AUDIO
September 30, 2016

Podcast: Building a Philanthropic World of Data and ‘Glass Pockets’

“When it comes to knowledge and information, foundations are like black holes,” says Brad Smith, chief executive officer of the Foundation Center. “And they need to become supernovas.”

Mr. Smith’s organization is a global platform for data on philanthropy, boosting transparency and equipping donors with the knowledge they need to make strategic giving decisions. Philanthropy’s “next fronter,” he asserts in this edition of the Business of Giving, “is going to be managing information, and producing and sharing knowledge.”

There’s a great deal of work still to be done on that score: Just 7 percent of U.S. foundations even have their own website, Mr. Smith notes. He also talks about how open data drives philanthropic innovation; the profound impact the Internal Revenue Service’s release of machine-readable Form 990s will have on transparency; and the importance of foundations having “glass pockets” as their role evolves from giving away cash to investing for social impact.

Listen to the full interview below and/or scroll down to read a transcript provided by the Business of Giving.

Denver: The rate of change is increasing in every field of endeavor, including philanthropy. And in order to be a true leader in the field, a person can’t be 100% consumed with just the well-being and state of their own organization; one also must leave some space and time to contemplate what all these changes mean for the entire sector. One individual that fits that description perfectly is my next guest… He isBradford K. Smith, the President and CEO of the Foundation Center. Good evening, Brad, and welcome back to The Business of Giving.

Brad: It’s great to be back here.

Denver: For those listeners that are not familiar with the Foundation Center, tell us about the work that you do.

Brad: Great. I think the easiest way to understand us is:  what Bloomberg does for the financial markets, we do for philanthropy!  Basically, we publish data and information about the transaction of philanthropy. In other words, these endowed foundations that make grants to support organizations in the social sector to make the world a better place…We track all that information. We put it out there in an unbiased way so that you can search it; you can find it; you can understand who’s funding your cause, who’s not funding your cause, what foundations are doing, and what they’re not doing.

Denver: Let’s talk about foundations for a moment. When we look at philanthropy in the US, last year about $375 Billion was made in contributions. What percentage of that comes from foundations?

Brad: It’s roughly 16 – 17%,  and this is a common misunderstanding. A lot of people look at nonprofits in America, and they assume that their larger supporters are wealthy foundations and maybe individuals, but the largest source of income for American nonprofits in the aggregate is actually government. Foundation money is very important because it’s one of the few sources of income that nonprofits have that usually is not earmarked; it’s very flexible.

Denver: Well, let’s talk a little bit more about that. I think foundations are pretty abstract to most people. It’s kind of a big idea out there, and I think you have a wonderful way of explaining it by talking about the sources of influence that they hold.  There are three of them,  and let’s pick up on each.   I’m going to start with the one you just mentioned. The one that is obvious to everybody: money, but as you say it’s a very special kind of money, right?

Brad: Correct! Foundations have a really important role in American history and American society. Basically, our government has created a kind of social pact in which wealthy individuals are given a tax incentive for creating a charitable foundation. They make a donation of a portion of their assets to the foundation. They no longer control those assets. They can’t take them back for personal use. They get a tax exemption in exchange for creating a stream of charitable giving in the future. Now, there are a lot of ways to look at the size of the philanthropic sector in the US. There are a lot of foundations. I  know when the Foundation Center was created in 1956, there weren’t near as many. In fact, when the Foundation Center published the first print directory of American foundations, there were about 4,000 foundations. Today there are well over 80,000 foundations…about 87,000 to 88,000. And the assets they manage–their investments–surpassed $800 Billion. And it’s the earnings on those investments which are tax-free, that are used to actually fund grants and fulfill their charitable purpose.

Denver: Right. The second source of influence that foundations have is “convening power.”

Brad: Well, there are not a whole lot of people in this world whose job is to give away money. And people always were sort of perplexed about that. They said: “Gosh, how do you find the organizations to be worthy of getting the support of the foundation?” And I used to tell them: “Look, when you are in the business of giving away money, you don’t have to go looking for people; they find you.” So, one of the things that gives a foundation virtually a seat at any table is the fact that they’re giving away money.

