Evan Sparks

Back to Bill

Evan Sparks — Sat, 01 Oct 2011 21:40:51 +0000

Bill Daniels was never one to back down from a fight. As a scrappy, undisciplined youth, he may have even picked a few of those fights. In high school, as a Golden Gloves state boxing champion, he learned how to fight fair and square. And later in his life—after years spent as a naval combat pilot, a cable television pioneer in an industry that battled many times for its survival, and as a political candidate bloodied more than once by the process—Daniels proved that he knew what it meant to fight for a cause he believed in.

Perhaps no fight was as important to Daniels as the cause of freedom. Twice he put his life on the line in defense of freedom, first against fascism, then against communism, in the Second World War and again in the Korean conflict. Not long after the attack on Pearl Harbor, Daniels was commissioned as a carrier-based fighter pilot. He piloted a Grumman Hellcat in the invasion of North Africa, and a Chance Vought Corsair in the desperate battles for Guadalcanal, Midway, and the Coral Sea. He earned the Bronze Star for saving the lives of crewmates after a kamikaze attack trapped them below the decks of the USS Intrepid. In Korea, he would serve his nation once again behind the controls of a Grumman F9 Panther. Indeed, Daniels often said that it was his military service that most defined him as a person.

Daniels passed away in 2000. Two years later, the Smithsonian National Air and Space Museum sent a grant inquiry to the Daniels Fund, the $1 billion foundation Daniels had endowed upon his death, requesting funding for an educational exhibit featuring World War II aircraft. In declining the request, the program officer explained that it would be inappropriate to fund a project featuring “instruments of war.”

When it was pointed out that Daniels had flown the same type of aircraft to defend the cause of freedom, the program officer nonetheless insisted that the request be declined, since the exhibit featured planes designed to “kill people.”

“It was a wake-up call,” recalls John Saeman, who was then a member of the Daniels Fund board and who later served as chairman. Saeman was one of Daniels’ best friends. He had watched as Daniels spent the final years of his life carefully defining his intentions for the philanthropy that would bear his name. After Daniels died in 2000, his estate transferred to the fund, making it one of the largest foundations in the nation. And now, two short years after its founding, the Daniels Fund seemed not to understand—at times, even to disregard—the intentions of Bill Daniels.

“We had to get into the inner workings and understand what was happening internally,” continues Saeman. “We had to make some corrections. We had to make sure people who were responsible for the grantmaking—as well as the board—knew exactly what Bill stood for and what he would have wanted to accomplish.”

Saeman was a busy man. He had his own diversified investment business, Medallion Enterprises, and was already committed to his own extensive philanthropy. But Saeman knew that this had to become a top priority. A great principle was at stake: “We realized pretty quickly that we needed to define and defend Bill’s donor intent.”

That realization by the board triggered something rare, if not unique, in the annals of American philanthropy. It triggered a process of recovery and restoration, of rediscovering Bill Daniels’ intent for his foundation and instituting a process by which it would be protected in the future. It is a story of fidelity to a person and a principle. It is a story of extraordinary friendship.

“Every single person on the board, then and now, really loved Bill,” explains Linda Childears, who was then a board member and is now president of the Daniels Fund. “We wanted to do right by him.”

Building the Best

Bill Daniels had that effect on people. Born in 1920 in Greeley, Colorado, he moved with his family from Omaha, Nebraska, to Council Bluffs, Iowa, before settling in Hobbs, New Mexico, a dusty town near the Texas border. During the Great Depression, he sold magazines door-to-door and worked as a short-order cook—anything to help his family make ends meet. As a teenager, though, Daniels needed discipline. He found it when his parents sent him to the New Mexico Military Institute (NMMI). Daniels entered the service after graduating from NMMI and became a highly decorated naval aviator. In 1952, after serving in the Korean War, Daniels moved to Casper, Wyoming, to start his own insurance business. It was traveling between Hobbs and Casper that Daniels made the discovery that would make his fortune.

Daniels loved boxing. The two-time Golden Gloves state champion stopped at Murphy’s Bar in Denver one Wednesday night—fight night at Madison Square Garden. To his surprise, the fight was visible on a television behind the bar. It was the first time he had seen a television. He was instantly transfixed. “I thought, ‘Wow, what an invention,’” he recalled years later, “and I looked forward to seeing more television when I got to Casper.”

Daniels went on to Wyoming. But, as was the case with many small, rural communities, there was no television in Casper: a mountain range prevented the signal from reaching the town on the banks of the North Platte River. He did some research and found that several towns in the eastern United States had resolved the same issue by transmitting TV signals to homes through cable.

Daniels wasn’t an engineer, but he gained a rudimentary understanding of how cable worked. For communities unable to access broadcast signals, television could be delivered by radio frequency signals transmitted through coaxial cable. A single large antenna might be set up on a mountaintop or hill to pick up the nearest signal, which would then be run through cables strung on telephone poles to the homes of subscribers. The early 1950s had seen a moratorium on new stations, but with war over and the economy beginning to hum, consumers were ready for the entertainment choices television had to offer—or so thought Bill Daniels.

In 1953, Daniels raised $250,000 to start a cable system in Casper. Because of the great distances between towns in the West, he had to have signals transmitted to Casper via microwave, at great initial expense. But the bet paid off. For a single black-and-white channel that broadcast for only eight hours daily, he won 4,000 subscribing households—about a third of the total homes in the area. Daniels soon added other cable systems in Farmington, New Mexico, and Rawlins, Wyoming.

Before long, he found himself traveling all across the West, securing investors, finding customers, and recruiting talent. He brought a salesman’s cheerful persistence, a sense of fair dealing, and an outgoing and sometimes outrageous spirit to his business. “Without quite realizing it, he was starting to define his role in the industry,” notes one biographer. “No one else saw the opportunity or took it. He was the man in the middle of everything—the guy who knew more about the business as a whole than anybody else.”

In 1958, as small cable systems began to proliferate, Daniels sensed the need for a brokerage firm for the nascent industry. He founded Daniels and Associates, and he got on the phone with system operators, buyers, and sellers and arranged the deals that grew the industry. Daniels’ office in Denver became the center of the burgeoning industry. “Bill may have been the prime architect of [cable’s] capital structure—the whole way in which the cable industry decided to make money,” explained cable entrepreneur John Malone. “In the very early days, the theory was that you charged people a lot to hook them up and then you wouldn’t charge them hardly anything after that. Bill took it the other way, which was we’ll have much higher revenues and much more success if we treat it as an ongoing revenue stream.”

Daniels cultivated an intense loyalty among his staff. “He hired you, he gave you responsibility, and he let you do your job,” said one staff member. In exchange, he expected the best—down to the smallest details. Daniels demanded punctuality; work started at 8:00 a.m. sharp. Neatness and good manners were expected every bit as much as hard work. Business in turn flourished. As his stature within the industry rose, Daniels emerged as an ambassador for cable. He led the trade association and was at the front of the fight to overcome regulations that were preventing the industry from reaching its full potential. But in a larger sense, he was an evangelist for the wired world. Daniels believed that cable would eventually offer original content, not just take pre-existing content from broadcast television and deliver it to remote places. “The thing that Bill always conveyed to those around him,” John Saeman says, “was his vision for the industry and his unwavering belief that we were going to be a nation wired for cable TV.”

Daniels set about to make sure that cable’s customers had good reasons to pay subscription fees. He was an early supporter of Ted Turner’s Cable News Network—CNN. He conceived a public affairs network before C-SPAN was created. Inspired by ESPN, he launched Prime Ticket, a Southern California–based regional sports network, and negotiated rights to broadcast the L.A. Lakers’ games. The deregulation of cable in 1984 triggered massive growth in the industry. Daniels sold off his cable systems. In 1994, he sold Prime Ticket to TCI—and found his wealth pushing toward the billion-dollar mark.

Daniels had always been generous to his employees and to people in need, but now in his 70s, he began to think seriously and plan carefully for what would happen with his money. He dedicated himself to laying out plans for the Daniels Fund, and his plans were very specific. He limited funding to Colorado, New Mexico, Utah, and Wyoming, as well as to programs with a national reach. He even detailed what percentage of grantmaking should go to each region. Thirty percent of the grantmaking would provide scholarships to graduating high school seniors who demonstrate (among other qualities) character, leadership, and a commitment to service. The other 70 percent would go to grants in ten areas: aging, alcoholism and substance abuse, amateur sports, disabilities, early childhood education, K–12 education reform, ethics and integrity in education, homelessness and disadvantaged populations, youth development, and, finally, Young Americans Bank, which Daniels had created in 1987 to teach kids financial responsibility through hands-on learning.

Finally, Daniels selected seven close friends and associates for his board of directors. They included his brother, Jack Daniels, whom he named chairman; John Saeman; Linda Childears, the founding president and CEO of Young Americans Bank; fellow cable entrepreneur Leo Hindery; Republican leader Jim Nicholson; and his friend and former banker, Bruce Dines. “Bill had put more thought into what he wanted from his foundation than almost anyone that I have encountered,” says Saeman. “He knew what he wanted it to do and what he didn’t want it to do.”

Giving It Away

“Bill Daniels was bigger than life in this community, and the people adored him and the press loved to write about him,” explains Linda Childears. “When he died, his billion-dollar bequest to the foundation was front-page news. The community pressure was instant and intense.”

To ramp up the scholarship programs, the fund sought guidance from a Washington-based organization that focuses on college access for the underprivileged. “In the early scholarship program, we knew that Bill wanted to find a certain kind of Daniels Scholar—a highly motivated young person who just needed that opportunity,” says Childears. “He was looking for a diamond in the rough. But the experts’ solution was to run a college prep program, with the idea that we’ll get to know those kids and we’ll pick the kids from the prep program.”

“Was it a good idea?” asks Childears. “Absolutely. Did it find some great kids? Absolutely. Was it in the materials that Bill left us? There is nothing to suggest it.”

For the grantmaking program, the fund hired dozens of people with professional philanthropy backgrounds, experienced grantmakers who knew the nonprofit world, who could manage distributions and evaluate results. Current and former fund directors uniformly emphasize that these were good, hard-working, well-intentioned people. But, notes Childears, “we had people who didn’t understand Bill’s approach—the principled, entrepreneurial, self-reliant approach.”

Early on, a decision was made to open satellite offices in the Daniels Fund’s three other states—Utah, New Mexico, and Wyoming—and to staff them with local grantmaking professionals. It didn’t take long before the satellite offices began to present challenges. “The scholarship program was handled completely differently in all four states,” says Childears. “There was no consistency, and brand integrity would have been important to Bill.”

As each of the state satellite offices undertook different approaches to grantmaking, the brand integrity issues became ever more visible. The board grew increasingly concerned that the approaches were not always aligned with donor intent. “The staff at each office considered different factors when deciding whether to fund an organization,” says Childears. “It was clear that some of the factors being considered were not ones that would have been important to Bill, who was primarily concerned about the focus and effectiveness of the organization.”

A troubling thought began to haunt the board. “It didn’t take all that long,” reflects Childears, “but all of a sudden, the Daniels Fund was starting to look like someone else’s foundation.”

Correcting Course

In 2002—two short years after the death of Bill Daniels—the board began to implement changes. “It had become clear that the fund was drifting,” explains Jim Nicholson, a former chairman of the Republican National Committee and Secretary of Veterans Affairs who has served on the Daniels Fund board since its inception.

The board took action. First, it hired a new president. Hank Brown had known Bill Daniels for decades through Colorado politics and a mutual interest in charitable activities. The two shared similar backgrounds and values. Brown had been decorated for military service as a forward air observer in the Vietnam War, had served as a Republican member of Congress in both the U.S. House and Senate, and had served as president of the University of Northern Colorado.

“I found a couple things that were of concern,” Brown explains, “and that concerned the directors as well.” First of all, the foundation’s giving had strayed from Daniels’ vision. “The staff was not familiar with Bill’s beliefs,” says Brown. “For example, the staff had unilaterally decided to stop supporting certain organizations, disregarding entirely the fact that Bill had admired and funded those exact organizations during his lifetime.” Nicholson agrees: “You had a bunch of young professionals who weren’t familiar with Bill Daniels—who didn’t know him, who didn’t know his soul.” Brown and the board immediately retracted grantmaking authority to their own level.

Another issue centered on overhead. Brown spent a year studying administrative expenses at foundations with similar asset bases. He soon learned that the Daniels Fund was spending about 20 percent more on administrative overhead than what would be found at peer-level foundations, in large part due to the satellite offices. In 2003, Brown proposed reducing staff and overhead by closing the satellite offices and trimming staff at the headquarters.

“It was enormously painful,” Brown says, “but I think we did it in a way Bill would have wanted us to do.” (For example, the fund helped terminated staff to find new jobs and offered generous severance payments.) The timing of the reduction was also unfortunate, Childears notes. “Opening a new headquarters building and making the cuts at the same time was a mistake,” she explains. “We underestimated the pushback we would get from that. But there’s no way to make that easy.”

The board’s act resulted in headlines throughout the Rocky Mountain states and across the philanthropy community. “Changes at Denver’s Daniels Fund: Politics or Prudence?” read a headline in the Chronicle of Philanthropy. Those concerns diminished over time, notes Brown. “There are people of both political parties on the board, and most of the funding has gone—and continues to go—to direct service programs that serve those in need.”

Defining the Donor

Bill Daniels needed to be front and center at the Daniels Fund, the board decided. The first order of business was to explain—to themselves, their successors, and the world—exactly who Bill Daniels was and what he wanted to do with his money. Then they would have to create a set of institutional safeguards to keep him front and center.

The problem was not that Bill Daniels had not clarified his wishes. In many ways, he had made his wishes very explicit—down to the percentage of the annual payout that would go to his selected funding areas and states. But, as his board was discovering, Daniels did not leave very much guidance for the principles that should govern the foundation’s grantmaking. That was the challenge now facing the Daniels Fund.

Early on, the board faced a fundamental problem. “The directors all knew Bill Daniels in different ways,” Saeman explains. “Each of us brought a little different perspective to the table on who Bill was and how he thought.” Take religion. “I worked for Bill for 15 years, and I never had a conversation with him about religion,” says Childears. “I found out after he passed that Bill had a pastor, that he spoke with him daily, that they prayed together regularly. I had no idea that any of that existed.”

Fortunately for the board, Daniels had a long, clear history of generosity. He endowed scholarships—often in the name of a friend—at colleges and universities across the nation. He personally paid college tuition for many young people he met who were in need. He supported homeless programs, he started Young Americans Bank, and he funded the construction of the Daniels Children’s Center at the Betty Ford Center (where, in 1986, he had overcome his own addiction to alcohol).

Daniels was also clear about his wishes in his personal giving. “Very seldom did a check ever go out that didn’t have a letter with it,” says Saeman. The letter would say clearly what he was giving the gift for and why. “Bill was quite a prolific writer,” he says. “We felt confident that we had a large body of evidence to refer to, in addition to his written directions to the board.”

The board began a painstaking review of Daniels’ correspondence, speeches, and writing. It commissioned researchers to track down any and all available material. As new items became available, they were catalogued and cross-indexed. The board was determined to have as comprehensive a set of primary source documents as it could get. By the time Hank Brown left the Daniels Fund in 2005 to become president of the University of Colorado, the process was well underway. To replace Brown, the board turned to board member Linda Childears. In her new capacity as president and CEO, she would partner with John Saeman (who had become chairman of the fund after Jack Daniels’ death in 2003) to drive the project to completion.

“I don’t think the donor—as smart as he was and as much time and attention as he gave to his plan over the last two years in his life—had any idea of the complexity of implementing his plan,” says Saeman. Childears agrees. “What I wish we’d gotten from Bill was much more about his values, his core principles, and how that should be translated into philanthropy.”

“Here’s an example,” she offers. “In the incorporating documents, Bill said he wanted to fund ‘innovative education programs.’ Well, there isn’t a nonprofit in America that doesn’t claim to have one! It actually doesn’t give a lot of direction. So what did Bill really mean? Well, look at the second half of the sentence—‘such as charter schools and voucher programs.’ When you look into his letters and read his correspondence, it becomes very apparent what he was talking about. Basically, it was what we would call school reform.”

Another example concerns funding ethics programs at business schools. “Bill indicated he wanted to support ethics programs,” explains Saeman. “Well, ‘ethics’ is a pretty broad word. Every school in the country has an ethics program; everybody believes in some kind of ethics. But we wanted to make sure that we were supporting the kinds of ethics programs that Bill would support, not just anything that called itself an ‘ethics program.’”

So what did Bill Daniels mean by “ethics”? “We went through his files, his letters, and, just as importantly, his actions,” continues Saeman. “The board concluded that Bill was fundamentally guided by principle-based ethics. He believed that there are certain principles—man’s integrity, honesty—that are inviolable. He believed in the reality of absolute ethical principles, and the need of all people to follow them. We concluded that Bill would have wanted to fund programs that conformed to standards of right and wrong.”

