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GP25Feb04: Giving Productivity Paradox. Last week we said that America’s productivity is going up—at about 3% a year—but that our standard of living has been visibly suffering since the mid-1990s, resulting today in the sullen, angry electorate widely detected by pollsters and nighttime pundits. Large segments of the citizenry are feeling neither productive nor enriched, since rising tides have failed to raise their boats. This same, slow erosion in our quality of life, if once invisible to our politicians, has probably been with us for a quarter of a century, dating back to the Bicentennial. The economists have missed it, because they’ve been focused on the wrong statistics, such as total personal income or the Gross National Product. Meanwhile our infrastructive, public health system, and overall environment have fallen into disrepair. Our personal gain has not compensated us for the loss of common goods, and it’s fair to say we have been going up the down escalator. Eventually, we suspect, the disintegration of the commonweal threatens to reduce our vaunted productivity as well. Of course, this should not put us in a black mood. There is nothing inevitable about our present course. A foul temper is a luxury only afforded to curmudgeons. Knowing we have been burning all our candles at both ends, maybe we can now restore that fragile web of things that make for a civil society. 1,000 Points of Light. Back in 1991, George Bush the Elder called for “the illumination of a thousand points of light” in his State of the Union address, asking citizens throughout the nation to voluntarily help enrich the community and to bring hope to those sidetracked by illness or poverty. His charge to us has taken on a certain urgency as our electrical grid falls apart, larger numbers of college freshmen enroll in remedial composition courses because they never learned to write in high school, health costs soar 10 to 15% a year while our health actually declines, and the legions of those left behind in poverty grow larger after declining for a good part of the 20th century. Enlightened self-interest alone might lead us to give a little or to give a lot. We’re in need of extraordinary, passionate voluntarism, massive giving, and more disciplined management of all non-profits for the collective good. The Gift Outright. At the Kennedy inauguration, Robert Frost read his “Gift Outright,” in which he reminded us: The land was ours before we
were the land’s. Indeed, Frost reminds us that in America and in much of the developed world, we have come into possession of a bountiful land at little or no cost to ourselves and that, from the moment of birth, we are a drain on its resources. Our debt to it mounts steadily from the moment we put foot onto this earth. For us, the practical and spiritual problem is to repair the deficit we are running up. Our Federal Government is piling up a national debt that boggles the mind. But, more importantly, we are often burning up more of the earth’s capital in our lifetime than we can replenish. This realization should probably double-prod us to labor as hard at giving as we do at building up our own nest egg. Perhaps we want our personal cosmic balance sheet to say we are creative producers, not bankrupt consumers. In this and letters to come, we and our colleague Dr. Steve Martin, who has spent a lifetime teaching people to be helpful, will consider philanthropy and its several aspects: that without it, we are not a community, since giving brings us together; that it has a special urgency in 2004; that fruitful giving is not an easy chore; that giving rewards the giver as much as the community. The Salvation Army. A Caution. The late Joan Kroc, widow of McDonald’s founder Ray Kroc, has just left $1 billion plus to the Salvation Army. It’s to start community centers around the country patterned after a 12-acre complex she backed in San Diego. Although a portion of her funding will go into operations, the Army is obliged to raise another $40 to $60 million of operating funds as part of the bequest. As much as we salute the magnificent generosity of Mrs. Kroc that has handsomely benefited, as well, two colleges and PBS, we suspect her money may divert the Salvation Army away from its mission. It has always been an effective charity that has stayed on message. All of us remember the Army that raises a few dollars to give the down-and-out a bed for the night, a square meal, and a little prayerful meditation. The prospective community center venture it is undertaking promises to be more complicated and ambiguous, a diversion from the rest and sustenance business. We would see some troubles ahead for this wonderful organization. This caution should not discourage wealthy donors. But it makes us think harder about how to handle largesse and about what it takes for a charity to be effective in our time. Yale. For substantial donors who can make large contributions, the challenge of the moment is not to build monuments, but to construct endowments. In particular, we don’t need any more presidential libraries. In fact, we probably didn’t need the first one. People of means should find an organization that’s doing a spectacular job, such as the present day Salvation Army, and swell its endowment to guarantee operating funds for more of what it is doing already. That means that 90% of one’s contribution should go into an endowment, and then the donor must act to see that decent returns are secured on the assets. Most endowments fall short on managing their monies, some scandalously so. Yale has had a dazzling performance for several years, even making a 41% return one year when venture capital had a hot hand. Pension managers and corporate executives have learned about its results, and several have queried us about how it operates. The key has been its focus on alternative investments. Its investment czar David F. Swensen has authored a book for his peers called Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment. As an introduction to the asset allocation question, we recommend that you read TIAA-CREF’s review of college investment performance, since it has been looking at this question for 30 plus years. It includes Swensen’s wisdom in at least one of its reports. See www.tiaa-crefinstitute.org/Publications/quarterly/pdfs/qtrly_spec03.pdf. For starters, you will learn that you only want to spend 4 or 5% of your endowment in any one year. Alcoholics Anonymous. We are not saying, however, that Yale is an example of a highly effective non-profit. We would argue that Ivy League colleges have grown much less effective ever since the sixties at creating the broad, educated, value-driven leaders we harvested there in prior decades. The current president of Harvard, Lawrence Summers, is to trying to reform the priorities and organization of his institution, apparently realizing that it is not all it should be. But he is locked in battle with the stubborn hierarchies in Cambridge which are somewhat immune to the future. Yale, Harvard, the University of Texas, Stanford, etc. only remind us that sizable endowments are only half the battle: You must have an acute sense of mission to be worthy of your endowment. It’s Alcoholics Anonymous that comes to mind when we think of an effective non-profit. It only exists to help drunks get sober, pure and simple. It’s a Spartan organization: power is quite dispersed; its strength and usefulness stems from massive participation by its 2 million-plus members who regularly go to small meetings in town after town around the United States and in other countries. It’s renowned for helping individuals whom expensive treatment centers and abstruse therapies could not reach. As best we know, all its funds are raised by passing the hat at its meetings. Somebody with a delicious sense of humor named its publication the Grapevine, quite a twist for a fellowship that’s trying to get people off the grape. AA is by and for its members. As it says:
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