And the other thing is, they’re giving away money which, unlike congressional money or city money, isn’t earmarked by elected officials for their pet causes. It’s very flexible, long-term, risk-taking money.  But this also gives them the ability to “convene.”  And we find that the foundations that are having the greatest impact on the issues that are working– whether it be criminal justice, or climate change, or job creation–are not just giving away grants in a retail kind of way. They’re actually creating tables to which policy makers, academics, activists, and others can come, and really think about what the long-term solutions are to these serious problems that our society and world face.

Denver: And it would seem in an era of collaboration, they do have that special role to be able to do that. They don’t have a dog in the fight; they’re neutral…

Brad: Correct.

Denver: They give money away, and they have an incredible ability to get everybody to come when they call a meeting.

Brad: Yeah. When I worked with the Ford Foundation, the two jokes they always tell you when you start to work there is that all your phone calls get returned. And immediately, it seems like all of your ideas are brilliant.

Denver: That’s right, and you also become a little funnier and better looking too.

Brad: That’s right, yes, of course. Two of the perks.

Denver: And finally, and this is so important:  the accumulated knowledge that foundations hold.  Speak to that.

Brad: I think this is really the frontier for foundations. Roughly, I think we can say that… and I know you’ve had a lot of speakers come on this program… foundations have moved from the notion of just giving away money… a charity approach… to what a lot people call social investment. The idea that even though you’re making a grant, you’re investing in a solution, and you’re expecting return in the form of impact.

But another way to look at foundations is–I gave a presentation on this recently–and I said: “When it comes to knowledge and information, foundations are like black holes, and they need to become supernovas.”

 

So what do I mean by that? The average foundation receives hundreds, if not thousands of proposals from nonprofit organizations–different kinds of social sector organizations filled with ideas about how to make the neighborhood, the community, the city, and the world a better place. Some portion of those get approved. As part of the process, the groups that get the grants provide written reports periodically– progress reports–full of information also. Then there’s also the foundation staff themselves. When you’re sitting in a foundation, let’s say you’re working on early childhood issues. On any given day, you probably talk to four or five different people who are the best in their field… who have fantastic ideas about how to solve all the issues around early childhood learning. And you accumulate all that knowledge; that knowledge is in your head; it’s in your notes; it’s on your hard drive. All these documentations are  flowing in the foundations. If we weren’t philanthropy– if we were Google or we were Facebook–we would have data scientists crawling all over that stuff!

Denver: Tagging everything.

Brad: Tagging everything, looking for correlations, trying to extract. Now, this is a tremendous source of potential knowledge about how we can make this world a far better place. And I think the next frontier for philanthropy is going to  be managing information, and producing and sharing knowledge.

Denver: Let’s talk a little bit about that frontier. A few years ago, the Foundation Center started a blog called “Glass Pockets.”  The tagline was: “Bringing transparency to the world of philanthropy.” And when it comes to the world of foundation transparency, there is a development which you believe will have a profound effect. It’s Machine-Readable 990s; tell us what that is. And what is the significance of it?

Brad: Yeah. I think that phrase “Machine-Readable 990s”–  if we went out onto Broadway out here,  and we asked a bunch of people what they think about Machine-Readable 990s… We’d get a lot of blank stares.

First of all, the whole notion of transparency is in the DNA of the Foundation Center because we were created during McCarthyism when foundations were being investigated for support of un-American  activities. And a group of foundation leaders felt that the best way to deal with that kind of suspicion was to create a public information service about philanthropy. And part of that is, we’re not an advocacy organization; we’re not membership; we’re neutral.

But there is one thing we advocate on, and that is transparency,  because that’s why we were created. And in fact, the name of the site we have on thisGlasspockets.org comes from a quote that was used at the founding of the Foundation Center.  We think the foundation should have “glass pockets.”  That came from the Chair of the Carnegie Foundation board at the time. So we have been promoting foundation transparency.  And for years, the tax return– that foundations file– which is called a 990 PF (which means private foundations)  is what the endowed foundations file. Because of the tax exemption they have in exchange for serving the public good, it’s open information. What that means, or what it has meant until very recently, is that that document if you request it, should be available from the foundation itself, and available from the Internal Revenue Service.

Now, what a lot of people don’t understand is those documents are filed… some portion of them.. are filed electronically online by foundations. Many of them are filed in written form…

Denver: The old-fashioned way.

Brad: ..and some of them–because we see these all the time–some are still filled out in pencil. But up until very recently, regardless of how they were filled out, the Internal Revenue Service was fulfilling its public information requirement by making them available as image files, something called a TIFF file. Probably the easiest way for people to understand is: it’s just like a PDF.