“It took us a couple of years to get to the point where the whole board could say, ‘I think every word in here describes our guy,’” adds Childears. “It required us to get away from experiences we’d had and boil it down to characteristics—his style, his values, his principles.”

The result: a thorough set of documents describing who Daniels was and what he wanted to do with his money. “Preserving Donor Intent” outlines Daniels’ written instructions (in the fund’s bylaws), along with his principles and beliefs, his giving during his lifetime, and interpretive comments by the board. Another document, “Understanding the Man Behind the Daniels Fund” is longer, identifying 11 core characteristics of Daniels (such as integrity and patriotism) and pointing to examples of these characteristics in Daniels’ life, quotations from Daniels’ writings, and implications for the Daniels Fund.

Institutionalizing Intent

Assembling the materials on Daniels and his intent was utterly necessary, the board realized, but it would not be sufficient. The documents needed to become operational, to be integrated into the legal structure and, more importantly, the culture of the Daniels Fund. “It had to start with the board establishing Bill’s intent as a matter of governance,” says Saeman. “It had to permeate the whole organization.”

The first order of business was to require all board members to acknowledge, in writing, that they had read and understood the full set of materials on Bill Daniels. Then they were required to sign the following statement:

Signing this document affirms your commitment to preserve Bill Daniels’ donor intent and his personal style of conducting business. You agree to set aside your personal views or preferences when acting on behalf of the Daniels Fund. It is the Board’s responsibility to ensure that the Daniels Fund most effectively fulfills Bill Daniels’ intentions and remains true to his ideals. You also acknowledge that you have read this document and understand its importance in guiding the efforts of the Daniels Fund.

To emphasize the continuing nature of their commitment to Daniels’ intent, at each annual board retreat, a director prepares a presentation reflecting on the donor and his purposes. Likewise, staff members were required to sign a document stating: “I am committed to preserving Bill Daniels’ donor intent and I understand the seriousness of this endeavor.” These practices continue with each new board member and employee.

Brown and Childears made a concerted effort to recruit employees who would honor Daniels’ intent. “It’s enormously important to get people who haven’t worked only in the nonprofit sector,” says Brown. “People who are attracted to foundation work are not typically entrepreneurs,” adds Childears, whose background before helping Daniels to found Young Americans Bank was in commercial banking. “Entrepreneurs are out running their businesses, making money. And there’s a world of difference between how an entrepreneur who’s made his fortune looks at the world and how someone who has never been responsible for revenue looks at the world. The difference is staggering.”

Finally, the board instituted a new mechanism for its own succession. Board members serve a four-year term and are eligible for a second. “If your term is up and you want to run again, the nominating committee chair conducts a peer review, and then it goes to a board vote,” explains Childears. “It’s unusual, it’s not easy at all, but it does get to what we’re trying to do, which is hold each other accountable to donor intent.”

Defining Daniels’ intent has helped the board to understand better the kind of director Daniels would choose. In 2010, the board put their efforts to the test and elected the first director who had not known Bill well. Francisco Garcia had served on the board of Young Americans Bank. “He’s a younger person, an entrepreneur with a military career. He has his own foundation that works with people similar to those Bill worked with. He has an almost instinctive understanding of Bill because of how similar they are,” Childears marvels. “That was extremely deliberate. Francisco is a dynamo director.”

A Fighting Chance

Bill Daniels was a high-profile figure who loved his community, and so his fund’s efforts reach out into that community. As befits a cable pioneer, there’s a lot of video footage of Daniels. His fund’s website hosts videos of him talking about his values and principles. The fund has also commissioned a book about Daniels’ life and philanthropy, in order to reach wider audiences.

Drawing on the board’s collection of Daniels’ letters and writings, as well as video and photo archives, the fund produced a “Legacy Kiosk”—an interactive presentation on Daniels’ life, achievements in business and public service, philanthropy, and personal values. The kiosk is available at Daniels Fund headquarters, as well as at places he loved: Young Americans Bank, NMMI, the Betty Ford Center, the Daniels College of Business at the University of Denver, and his Cableland mansion, which Daniels donated to the City and County of Denver to serve as the official mayoral residence. The legacy kiosks allow future generations of Daniels’ grantees, as well as Daniels Scholars, to learn about their benefactor.

Daniels’ friends are doing everything they can to convey his character to those who never met him. They frequently speak about him to Daniels Scholars, for example. “They seem to be extremely interested and grateful to hear about him,” says Jim Nicholson. “He seems to be an epic figure to them.” Sharing the Daniels story first-hand is especially important, he adds, because it means that “this is working—all the efforts we’ve made to transmit the Bill Daniels story and the Daniels culture.”

“I had a chance to work with Bill, to hear his values and beliefs, and I still marvel at what Bill did and what he’s done with his money—it’s life-altering stuff,” adds Childears. “It’s so clear how important it is to always preserve donor intent. But equally clear is the simple fact that it’s never going to be easy.”

For now, with donor intent clarified and secured, the fund’s path seems clear. Daniels’ legacy was turned around by his loyal friends. Only the fund’s ongoing efforts will provide a foundation for future fidelity to donor intent. If those ongoing efforts succeed, there will be hundreds of thousands of people in the Rockies who know that their education, their well-being, or their financial literacy is owed to the generosity of Bill Daniels. If they succeed, it will be thanks to Saeman, Childears, Brown, and Daniels’ other close friends, who worked tirelessly to give their guy a fighting chance.

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This article was originally published in Philanthropy‘s Fall 2011 issue.

Illuminated Giving

Evan Sparks — Sat, 02 Jul 2011 03:26:53 +0000

Oklahoma City
“It’s been banned; it’s been burned,” says Steve Green. “It’s been loved and hated. It’s the best-selling book of all time, the most-translated book of all time, and, I think, the most important book of all time.” He is referring, of course, to the Bible.

Green is president of Hobby Lobby, a nationwide chain of arts-and-crafts stores founded by his father, David. The Good Book informs his family’s business and inspires their philanthropy. It is also the centerpiece of their latest charitable project: the creation of the country’s first museum devoted to telling the story of how the Bible came to be, recounting its effects on the world, and relating its message.

The Greens own an unrivaled personal collection of Bibles, biblical manuscripts, and scriptural antiquities. When their museum opens, it will showcase a world-class collection with a strong non-sectarian emphasis. Among the items it will feature are fragments from the Dead Sea Scrolls, some of the world’s oldest complete Bibles, exquisitely illuminated manuscripts from the Middle Ages, and first editions of landmark Bibles.

In the meantime, a portion of the family’s collection is touring the world. On May 16, Steve Green unveiled “Passages,” an exhibit at the Oklahoma City Museum of Art that marks the 400th anniversary of the King James Version of the Bible. After that, a portion focused on the Catholic contribution to the King James Bible will travel to the Vatican, where it will be a featured exhibit at the Braccio di Carlo Magno museum in St. Peter’s Square. Other sites for a “Passages” exhibition are currently being negotiated both stateside and abroad. The exhibit will go on a worldwide tour while the Green family continues to build a permanent museum dedicated to the Bible.

“Whether you believe or not,” Steve says, “the history of this book is a story to be told—people gave their lives for it. Our goal is to make the Bible more accessible than ever before.” This story, as told through the Greens’ collection, is breathtaking. “Passages” starts with the earliest Jewish scribes and moves on through the apostolic, patristic, and medieval ages. It examines the Renaissance and European Reformation and culminates with the English Reformation and the translation of the King James Bible.

“You would have to travel around the world to see single items that are on display here in Oklahoma City,” says Scott Carroll, a biblical scholar and the curator of the exhibition. He glances at the artifacts on display, eyes wide with awe, before continuing. “There are numerous items that you couldn’t see anywhere outside of Oklahoma City.”

Among its more than 300 notable artifacts are an unpublished fragment of Genesis from the Dead Sea Scrolls; the Codex Climaci Rescriptus, which contains the earliest known manuscript of the New Testament in Palestinian Aramaic; the Roseberry Rolle, a translation of the Psalms into Middle English that predates John Wycliffe’s English Bible by 40 years, as well as first editions of Coverdale, Tyndale, Geneva, and King James Bibles. The exhibit also includes a number of interactive features. St. Jerome, who translated the Latin Vulgate, appears as an animatronic figure. So too does William Tyndale, who translated the New Testament into English and was put to death by Henry VIII. Docents dressed in period costumes operate exact replicas of the Gutenberg and King James printing presses, and artists conduct live demonstration of scriptural adornment techniques.

“To know the story of how the Bible was transmitted and preserved is important,” says Carroll. “It didn’t simply drop from Mt. Sinai and end up in a motel drawer! It’s a story of sacrifice and loss of life, of people diligently copying texts, of teaching the story to generation after generation. That’s all part of the story of ‘Passages.’ If you are a person of culture, you must know about the Bible and how it came to be.”

“We believe in the Bible,” says Steve Green. “We live our lives according to the Bible. We believe it is the best instruction for man to live by, and we strive to do that ourselves.” The Bible is likewise at the heart of their business. “We strive to run our business according to biblical principles. As we apply the principles that we see in scripture, we believe that God blesses—and we have definitely been blessed.”

More Than a Hobby

The Green family traces those blessings to Altus, a small town in the dusty southwestern corner of Oklahoma. At age 16, David Green started working in the Altus five-and-dime. After serving briefly in the U.S. Air Force, he married Barbara and joined the fast-growing five-and-dime chain TG&Y, working his way up to area supervisor for Oklahoma City.

David loved retail and had a natural gift for moving merchandise. “I saw potential that TG&Y was not capturing,” he explained. He grew TG&Y’s pet department by selling 10-gallon fish tanks below wholesale price. The tanks were loss leaders. The stores more than made up for them on sales of fish, equipment, and accessories.

He also saw an opportunity to produce picture frames for the store’s craft department. With $600 in borrowed capital, David and a partner bought a frame chopper and materials. They enlisted their families in making the frames. David and Barbara’s children—Mart, Steve, and Darsee—earned 7¢ for each frame they assembled. Before long, they were struggling to keep up with orders.
In 1972, independent of TG&Y, David and his partner opened a 300-square-foot store for their frames and other craft supplies. Hobby Lobby struggled at first, but its product mix proved ideal for Christmas decorating. The little store finished the year with a small profit. From there, Hobby Lobby grew and grew. David bought out his partner in 1973, and in 1975, he opened a new store and resigned from TG&Y.

Today, Hobby Lobby is the nation’s largest privately held arts-and-crafts store, with 479 stores in 40 states and 18,000 employees. Sales top $2 billion annually. The company has a massive manufacturing and warehouse operation in Oklahoma City. And Hobby Lobby’s business model has proved resilient during the recession. “When economic times are bad, people tend to make and craft even more of their gifts, rather than buy them ready-made,” David writes.

There have been a few hiccups along the way. Cash sluiced around Oklahoma during the oil boom of the ’70s and early ’80s, and David admits that they got sucked in. “We had been born as an arts-and-crafts store, but now we were loading up [on] all kinds of upscale merchandise,” he recalls. “We were coasting high on a false sense of security.” When the price of oil collapsed, and Oklahoma’s economy with it, Hobby Lobby’s high-end goods stopped selling. The company lost $1 million in 1985.

“Dad would say he wasn’t sure how we were going to make it,” says Steve. “He would say that was the worst time and yet at the same time the best time, because he would say that that’s when he gave the business over to God and said, ‘I can’t make it. And if it’s going to make it, You are going to have to make it happen.’” The Greens re-focused on their core arts-and-crafts merchandise, secured financing, and ended the year in the black.

Working on Purpose

“I graduated high school and started working for my dad,” smiles Steve Green. “I still do.” Steve has worked in virtually every corner of Hobby Lobby. He mowed lawns, painted buildings, and unloaded trucks in high school. He worked as a liaison between stores and the corporate office. “I worked in buying,” he recalls, “I’ve been over our international department, legal department, accounting department, information systems department.” Steve ultimately worked all the way up the corporate ladder and is now president of Hobby Lobby. “I currently spend most of my time in the real estate department overseeing our growth and new store expansions.”

A deep sense of purpose animates Hobby Lobby. “My father was a son of a pastor,” says Steve, “so he was born in a Christian home, and most of his siblings went into the ministry.” The Greens see Hobby Lobby as a ministry of their own: first, in retail as a form of service; second, in the way the company treats its employees; and finally, in the way it employs its profits.

The Greens believe that they serve their customers by “offering an exceptional selection and value.” “We ask that all employees see themselves as servants,” David explains. “Our stores serve the customers. If everything is working as it should, the staff will feel honored and fulfilled, and the customers will be pleased.”

Hobby Lobby is also the Greens’ ministry to their employees. Like Chick-fil-A—another privately held company owned by evangelical Christians—Hobby Lobby closes on Sundays. That was not always the case. It wasn’t until 1998 that Hobby Lobby first experimented with Sunday closures in its three Nebraska stores. Then David had a revelation: “It was as if God was saying to me, ‘Oh . . . so if you’re blessed, you’re going to be obedient, but if the numbers don’t work out for you, maybe not?’” By 2000, all Hobby Lobby locations were closed on Sundays. “Our decisions are long-term,” Steve explains. “We believe that it has been good for our company. I think that it has attracted better employees, because they like the idea that they’re going to be able to get off on Sundays to worship and be with their families.”

Being privately held allows Hobby Lobby much greater flexibility to use company resources for philanthropic ends. “We are wholly owned by the family,” explains Steve. “We get together as a family and we make those decisions. If we want to close on Sundays, we can do that. There’s a lot of benefit in not having to worry about being a publicly traded company, dealing with the pressures created by the stock market.”

Family ownership also allows the Greens to minister directly from Hobby Lobby’s profits to support Christian and humanitarian ministries around the world. “If everybody agrees that we want to help support a particular ministry, we can do that.” The Greens don’t make a distinction between personal philanthropy and Hobby Lobby’s corporate philanthropy. “Most of the giving is done as a family through the business. We don’t have a separate family foundation. It’s a business decision that we make as a family.”

Sharing God’s word, Steve explains, is the common denominator in the Green family’s giving. “Most of our business decisions are long-term, so we bring that same thought to our charitable giving, which has led us in many cases to God’s word. Much of our giving has been spreading God’s word around the world through different ministries, and the Bible project happened to be a very good fit. There are other humanitarian things that we do as well, but what seems to be at the core of this is sharing God’s word and encouraging people to consider it.”

“It Just Fell into Our Lap”

At the moment, the Greens’ Bible collection and “Passages” are Steve’s top philanthropic priorities—so much so that he is devoting half of his time to them. But the Greens’ philanthropy extends to much more. For example, they support ministries that bring the gospel message to people who haven’t heard it. They support Wycliffe Bible Translators, which is seeking to make the full text of the Bible available in every language. (Although the narrative of “Passages” culminates with the King James Bible, it wraps up with a pitch for Wycliffe.) They also support OneHope, which, Steve says, “takes the four gospels, harmonizes them, puts all the stories in chronological order without repeating them, and distributes that to kids in 100 countries around the world.” Another ministry, Every Home for Christ, seeks to bring “a gospel message to every home in the world.”

The Greens likewise work to tell the story of evangelistic efforts. For instance, Mart Green has long been fascinated by the story of Nate Saint, Jim Elliot, and three other young American missionaries. In 1956, they were murdered in Ecuador by the Waodani Indians—a tribe they were trying to reach with the Christian gospel. Saint and Elliot’s widows, Rachel and Elisabeth, continued their husbands’ work with the Waodani, eventually seeing widespread Christianization among the tribe. Mart founded a nonprofit film company, EthnoGraphic Media, which in 2006 released End of the Spear, a drama based on the lives and deaths of the young missionaries—and the reconciliation of Saint’s son Steve with his father’s Waodani killer.

The Greens have also been very active in supporting Christian colleges, but not necessarily on purpose. “I think some of that kind of just fell into our lap,” Steve explains. “The biggest one has been Oral Roberts University.” In 2007, the Tulsa-based university found itself embroiled in a nasty scandal involving personal and financial misconduct by its president and his wife. The Greens had no personal connection to ORU, Steve explains, “but from what we were reading in the papers, it looked like they were getting ready to close their doors. We hurt for that. We don’t need fewer institutions that are teaching on a biblical basis.” In 2008, the Greens gave $70 million to ORU, including over $50 million to retire its debt. Mart became chairman of the board and imposed a plan for financial recovery and governance reform.

Much of the Greens’ support for Christian higher education has been through property deals—$300 million worth of deals for 50 institutions, notes David. The family gave a $10.5 million facility to Liberty University for a law school, and made $5 million worth of renovations to a campus that they gave to Zion Bible College. In 2009, the Greens bought an idyllic 224-acre campus dotted with Romanesque revival buildings for C. S. Lewis College, a non-denominational Great Books college planning to open next year in Northfield, Massachusetts. Steve considers the property a bargain. Hobby Lobby will spend $6 million on its purchase and renovation; when they turn the deed over to C. S. Lewis College, it may be worth as much as $30 million.

