"Risk Is a Fact of Life." A Conversation with Stephen Heintz of the Rockefeller Brothers Fund

photo: New America,  2.0 Generic (CC BY 2.0)

photo: New America, 2.0 Generic (CC BY 2.0)

Stephen Heintz has led the Rockefeller Brothers Fund since 2001. He is among the nearly 50 social sector leaders that Vivien Hoexter and Linda C. Hartley interviewed for their new book, Big Impact: Insights & Stories from America’s Non-Profit Leaders

Who has had the greatest influence on you as a professional?

There have been so many wonderful mentors in my life. The very first was an American businessman turned politician turned statesman named Chester Bowles. I was a senior at Yale, an American Studies major with a focus on American diplomatic history. I was required to write a senior thesis using original research. I was struggling to find a topic. David Halberstam, in The Best and the Brightest, introduced me to Chester Bowles.

Bowles was deputy secretary of state in the first year of the Kennedy administration. The reason he was of interest to Halberstam was that Bowles was the outlier on the team. He opposed the invasion of Cuba and was reluctant to see America getting more deeply involved in Vietnam. He kept expressing contrary views to the new frontiersmen of the Kennedy administration. Bobby Kennedy in particular found it irritating, and they ultimately pushed Bowles out of the State Department leadership at the end of 1961 and sent him back to India to be ambassador a second time. I found out that Bowles had left all his papers to Yale. I had an extraordinary experience writing this long manuscript about his experiences, and I got to know him. I went to interview him, Dean Rusk, Ted Sorensen and other key players in that story.

Bowles, as he had so often done throughout his career, took me under his wing, although he was long since retired and living on the shores of the Connecticut River. I started my own career immediately after that, in politics and state government in Connecticut, where Bowles had been governor. He became an important mentor at a very early age for me, and a very late age for him.

The second was a governor of Connecticut, Bill O’Neill, for whom I ended up working. He somehow had the crazy idea when I was 29 years old that he wanted me to be state social services commissioner. This frankly scared the death out of me, and I tried to talk him out of it. He laughed and said, “Well, I appreciate your modesty, but you’re the guy I want.” I said, “Well, all right, governor, if you’re crazy enough to appoint me, I guess I’m crazy enough to accept.” We had a really wonderful working relationship that I learned a great deal from.

Now fast-forward many years. David Rockefeller became an important mentor and leader to me over these past 15 years. It was an extraordinary privilege to get to know him in the last part of his life and to understand how much responsibility we have to extend his and his brothers’ legacy.

What new opportunities do you see for this foundation for the next five years?

One of the things that’s been exciting here in the last couple of years is that we’ve been having a very explicit conversation with our trustees and our staff about risk. This was the subject of a two-hour conversation at our March board meeting this year. Risk is a fact of life, and we all manage it in a variety of ways. Some risk you can anticipate, so you plan for the potential of those risks, you get fire insurance. Some risk you can’t anticipate.

The question is: How do you respond to risk as it happens? Some are considered risks we all take. In investing money, we’re taking risk. We study, we learn, we listen, we get advice and we might make an investment and hope that it’s going to produce a certain return. We certainly hope we’re not going to lose money, but sometimes we do. In grant-making, we’re taking risks too. Because we’re betting on people, we’re betting on institutions. Let me step back and say, philanthropy is a very small sector. American foundations give away about $60 billion a year, a significant sum of money except when you compare it to the scale of the problems we are addressing.

Just look at all federal, state and local government spending in the United States. It is about $7 trillion, and the U.S. gross domestic product is about $18 trillion. So $50 billion to $60 billion is really a small amount of money. A lot of that is being used for what we might traditionally think of as more charitable things, not for social change. The amount that’s going into social change work is small, and some of that is being used internationally.

We have the challenge of trying to figure out how to leverage the resources—the small resources that we’ve got—to have the biggest possible effect. The simple metaphor I use is acupuncture, something I had a little experience with during my recovery. We have these tiny needles, and the question is: Where do we insert the needles with the expectation that we might trigger some larger systemic change? And that leads you to think: It’s not just about the money. It’s about other assets that we can invest: reputation, convening power, knowledge, capacity-building and risk. Sometimes, if you want to create major change, you have to take extra risk to do it. We’ve been trying to think about our risk posture in a 360-degree way that looks at all those factors.

What are the risks we take with our endowment? For example, what risk did we take when we made the complicated and important decision to divest from all fossil fuels, especially given that fossil fuels were the original source of the Rockefeller wealth? That was a risky decision. A lot of investment advisers were saying, “You’re excluding a very significant share of the global economy and saying you’re not going to participate in it. That will limit the places you could go for the financial returns you’re trying to achieve.”