So even if you filed it digitally, anybody who requested it essentially gets a pictureof it. Now if you’ve ever tried to edit a PDF, or do anything with a PDF…You can’t do anything with it, right? It’s not like a Word document. It’s not digital; it’s a picture; it’s like a photograph. So, we and GuideStar, and other organizations that work a lot with these tax returns in order to get information from them, basically had to create a pretty significant infrastructure to try to extract data from these documents– which is largely a manual process. As of just a few months ago, the Internal Revenue Service surprised everyone by releasing all the tax returns– the 990 PFs  that have been digitally filed– as machine-readable open data. So what is machine-readable open data?

What that means is:  it’s actually released in a form where it can be automatically harvested by a computer with no human intervention. Basically, if you think of the computer as like a vacuum cleaner– it sucks in all the information, and then using algorithms and other kinds of computer programs, you can manipulate and begin to do all sorts of things with that information. All of a sudden, the barriers to actually creating something useful out of information have been drastically lowered and made much cheaper.

Denver: Now this only works for those 990 PFs  that have been digitally filed…

Brad: Correct!

Denver: Is the IRS thinking of making that mandatory down the road?

Brad: As I understand it, this being America, this would require an Act of Congress.

Now, another shocking fact about foundations– which I find people are always aghast at–I’ve asked them: “What percentage of foundations do you think have websites?” And it turns out that the answer is roughly 7%. And even the very largest foundations that have over  $100 Million in assets–there’s about a thousand of those– 30% of them do not have websites.

Denver: That’s pretty shocking.

Brad: A country like the Netherlands?  By law, if you have a foundation, you have to have a website. So, there’s no mandatory filing requirement for these tax returns. We downloaded all the ones that the IRS has released, and for 2014, roughly, there were around 50,000 foundation tax returns included.  So, no more than maybe 60% of the foundations were included,  and these were because those documents were filed online and released in digital form.

So what does this really mean? What it means is that the proverbial two kids in a garage with good programming skills…people that can create algorithms and maybe have big hard drives or cloud storage… can grab all this information and start doing things with it… Like what? They could search for part of that document, for example, where you have to list the titles, the names, titles and salaries of, I think, the five highest paid employees.

Denver: Right.

Brad: So you could basically take the CEO salaries. And if you don’t know the field, and you basically just want to make a comparison, you can say: “Well, the president of the Gates Foundation makes X, and the president of the Bob & Betty Sue Foundation in Mississippi makes one-tenth of that. There ought to be a law. You could do the same with all the overhead expenses, travel, all that kind of stuff.

The grants, by law, part of that document is supposed to list all the grants you made, and the recipient, and the amount.  You’re supposed to have a description now. A lot people don’t put the description. The good side is that this could begin to force people to improve the information. The bad side is that people could extract a lot of information they don’t understand. And then I think the other thing that is just going to really surprise foundations is: foundations are required to attach to that tax return… a list of all their investment holdings at the time they file. And it will be much easier for anyone to search through the investment portfolios of foundations to see what stocks and bonds they’re holding. And again, if someone wants to make mischief, they could point out that:  Well, if your mission is basically to improve healthcare, and you are heavily invested in tobacco companies, that may be inconsistent. And some foundations in the past, when they’ve been pressured by inconvenient press stories, this is one of the points of entry that the journalists have.  But it’s been very hard to get that information.

Denver: Well, it’s all very interesting. I think it is going to change the nature of your work. You’ve been toiling to extract this information to make some sense of it, but it would seem that you’re going to have a higher level of analysis now that machines are doing it….probably faster and more comprehensively than people ever could.

Brad: We deal very heavily with the grants information, because one of the main consumers of our information are nonprofits that are trying to figure out which foundations might be willing to give them a grant. So we produce large, searchable databases that you can search by cause: environment, health, arts, or whatever, and then narrow it down to exactly the foundations that may fund in your geographic area, your particular kind of work– and then see actual examples of grants. So we work a lot with the grants. Historically, we’ve only basically extracted, coded and sorted and put into these databases about 250,000 to 300,000 grants a year. Because we were actually manually extracting those, and then hand coding them!  We had people looking at them and saying: “Okay, this must be arts, and for arts it must be sculpture, and it’s for the state of such and such, and is to such and such organization.” We saw this coming.  Actually in 2012, we started rebuilding our core databases to be able to ingest information that was coming in directly from computers. And we built them to code 2 to 5 million grants a year. And already this year, with the new system, in the first five or six months of operation, we’ve coded over 1 million grants.