“We’re involved in buying and giving real estate when we’re able to buy it at a very good price,” Steve explains. “That was an opportunity. It’s not been an intentional one, but it’s been, I think, one that God has directed us to.”

“One Thing Led to Another”

“My brother runs a Christian bookstore chain [Mardel, an affiliate of Hobby Lobby],” says Steve. “He commented many times that it would be neat to create a Bible museum. By the time an opportunity arose, the idea had been pretty thoroughly discussed in our family.”

When the moment came, it was in the form of a gospel of Luke, written in gold ink on purple vellum. “An opportunity presented itself at a very good price,” Steve says. The family that owned the artifact ended up changing its mind, but the Greens’ inquiry triggered interest in the world of biblical antiquities. “So we started looking for opportunities,” he continues, “and one thing led to another, and we have the collection we have today.”

The collection came together “at lightning speed”—in less than two years. “Our intent was not necessarily to do that,” Steve admits, “but as we started acquiring items, other items became available, word got out, and so people started presenting us with opportunities.” The Greens had an unlikely assist from the economy. “There were people who were struggling because of the economy and in need of cash,” Steve explains, “and they elected to sell a collection or a Bible.” Other collectors decided to sell because of the Greens’ vision for the museum. “I think there are some who might have been motivated to sell because we would share with them what we would love to do with the artifacts.”

The family worked closely with Scott Carroll, a biblical scholar with a long career of acquiring and studying ancient manuscripts. Steve Green joined Carroll on several acquisition trips, meeting dealers and attending auctions. “I tagged along and was just soaking in all the information Scott was sharing,” Steve says. “Then he would present the opportunities. We would discuss them, and I would decide to make the offers.”

“We don’t consider ourselves collectors,” he adds. “That’s not our nature as a family. It was more of the purpose that we had and the vision for the museum. A collector may have a little different mindset from what we might have; for us, it was the opportunities that presented themselves.”

“A Museum, Not a Ministry”

“Passages” is a prelude. After it closes in Oklahoma City in October, a selection of the exhibit will be displayed in the Vatican City. “Passages” will tour major cities for the next few years while the Greens’ ultimate goal—a museum of the Bible—comes to life. “‘Passages’ is a way for us to be able to start telling our story while we’re waiting for that permanent museum,” Steve Green explains.

That museum is perhaps as ambitious a project as the collection it will house. “We want to be a resource where the story of the Bible can be told in a very scholarly way that will also create an interest in the Bible,” Steve says. Like “Passages,” the museum is planned to be interactive, “attracting a wide spectrum of people, from children to scholars.”

It is not, however, planned to be evangelistic—at least not directly. “It’s a museum, not a ministry,” he adds. “But if we do the museum right, it will minister to people as a byproduct. I think it’ll be evangelistic in the sense that the evidence is very compelling that this book is unlike any book out there.” Even so, the museum will be deliberately non-sectarian. “Passages” includes artifacts from the Jewish, Catholic, and Protestant traditions; significantly, it will make a prominent stop at a museum in St. Peter’s Square in Rome. The eventual Bible museum will feature, among other things, the world’s largest private collection of Jewish scrolls (including Torahs that survived the Spanish Inquisition and the Shoah) and items that document the contribution of Jews and Roman Catholics to the King James Bible. “The idea of it being non-sectarian was really a decision based on the history of the Bible,” Green explains. “We didn’t make that decision. That decision was made because the history runs through the traditions of Judaism and Catholicism and Protestantism.”

The museum will also allow the Greens to expand beyond the story told in “Passages,” with its culminating focus on the King James Bible. One of Steve’s favorite artifacts in the collection is a Bible published by Robert Aitken in 1782—“the first and only Bible commissioned by the U.S. Congress,” he explains. The Aitken Bibles were commissioned by Congress in response to the shortage of Bibles from Britain during the American Revolution. “It gives the picture of the environment of the founding of this country,” Steve says, “and I think that today there’s probably a different picture viewed, but this is a way of going back and seeing maybe what the attitude at the time might have been.”

In keeping with its scholarly ambitions, the museum will house a research program: the Green Scholars Initiative. The initiative will allow undergraduates to collaborate with leading researchers to study and publish items in the collection that have not yet received scholarly attention. “This,” Steve concludes, “is a way of getting some of that information out quicker and at the same time mentoring students to have a love for the scholarly work—and it may give them a passion to pursue that opportunity as a vocation.”

“This Place Is Like a Tree”

Steve Green is currently scouting sites for the Bible museum in three cities: Washington, New York, and Dallas. (Washington would have the highest attendance, he says, but that is not the only factor in the decision.) With “Passages” touring and his hands full with planning for the museum, Steve does not envision any other big philanthropic projects soon.

He grins. “But we may wake up and read the paper and feel we need to get involved in a project.” One thing is certain: the Greens will continue to do both business and philanthropy as a family.

Steve and his wife, Jackie, have six children. Mart has four. Following in their father’s footsteps, Steve’s two adult children work for family enterprises: one for Hobby Lobby and one for the Green Collection. Not all family members are obliged to join the business, of course. “If they feel this is not what their calling is and they want to go do something else, then they’re free to do that. But if this is what they feel their calling is, as I did, we want to provide the opportunity.”

The next generation is also learning to participate in the family’s giving. “They don’t vote necessarily on the bigger family decisions,” Steve says, “but they are able to have a little bit that they are directing themselves, to give them a sense of the decision-making that the family goes through.” For example, some of the third-generation family members are supporting Christian orphanages overseas.

Ultimately, the Greens view Hobby Lobby, and the philanthropy it makes possible, as a work of long-term stewardship and investment. “If you want to work here, you’re welcome,” David Green tells his kids and grandkids. “But you’ll only get what you earn. This place is like a tree that can bear fruit if it’s taken care of. In the final analysis, it doesn’t belong to you, or even to Mom and me; it belongs to God. We all have to give it our best attention so that the tree stays strong and healthy for decades to come.”

His words call to mind those of another David, some 3,000 years ago. “Blessed is the man who walks not in the counsel of the wicked,” sings King David in Psalm 1. “He is like a tree planted by streams of water that yields its fruit in its season, and its leaf does not wither. In all that he does, he prospers.”

__________

This article was originally published in Philanthropy‘s Summer 2011 issue.

Intellectual Capital

Evan Sparks — Fri, 06 May 2011 20:28:20 +0000

New York City
“Scary,” says Marilyn Fedak. She looks out the window from her corner office. Outside, a winter storm is raging. Whirling snow obscures the view of the Empire State Building and Rockefeller Center from her 39th-floor windows. In a few hours, the heavy snowfall will snarl travel and down power lines from D.C. to Boston. She pauses for a moment.

“It was so scary,” Fedak explains. “It’s not like I haven’t been through bear markets before. But this one was different. I don’t think people realize how close we came to the system breaking down. I felt like everything I had learned about the markets and investing over 40 years wasn’t working as it should.”

“I literally did not sleep through a night from Labor Day of 2008 until probably April,” she says. The daily bad news of the financial crisis kept her awake, fretfully watching business news on TV. Fedak knew first-hand how dire things looked for the financial markets; at the time, she was vice chair for investment services at Alliance Bernstein. All the while, her anxiety about the capital markets was compounded by another set of worries.

“I began to realize that capitalism was being vilified, in ways we haven’t seen since the Great Depression,” adds Fedak. “The rhetoric was terrible. ‘Something has to be done to support capitalism,’ I realized. ‘What can I do?’”

After all, she reasoned, “capitalism has been very good to our country and our citizens. And I could see that from a very personal perspective.” Her grandfather emigrated from Russia at the age of nine. He started out selling pencils and newspapers on Manhattan’s Lower East Side. He bought a luggage store, which Marilyn’s father and uncles grew into a wholesale business. Growing up in Yonkers, Fedak taught herself to touch-type and started working as an office clerk at 14; she saved enough to pay for her first two years at Smith College.

In 1984, Fedak joined Sanford C. Bernstein & Co., which was then a smallish firm with 200 employees and $1.8 billion under management. (For more on the Bernstein story, see Philanthropy, Fall 2010.) Fedak prospered as an investment manager at Bernstein. In 2007, she was included in Fortune’s list of the 25 highest-paid women in business. “All along the line, I’ve loved to work, to be judged on the basis of my own merits,” Fedak says. “In the investment business, you get a report card every day. You see how your portfolio performed against the markets.” When Fedak retired to an emeritus role at the end of 2010, Alliance Bernstein had 4,500 employees and nearly $500 billion under management.

Fedak sees capitalism through the lens of her experience at Bernstein. At its best, the free market produces a “virtuous cycle,” but it has to be rooted in trust and the rule of law. “Trust and predictability are everything.” She leans forward to make her point. “Capitalism is based upon the idea that, implicitly or explicitly, you’re making contracts with people all day long, and if you can’t trust that the laws in place will prevail and that the other person is going to fulfill their side of the bargain, well, then no transactions are going to take place.”

And that is why Fedak is not so concerned about bubbles. “It’s human nature,” she explains, “and you don’t want to put so many obstacles in place that you eliminate them, because some very good things come out of bubbles. A lot of the technologies we have in 2011 were born out of seeds planted in the tech bubble of 1999.” What worry her are government intrusions that disrupt the virtuous cycle. She points to what happened in the Chrysler “bankruptcy,” when junior creditors (including politically favored employee unions) were moved ahead of senior debt holders in line to be paid. “This was one of the biggest catalysts for me in this project,” Fedak explains. “I walked in and said to our bond guys, ‘How do you value a bond today? How do you have any faith in your standing as a creditor?’ You need trust and you need predictability.”

But most of all, she was increasingly worried about what she sees as the lack of understanding of how capitalism works and its benefits among young people today. “I’ve known so many young people in the investment business who didn’t see the moral benefits of the system,” she explains. “They haven’t been taught how the free markets interact with our institutions, personal liberties, and social mobility.”

Fedak decided that she wanted to work with college students, to teach them about the very real virtues of free markets. Working with the Center for the American University at the Manhattan Institute—which she and her husband, Michael, a physician, have supported for decades—she launched the Marilyn G. Fedak Capitalism Project.

“We seek to encourage colleges and universities to expose their students to the linkages between our country’s economic system and our political institutions, liberty and democracy,” she explains. “We believe that such an understanding is critical for the future leaders of our country to ensure the preservation of all that has made the United States such a great country.”

Fedak and her Manhattan Institute colleagues are currently developing their plans. Among their ideas thus far: sharing course syllabi and using multimedia platforms to distribute lectures. She is also intrigued by the possibility of creating course content for law and business students. “Something like 70 percent of law courses are about business, but many of these kids have no understanding of the business world, much less how capitalism really works.” Other ideas include a course reader on capitalism that professors could use, or a business-school counterpart to the Federalist Society. “Let’s try a lot of different ideas with relatively small amounts of money behind them,” Fedak says, describing her approach, “then see which ones are worthy of larger funding.”

In the end, Fedak hopes that future leaders will see and appreciate capitalism’s inherent virtues. “The flexibility, the mobility, the serendipity that one has in a free-market environment is quite extraordinary if you think about it relative to the way socialism works, or even more closed political and economic environments around the world.”

Fedak is joining the ranks of many donors who are promoting a return to the first principles of free enterprise. And through these efforts, these donors hope to make a long-term investment in strengthening the American economy.

“Capitalism Is a Moral System”

John Allison was chairman and CEO of BB&T when the financial crisis hit. Based in Winston-Salem, North Carolina, BB&T Corporation is one of the nation’s largest banks. It was experiencing what he calls a “flight to quality”—as venerable but precarious financial institutions tottered, BB&T’s sound management was making it a refuge in the storm.

Even though BB&T was healthy, it was told to take some medicine: the Troubled Asset Relief Program, or TARP. Under TARP, all of the nation’s largest banks—healthy and failing alike—were supposed to accept government money in exchange for equity warrants. “TARP was a rip-off for healthy banks like BB&T,” says Allison. “We had to pay high interest rates for money we didn’t need. It cost us over a hundred million dollars.”

“I was personally, adamantly opposed to TARP,” he adds, but “we were under intense regulatory pressure.” BB&T was forced to take TARP money and give the government a stake of the bank. “I didn’t see how bad it was going to be,” he explains. But he’s referring not to the extent of the crisis but to the government response. To Allison, the financial crisis was not a wake-up call. Instead, it confirmed his core principles.

“Government policies really caused the financial crisis,” he explains. “We haven’t had a failure of markets.” He points to a series of government policy decisions, from the Federal Reserve’s low interest rate and inverted yield monetary policies to the creation of Fannie Mae and Freddie Mac, that exacerbated what would otherwise have been a normal—and much-needed—correction.

Thus, Allison argues, what America’s business leaders need to do is return to free-market principles. Allison modeled this kind of leadership, even when it appeared to intrude on the bottom line. After the Supreme Court’s infamous Kelo decision, BB&T was the only major bank not to provide financing for projects that used land seized through eminent domain for private purposes. “We thought that was a violation of a principle that is necessary for a free society,” Allison says. The bank’s decision “turned out to be great economics, which doesn’t surprise me at all.”

“Far more important than the economic issues are the philosophical issues,” says Allison. “The real causes of the financial crisis are philosophical: a combination of altruism and pragmatism. Pragmatism is what we tend to teach in our business schools: do what works. A lot of things that work in the short term are very destructive in the long term.”

“I’ve been a student of economics for a long time,” he continues. “But my real intense interest began with Ayn Rand.” He picked up a copy of Capitalism, the Unknown Ideal and read it during his senior year at the University of North Carolina. He was hooked. “Atlas Shrugged was a tremendously powerful book for me. For me and for many people I’ve talked to, it was a huge a-ha! It was an argument from an entirely different perspective.”

What Allison found in Rand was an imaginative expression of something inherent to the free market system: a moral framework. “Most people realize that capitalism produces a higher standard of living,” he explains. “But it is perceived by most people as amoral, if not immoral.” His voice rises a bit. “Capitalism is a moral system—the only system that is consistent with man’s nature as an independent thinking being who needs to be free in order to be innovative and productive.”

For Allison, capitalism’s morality is rooted in human nature. Man has rational capacity, and a capitalist system allows him the greatest freedom to exercise that capacity for creativity and innovation—and to be rewarded accordingly. “It is, in a very deep sense, a just system,” he explains. That people tend to thrive more in capitalist economies, not to mention enjoy more freedom, is just the icing on the cake.

Like Fedak, Allison witnessed the morality of capitalism up close over the course of his career. He joined BB&T after graduating from college, and he worked his way up in the ranks. He became CEO of BB&T in 1989, and began the company’s transition from a small regional bank into the nation’s 10th-largest financial holding company, growing BB&T’s assets from $5 billion when he became CEO to $152 billion when he retired at the end of 2008.

Amid the growth, Allison put his stamp on BB&T’s corporate charitable giving. Like much corporate philanthropy, BB&T’s giving a decade ago was going to good causes, but it wasn’t particularly strategic. “The money that was being spent wasn’t going to promote the well-being of our company or our country,” he explains. “We needed to focus our contributions on something that will matter, and we think that presenting the concepts that undergird capitalism is essential for both BB&T’s well-being and the well-being of the society in which we live.”

Allison’s approach: small, active centers on college campuses, designed to give the best and brightest college students an introduction to ideas they weren’t likely to get in their other classes. “One of the principal goals for BB&T is to encourage a rational discussion of the fundamental moral principles underlying a free society and free markets,” he says. “The best way to have the biggest effect in the long term is by impacting future leaders.”

Allison started at Duke, where he earned his MBA and later served on the board of the business school. “I had long argued that business schools needed to do more on leadership and ethics—at an individual level, at the business level, and at a societal level. The people at Duke got interested in that idea.” And thus was born Duke’s Program on Values and Ethics in the Marketplace. Next came a program exploring the ideas underlying a free society in the philosophy program at the University of North Carolina at Chapel Hill.

Dozens of other centers followed. Today, BB&T supports 65 university centers—serving nearly every major college and university in the bank’s core operating areas in the southeast. The centers are housed in a wide spectrum of academic departments, although most of them are in economics departments and business schools, where they reach future business leaders, entrepreneurs, and job creators. Last year, nearly 25,000 students participated in some way in a BB&T-supported program.

BB&T today contributes about $6.9 million per year to the centers. (Although Allison retired as BB&T’s CEO at the end of 2008 and as chairman a year later, he remains at the helm of BB&T’s charitable support for these centers.) When it launches a new one, it usually makes a 10-year commitment, ranging from $500,000 for a small college to $1.5 million for a major university. “The university makes a profit on it because they’re leveraging their existing faculty,” says Allison.

