Then It's Gone: The Big (and Obvious) Drawback of Spending Down

Chuck Feeney is finally tapped out. With a final $7 million donation to Cornell University, Feeney's foundation, Atlantic Philanthropies, officially wrapped up its giving—concluding an epic spend-down that entailed "$8 billion in grantmaking over 35 years, in 23 countries on five continents," as Atlantic CEO Christopher Oechsli said in a letter last month. 

Feeney—the once-anonymous philanthropist who became among the most celebrated givers of our time—has received yet another round of accolades for his generosity in recent weeks. But here's a question that few people have stopped to ask: Did Feeney do the right thing in choosing a spend-down strategy for Atlantic? 

There's no right or wrong answer to this question. Well-known arguments exist on both sides of the spend-down debate, and anyway, this is ultimately a personal choice for philanthropists—some of whom really want to have a hand in the disposal of all their wealth during their lifetime. 

That said, with Atlantic wrapping up grantmaking, now's a good moment to take a closer look at the biggest drawback of spending down: Namely, that it means important funding institutions shut their doors and go out business, potentially leaving critical voids in their wake. Related to this, it's worth pondering how this strategy translates financially in terms of the ultimate tally of grantmaking dollars a philanthropist might wring from their fortune.

Now's a good moment for such an analysis because the spend-down model has lately found much favor among top philanthropists. Some of the biggest givers of our time—including Bill and Melinda Gates, Mark and Priscilla Zuckerberg, and Dustin Moskovitz and Cari Tuna—have all embraced spend-down over perpetuity. 

This choice makes a lot of sense, given that front-loading philanthropic dollars can make a far greater impact in some areas than more conservative payout strategies. Just consider how cost effective it is to spend on vaccination today as opposed to taking care of sick people tomorrow. Or how much better it would be to prevent a global rise in temperatures than to deal with the future cataclysmic effects of climate change.

The historic accomplishment of Sears Roebucks founder Julius Rosenwald in educating a generation of African-American children in the South is never far from mind as we ponder the upsides of giving fast. Rosenwald, who we've called the "godfather of spend-down," blew through his fortune by helping fund thousands of schools in Jim Crow states, with untold positive consequences for human potential. 

If you really believe your money can be decisive in solving problems now, or preventing them, it doesn't make much sense to save it for a rainy day. Especially with so much additional wealth now waiting in the wings that will enter philanthropy in the coming century. 

On the other hand, the hard truth is that most problems never really get solved. And after spend-down foundations pass from scene, those problems often persist, now possibly lacking key champions. 

The Beldon Fund is a good recent example of the pros and cons of spend-down. For a while, Beldon—which was created in 1982 by office furniture heir John Hunting—was a top grantmaker in the environmental field. Then it spent down and closed its doors in 2009. 

Beldon's aggressive strategy of spending down was a good thing in many ways. It was active when many fewer funders were operating in the environmental space, and it embraced certain priorities and grantmaking strategies, especially advocacy, that other green funders often shied away from. In a post-mortem, the foundation concluded: "By spending out, Beldon was able to concentrate the resources necessary to help shape the field of environmental health and build a strong infrastructure for environmental advocacy in its key states."

The problem is that Beldon is now no more. Sure, new green funders have come along—underscoring how philanthropic coffers get replenished—but none have exactly replicated Beldon's mix of issues and strategies. Beldon is likely still missed by environmentalists in certain niches. Meanwhile, of course, the challenges Beldon worked on haven't disappeared. 

Atlantic Philanthropies will be missed, too. While Atlantic's grantmaking will live on through several major, high-profile initiatives that will unfold over coming years, advocates working in key areas have now lost a friend that won't be so easy to replace. For example, Atlantic has been the single most important funder over recent years in challenging harsh school disciplinary policies that exact a major toll on kids of color. It spent over $40 million on work that, as I've written, had major success in changing thinking and policy on school discipline. Such a big and aggressive investment would have been unlikely if Atlantic weren't spending down. But the battle over harmful school discipline policies is still not finished. And it's hard to think of other funders who will take up this work with a similar level of focus and boldness. 


The same might be said about healthcare equity, where Atlantic was also a major leader. The foundation famously made a huge investment in backing the Affordable Care Act in 2009, playing a critical role in that policy debate. A range of other grantmaking by the foundation also bolstered the implementation of the law. Yet even as Atlantic steps off the philanthropic stage, its major achievement on Obamacare is now at risk of being rolled back. Yes, there are other funders who'll fight to save the ACA, starting with Robert Wood Johnson, but the number of top national foundations committed to healthcare equity—and ready to back hard-hitting advocacy work in this area—is quite small. Here, again, Atlantic played a position that won't be easily filled by others. 

The road not taken by Chuck Feeney, in terms of deploying $8 billion, is worth pondering. The W.K. Kellogg Foundation, which is endowed with a comparable pot of money, makes some $300 million in grants a year. And it has the capacity to sustain and often grow that giving year after year, forever. Even if Kellogg's endowment and giving level doesn't rise going forward, it will still be on track to give out $30 billion over the next century.  Who'll be seen as the more impactful philanthropist by future historians: Will Kellogg or Chuck Feeney? 

Today's new funders talk a lot about leveraging their money. And deploying fortunes early and aggressively to solve or prevent problems is certainly a good way to do that. That's especially true for donors interested in issues like preventive healthcare, biomedical research, or time-urgent challenges like climate change. But the calculus may be different when it comes to other areas, like social justice, where playing a much longer game might make more sense.