Denver: That’s great.

Brad: And we’ve automated the coding of them as well, which is a very geeky process that I’d be glad to explain, but maybe I’ll spare your listeners.

Denver: Well, it’s a real challenge with so much data out there, it’s so difficult for anybody to make heads or tails of it.  So the premium on the classification of data really has to be one of your major objectives.

Brad: I honestly think that open data in general: there’s more good than bad to it. I think it’s easy for people to think of the embarrassing things that might be extracted from a tax return. But part of the theory of open data is that when it’s open,  and more people are using it, there’s lots of innovation. People create new products and services, new sources of knowledge.  And the heavier use of that information improves the care and accuracy that people use in filling it out.  So, I think that’s good. The complicated thing is that it makes it possible for people to reach rapid conclusions based on a little bit of data they really don’t understand.

As you said, you’ve toiled in this field for years to try to help the public understand philanthropy, but most people don’t understand philanthropy. They don’t understand foundations. So people will grab this data; they can make crazy conclusions.  And I think this is going to place, as you said, a much higher premium on “sense making” and people that really understand the field.

The Foundation Center actually created– together with the Urban Institute and the Internal Revenue Service years ago– something called the National Taxonomy of Exempt Entities. So, when a nonprofit applies for a charitable status, they’re given an activity or subject code by the IRS.  And this is from this taxonomy.  We built on top of that a philanthropy classification system. So when we see a grant from a foundation on a tax return– or directly transmitted to us by the foundation–we tag it, in today’s parlance, for the subject of the grant: education, health, whatever. We tag it for the population groups served– either the whole world or LGBTQ, or women, or men, or low-income, or whatever. We tag it for the strategy used by the foundation:  “Is this grant for capacity building? Is it for capital support?” We tag it for the type of organization, and then we geo-tag it for the geographic location of the benefit.

Denver: Well, you know when a treasure trove of information like this becomes available, or potentially available, there’s going to be a whole new set of actors who are going to be coming into the fray– whether they be start-ups or new businesses.  You hope they are well-intentioned, but some of them are not really going to be steeped in the history of philanthropy… and they’re going to be sending out this information, so I know you’re prepared for that.

Brad: Yeah, I think open data brings in a lot of people, and if you study the cycle of disruption, what usually happens is in any field– in publishing, online information… and in some ways organizations like the Foundation Center and GuideStar are nonprofit information businesses that are subject to the same kinds of disruptive cycles as the New York Times and LexisNexis and Thomson Reuters… So basically what happens is the data becomes open or becomes virtually open because it  becomes so cheap. You get new entrants that requires less infrastructure. They produce something which the incumbents feel isn’t really very good and isn’t up to quality, but some portion of the market decides: “Well, it’s good enough.” And what happens, of course, is they get a little bit of income. Then most of them die off and go away, or lose interest, but some of them get better.

And if they get good enough, then they basically turn over industries. I was reading the other day about how Craigslist basically turned over the entire industry of print advertising. And Craigslist, if you look at it, it’s not very elegant…It’s not really sophisticated, right?

Denver: It’s like 1996.

Brad: Right! But, anyway, it’s just an example of what can happen. So yeah, I think that there will be more people getting into this. And I think there will be two types: there will be the sort of startups who just want to play with this data and see if they can create something that the world will use or buy. But we’re also seeing that there are large data analytics companies with names like Palantir and RelSci. These are very sophisticated companies that use a lot of technology, which actually comes from contracts they have with governments–a lot of times around security issues, or defense, or what not. But like most enterprises in today’s world, they also were looking to have a kind of CSR (Corporate Social Responsibility). And they’re looking to get into the philanthropic space by basically promising to use all their big data technology to be able to measure impact. I think the real obstacle for them is they’re getting into it thinking that the space is occupied by lots of Gates Foundations.  There’s only one Gates Foundation.

Denver: Right.