When Allison launches a new program, he looks first for a faculty member who’s passionate about the idea. “Execution is almost totally driven by the faculty member’s interest in doing this,” he explains. “We won’t do it unless we find a faculty member who’s genuinely interested.” That professor’s interests often drive the focus of the program—the campus centers range in topics from public choice to broader questions of morality. Much like the capitalist system they seek to explain, the centers are neither centrally planned nor administered. “Our goal is not to indoctrinate students, but for them to hear—often for the first time—an ethical defense of free markets,” says Allison.

The centers do share some elements in common: a course on the moral foundations of capitalism; distribution of classic books on free enterprise (such as F. A. Hayek’s The Road to Serfdom, Ludwig von Mises’ Human Action, and Milton Friedman’s Capitalism and Freedom); and a seminar, lecture, and debate series. Faculty members design their own syllabi for the moral foundations course, but they don’t select the readings in a vacuum. “One of our goals is to network faculty,” says Allison. “Universities are definitely silos, but there’s some real thinking going on when we get top-flight intellectuals from philosophy talking to economists, and top-flight economists talking to political scientists.” One of the places this happens is at the BB&T-sponsored summer conference for faculty at Clemson University. At several universities, BB&T has also partnered with the Charles G. Koch Charitable Foundation to cultivate social science and economics Ph.D. candidates with an appreciation of capitalism.

Another common element of the BB&T programs—and one that is occasionally controversial—is the inclusion of Atlas Shrugged in the curriculum. According to Allison, Rand inspires a uniquely hostile response from the left. “I think it’s because Rand provides a secular, integrated defense of capitalism,” he explains. “The left likes to believe that they own all the secular arguments. They’re scared of Rand. She poses a far bigger threat, because she challenges a lot of the fundamental premises on which statist arguments are based, on their own terms. If she wasn’t having an effect, they wouldn’t pay any attention to her.”

Atlas Shrugged is also unique among capitalist classics in that it’s a well-plotted novel that—excepting the dense monologues that run up to 90 pages—zips along like a train gliding on Rearden Metal. “That’s one of the reasons I really encourage Atlas,” says Allison. “For many students, a novel is a much more compelling presentation than an economic argument. They might not totally agree with Rand, but that’s not the point. It’s the book that helps them think in a different way, separate from an economic argument.”

“Integrating Theology and Economics”

Like John Allison, Robert and Patricia Kern believe in the urgency of making a moral case for free enterprise. The Kerns, however, bring to the conversation a different perspective and a different set of priorities. “We’re striving to connect the topic of economics with the concerns and culture of faith-based communities,” explains James Rahn, president of the Kern Family Foundation. “That’s not in contrast to a more secular, libertarian approach, mind you. We are taking a different perspective, looking at the same fundamental issues, but through different lenses.”

“In the second half of the 20th century, the case for free enterprise was taken over by people with a utilitarian moral theory,” says Greg Forster. He is program director for American history, economics, and religion at the Kern Family Foundation. The Kerns, Forster adds, have great respect for those, Friedman and Hayek among them, who have made this case. But, adds Forster, “there is a shallowness to the utilitarian view of the universe and human life, which is evident in its understanding of economic systems. If the case for free markets is shackled to this reductionist anthropology and morality, it’s not going to be persuasive to people who start from a faith-based perspective.”

Although “free markets have performed better than any other system devised,” Forster continues, “no social system can maintain itself over time unless it is constantly infused toward renewal. There is more than morality at stake here. This is about our understanding of the whole universe and our place in it, and there is a spirit that needs to infuse the social system. If you want to talk about that, you have to go beyond morality and talk about theology.” Hence, Forster explains, the Kerns believe in making the case for the free enterprise system’s roots in the Judeo-Christian moral tradition: centered on the freedom of the individual—and the individual’s relationship to God.

Robert and Patricia Kern, now in their 80s, met while they were undergraduates at the University of Illinois—Robert, in the school of engineering—in the 1940s. In 1959, they founded a generator company in a rented garage in Wales, Wisconsin. He produced electrical generators and grew the firm—later known as Generac Power Systems—into one of the world’s largest producers of engine-driven generators, with a specialty in 5-to-500 kW systems for emergency and stand-by residential and light commercial uses. Kern grew Generac to nearly 2,100 employees before he sold it, using the proceeds to establish the Kern Family Foundation.

The Kerns have also been active in the life of their church. Robert is the son of a Baptist minister, and Patricia served for 22 years on the board of a Baptist seminary—including 6 years as chair, the first woman to do so. Both Kerns have a strong sense of the unity of their vocations in the world and their callings as Christians, and they believe that today’s evangelicals need a better understanding of the role of economic activity in a life of Christian discipleship. Through the Kern Family Foundation, the Kerns have worked to promote K–12 education reform, engineering education, and pastoral education.

The Kerns’ approach to reviving faith-based economic understanding works through higher education, with two prongs: Christian undergraduates and evangelical seminarians. These two prongs reflect the Kerns’ beliefs about vocation: that all people have a calling to use their gifts in service to others, and that the church is to urge its members to find this calling.

In 2009, the Kern Family Foundation launched a major effort to reach evangelical college students through the American Enterprise Institute (AEI). AEI president Arthur Brooks brought to the think tank a trademark interest in the connection between economic and moral well-being. “Arthur really understands that economics is not about whether we get an extra quarter-point of growth in GDP this year,” explains Forster. “Economics is about people living into their callings and making a contribution to the common good. What Arthur has done is gather together several other superb economists at AEI and build a project that translates economics into a language that speaks to those concerns, and particularly that speaks to the spiritual hunger that evangelicals have to know what God wants from their working lives.”

That project is called the Common Sense Concept, and it taps into the Kerns’ concern that evangelical young people no longer see the connections between following God and serving others in a free marketplace—indeed, that they are increasingly attracted to leftist arguments for “social justice” and its resulting dependencies. AEI’s outreach includes a series of short books for college students written by AEI scholars. Steve Hayward offers a biblical perspective on humans and the environment. Financial expert Alex Pollock writes on booms and busts, proposing that the roots of financial collapses are a consequence of human moral failings. Finally, Arthur Brooks and Peter Wehner argue for the morality of democratic capitalism. “They lay out the case for why free enterprise is morally good, but also requires the vigilance of people infusing a moral spirit into it,” says Forster.

AEI also hosts a lecture and debate series for college students and young professionals. Last year at Wheaton College in Illinois, Brooks debated liberal minister and commentator Jim Wallis on whether capitalism has a soul. “We didn’t think we’d be able to get something as good as a debate between Arthur Brooks and Jim Wallis,” says an impressed Forster. “It was a smash hit from our perspective.” At AEI’s Washington headquarters, “new monastic” and peace advocate Shane Claiborne debated microfinance leader Peter Greer on loving one’s neighbor in the 21st century.

“Theology lacks in itself the empirical understanding of human nature that we get from economics,” Forster says, explaining the other prong of the Kerns’ work. “There needs to be a dialogue between theology and economics. The theologians need to take into account how economics really works, and the economists need to take account of how human beings really work.”

To this end, the foundation has worked closely with the Acton Institute, which Forster calls “the premier organization dedicated to research integrating theology and economics.” The Kern Family Foundation is helping Acton to become a more influential resource for and participant in evangelical theological debates. The Kerns also support field learning, new courses, faculty projects, and other ways of infusing economic thought into the curricula of 13 evangelical seminaries. “We think this is really essential to the future of the church,” says Forster.

The Kerns’ efforts to seed the Judeo-Christian moral tradition of vocation into Christian colleges and seminaries are one part of their work in higher education. As an engineer who became a successful entrepreneur, Robert Kern also hopes to “instill the entrepreneurial mindset” into future engineers, says program director Tim Kriewall, who oversees the Kern Entrepreneurship Education Network (KEEN). KEEN is a network of 18 small, private colleges and universities—comprising more than 13,000 engineering undergraduates—that share the Kerns’ vision for entrepreneurial engineering.

“We’re trying to get people work-ready, so to speak,” Kriewall says, “so that when they graduate with a bachelor’s degree, they can make contributions to the firms that employ them without needing to go on to grad school.” The Kerns’ goal is not for every graduating engineer to be ready to start his or her own business, but rather for young engineers to adapt their talents to emerging opportunities. “It’s not about entrepreneurship; it’s about supporting entrepreneurially minded businesses,” Kriewall adds.

Like the Kerns’ programs on values and free enterprise, KEEN helps young people to understand their vocation—how, through their work, they can serve others and realize their callings. “We get out of bed in the morning to apply our God-given skills to help people,” Kriewall explains. “That’s what entrepreneurs do.”

The same moral imagination undergirds all of the Kerns’ efforts. “We’re talking about a curiosity level that leads you to understand what is taking place outside of the world that you’re living in, because your ideas can come from anywhere, and if you don’t have a breadth of natural interest, I don’t think it’s going to take you very far,” says Robert Kern. “There’s something new to be learned every day, and all of this, put together, wraps itself up in developing an entrepreneurial spirit.”

Investing in Influence

Back in her midtown office, Marilyn Fedak acknowledges that she is taking a different tack from John Allison and the Kern Family Foundation. Nonetheless, she is watching both efforts closely. Allison was “the very first person I spoke to,” she says, and she is intrigued by the Kerns’ efforts to reach evangelicals. But she intends to pursue a different strategy. “I really want to try to get to the future leaders of our society,” she says—students at Ivy League schools and America’s top law and business colleges.

While Fedak is just beginning to ramp up—and seek additional funding for—her project, Allison has reached the limits of what BB&T can do. It has a center at nearly every major college and university in its operating area. “The big opportunity I’m focused on is how we can take these programs out of the BB&T footprint,” he says. “We have a proven program that has been very successful, but we shouldn’t do it with BB&T money.” To expand the programs, Allison has created the Fund for Inquiry into the Morality of Capitalism, administered by the Center for Excellence in Higher Education. His goal: 200 new university centers in the next 10 years.

One of the difficulties of funding in the realm of ideas is that it can be hard to identify clear outcomes. Allison, Fedak, and the Kerns measure their work, but they are limited by the goals they hope to achieve. As Greg Forster puts it, “We want to build a basis for generational culture change.” These donors are not just exposing students to the benefits of capitalism; they hope to make the case for the rightness of the free enterprise system.

On this point, all four donors agree: For the economy to become healthy again, future leaders will need to understand why free enterprise is a moral good. They will need to understand the failures of 2008 and 2009, and how to avoid repeating them. They will need wisdom—as well as recognition of the wisdom inherent to the market.

The storm outside Fedak’s windows gathers force; snow piles in curves along the windowsills. In the distance, the Empire State Building is barely visible. Fedak turns away from the window. She knows the storm will pass. She has work to do.

__________

This article was originally published in Philanthropy‘s Spring 2011 issue.

High-Flying Philanthropy

Evan Sparks — Fri, 18 Mar 2011 13:52:54 +0000

Gretchen Reed loves to fly. She owns not one, not two, but eighteen restored, antique aircraft—many of which are still flown. She’s especially fond of her Aeronca Champion, a classic, two-seat, single-engine, fixed-gear airplane, flown from her own, private airport in northeastern Ohio.

Reed is not only an avid aviatrix. With the gift of her airport and collection to Lake Erie College in Ohio, she has proven herself an avid philanthropist.

Reed first caught the aviation bug from her husband, Chuck, whom she married in 1966. She was an English teacher in Painesville, Ohio, and he was an Air Force veteran of the Korean War who worked for Avery International. (It later became Avery Dennison, perhaps best known for producing mailing labels and other adhesive office supplies.) Chuck held 20 patents in pressure-sensitive materials and applications, including the tabs used to secure disposable diapers.

“Aviation was his whole life,” says Gretchen. When he went on business trips, he flew himself. He encouraged his wife to take up flying, too, and she became a licensed pilot in 1969. Later that year, Gretchen went to the superintendent of the district in which she taught and proposed an aviation class for high school students. She taught that class until her retirement in 1995, introducing more than 600 young people to the pleasures and rigors of flying. When she started the program, she was the country’s only female high school aviation teacher.

In the late 1970s, the Reeds decided to build their own airfield. They bought 68 acres in rural Lake County, Ohio, and cleared land for the east-west grass runway; another grass runway followed in the 1980s. They also built hangars on the property, which they named Pheasant Run Airport. Gretchen moved the high school aviation program to Pheasant Run, and she and Chuck would fly with her students after school and on weekends.

“Restoring and maintaining aircraft was a long-time interest of Chuck’s,” says Gretchen. Pheasant Run allowed him to indulge the hobby. His handiwork is on display in the hangars at Pheasant Run, and includes a Fokker Dr.I, a reproduction of the triplane flown by Manfred von Richthofen (the Red Baron) in World War I; an Interstate L-6, an observation scout plane used by Gen. George S. Patton during World War II; and a Meyers OTW Army trainer produced from 1936 to 1944. The OTW was Chuck’s favorite, Gretchen says. “It’s a very responsive, tandem, open-cockpit old-fashioned airplane. Open-cockpit flying is a whole lot of fun. It sounds just like old airplanes are supposed to sound.” The OTW is so valuable today, Gretchen says, that she stopped flying it after only 35 hours, lest anything happen to it.

When Chuck’s health began to decline, the Reeds started talking about what to do with Pheasant Run and their collection. They had both loved teaching and having visitors at Pheasant Run, and the idea of a museum was appealing. (For example, both were involved with the International Women’s Air and Space Museum in Cleveland, where Gretchen is a trustee.) After Chuck’s death in 2008, Gretchen made concrete plans for the future of Pheasant Run, deciding to give it to Lake Erie College.

Lake Erie College, Reed says, was a “perfect fit” for her gift. Now co-ed, in the 1930s it was the nation’s only women’s college to offer an aviation class; Amelia Earhart visited the campus multiple times. “My initial thinking was that Pheasant Run would become an educational center and an aviation museum,” Reed says. “We’ve been working toward that goal ever since Chuck died.” The hangars are now cleaned up, organized, and ready for visitors.

“Pheasant Run will be first and foremost a center for preserving history,” says Lake Erie president Michael Victor. “But it will be more than that: it will be a center for teaching, and a learning center for aviation and avionics majors.” Reed’s gift—valued at over $3 million—includes additional adjacent acreage on which Lake Erie College hopes to build a longer runway and additional hangars. And Reed’s gift has opened the door for other gifts. “We’ve received interest from other aviation enthusiasts about donating their planes to Lake Erie College to add to the collection,” says Scott Evans, Lake Erie’s vice president for institutional advancement.

And as aviation returns to Lake Erie College, and as students once again take to the air from Pheasant Run, Gretchen Reed will see her and Chuck’s philanthropic vision take flight.

__________

This article was originally published in Philanthropy‘s Spring 2011 issue.

Duke of Carolina

Evan Sparks — Tue, 01 Feb 2011 14:48:35 +0000

As a cardinal flies, it’s only three miles from a modest tobacco farm near Ellerbe Creek to the campus of Duke University. Today, a traveler can cover the distance in about 10 minutes, entirely within the city limits of Durham, North Carolina.

That otherwise unremarkable distance marks the journey of James B. Duke. Born on a small homestead, and interred in the chapel of the university that bears his name, Duke was a man of the Carolinas.

No matter what else he became, James B. Duke remained a man of the Carolinas.

Tobacco made him one of the richest men in the world, and he created a worldwide market for North Carolina’s signature crop. In his career’s second act, he harnessed the power of Carolina streams, making possible the electrification—and the mighty textile industry—of the two states. And although he had a Fifth Avenue mansion in New York, although he had tobacco interests around the world and hydroelectric projects as far afield as Quebec, when he turned to philanthropy, he remained a man of the Carolinas.

On December 9, 1924, the Charlotte Observer broke big news for the Carolinas. Duke had established a significant philanthropic foundation. Duke’s attorney read the indenture of trust creating it, and “a hushed silence fell upon those present as the magnitude of the gifts began to dawn upon them.” The Duke Endowment was at the time a philanthropic legacy rivaled in size only by those established by Andrew Carnegie and John D. Rockefeller. But unlike Rockefeller’s and Carnegie’s foundations, Duke’s was intended only for the Carolinas. And unlike the open-ended charters of Rockefeller and Carnegie, Duke knew exactly what he wanted to fund: hospitals, orphan care, rural Methodist churches, three Carolina colleges—and Duke University, which he sought to turn into a world-class institution.

The story of Duke’s philanthropy is remarkable in two ways: first, for the way he identified, clarified, and documented his charitable purposes; and second, for the way his trustees have perpetuated those purposes. For unlike many foundations of Duke’s era, which spent the past century finding ways out of their founders’ designs, Duke’s trustees have sought to stay as close to his purposes as possible.

Smoking the Competition

Born in December 1856, James Buchanan Duke was named for the 15th President. His family—including his father, Washington, and his older brother Benjamin—called him “Buck,” and it seemed to suit him. He was a strong, sturdy child, eager for life.