It was not only a risk in our investments, it was a risk for the Rockefeller family and the brand name. But it turned out to be something that paid enormous benefits. So I think that this is an opportunity. The opportunities are to be bolder, to take more carefully and prudently considered risks that have the potential to advance the things that we are trying to help, and the progress we’re trying to help achieve.

In 2006, David Rockefeller, one of our founders, and I started having a set of conversations about what he could do to help the RBF. That led to an extraordinarily generous decision on his part that we will be receiving a significant bequest from him. We have been, with our board of trustees, engaged in a process, knowing that we would receive David’s gift at some point in the future. We’ve been engaged in a multiyear process to think about how we can best utilize those resources.

We don’t know exactly what the value of the bequest will be, because a lot of it is still in various assets that will need to be liquidated, but it will give us substantial additional capacity. It’s both a wonderful opportunity and a welcome but heavy responsibility.

How can we best carry forward David Rockefeller’s legacy? It comes with a great sense of sadness at his passing, but it is very exciting. It was just such a wonderful thing when he told me that he had made that decision. It was an incredible vote of confidence. We had our 75th anniversary in 2015, and David had been involved all 75 years. He was 25 when he and his brothers started the RBF, and because he was the youngest kid, they made him the recording secretary. If you look at the first board meeting minutes, they’re all signed “David Rockefeller.”

What is your organization doing internally and externally to address racial inequity?

I would say we are working on three dimensions. A few years back, we decided it was time to undertake a diagnostic look at our organizational culture, to figure out how healthy we were as an organization. We wanted to look at questions of diversity, equity and inclusion. That was a wake-up call, although we knew going in that there were issues. If you just look at the data, we do pretty well. We have a very diverse staff. We do particularly well on gender, like many nonprofit organizations. We are very diverse with regard to race and sexual preference and a variety of other factors. By the numbers, we were pretty good.

We did a deeper dive in this diagnostic work, and we found we were not as inclusive an organization as we thought we were or should be. That came through in confidential surveys and interviews conducted with staff at all levels of the organization by consultants, third parties who protected confidentiality. I was really surprised and concerned. So we started a process to try to engage staff in thinking about how we could become truly more inclusive. That’s complicated work, and we have taken our temperature along the way. The more recent staff surveys suggest that we’ve made some good progress. But in the last year, the events in society around us, starting with the seemingly unending instances of police violence against people of color, put the issues in a different light.

After the Dallas shootings in 2016, I invited any staff members who wanted to to gather. I didn’t have an agenda, and I didn’t even really know what to say, except that I was very disturbed by what was happening in our society. I wanted this to be a place we could talk to each other about the state of racism in our society, and to think about what we might do.

It was hard for people to talk about this. One of my colleagues, who is African-American and a leader in the institution, said, “I’m not sure if this is a safe place for me to talk about how I feel about it.” This again was hard news to hear, but exactly what you hope somebody will say, because only through honest interaction can we make progress together.

We are now in the next phase of an organizational-culture initiative we are inviting staff to help develop. We had some ideas we put on the table, and some seemed to resonate with staff and others didn’t. We said, “Why don’t those of you who are really interested in this or have some ideas or concerns get together, and then come back and tell us what you think would be the right way to broaden and deepen the conversation?” This is obviously not rocket science; it’s harder than rocket science. But it’s not something you do and move on. It’s something you have to keep doing. It requires continuous attention.

What are we doing externally is the second part of your question. We are, of course, a nonpartisan organization, and we’re very careful about that, but we are political in the sense that we believe that one of the most important acupuncture needles is to influence the exercise of public power. If you can influence public policy or private-sector behavior, you are really producing change, because those are the dominant sectors in our society. Those are our two primary areas of engagement.

Now we’re in a policy environment very different from the one we’ve been operating under for the last eight years, and arguably for long before that. Many of our staff were shocked by the rhetoric and the outcome of the presidential election. We are a diverse organization, and a number of people on staff feel personally threatened by some of the policies of this administration. We have people who are green-card holders, people who are in the LGBTQ community, African-Americans, Latinos. People are worried—personally worried, even though they live in New York, which is a diverse and progressive city.

The three areas in which we work are strengthening the vitality of democracy, promoting sustainable development and building peace in the Middle East—in Israel, Palestine, U.S.-Iran relations and Afghanistan. All three of these areas are directly challenged by the policy directions of this new administration. We have spent the time since November preparing a plan for how RBF should position itself in the new environment.

I’m proud of the fact that the board has agreed to a 12 percent increase in our grant-making budget for 2017 and 2018 and perhaps an additional year, depending on how the market performs. This provides us more funding, especially to work on inclusive American democracy. Half of it has gone into that portfolio, and half of it went into a new fund that gives us the flexibility to respond to urgent needs that arise as a result of the initiatives of this administration.

The board has given us the flexibility to support initiatives that may be out of our usual areas of focus. But if they are urgent and need an infusion of capital, we have the means to act.

