations and, perhaps more importantly, as a way of staffing and managing them more astutely.