The Duke family eked out a living on a small Piedmont farm. Washington raised his children in the Methodist church, and Buck grew up listening to circuit-riding preachers, hardworking evangelical entrepreneurs who wore themselves out in their ministries. “My old daddy always said that if he amounted to anything in life it was due to the Methodist circuit riders who frequently visited his home and whose preaching and counsel brought out the best that was in him,” he reminisced. “If I amount to anything in this world I owe it to my daddy and the Methodist church.”

By the end of the Civil War, North Carolina had been devastated—more than any other Southern state—and the Dukes were penniless. They made a new start with their one crop that had not been stripped away during the conflict: tobacco.

The small log outbuilding on the Duke family farm hardly bespoke great enterprise. In that 16 by 18 foot house, Washington Duke and his children beat, sifted, and packed the tobacco leaves, and Washington peddled the tobacco from a mule-drawn cart in eastern North Carolina.

In 1874, when Buck was 17, the family moved to Durham. The Dukes—Washington, Ben, and Buck in partnership—opened a tobacco factory there, but they found their potential in Durham limited by the fierce competition. Buck had a plan. “My company is up against a stone wall,” he said. “It can’t compete with Bull Durham [a popular rival]. Something has to be done and that quick. I am going into the cigarette business.” The Dukes were among the first cigarette manufacturers in the South, and they were the first to—at Buck’s recommendation—adopt machine production on a large scale. The risk paid off handsomely; the Dukes were able to produce far more cigarettes much faster than older methods.

To sell the growing surplus inventory, and build up consumer demand for the Duke brands, J. B. Duke pioneered national cigarette advertising. He used mass media, like tradable “cigarette pictures” and billboards. J. B.’s devout father was concerned about the suggestive pictures, and his competitors sniffed at “this damned picture business” that “degraded” the cigarette industry, but the advertising worked, and smokers across the country increasingly asked their local tobacconists for J. B.’s brands by name.

By 1890, J. B. Duke had become the nation’s leading tobacco magnate. Competition was fierce, with advertising costs accounting for about 20 percent of sales, and Duke, like many of his era’s industry titans, sought to limit competition and thus reduce costs. The Duke firm joined four others to form the American Tobacco Company, which accounted for upwards of 90 percent of the domestic cigarette business. Duke, who had orchestrated the merger, was at the helm of the new monopoly. By 1904, when American Tobacco incorporated yet more allied tobacco interests, it was involved in almost every single line of the tobacco business.

Tobacconist to the World

In 1901, Duke bought a major British tobacco company. His ambitions were increasingly global. This action alarmed many British manufacturers, who banded together, advertising with jingoistic jingles like “Rule, Britannia! Britannia rules the waves/Britons to Yankee trusts will ne’er be slaves!” Duke fought the British to a stalemate with a generous bonus for tobacco merchants, but this approach was expensive, and as with his American competitors, Duke saw no reason not to join forces. The result, in 1902, was the British-American Tobacco Company.

William C. Whitney, a former Secretary of the Navy and a member of New York’s famous Whitney family, was one of Duke’s colleagues in the merger. He believed that Duke had more in mind than just cornering the British tobacco trade. “His keenest satisfaction from this international triumph,” Whitney said, “came to him in the knowledge that he had gotten an almost unlimited and more lasting market for the tobacco made by his own people on their small farms.”

The first decade of the 20th century brought a wave of sadness to J. B. Duke. Washington Duke died in 1905. Later that year, after less than a year of marriage, J. B. filed for divorce from his wife, on grounds of (her) adultery. In 1907, the federal government brought an antitrust suit against American Tobacco under the Sherman Antitrust Act, and the Supreme Court ordered the company dissolved in 1911. Duke’s two bright spots during this time were his marriage to Nanaline Holt Inman in 1907, and the birth of their only child, Doris, in 1912.

Although he remained very much involved in British-American Tobacco, J. B. never returned to the tobacco industry with the same ardor of his youth. For he had a new enterprise: the hydroelectric development of the western Carolinas.

Duke Power

Although water power had been used for centuries to operate mills, in the early 20th century using it for electrical generation was still a novelty. But as turn-of-the-century America developed, Duke would find, its thirst for electric power would be slaked most efficiently by river power. Hydroelectricity would not only provide cheap power to the textile mills that dotted the Carolinas, Duke observed; it would also see that electrification would spread across the Carolinas, helping the states to advance in their development. (Duke’s foresight put him a generation ahead of government efforts to electrify the Tennessee River valley during the Great Depression.)

“For many years I have been engaged in the development of water powers in certain sections of the States of North Carolina and South Carolina,” J. B. wrote in the indenture creating the Duke Endowment. “In my study of this subject I have observed how such utilization of a natural resource, which otherwise would run in waste to the sea and not remain and increase as a forest, both gives impetus to industrial life and provides a safe and enduring investment for capital.”

Duke brought his entrepreneurial talents to his new hydropower business. His physician presented him with the idea of developing the Catawba River and introduced Duke to a 32-year-old engineer named W. S. Lee. Duke entrusted Lee with full authority to begin purchasing property and building dams; Duke did not even give Lee a set of instructions. “It was his policy to designate one man to begin and complete a thing rather than start a debating society or hold a town meeting over it,” Lee recalled.

Duke’s next task was to persuade mill owners to use the new source of energy. Electricity was cheap, but it wasn’t an easy sell. “You must be drunk or a damned fool if you think I will bring electricity into my mill to kill my people,” replied one mill owner. Other owners saw it differently, believing—in the words of one—that “yes, Mr. Duke will make it a success.”

Duke’s Southern Power Company grew by the 1920s into the leading electric utility in the western Carolinas. (After his death, it was renamed Duke Power, and it still operates today as Duke Energy.) In 1924, Duke won from the North Carolina Corporation Commission approval for a rate increase that would allow Southern Power to maintain its growth and meet the Carolinas’ increasing need for power.

Duke’s interests in Carolina hydropower brought him even closer to home. He continued to maintain his mansion in New York and his farm in New Jersey, but he built a new house in Charlotte, where Southern Power was headquartered, and began to spend more time there. Moreover, one can see in the way Duke developed his power company—securing steady revenue and foregoing personal dividends—the beginnings of his “grand design” for philanthropy in the Carolinas.

“Philanthropy on a Princely Scale”

J. B. Duke’s philanthropy did not spring fully formed from his head in 1924. Rather, it grew organically out of his life and interests. Duke always attributed his family’s success to their Methodist faith, a creed that stresses hard work. His interest in orphans came from his own experience of being a half-orphan. And the Duke family had for many decades generously supported Trinity College.

It is true, however, that J. B. was not a philanthropic heavyweight in the early years of his career. For one, he thought it better for him to make money when the making was good. “I am going to give a good part of what I make to the Lord, but I can make better interest for Him by keeping it while I live,” he said. Furthermore, in the Duke family’s division of labor, Ben tended to handle the philanthropy.

J. B. Duke took on more philanthropic responsibilities when Ben fell seriously ill in 1915. He took a personal interest in the design of Trinity’s new campus, and he began having funds for “worn-out” Methodist preachers and their widows and orphans distributed through Trinity. J. B. began giving on a large scale several years before he created the Duke Endowment.

Of course, even if J. B. Duke had not indicated his philanthropic objectives prior to 1924, after the Duke Endowment was created, it was impossible to ignore them. His indenture of trust imbues his philanthropy with the same confidence he had in his entrepreneurship. First, he created a university as a memorial to his father and brother. “An institution to be known as Duke University” was to receive $6 million from the endowment up front. And, given the Dukes’ long connection to Trinity, J. B.’s next condition was only natural: if Trinity was to rename itself accordingly, it would receive the $6 million to fund a new campus and new schools of divinity, law, and medicine. “I have selected Duke University as one of the principal objects of this trust because I recognize that education, when conducted along sane and practical, as opposed to dogmatic and theoretical, lines, is, next to religion, the greatest civilizing influence,” J. B. wrote. He intended that Duke University attain “a place of real leadership in the educational world.”

He identified four areas of funding, and allocated specific percentages of the endowment’s payout that would go to each. Four institutions of higher education together receive 46 percent of the payout: Duke was to receive 32 percent; Davidson College and Furman University, 5 percent each; and Johnson C. Smith University (a historically black university in Charlotte), 4 percent. Duke allocated 32 percent for hospitals in the Carolinas, 10 percent for the care of orphans and half-orphans in the Carolinas, 10 percent for the construction and maintenance of rural Methodist churches in North Carolina, and, finally, 2 percent for the support of elderly Methodist clergymen and their widows. Unlike Carnegie and Rockefeller, Duke focused his largesse in just two states—to give elsewhere, he thought, “would be productive of less good by reason of attempting too much.”

In addition to his strict percentages, Duke included a statement of principles to guide his trustees. He selected hospitals because of their benefits for helping the sick and for improving mankind. “I very much hope that the people will see to it that adequate and convenient hospitals are assured in their respective communities, with especial reference to those who are unable to defray such expenses of their own,” he explained. As to orphans, he wrote, “nothing can take the place of a home and its influences, [but] every effort should be made to safeguard and develop these wards of society.”

And, of course, he provided for the needs of his beloved Methodist church. A colleague once suggested that he give more ecumenically, but Duke demurred. “No, that would be the biggest kind of mistake,” he replied. “Competition in religion keeps up the interest.”

Finally, part of his grand design was to connect his philanthropy with a stable company: Southern Power. He instructed his trustees to hold only stocks in that company (except for some government bonds) and to maintain control of it. This part of his design was thwarted after the Tax Reform Act of 1969 forbade foundations to own more than half of a company’s shares; by 1994, the endowment had sold off most of its Duke Power holdings.

Duke didn’t stop giving after he created the endowment. Before his death in October 1925, Duke decided to give even more—$7 million extra—to ensure the completion of Duke University’s new campus and growth plans. He took a special pleasure in the design of Duke’s grand Gothic West Campus. “Don’t disturb me now; I am laying out the university grounds,” he said to his nurse days before he died. “I am looking to the future, how they will stand and appear a hundred years from now.”

“Persons of Character and Ability”

Duke had thrived in business because of his eye for talent. “He was an extremely keen judge of men and of their character and ability,” writes Duke biographer Robert Durden. He delegated a great deal of responsibility to his trusted employees, and rewarded them accordingly, including offering them stock in his businesses. “I have only one instruction to give you,” J. B. told one new hire. “Don’t ask me to raise your salary. I always know what my people are worth to me, and I pay them what they are worth without being asked.”

J. B. brought this eye for talent to his philanthropy. He entrusted the Duke Endowment to his closest personal and business associates. Two of them were relatives: wife Nanaline and A. J. Drexel Biddle Jr., Ben Duke’s son-in-law. (Mary D. B. T. Semans, Biddle’s eldest daughter, chaired the endowment from 1982 to 2001 and remains on the board today.) The endowment’s first chairman after Duke’s death was George Allen, who had first come to American Tobacco in 1895 and who worked closely with Duke in his New York office. William Perkins, Duke’s chief counsel since 1914, had drafted the indenture. These and other trustees repaid Duke’s loyalty; 8 of the original 12 stayed on the board for more than 25 years, and Allen remained chairman until 1960.

Duke instructed his trustees to “make a special effort to secure persons of character and ability, not only as trustees, but as officials and employees.” Trustee selection has been an important way of helping to honor Duke’s charitable purposes. “Of the 15 trustees, we still have 3 family members. That’s not specified in the indenture, but that’s been the practice to have family representation,” says Eugene W. Cochrane Jr., the endowment’s president. “They offer a spirit of the family that’s been important to the endowment.”

Meeting 10 times annually ensures that the trustees engage with each other and with the staff. Duke intended for his trustees to commit a good deal of time, and he rewarded them accordingly. Compensating foundation trustees is controversial, but Duke put it into the indenture. His purpose was to recruit persons of “ability” for the board, and it underscores the trustees’ moral and fiduciary obligation to pursue Duke’s charitable intent. Today’s board, chaired by Neil Williams, consists of business executives, professionals, and academics with some connection to the Carolinas.

And every year, the trustees follow another practice instituted by Duke: reading the full text of the indenture aloud at a board meeting. Although this practice originates in Duke’s aural learning style, it brings trustees face to face with their duty as stewards of Duke’s philanthropy. “After the reading, there is always a time of reflection and comment about Mr. Duke, his ideas, and our mission,” Semans says. “This closeness to the founder renews us and gives us a sense of new energy.”

The Duke Endowment Today

In the 86 years since its creation, the Duke Endowment has distributed more than $2.7 billion. All of these grants fall into the same categories—and similar percentages—established by J. B. Duke. “One of the great things Mr. Duke did was limit us to a geographic area,” says Cochrane—this geographic focus has allowed the endowment, as Duke predicted, to have a greater effect.

More than anything else, the endowment has achieved J. B. Duke’s goal for Duke University: that it become a world-class national research university. Every measure indicates that it has: the university is currently ninth in U.S. News & World Report’s domestic rankings, 24th in the Times Higher Education global rankings, and 35th in the Shanghai global rankings. “Trinity was a small Methodist college,” says Cochrane, “and Mr. Duke said, ‘I want it to become a great university’—and it has.”

The endowment’s support for nonprofit hospitals accelerated their development in the Carolinas; in the endowment’s first several decades, North Carolina’s rate of growth in hospital beds per 1,000 people was almost double those of comparable states. In terms of quality, Cochrane says, these hospitals “match up very favorably” against those in other southeastern states. But even from the earliest days of the endowment, the trustees and staff did not fund hospitals qua hospitals, but rather hospitals as a means to the “object of good medical service.” The Duke Endowment’s work—including funding the first group health plan in the Carolinas and putting the states ahead of the curve in outpatient care—ultimately raised standards of medical care in the Carolinas.

The bequest for care of orphans and half-orphans was, for the first few decades of the endowment, used to fund orphanages, Cochrane says. By the 1940s, orphanages had given way to foster homes, and the endowment began to give assistance for foster care. The endowment also funds programs to encourage adoption. And since Duke specifically mentions half-orphans in the indenture, the endowment today supports programs that serve children at risk of neglect and abuse.

The endowment’s grants for higher education have remained remarkably stable. Duke, Davidson, Furman, and Johnson C. Smith have benefited greatly from J. B. Duke’s largesse. (During the Great Depression, some of these schools received more revenue from the endowment than from tuition, a remarkable advantage.) In the 1960s, for example, the endowment supported Duke’s ambitious plan to raise its faculty salaries to a level competitive with the Ivy League. “I’d like to think the endowment has been a major part in making those schools as strong as they are as compared to all private colleges in the Carolinas,” Cochrane points out.

The endowment has departed from the letter of the indenture in some places—as Duke might have expected when he allowed his trustees “uncontrolled discretion” to make grants “in like manner.” For example, Duke specified that the endowment should give hospitals $1 for each day of charity care rendered, which was at the time a generous contribution. Today, of course, $1 per day per bed isn’t even a drop in the bucket. So, Cochrane explains, the trustees looked at what charity care meant today. “It’s largely in rural medical clinics and medical clinics that serve underserved populations.”

Some of the changes in what the endowment funded came from changes in the needs within the areas Duke sought to fund. “For many years, the endowment primarily provided capital support. And that was probably the need in the early to middle parts of the 20th century,” Cochrane says. “In the 1990s, that began to change. The endowment began moving toward more program support.” Today, although the endowment still occasionally funds capital projects, it also supports programs with grants of three types: “Strengthening Organizations,” “Advancing Innovation,” and “Replicating Success.”

The endowment is also funding more across multiple program areas. One current grant—to improve the physical health of clergy, which is worse than the average North Carolinian’s—is a collaboration led by the endowment’s rural church division, with support from its health care division, and inspired by Duke’s expression of care for “worn-out preachers.”

“Duke Did That”

How will the Duke Endowment adapt in the future? Cochrane says the endowment is already thinking ahead. “Mr. Duke set up the indenture before you had health insurance, Medicare, and Medicaid,” he explains. Thus, the endowment’s original mandate for hospitals has been transformed. What does the current round of healthcare reform portend? “A lot of our dollars have been to help people without health insurance coverage. If the health plan stays in place, most of those people will be covered,” Cochrane points out. “You have all of a sudden all these people who have insurance and are therefore seeking health care—who’s going to provide it?”

“Our numbers show that there’s going to be a significant shortage in the health workforce,” he adds, “so we’re looking to see what we might fund in that area.”

The endowment is also working to bring highly effective national nonprofits to the Carolinas. “If you can identify those programs that really are proven,” says Cochrane, “why shouldn’t your strategy be to bring those programs into the Carolinas and replicate them here?” For example, the endowment has brought to 20 Carolina counties Nurse-Family Partnership, which provides first-time, low-income mothers with regular home visits from nurses, from pregnancy through infancy, helping parents provide a healthy home life.