We have also decided that our values—institutional values about diversity and equity and inclusion—are going to be front and center. We will be looking to support organizations that are representative of marginalized and vulnerable communities as part of this initiative.

After the 2016 election, the New York Times reported, “the widening political divergence between cities and small-town America reflects a growing alienation between the two groups, and a sense—perhaps accurate—that their fates are not connected.” What role should the nonprofit sector play in helping these two groups find common ground?

Oddly enough, in the philanthropic world, we have focused our efforts on inclusion in a way that made a significant portion of the population of our country feel excluded. That is truly unfortunate. We know there are 1.7 million nonprofits in this country. Thousands and thousands of those organizations are in rural communities and in the middle of the country. Those are places to which the large foundations haven’t been paying as much attention. So those organizations are a potential source of healing and progress, because they are part of this sector.

Inviting them to help educate us about life in the communities they serve, and what we might do differently, and do better to include those communities, can be an important part of the process. We have colleagues in all those communities and counties, and we need to invite them and listen to them and find ways to work together.

How are the choices of very wealthy private philanthropists influencing traditional foundation giving?

I’ve just started reading David Callahan’s book, The Givers: Wealth, Power, and Philanthropy in a New Gilded Age. There is a lot of conversation about the new philanthropy versus the old philanthropy. I have not yet been persuaded there’s that much difference between the two. There is one important difference, which is that the amount of new money is huge. The estimates of the generational transfer of wealth and the part that will end up going to philanthropic purposes adds up to tens of trillions of dollars in the decades ahead.

In a way, the new philanthropy—high-net-worth philanthropy—is going to become the dominant philanthropy. We have experienced this, in a modest way, at RBF. In the mid-1970s, the RBF was the 15th largest foundation in America. Today, we are the 93rd largest, measured by asset size. And it’s not because we threw our money away or wasted it or spent it all down. It’s because of all the additional wealth coming into philanthropy. It’s changing the dynamics between foundations with a longer history, longer experience basis, multiple generations of leaders, and a lot of this new wealth that’s coming in without that experience. Many are trying to invent a new operating system for philanthropy, which can be very exciting, but I don’t think it’s all that different yet. Some parts of what people consider the older, traditional philanthropy we are not about to throw out.

I encourage people to study the Rockefeller story. It’s now a five-generation story. There is no other family in the world that has been as philanthropic for as many generations. They have been through a lot together. It wasn’t always easy, but they worked it out. The lessons they learned will be valuable to this new wealth coming in. I will be interested to see how the wealth is organized, how the governance of these new foundations is established. I worry a little bit about the inequality aspect. All this wealth is a product of the enormous economic inequality in our society.

The first Rockefeller became unimaginably wealthy compared to the average citizen of his time. And he started out with nothing. We have in the archives his original ledger book from 1855, when he went to work at age 16. He made $45 that year. He gave away $5, so he was already giving away more than 10 percent. The wealth that is being created today is a product of economic inequality, and as a result, it sets up some challenging social and economic and even political dynamics. We may be getting to a point where we need to think about more oversight for private foundations. This will be very unpopular, and David Callahan’s book has stirred controversy in this regard.

On one hand, one of our greatest assets is our independence. We don’t want to lose our independence, because that gives us the ability to take risk. If the government sector and the private sector won’t tackle a problem, foundations can step in. On the other hand, we need to do it in a transparent fashion. Right now, that is largely voluntary, and maybe some of that needs to become mandatory. That’s the conversation we need to have as all this wealth makes its way into philanthropy and takes on big social issues.

If there were one thing you could say to your colleagues who are leading nonprofits seeking funding, what would it be?

Don’t give up. Don’t be discouraged by the unanswered email or the languishing proposal that’s sitting on somebody’s desk. That’s actually more of a message to foundation staff. We need to be more responsive. It’s hard, because we’re working hard, reviewing a lot of proposals. A lot of people are asking for support. All are good ideas, but we need to work on improving our responsiveness. A quick “no” is a whole lot better than a long, long silence. The other thing I would say to them is study, because it will serve them well. It will make the nonprofit-foundation relationship more effective if grant-seekers really try to understand what foundations are interested in before they approach them.

Another responsibility for us is to communicate clearly what we’re interested in, so that people will not spend a lot of time and energy, with limited resources, getting ready to send something we’re not going to be able to support.

RelatedHe Played the Long Game: David Rockefeller's Philanthropy and Legacy

Vivien Hoexter and Linda C. Hartley are principals of H2Growth Strategies LLC, which provides strategic planning, fundraising and governance counsel to mission-driven organizations. H2Growth has partnered with more than 100 organizations to raise over $1.5 billion. For more information about the book and the authors, please visit http://www.h2growthstrategies.com/book.