In Defense of Perpetuity, Part Two

Last month, I wrote a piece titled "In Defense of the Forever Foundation: Why Perpetuity Will Always Have a Place in Philanthropy." Unsurprisingly, it touched a few nerves. In a recent email newsletter, foundation president and philanthropy critic Alan S. Davis called it an attempt to “defend the indefensible,” and other proponents of spend-down giving have voiced objections as well.

Some of their points are spot on, and it should be noted that I support Davis’s work and other efforts to get the wealthy to give away more of their money. Generally speaking, the problem of modern philanthropy is not that rich people should be stashing more of their money away for the future. As I noted in the earlier post, myself and other IP writers have for years been challenging stingy payout norms, the warehousing of wealth in DAFs, and funders’ overall obsession with protecting and growing their assets.

It would certainly be indefensible to hold up perpetuity as a model for all giving. As I wrote then, the fact that many philanthropic newcomers no longer treat perpetuity as a default is a very welcome development in an era of egregious disparities in wealth and power.

That said, I still think it’s going too far to dismiss philanthropic perpetuity entirely. I realize that for some people, the very concept of a rich institution designed to sit atop an endowment for the foreseeable future will always be non-negotiable, particularly in the face of today’s pressing needs. My point is simply that there is still a place for institutions like this in the philanthropic sector, and this doesn’t need to be a zero sum game. There are different, valid perspectives on what it means to do philanthropy right.

With respect to Davis (of whom we’re certainly fans here at IP) and other critics, it seemed worthwhile to dig into a few more points I didn’t get a chance to explore in that first piece. I don’t expect this to change the minds of those with strong views on the matter, but I hope it has some value as an addition to the ongoing and worthy debate around giving now versus giving later.

The opportunity cost problem

One of the strongest arguments against perpetuity is the idea that when funders fail to give in a substantial way now, they squander the chance to deal with problems when they’re more manageable. In that sense, it doesn’t matter that a perpetual foundation gives away orders of magnitude more money over time if it’s simply dealing with the fallout of problems it could have nipped in the bud early on.

The climate crisis is an obvious example. Wouldn’t it have been better if the big mid-century foundations had dug deep for climate solutions decades ago? Yes, of course. Looking back, it’s easy to pick out lots of ways philanthropy failed to step up, making things harder for us today. In light of the past few years, pandemic preparedness also comes to mind, or investments in the long-term health of U.S. democracy.

The caveat is that hindsight is a far more precise instrument than foresight. What we know and believe now about climate, about public health, about technology, about who deserves a say in how society is run — these assumptions didn’t necessarily apply decades ago. Our concept of what constitutes social good isn’t fixed in time, and often changes quite quickly.

Say a number of major U.S. foundations were obliged to spend down many decades ago. Would they have really backed inclusive, intersectional climate movements? Probably not. Would they, for instance, see eye-to-eye with transgender activists and extend them monetary support? Definitely not. We have to assume they’d pour their limited dollars into the priorities of the day — including the dubious (say, the Green Revolution or mid-century approaches to community development) and the repugnant (say, eugenics).

Is it not better to have the Fords and Rockefellers of the world around today to support climate justice, racial justice and gender justice, rather than encountering them as mere notes in a history text, having spent down on causes we no longer value?

For that matter, it makes little sense to assume we have the last word on what’s best for society just because we happen to be living in 2023. To call on a common example, say our unsustainable fixation with breeding and eating animals finally loses steam over the next century. Will we then lambast philanthropists for not doing more to get behind veganism today?

Of course, there are plenty of ways immediate philanthropic giving has proven valuable and will stand the test of time. I merely offer that perpetual grantmakers can be useful in those cases where our understanding of society’s needs evolves, giving subsequent generations more capacity to address what their predecessors may not have even considered.

The billionaire problem

That brings me to another point I raised in that previous piece: the perpetual foundation’s tendency to evolve beyond the original donor’s worldview. Minus clear guardrails to preserve “donor intent,” we’ve seen how many legacy foundations embrace progressive causes over time. Many conservatives bemoan that fact; I’d hold it up as a strength in a rapidly changing society.

But what if a super-rich donor really wants to spend down, and actually wants to do it right? Wouldn’t that be the best possible scenario? Well, it depends.

It’s hard to argue that it would have been better had MacKenzie Scott established some kind of perpetual grantmaking vehicle with her billions. Although we’ve critiqued Scott’s giving for a possible lack of strategic staying power, there’s a strong argument that her giving will stand the test of time via the increased long-term capacity of the organizations she backs.

However, we also need to be clear-eyed about the fact that a billionaire’s still calling the shots. Scott seems to sincerely want to yield her outsize power to others, but it’s impossible to get around the fact that any attempt to “empty the safe" while alive is an exercise in wielding power as much as giving it up. Call it the law of conservation of billionaire power: The owner of a massive fortune, once it’s accumulated, cannot let it go without exercising an equal level of personal power.

Not every billionaire is like MacKenzie Scott, who does her best to center her recipients. But in the end, she’s still the final word on all those gifts. Heck, Forbes went so far as to name her 2021’s most powerful woman in the world. Choosing to set up a perpetual foundation instead wouldn’t have gotten around the law of conservation of billionaire power — that choice would itself be a form of exercising power — but it would, in a sense, dilute that power by passing some decision-making down the line.

Is that better than giving out big general support gifts now? Depends on who’s getting the money, and on who you ask. Would progressives have been as happy had Scott yielded her power in the form of massive unrestricted gifts to conservative groups, as she very well could have done — and as other billionaires do? Wouldn’t some be wishing she’d set up a stodgy perpetual family foundation instead?

All of this is to say, even as we need to continue pressing funders to give away a lot more than they’ve been giving — foundations included — we can’t trust that we have all the answers right now. We certainly can’t trust that today’s billionaires and other elite philanthropists have all the answers, even about whom to call upon for better answers. With that in mind, I’d maintain perpetuity still has a role, even if it shouldn’t be a default or dominant one.

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