In the days before his death, Duke was laboring over plans for a coal-fired power plant. He saw the need to adapt his vision of hydroelectricity and diversify sources of power. In so doing, he showed characteristic shrewdness. Likewise, his endowment continues to shrewdly meet the higher education, health, childcare, and rural church needs of today’s Carolinas, following Duke’s designs and desires.

“It is time I was beginning to think about a monument,” Duke said in 1923. “I want to leave something in the state that 500 years from now people can look upon and say that Duke did that.” Of the perpetual philanthropy of the Duke Endowment, Carolinians present and future can say as one: “Duke did that. And he still does.”

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This article was originally published in Philanthropy‘s winter 2011 issue.

Eye of the Needle

Evan Sparks — Fri, 01 Oct 2010 20:16:04 +0000

Jesus of Nazareth didn’t make it easy on his rich followers.

One devout young man, satisfied that he led a worthy life, was told to sell all he had and give it to the poor. He went away sad, for he was very rich.

In a parable, a rich man built massive barns to store his bumper crops and went to bed happy in his wealth, only to die that very night. “So is the one who lays up treasure for himself and is not rich toward God,” concluded Jesus.

“No one can serve two masters, for either he will hate the one and love the other, or he will be devoted to the one and despise the other,” Jesus said. “You cannot serve God and money.”

More often than not, Jesus presents wealth as an obstacle to a life of faithful discipleship—just as the eye of a needle would obstruct a camel. His followers have since swung to extremes on how to understand Jesus’ teaching on riches, with some ignoring it (imploring their followers to live their “best life now”). Others have taken his teaching quite literally, giving away all they have and living in pious, monastic, or needy communities. What is the wealthy Christian to do?

The answer, write Paul Schervish and Keith Whitaker (a Philanthropy contributing editor) in their new book Wealth and the Will of God, is not to start from the perspective of wealth. They instead propose that the first question the wealthy Christian should ask lies along the lines of the first question in the Westminster Shorter Catechism: “What is the chief end of man?”

Schervish and Whitaker inquire deeply into the thought of five seminal Christian thinkers—Thomas Aquinas, Ignatius of Loyola, Martin Luther, John Calvin, and Jonathan Edwards—as well as Aristotle, that “master of those who know” who so influenced medieval Christianity. Each chapter is organized by what these thinkers had to say about ultimate purposes, capacities for pursuing those purposes, and deliberation about matching those capacities with ultimate ends.

(The authors’ reliance on the concepts of “moral biography” and the sociological concept of agency supply the book’s architecture. Unfortunately, they are the weakest elements of the book. But even though their academic tone will make it slow going for the general reader, Schervish and Whitaker have done donors a service by collecting and investigating these thinkers’ beliefs, and readers will find it a valuable comparative study.)

What are these ultimate ends? Expanding on Aristotle’s ultimate purpose of happiness—that is, the “activity of a soul in accordance with virtue”—Aquinas posits “final perfect happiness [that] can only come from the vision of the divine essence.” Ignatius offers the praise and service of God as man’s ultimate end. According to Schervish and Whitaker, Luther endorses “spiritual marriage,” the union of Jesus Christ and the church. Calvin emphasizes salvation from sin by grace alone. And for Edwards, the goal of life is for a Christian to “remanate”—Edwards’ word—God’s love to the world as it has been given to him.

And does having money get in the way of loving, praising, serving, desiring, and reflecting God? The thinkers represented are united in viewing wealth not as intrinsically detrimental because it does not belong—ultimately—to the wealthy person. As Calvin wrote, “the endowments which God has bestowed upon us are not our own, but His free gifts, and . . . those who plume themselves upon them betray their ingratitude.”

This is not to say that private property should be banned; Aquinas and Calvin alike make a strong argument for the recognition of private ownership. (“People have a natural authority over external things,” writes Aquinas, “since people have a reason and a will that can make use of external things for human benefit.”) The challenge for the rich Christian, especially for an entrepreneur or businessman who made his own fortune, is to view himself as a mere steward of wealth that he did not merit apart from grace.

One way to do this, endorsed by Catholic and Protestant thinkers alike, is to practice detachment. “We ought to use these things to the extent that they help us toward our end, and free ourselves from them to the extent that they hinder us from it,” writes Ignatius. “To attain this it is necessary to make ourselves indifferent to all created things.” Ignatius spiritualizes Jesus’ teaching on poverty, urging his disciples neither to desire nor to spurn wealth, but merely to direct one’s longings toward Christ only. Indifference to wealth is rooted in Scripture. The Apostle Paul writes, “As for the rich in this present age, charge them not to be haughty, nor to set their hopes on the uncertainty of riches, but on God, who richly provides us with everything to enjoy.” Should God call one of his followers to material poverty, he or she would be able to accept the call joyfully.

So, if you are a wealthy but indifferent Christian, what do you do now? You can give it all back to God, since he is the source of the wealth in the first place. But should you “give back” to God in return for his grace? What, exactly, does the wealthiest Christian have that would add to God in any way? How could the corpus of even the Bill & Melinda Gates Foundation add a speck to the beauty and glory of the Lord?

Jesus told the devout young man to give all he had to the poor. The thinkers whom Schervish and Whitaker marshal all offer various precepts for cheerful, loving disposition. Aquinas’ “order of charity” moves from God to oneself to one’s neighbor to one’s own body. Luther’s hierarchy of living encompasses first the church, then education, the aged and infirm, the homebound poor, “industrious newcomers to the city,” capital projects, and finally stores of food. (Luther’s counsel led the Wittenberg city council to form a “community chest” in 1522 to meet these needs.) Needless to say, the Christian tradition offers a wide range for philanthropic activity. Schervish and Whitaker’s purpose is not prescriptive. Rather, they offer wealthy Christians a theological and philosophical framework for discerning—for themselves—whether, why, and how they ought to give.

Ultimately, the Christian should find that giving comes naturally, “a grateful response to unmerited gifts from God,” as Schervish and Whitaker put it in their chapter on Calvin. And perhaps giving has a deeper wellspring, they write in their chapter on Edwards: “We give from our immersion in God’s overflowing generative love.” The grace of God transforms wealth. No longer an obstacle to following Jesus, it becomes a means of service to God.

“The poor have always been the favorites of God and His saints, but I believe that it is one of the special achievements of Grace to sanctify the whole of life, riches included,” says the fabulously rich Lady Marchmain in Evelyn Waugh’s novel Brideshead Revisited. “It’s very unexpected for a camel to go through the eye of a needle, but the gospel is simply a catalogue of unexpected things.”

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This review of Wealth and the Will of God: Discerning the Use of Riches in the Service of Ultimate Purpose, by Paul G. Schervish and Keith Whitaker, was originally published in Philanthropy‘s fall 2010 issue.

Liberty Fund

Evan Sparks — Thu, 01 Jul 2010 21:06:15 +0000

It was always a mistake to tell Pierre F. Goodrich you were too busy to read. “What are you doing,” he would reply, “between midnight and 2:00 a.m.?”

Goodrich himself spent the wee hours buried deep in books, engrossed in philosophy. When he had an idea or was intrigued by a passage, he would pick up the phone and call a friend, no matter the hour.

“Pierre Goodrich was not an easy person to understand,” says T. Alan Russell, who worked closely with him. Goodrich had an intense devotion to the life of the mind, going so far as to bring along a suitcase full of books on his honeymoon. Reserved and introverted, he avoided small talk, but he would stand for hours in pouring rain without an umbrella to continue a philosophical conversation

The Entrepreneurial Goodriches

In 1832, Goodrich’s ancestors settled in Randolph County, Indiana, near the Ohio border. James P. Goodrich, Pierre’s father, was the second of five Goodrich boys. James and his brothers worked on the family farm, and the boys showed a special knack for enterprise, doing farm chores for neighbors and selling their own homemade soap. The brothers stuck together, and some of the family businesses they started in their youth were going concerns decades later.

By the time Pierre was born on September 10, 1894, his father was on the verge of launching a political career that would see him elected Governor of Indiana in 1916. Eventually, he became a Republican elder statesman. All the while, he and his brothers continued to build their businesses. They were involved in farming and land management, natural gas exploration, grain distribution, and banking.

The Goodrich fortune took off with the arrival of late-19th-century technologies. As the Goodrich brothers were working harder and accumulating more and more capital, the United States was experiencing a streak of remarkable inventive genius. The Goodriches did not invent the telephone or the electric light or discover uses for natural gas, but their wealth enabled them to get in on the ground floor, establishing lucrative franchises employing these new technologies. “Within a short time,” writes family biographer Dane Starbuck, “the Goodriches held a monopoly in most basic utilities: coal, electric, water, natural gas, and telephones.”

By the late 1920s, however, James Goodrich doubted that the good times would continue. “Uncle Jim came into a family meeting and just told his brothers, ‘We’re going to get out of the utility business,’” related James’ nephew Bud Goodrich. “He sensed something was wrong with the economy and that things were going to happen that he didn’t like. Uncle James told his brothers, ‘We’re going to pool our money and form a corporation so if, down the road, we see something we want to buy or something we want to invest in, we’ll have the cash to do it.’” The Goodriches sold their interests in almost all their utilities and invested their profits in short-term certificates of deposit.

Two years later, the stock market crashed.

“Constant Reinvestment”

James Goodrich had taken a big risk—jumping out of the profitable utilities business. It paid off. The family was flush with cash when cash was a scarce commodity. Economic misery meant opportunity for the Good-riches; they began buying companies at bargain-basement prices. When they bought what would become the Indiana Telephone Company (ITC) in 1934, they paid far less (a few cents per share) than another potential buyer had offered—but they paid in cash, whereas the other buyer had only credit. (The Goodriches owned ITC until 1978, when it was sold at $107 per share.)

Pierre (he pronounced it “peer,” with a characteristically Midwestern lack of pretension) took charge of ITC. But he didn’t take risks like his father did. Perhaps it was his upbringing—his mother had forbade him to go to the local swimming hole unless he promised not to get wet, or to play baseball unless he promised not to run—but whatever the cause, Pierre Goodrich was cautious, exacting, and methodical. And, it turns out, these were exactly the right traits for running and growing the family’s now more established businesses. Moreover, while Pierre may not have had James’ flair for risk, he had the same good judgment about business—one he honed through Socratic discussion. “He’d rather aim and fire than fire and aim,” explains T. Alan Russell.

For example, Goodrich was extraordinarily prudential about hiring people. When Russell interviewed for a senior post at ITC, Goodrich personally interviewed him for two solid days. “The very first question that Pierre Goodrich asked me was ‘What is the difference between a paramecium and an amoeba?’” Russell recalls. “I thought they were both one-cell animals and that one reproduced differently than the other—and that’s as close as I came to answering a question for two days!” Goodrich’s interview questions encompassed religion, science, culture, history, philosophy—anything that would indicate an open, inquiring mind, which Goodrich prized more than anything else. A curious employee would seek all the information needed to make a rational business decision.

As Pierre Goodrich took the helm at more of the family’s companies, he focused on increasing actual value through what Starbuck calls “constant reinvestment.” By 1946, through mergers and purchase of stock, he acquired control of the Ayrshire Collieries Corporation. By 1969, applying principles of reinvestment, Goodrich had increased the company’s sales by 26 times and its income per share 36 times over, making Ayrshire Collieries the nation’s 11th-largest coal mining firm.

“Constant reinvestment” is not only a good way of describing Goodrich’s business practices, but also his intellectual life and his charitable giving. He was constantly returning to the sources, and he devoted his giving to helping others “reinvest,” intellectually, in the origins of liberty.

“What Am I? Can I? Ought I?”

Education was at the heart of Goodrich’s management style. “He always operated the company like a Socratic discussion,” Russell reflects. Questions would lead not to pat answers but to more probing questions. “He did not like expedient answers.”

Indeed, education was at the heart of how Goodrich lived his life. “‘Education’ is something that happens within an individual,” he wrote. “No matter how formally educational the setting or the process, if nothing happens to the supposed learner, nothing educational has taken place.” Goodrich found this inner education at his alma mater, Wabash College, from which he graduated in 1916. His intellectual pursuits were formed by Wabash, whose creed at the time declared that “habits of mind, rather than mere information, count largest in the long run. The foundation of the educational process is Discipline, and Discipline is not secured by superficial pursuit of many studies.”

Goodrich joined the Wabash board in 1940, and rather than have students pursue “many studies,” Goodrich advocated for the Great Books curriculum then being popularized by Mortimer Adler and Robert Maynard Hutchins. Wabash created a Great Books colloquium—employing Socratic dialogue—in 1946.

It was at Wabash that Goodrich erected a monument to the study of liberty. In 1957, he began planning the Goodrich Seminar Room, to be housed in Wabash’s main library. The room was built according to his precise directions: 38 feet wide by 50 feet long, with an 18-foot ceiling. On the walls are massive limestone steles marked with a chronological history of liberty. Starting with the cuneiform symbol ama-gi, the oldest known word for “freedom,” Goodrich’s chronology follows philosophical landmarks from the ancient Sumerian Ur-Nammu Code to the Declaration of Independence. “It is hoped that the individual who enters this room will immediately feel the humbling presence of the centuries of written communication portrayed by the walls,” Goodrich said.

At the center of the room is a massive, oval table, designed for the same kind of discourse that Goodrich pursued in his companies. Bookshelves underneath the limestone slabs contain major works by the authors listed on the wall, plus other writings that have contributed to the understanding of liberty. (The books thus extend the story of liberty beyond the Declaration of Independence to the 20th century.) During Socratic discussions, Goodrich intended for students to get up and peruse the books, which he had donated from his personal library.

From the 1940s through the 1960s, Goodrich was involved in the creation and growth of many other liberty-oriented organizations, including the Mont Pelerin Society, the Foundation for Economic Education, the Intercollegiate Studies Institute, the Institute for Humane Studies, and Human Events. By the 1960s, however, he grew disenchanted with Wabash College. “[O]n further reflection, [I] believe the College is not headed in the direction of further individual freedom and perhaps my views would not accomplish much,” he wrote to Wabash’s president. “I am very busy and it is likely that I would also waste my time.”

Despite his best efforts, Wabash had been swayed by the countercultural and radical tides of the ’60s; moreover, he could not sway it further in the direction of his beloved Socratic dialogue and Great Books curriculum. And while Goodrich enjoyed close friendship with Byron Trippet and Benjamin Rogge (Wabash’s president and dean, respectively, during Goodrich’s most active years on the board), Trippet’s successors resented Goodrich’s efforts to introduce his ideas into the school’s curriculum and teaching. When Goodrich died, he left Wabash $155,000—far less than the college had hoped for.

Instead, Goodrich poured his time and money into an educational organization that would be better able to achieve his charitable intent: Liberty Fund.

“Some Hopeful Contribution”

In the ’60s, Goodrich was at the helm of Ayrshire Collieries, ITC, Peoples Loan & Trust Company (the Goodrich family’s bank in Winchester), a holding company for Central Newspapers (owner of the Indianapolis Star), and several smaller firms. But he was increasingly devoted to Liberty Fund, which he had founded in 1960. Goodrich began selling off his companies and using the proceeds to build Liberty Fund’s corpus, which reached $26 million by the time Goodrich died in 1973.

Goodrich envisioned Liberty Fund as an operating foundation. He set its course with his ironclad “Basic Memorandum.” In this 129-page “document of hope,” as Liberty Fund chairman T. Alan Russell calls it, Goodrich set forth in declaratory prose the ideals of the fund and the methods designed to preserve his charitable intent. For example, Goodrich enjoins directors from making general operating grants or gifts for “grounds and buildings.” He offers several qualifications for directors, including how to assess “the character of the [potential director], his humility, his desire to continue his education, and his integrity.” Appended to the Basic Memorandum is Goodrich’s list of 76 essential thinkers and sources, from Plato and Augustine to Luther and the Declaration of Independence.

Liberty Fund’s officers and directors treat the Basic Memorandum with great reverence. They review Goodrich’s guidelines for Liberty Fund’s programs several times a year, says president and CEO Chris Talley, “repairing to the Basic Memorandum to think about the idea of Liberty Fund and what Mr. Goodrich wanted.” But Goodrich did not want Liberty Fund’s future officers to use the Basic Memorandum as an intellectual crutch. Instead, Talley explains, they discuss it not to determine “what Mr. Goodrich would want to have published, but—under his guidelines—what works are important to keep in print.” Or, as former Liberty Fund senior fellow William C. Dennis put it, “The Basic Memorandum doesn’t tell us what to do; it tells us how to think about what we do.”

Talley and Russell are confident that Liberty Fund today honors Goodrich’s intent. Its core programs—seminars and publications—were near and dear to Pierre. During his lifetime, Goodrich planned 11 seminars, the last of which was held after his death. His seminars were modeled after his approach to business meetings, Russell explains: free dialogue, probing questions, and the pursuit of wisdom.

These “Socratic conferences,” as Talley calls them, are somewhat infamous for following precisely the pattern Goodrich established. A group of 12 to 16 invited participants convene around a table to address questions inspired by common readings. A moderator poses questions and regulates the flow of conversation, but he does not give a lecture, nor does he even really guide the discussion. Every participant is treated equally, and conversations are continued outside the six formal sessions over meals and cocktails. Conference topics run the gamut of Goodrich’s interests, from political philosophy and law to economics and religion—even to “Redemption and Human Freedom in Bach’s St. Matthew Passion.” Discussions are often in reference to the work of a great thinker, such as Locke, Madison, or Tocqueville.

Goodrich was also a big believer in great books (not to mention the “Great Books”). He read voraciously and often recommended books to his business colleagues. “He would give you a book,” said Talley, who first encountered Goodrich working for him at Peoples Loan & Trust in the late 1960s. (Goodrich gave Talley a copy of Ludwig von Mises’ Human Action, which he regarded as superior to Paul Samuelson’s Economics as an introductory text.) “He would see the next time you met whether you’d actually engaged the book, and if so, he’d want to talk a little about ideas, and more books would come.”

Thus, Liberty Fund publishes 10 to 12 books per year, bringing into print important works that are not readily available and selling them at deliberately affordable prices. Its editions include scholarly materials that help readers to wrestle with these texts as Goodrich intended; for example, Liberty Fund’s edition of the Federalist Papers is the historically significant “Gideon” edition—the first to include Madison’s revised papers alongside Hamilton’s and Jay’s—and was co-edited and introduced by eminent constitutional scholar George W. Carey.

The ideals expressed in the Basic Memorandum are timeless, and thus Liberty Fund’s programs remain in line with Pierre Goodrich’s ideals. As technology has changed, however, so have Liberty Fund’s educational offerings. “We have a very extensive presence on the web, and one that we think is very consistent with donor intent,” says Talley. “Mr. Goodrich was very technologically minded, and wanted to be at the forefront, if it was affordable, of technological improvements.”

Among these newer resources is the Online Library of Liberty, a discussion forum for and repository of more than 1,000 classic texts about individual liberty, available as PDFs, in HTML, and for e-readers. Liberty Fund also offers the Library of Economics and Liberty, which features books, blogs, and podcasts on aspects of economic liberty.

The Next 50 Years

This year, Liberty Fund reaches the half-century mark. Its endowment grew to over $430 million by 2008, although it has fallen since then. Liberty Fund organizes about 170 Socratic conferences per year—and has convened nearly 3,500 worldwide since its founding. Its book catalogue encompasses more than 360 titles spanning subjects from economics to political thought. But Liberty Fund is not celebrating itself so much as its foundational principles; this year, Talley says, it is revisiting the conference themes that Goodrich composed during his lifetime. At the same time, the foundation is preparing for when it will be run by people with no memory of Goodrich’s lifetime.

At the moment, says Russell, 6 of Liberty Fund’s 12 directors knew Goodrich personally. Two others have close connections to him short of having known him personally. But how will subsequent generations know about Goodrich? One way is through the Basic Memorandum. Another is through constantly returning to Goodrich’s extensive written record.

Still another way of protecting donor intent is through habitual self-examination. Liberty Fund’s staff report extensively on its programs to the board of directors. The point is not to show off “results” to outsiders. Rather, “what we’ve tried to do is build a model,” explains Talley, “a reporting system that will propel the work that we’ve been doing as far into the future as we can, for the future generation that will have no personal knowledge of Pierre Goodrich.”

“Liberty is under attack, and it’s been under attack for a long time, and I think the intensity of that attack is going to increase,” adds Talley. He believes that Liberty Fund’s mission will become even more vital in its next half-century. “As long as we can keep the discussion and discourse alive, we will have accomplished something.”

Pierre F. Goodrich was fascinated by the Dark Ages. On the walls of the Goodrich Seminar Room at Wabash College, he deliberately left “a great deal of blank space” punctuated by only a few names, which symbolize those who preserved the ideals of freedom and the wisdom of the past. “There was a night following the Roman dictatorship, which was, as all dictatorships would be, evil and corrupt,” Goodrich wrote. “In this night, even the tools of the Greeks lay unused for lack of knowledge of them. But the Renaissance and the Reformation carried on.” As did Pierre Goodrich; as does Liberty Fund.

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This article was originally published in Philanthropy‘s summer 2010 issue.

The Old College Try

Evan Sparks — Thu, 01 Apr 2010 22:00:41 +0000

Forty-three. That’s the percentage of college freshmen who will drop out of school before getting a bachelor’s degree. Community colleges—even worse. There, over 69 percent of students will drop out before receiving a credential. That means only 57 percent of college freshmen—and a mere 31 percent of first-years in junior college—will earn the degree they ostensibly set out to obtain. By any measure, that’s a failing grade.

Bill Gates is a college drop-out—but he knows he’s the exception that proves the rule. That’s why he has committed his foundation to doubling the number of low-income people who earn a post-secondary credential by age 26. President Barack Obama frequently repeats his goal of returning America to having the most college graduates in the world, per-capita, by 2020. Thought-leaders and eminences from both sides of the aisle call for action.

But while the headline numbers command attention all by themselves, the contours of college completion rates suggest bigger problems:

Almost 60 percent of black college students do not graduate from a four-year program within six years.
Almost 54 percent of Hispanic college students don’t graduate within six years.
Male college students are 7 percentage points less likely to graduate than women; black men are 11 percentage points less likely to graduate than black women.
White female college students are more than twice as likely as black or Hispanic men to graduate from college.
College students from the top income quartile are almost twice as likely to graduate as students in the bottom quartile.
Although these ethnic and gender disparities are slightly smaller at the community college level, they are still substantial.

Nor are college graduation rates uniform across educational institutions. Elite universities such as Harvard and Yale have near-perfect graduation rates. Much lower rates persist among the campuses frequented by the students most at risk of dropping out: low-income young people, ethnic minorities, and first-generation college students.

The consequences for these at-risk students of dropping out are high. A bachelor’s degree continues to offer a hefty long-term wage premium over a high school diploma. Moreover, a student who enters college often takes on substantial debt—but the debt doesn’t disappear if she drops out. And the government has little to show for students who receive federal loans and grants but who fail to graduate.

Failing to graduate from college has financial and emotional consequences for individuals—especially given the expectation of everyone from parents and teachers to the President of the United States that they should be bound for college—but it also takes an expensive toll on the public fisc. For example, less than half of federal Pell Grant recipients studying for a bachelor’s complete a degree within six years. In 2010, that means that more than $13 billion in taxpayer grant money will be given toward degrees that will never be awarded. And the Pell Grants represent just a small share of federal and state funds directed to higher education.

In light of this challenge for low-income students and minorities, philanthropists are changing the conversation about college. For decades, colleges, policymakers, and philanthropists have endlessly promoted college access. Get students in the door. That’s the most important thing. Once there, they’ll take care of themselves—or so went the reasoning. College enrollments responded: from 1973 to 1997, the enrollment rate rose by nearly 20 percentage points to slightly under 70 percent of recent high school graduates, and has remained at that level since.

But now, the emphasis is shifting from access to completion. Dozens of foundations and philanthropists—from mega-foundations to small regional funders to individual donors—have re-centered their education grantmaking on college completion.

Their work is diverse and tailored to the communities they serve. They are sponsoring and disseminating research about the problem—and its solutions. They are working with individual students, helping provide much-needed social capital (what one donor calls “college knowledge”) for first-generation college students. They are thinking through a whole range of incentives (for colleges and students alike), looking for cost-effective ways to get students to stay in school. They are working with institutions, from small community colleges to massive research universities, in an effort to improve advising and measurement.

Perhaps most importantly, many philanthropists are finding ways to work backwards, to reach students well before they enter college, getting them ready for the challenges of higher education. Success in college, they have come to realize, begins in the freshman year—of high school.

Diving into Data

“This is a part of the educational system that has not had the kind of attention toward low-income, African-American, and Hispanic outcomes that our K–12 system has had,” says Marie Groark, senior program officer at the Bill & Melinda Gates Foundation. In fact, because graduation rates do not account for lower high school graduation and college enrollment rates among ethnic minorities and low-income students, disparities in college graduation rates are actually understated, according to William Bowen, Matthew Chingos, and Michael McPherson in their 2009 book, Crossing the Finish Line: Completing College at America’s Public Universities.

Finishing high school without being ready for college is the number-one reason students drop out. According to a report from the Bridgespan Group, “Academic preparation is the most effective means of increasing the odds that students will graduate from high school ready for college, matriculate, and eventually receive their degrees.”

Some students, of course, drop out because of financial problems—perhaps because they need to work full-time or deal with urgent financial concerns. “At every point in our analysis we find that students from high-income families are significantly more likely to graduate from college, and to graduate ‘on time,’ than are students with comparable qualifications from low-income families,” write Bowen, Chingos, and McPherson.

Many of the grants made in this area thus far have been intended to refine and publicize what we know about college graduation rates. (The official graduation rate, reported to the government as a condition for receiving federal student aid, is calculated as the percentage of first-year, full-time students who graduate within 150 percent of the time normally required.) One of the first foundations to take on college success in a major way was Lumina Foundation for Education. From 2001 to 2003, it awarded what it calls “the hallmark grants” in order to find and collect knowledge on student success.

Lumina learned that higher participation rates in collegiate activities correlate with higher graduation rates. It sponsored research on first-year programs that help students stay on track—when they are most vulnerable to falling behind. It also funded research into how undergraduate “learning communities” can help at-risk college students.

In 2009, with funding from the Gates Foundation (then a new entrant into the world of college completion), the American Enterprise Institute (AEI) published Diplomas and Dropouts, which pointed out not only that colleges were failing to graduate large numbers of students, but that there is wide variance in graduation rates even among four-year institutions of similar selectivity. In the “non-competitive” category—whose colleges are more likely to enroll low-income, minority, and first-generation collegians—the range in graduation rates between the top third and bottom third is 32 percentage points.

The AEI report was directed to policymakers and thought leaders, but there are useful tools available for students, parents, and guidance counselors, too. With support from Lumina, the Education Trust created CollegeResults.org, which allows users to compare graduation rates for thousands of colleges and universities. They can compile a list for comparison or see where a college fits among peer institutions.

“College Knowledge”

Tuesday, 7:30 in the morning. Even as the silent campus of Indiana University–Purdue University at Indianapolis (IUPUI) waits for the sun to rise, 25 young African-American and Latino men, wearing neckties and neatly pressed slacks, are up and about. Their morning appointment: the weekly meeting of the Student African American Brotherhood (SAAB).

Nathaniel Williams was one of those men. Now a high school teacher, Williams was president of the SAAB chapter before graduating from IUPUI in 2009. The agenda for the morning meetings vary—topics include study skills, men’s health, or relationships—but, Williams says, they always address the “seriousness of the crisis facing the black male in America, and especially the black male in college.”

At IUPUI, it was a big crisis: only 39 percent of African-American men at IUPUI returned after their first year, and just 12 percent graduated in six years. Thus, IUPUI used a Lumina grant in 2003 to launch a SAAB chapter on campus. SAAB (which also targets Latino men, and is open to all students) provides a student-directed community of support, encouragement, and discipline. SAAB members run their own meetings, Williams says. They set up mentoring relationships between freshmen and upperclassmen.

Through its university-sponsored office, SAAB also offers what student success director Khalilah Shabazz calls “intrusive advising.” She meets with students throughout the semester and helps them cut through university red tape. “We do a lot of text messaging with them,” she says wryly—today’s students seldom respond to email. SAAB also works with African-American and Latino men before they arrive at IUPUI, easing the transition with a summer bridge program.

Student initiative plus university support equals rapid adaptation, as SAAB has expanded in Indiana, says Philip Seabrook, assistant vice president at Indiana University. “The guys at Indiana State in Terre Haute are very serious about wearing a shirt and tie or a full suit on their meeting days,” he explains. “The message is that we’re about business, and we’re about helping each other through this process.”

SAAB members “turn personal passion into academic success,” Shabazz says, and their results back up that conclusion. According to a 2007 Lumina report, SAAB retention rates at IUPUI ranged from 62.5 to 90 percent. And, Seabrook says, the six-year graduation rate for African-American men at IUPUI has more than doubled to 25 percent. One student, Williams recalls, partied his way to a 1.3 GPA—before participation in SAAB gave him the purpose and solidarity he needed to graduate with a 3.08.

As SAAB illustrates, money isn’t necessarily the biggest factor in getting students through college. Culture is equally important—if not even more. Students who graduate tend to have a high level of internalized cultural preparedness for college. Cynthia Rivera Weissblum, president and CEO of the Edwin Gould Foundation, calls it “college knowledge”—the social capital that students need in order to succeed.

The at-risk students philanthropists are keen to help don’t have that reserve of college knowledge, and they have to accumulate it from scratch. They don’t know where to go when they have an academic problem—or even for routine matters like paying tuition and getting a student ID. They don’t know that they can meet with professors during office hours, and their work schedules are busy enough besides that they can’t even make them. And although a young person may have triumphed over the low expectations of an urban high school, college classes are on a whole different level.

Ideally, students should arrive on campus with a reserve of college knowledge. Some grantees are working to achieve this by involving students’ families in the process. “Strategies include engaging parents before their son or daughter starts college, or very early in the first year of college,” says Wendy Ault, executive director of the MELMAC Education Foundation, which supports college retention and completion initiatives exclusively in Maine. “In the freshman year,” she adds, “when the students are quite connected developmentally to their parents, it’s good to have a parent asking, ‘Don’t you have a test in economics coming up?’” One-third of MELMAC’s 18 grantee colleges are engaging parents during the freshman year.

Gains in college knowledge can be fleeting, however. They require hard work in order to be sustained. In 2003, the University of Southern Indiana (USI) used a grant from Lumina to launch a series of online “lessons” for students and their parents. The lessons allowed students and parents to identify areas of struggle with sufficient time to resolve them. “Freshman-to-sophomore retention jumped by more than 10 percentage points when both students and parents participated in the ‘lessons,’” Lumina reported in 2007. But these promising results have failed to translate into gains at USI. The program was discontinued; USI’s six-year graduation rate rose from 31.3 percent in 2003 to 33.2 in 2005, before falling to 30.7 percent in 2007, the last year for which data is available.

There are more promising philanthropic interventions elsewhere in Indiana. “We know that the work that happens in the first year, and particularly in the first semester, makes an enormous impact, particularly for low-income and first-generation students,” says IUPUI’s Scott Evenbeck. Evenbeck is dean of University College—founded in 1997 with support from the Lilly Endowment—into which entering students are enrolled as a “launch pad” to their degree-granting colleges. “We’ve brought retention from the low 60s to 74 percent this year, and the graduation rate has come from the teens to just about 34 percent,” he explains.

University College’s programs for first-year students include mandatory orientation and a summer bridge program to get students acquainted with college life. IUPUI also offers “learning communities”—courses that help freshmen get connected to IUPUI and its academic programs. They are taught by an “academic support team” that includes a faculty member, academic advisor, student mentor, and librarian. “That’s clearly the intervention that’s made the biggest difference,” Evenbeck says.

[For a look at the two big foundations working on college completion today, click here.]

Mastering the Incentives

College knowledge can propel a student to a degree. So can incentives. Philanthropists are well aware of the power of incentives in other areas, from welfare reform to prizes.

The Gates Foundation is examining how incentives—those of both students and colleges—affect graduation rates. “We’re going to explore how the huge amount of financial aid in this country could be used as an incentive to encourage completion,” Melinda Gates said in a November 2008 speech announcing the foundation’s post-secondary strategy. “This will include working with partners to develop changes in tuition and government funding so the college gets less money at the front end, just for enrolling a student, and more at the back end, after that student receives a diploma or credential.”

According to Richard Vedder, executive director of the Center for College Affordability and Productivity, many colleges don’t have the right incentives to graduate students in a timely manner. “There’s actually a cash incentive for colleges not to graduate students!” he exclaims, his voice rising with anxious energy. “From the schools’ point of view, in many cases, they get per-student state subsidies.” Vedder proposes that state and federal policymakers re-orient student aid and college subsidies to focus on student outcomes, especially for students at the margins of performance. Policymakers should restructure subsidies to public colleges to tilt the institutional incentive toward student success.

The Gates Foundation is also experimenting with financial incentives to spur students to finish their degrees. “We will explore how performance-based scholarships can provide greater financial incentive to finish school,” Melinda Gates said. “We have evidence from a pilot study in Louisiana that giving students scholarships if they increase their course load to full-time dramatically increases completion rates. We will be funding a demonstration of performance-based scholarships over the next three years in as many as 8 states and 15 post-secondary institutions.”

MDRC, a research organization that evaluates programs to help low-income families, conducted the Louisiana study. It offered grants of up to $2,000 to low-income students at two New Orleans community colleges who maintained a minimum credit-hour level and GPA. The grants were paid directly to the students, who could use them for non-educational expenses—which can be just as big a reason for dropping out as hefty tuition bills.

Thirty percent more students in the grant-receiving group enrolled in courses in their second semester than in the group that did not receive the support—and MDRC reported that positive effects persisted into subsequent semesters, even though no grant was offered. Although the encouraging results were disrupted by Hurricane Katrina, they are now being tested through 2012 in Ohio, New York, New Mexico, and California.

“In many cases, dropouts, especially low-income students, turn out to be a function of very small amounts of money,” says Mark Schneider, vice president at the American Institutes for Research. “For example, a student might be only $100 short of buying textbooks needed for a course. The student withdraws from the course or, worse yet, fails, loses financial aid, and then drops out. A small but targeted support program can make a big impact—a good opportunity for a donor new to the field or with limited resources.”

From Junior College to Senior Year

Community colleges enroll 44 percent of America’s undergraduates, offering career-focused degree and certificate programs or general coursework that prepares graduates to matriculate at a university. Community colleges are more likely to serve minorities, low-income students, and adult learners. Their three-year graduation rate in 2004 stood at just under 31 percent, although a larger proportion of entering students eventually obtained a two-year degree, four-year degree, or successfully transferred within six years.

These colleges represent a place where philanthropists can drive a wedge in college completion. According to Bowen, Chingos, and McPherson, “students who began their studies at two-year colleges were much less likely to earn bachelor’s degrees than were similar students who started at four-year institutions.” However, they add, students who succeed at community college and transfer to universities “graduate at higher rates than first-time freshmen with similar entering credentials.” If community colleges can boost their own completion and successful transfer rates, suggest Bowen, Chingos, and McPherson, it will boost graduation rates at four-year colleges, too.

To that end, Lumina launched Achieving the Dream in 2004. It’s a coalition of community colleges and charitable organizations with “a student success agenda based on data, making student success the highest priority at the institution,” says Samuel Cargile, Lumina’s vice president for grantmaking. Since then, Achieving the Dream has grown to comprise 102 institutions in 21 states. Lumina’s initial investments have been joined by other philanthropic partners; the other partners’ support for Achieving the Dream now outstrips the $60 million that Lumina has given. Other philanthropies supporting Achieving the Dream colleges include the Winthrop Rockefeller Foundation in Arkansas, Houston Endowment in Texas, College Spark in Washington state, the Heinz Endowments in Pennsylvania, the W. K. Kellogg Foundation and the Kresge Foundation in Michigan, and Knowledge Works Foundation in Ohio.

[For a look at donors who are skeptical about sending all kids to college, click here.]

The goal: practical application. “We’re interested in research that’s action-oriented,” explains James Applegate, Lumina’s senior vice president for program development. Once a college joins Achieving the Dream, it is required to bore down on its student achievement data. Only after rigorous self-analysis is the college guided through a strategy-development process. For example, several colleges wanted to upgrade their remedial education offerings, so they have worked on refining course placement, instilling study skills through remedial classes, and offering individual education programs. Achieving the Dream colleges have found good results with “learning communities,” said Applegate, and Lumina is sponsoring research to learn how to make them work better. Achieving the Dream colleges have also refined their advising and worked with K–12 education leaders to improve college readiness.

Take a look: at Tallahassee Community College (TCC) in Florida, a student opens her computer and logs on to TCC Passport—the student portal. She can access her email and course readings, check on her financial aid, and search the library catalog. And she can keep tabs on how fast she’s completing her degree requirements. TCC Passport gives students red, yellow, and green lights on key college requirements, from courses completed to tuition payments.

“We know a lot about our students that we didn’t used to tell them. Now everything we know about a student shows up in that student’s portal,” says William D. Law Jr., president of TCC. “The student has access to his or her whole record. When the faculty member sits down with a student, the record is fully available to both parties.” TCC Passport is not the college’s only student success initiative. Orientation and advising programs use data to identify students who are falling behind. TCC—one of the first Achieving the Dream colleges—also requires students who are placed into two or more remedial courses to take a “College Success” class.

To support its members’ reforms, Achieving the Dream provides coaches and “data facilitators” to work side-by-side with college administrators. It also works to build a more robust public policy framework for student success. And Achieving the Dream continues to grow. “We have learned a lot, and we think we’re ready to begin connecting to more community colleges with what we’ve learned,” says Applegate.

Ready on Day One

It’s the fact that can’t be ignored.

The number-one factor in college completion isn’t mentoring programs, scholarships, incentives, or institutional reforms. Those can all be helpful. But none of them is nearly as important as a student’s readiness for college-level work. Completion of a rigorous high school course load makes students several percentage points more likely to finish college. Thus, for many philanthropists, college completion begins in high school.

“High schools as currently configured are not working,” says Anne B. Stanton, program director for youth at the James Irvine Foundation in California. “We have young people spending long hours in remedial courses in college.” The problem: by taking a one-size-fits-all approach, many high schools fail to catch the interest—or imagination—of students. By turning them off to education, schools turn students away from post-secondary opportunities—and from opportunities to earn a good living and participate in civic life.

In 2006, the Irvine Foundation created ConnectEd: The California Center for College and Career. ConnectEd promotes “Linked Learning,” a set of reforms at the high school level that combines rigorous academics with relevant experience and the boost students need to pursue post-secondary training. Linked Learning includes four core components: academics (of sufficient rigor to ensure students succeed, without remediation, at a California state university), technical training (an eye toward skill-intensive, well-paying jobs), work-based learning (internships, apprenticeships, and school-based enterprises), and support services (including counseling and supplemental education).

All of these components constitute a “pathway” in a particular industry. However, the academic component leaves students well-prepared to take a different path if they choose, and students can switch between pathways if they like. As an example, ConnectEd’s engineering pathway includes the standard academic core, as well as a series of technical courses designed by Project Lead the Way, such as “Digital Electronics” and “Computer-Integrated Manufacturing.” To engage and inspire students, the engineering pathway includes “integrated units” on topics like naval architecture, bridge building, and ballistic weaponry.

“We believe that Linked Learning will fuel young people’s success in post-secondary education, ensuring that students will be more enthusiastic and boosting their achievement,” Stanton explains. One initial study found that students graduating from a Linked Learning program were more likely to pass the California High School Exit Exam, complete more rigorous courses, and graduate from high school.

In 2009, six California districts (out of 17 that applied) were chosen by ConnectEd to receive funding to offer at least four pathways each. Since each pathway can accommodate 400–500 students, Stanton adds, Irvine’s current grant could affect up to 12,000 young people—and up to 18,000 as three more districts receive implementation grants this spring.

“We’re continuing to build out the post-secondary side of Linked Learning,” Stanton says—focusing primarily on community colleges. Nonetheless, it is a promising approach to setting students on their way to post-secondary success well before they leave high school.

Getting—and Staying—on Track

There are hundreds of programs that help high school students get into college, and probably as many that help them succeed once they’re in. But very few provide a complete bridge to college, spanning the eight or more years from being a high school freshman to college graduation. In New York City, Sponsors for Educational Opportunity (SEO) does just that.

Founded in 1963 in Manhattan, SEO delivers a rigorous academic enrichment program for under-served, low-income minority students. Through SEO’s Saturday Academy, after-school programs, and vacation days spent in school, students spend a total of 60 extra days each year—a 33 percent increase—doing academic work. “Extended education is really the single most significant intervention,” says Cynthia Rivera Weissblum of the Edwin Gould Foundation, which has funded SEO for decades. “We’re talking about sending a young person to college equally as prepared as any student who comes from a well-resourced family.”

SEO offers programs that work to transmit “college knowledge” to students. When it comes time for them to make the leap to college, SEO helps them identify colleges with high graduation rates. In both high school and college, students tap into SEO’s network of 6,000 alumni.

One of the Gould Foundation’s primary contributions to SEO, Weissblum said, has been a rigorous, college-preparatory curriculum that would be the pride of any affluent suburban high school. SEO doesn’t just push its students into college; it makes sure they’re ready for the coursework. “It is irresponsible to send a student to a college where he or she is ill-equipped to compete,” Weissblum emphasizes.

SEO costs $4,000–$5,000 per student per year in high school, and $2,000–$2,500 per student in college, Weissblum says. “And the results are quite outstanding,” she adds. “The average college student at SEO maintains a 3.0 GPA. Ninety-four percent graduate from college within four years.” The high school class of 2009 gained an average of more than 150 points from the PSAT to the SAT—bringing their scores up to the level of students from families earning $160,000 to $200,000 annually. The average SEO student’s annual family income? $33,000.

“Pre-college preparation is the best bang for the buck,” concludes Weissblum.

A continent away, another nonprofit provides students with a bridge and path to college graduation. College Track combines after-school tutoring with college advising, mentoring, and leadership development. The program has one goal: to make sure that every one of its students earns a college degree. In 1997, Laurene Powell Jobs and Carlos Watson founded College Track in East Palo Alto, California. As volunteers working with seniors in a local high school, Powell Jobs and Watson realized that too many motivated students had not taken—or even been offered—the classes required to get into college.

To ensure that kids in the program are ready for college by the time they graduate, College Track enrolls students before they start high school. At least three times a week for four years, students gather at one of College Track’s four centers—there are currently three in the Bay area: East Palo Alto, Oakland, and San Francisco—for three hours of intensive instruction and mentoring support. Indeed, students spend so much time at College Track that they receive the equivalent of a full extra year of high school.

Since 80 percent of College Track students are the first in their families to go to college, the program includes comprehensive college prep activities beyond academics, including college tours and counseling, assistance navigating the application process, and help locating financial aid. To date, College Track students have been immensely successful at getting into college. “Everybody graduates from high school and continues with their education,” says Powell Jobs. What’s more, about 90 percent of them enroll in four-year institutions.

Once in college, students stay in touch with College Track’s college success director, who helps students connect with resources on their campuses. There are also peer groups at colleges where College Track alums have achieved critical mass. Alumni involvement is a core element of College Track. “Our most valuable assets are the students themselves, and we teach the older students how to support younger ones,” Powell Jobs explains.

The results speak for themselves: 70 percent of College Track graduates finish college in six years. Compare that to 24 percent of first-generation students nationwide. Of the College Track students who have already gone on to college, only 7 percent have left without earning a college degree. In 2009–10, the organization had expenses of about $5,000 per student, which includes some small scholarships and grants provided to the students themselves.

Both SEO and College Track have attracted substantial philanthropic capital. SEO’s roster of supporters includes some of New York City’s leading philanthropists, foundations, and companies. College Track draws support from major Bay area philanthropies like the Koret Foundation, the Silicon Valley Community Foundation, and the Stuart Foundation.

SEO is looking to grow, says Weissblum. The cost to double the program’s size over the next four years: $1.2 million. Growth—steady and deliberate, in order to preserve quality—is also on the way for College Track. Its New Orleans center opened in 2008 and now serves 100 students. Overall, College Track currently serves 850 high school and college students. “We have a wait list of five cities where we’d like to open up centers,” Powell Jobs explains. “We want to keep our standards high, though, and are reluctant to grow through franchising or through dissemination of our curriculum and training.”

From Access to Success

A 43 percent drop-out rate is discouraging. Even more dispiriting are the numbers for the students most at risk of dropping out: men, African Americans, Hispanics, and first-generation college students. And if the numbers are dispiriting, imagine the toll on the students who don’t cross the finish line. They’ve fallen short of their country’s aspirations for them—and their aspirations for themselves.

The numbers are important, but not as much as the personal touch. Likewise, reforms in public policy and institutional process at colleges are useful, but the best way to help students succeed is to meet them on an individual, personal level. That might mean peer relationships like those in the Student African American Brotherhood in Indiana, or making information about their academic progress easily accessible, like in Tallahassee. It might mean putting them on a pathway through college to a career that clicks, or building bridges from high school, like at SEO in New York or College Track in East Palo Alto. Big or small, comprehensive or tailored, national or regional—there are many models for philanthropic excellence in college success.

Philanthropists have turned their attention to college success, but they are still at the outset of their work. What they’ve learned thus far will help at-risk students achieve their goals, making the numbers less discouraging along the way.

__________

This article was originally published in Philanthropy‘s spring 2010 issue.

Does It Have To Be College?

Evan Sparks — Thu, 01 Apr 2010 21:41:13 +0000

This article is a sidebar to “The Old College Try,” Philanthropy, spring 2010.

The weight of philanthropic (and elite) opinion rests on the idea that college is necessary for success in modern American life—and for many, college means a four-year degree. The dialogue is changing somewhat—see, for example, the rise of the more inclusive goal of a “high-quality post-secondary credential” and more support for community colleges—but not enough for some. Critics of this ideal include Charles Murray (in his widely discussed Real Education) and Matthew Crawford (in his best-selling Shop Class as Soulcraft). Moreover, some donors are frustrated at the lingering bias toward four-year degrees and against vocational or career-focused training.

Andrew Grove, the former CEO of Intel, argues that to make the four-year degree the standard is to erect a “ladder to the sun,” when many people would be happy with “a ladder to a middle-class existence.”

Grove conducted an informal survey of philanthropic higher ed initiatives in the San Francisco Bay area. “Every single program . . . emphasizes four-year college,” he says. He took a different approach. As Grove explained in a speech at a Philanthropy Roundtable meeting last year, starting in 1999 the Grove Foundation offered $5,000, three-year scholarships for practical, career-focused training for at-risk students with the potential to enter the middle class.

The results were disappointing: only 25 percent of scholarship recipients completed their training within three years. By 2008, recruiting for the scholarship became increasingly and mysteriously difficult. Why? “One of our participating teachers, who was helping us locate and recruit students, made a comment several years ago that I laughed at at the time, and I think it captures the essence of what we are dealing with,” Grove explains. “He said, ‘The students you’re looking for don’t exist; that’s why we can’t find them. They don’t exist because they are pushed, kicked, enticed, encouraged, and shamed into going on to a four-year college education.’”

Linda Childears, president and CEO of the Denver-based Daniels Fund, believes “it’s unrealistic to think that all students can do college-level work or should do college-level work—but all students should have the opportunity. I worry that we’ve lowered our standards to make college accessible to everyone.”

Cable pioneer Bill Daniels, the founder of the Daniels Fund, “didn’t want to see a student not go to college for financial reasons,” Childears explains. Thus, the Daniels Fund operates a scholarship program in Colorado, New Mexico, Utah, and Wyoming. “We’ve had good success with our graduation rates, giving the scholars the support they need when entering college,” she adds.

Since all kids are not college-bound, however, and to fill in the gap for young people who prefer to learn a trade, the Daniels Fund supports vocational training through its Youth Development Grant Program. “We want kids to be successful in life—in college or whatever path they choose,” Childears says.

Grove likewise argued for balanced philanthropic support for post-secondary education and training. “We have, collectively, a well-intentioned push toward a one-size-fits-all program of education,” he remarks. “The consequence of that is a failure to increase the effectiveness of our workforce; that determines the effectiveness of our economy, and most importantly, what it does is destroy the ladder to the middle class.”

Two Big Foundations, Two Big Goals

Evan Sparks — Thu, 01 Apr 2010 21:32:41 +0000

This article is a sidebar to “The Old College Try,” Philanthropy, spring 2010.

After Warren Buffett pledged the lion’s share of his fortune (the gift was valued at $37 billion at the time) to the Bill & Melinda Gates Foundation in 2006, the foundation had an opportunity to expand its portfolio. “After tons of research and meeting with policy experts, practitioners, and other foundations, we came back to what has been the foundation’s domestic focus for the past eight years . . . because the evidence spoke clearly,” said Hilary Pennington, the Gates Foundation’s director of education, post-secondary success, and special initiatives, in 2008. “The highest-leverage investment we can make—education. This time, post-secondary education. And even more specifically, post-secondary success.”

Gates’s target: doubling the number of low-income Americans who complete a post-secondary credential by age 26. The foundation’s $450 million strategy is three-pronged: improving the performance of the higher ed system, helping students to succeed, and shifting the policy environment to favor degree completion.

Likewise, in 2009, the billion-dollar Lumina Foundation for Education announced its “big goal” (“To increase the proportion of Americans with high-quality degrees and credentials to 60 percent by the year 2025”) and re-oriented its signature programs—Know How to Go, Making Opportunity Affordable, and Achieving the Dream—accordingly. “We’re adapting them and integrating them into our new strategic plan, which focuses on the issue of getting students financially and academically prepared for college, dramatically raising the success rates for students in college, and improving the productivity of institutions,” says Lumina’s senior vice president for program development, James Applegate. “We’re not thinking about this as traditional grantmaking activity. We have to use all the tools available to philanthropy.” Lumina is also working to improve institutional data collection so that it better captures non-traditional students, such as adults and part-time students.