Brad: And if you look at the 87,000 foundations in the US, as I said earlier…just 7% have websites,  but only about 900– I think it’s 976– have assets of over $100 Million. And 76% of them have 4 staff or less. So a foundation that has no staff, or 2 staff members, are probably not going to be signing a contract with a sophisticated data analytics company…

Denver: You’re so right. Sticking with data and classification, you have helped lead a cohort of like-minded colleagues around contributions that foundations are making to help the world achieve the Sustainable Development Goals or SDGs, as they are called– the target date is 2030. Refresh our listeners as to exactly what the SDGs are.  What have you created–and what kind of platform to track the work of foundations towards helping make them happen?

Brad: Well, in the year 2000, the United Nations came up with something called the Millennium Development Goals. These are 15-year goals to try to inspire the world to improve health,  education, and other kinds of social indicators for the poorest of the poor… especially in the developing world. Those expired at the end of 2015; a lot of progress was made but there is still a lot to be done. And the UN embarked– on a very long and sophisticated process– which all UN members participated in…all the national governments that are members of the UN. It’s about 190+ countries. But also, over 8 million people participated directly online through “The World We Want” campaign. So this was the start of the largest participatory exercise that I know of in human history–to try to come up with what the new 15-year global agenda should be.

One thing that’s really interesting is that they came up with an agenda that actually is for the whole world. The Millennium Development Goals were only for the so called developing countries– the poor countries in Africa, Latin America, Southeast Asia. This is for the whole world, so they’re designed to address economic, environmental and social disparities– not only between nations, but within nations. So what’s really powerful about these is that they are as relevant in Detroit and Toledo as they are in Maputo and Jakarta.

Denver: Every country, every city has skin in the game.

Brad: Right. And a lot of people will look at the UN with sort of a jaundiced eye and say: “Oh my gosh, there are 17 goals.. That’s way too many, and there are 169 targets, and there are 200+  indicators.” And one of the things I often say to people is that: “Well, there were 189 – 190 nations that agreed on this. Think of the organizations we work for–foundations. Think if you put 190 foundations in a room, do you think they could agree on 17 goals?” I said: “It’s a pretty incredible achievement.” And they’re very ambitious, but they do for the first time cover the world. And the previous  Millennium Development Goals really didn’t deal much with environment…

Denver: That’s right.

Brad: This deals with water quality, with climate.  And we feel that foundations have an important role to play in this.  So, the Rockefeller Philanthropy Advisers, the United Nations Development Program, and The Foundation Center have something called the SDG Philanthropic Partnership– which is basically to help foundations understand this global framework… See how they’re already participating in it…and how they can actually increase their participation… and make it easier for them to forge the kind of partnerships with each other,  and with government and the private sector, to spur the achievement of these goals and targets.

Denver: And you have a separate website around that, right?

Brad: Yes. We have a website called sdgfunders.org. Then we’ve actually done a back-of-the-envelope calculation based upon what we already know about what foundations are doing today,.. all the data that we have in our database is about American philanthropy, but also a growing body of philanthropy in other countries…  we predict that, very conservatively,  foundations will spend over the next 15 years about $364 Billion in grant money towards the realization of these objectives.

Denver: People estimate that it is going to take about  about $3.5 Trillion. So it’s a pretty sizable slice.

Brad: It’s a sizable slice, and as we’ve been talking about… laced through this:  the leverage that this money can produce is tremendous precisely because of its low level of bureaucracy and its high degree of flexibility. There’s just not a lot of flexibility in the world. I remember years and years ago when I was with another foundation, a government sponsored foundation actually, we were starting to get invited to the World Bank for conversations about how to collaborate. And we were all dreaming that the World Bank would take all of our cherished little projects and causes, and put hundreds of millions of dollars into them. And after two years of conversations, basically the World Bank staff turned around and asked us for grants. We learned a lot, because what we saw was that they have hundred of millions of dollars but it’s all tied up. And it’s all earmarked…

Denver: Not too liquid.

Brad: … and $50,000 flexible money could basically unlock the potential of hundreds of millions.

Denver: Let me move on to something else. We had Clara Miller, the President of the FB Heron Foundation on the show earlier this year.  I think it’s fair to say that they are the poster child for mission-related investing. And as you know, they have committed by the end of 2017 to have all of their assets deployed towards mission.  That includes their endowment, which will all be invested in either nonprofit or for profit companies– which are going to help them achieve their mission:  Helping people lift themselves out of poverty. Do you see this catching on with other foundations?  Or do you think it’s going to be a long time coming?

Brad: If you’d asked me this five years ago… and you might have actually…I would have probably had a more skeptical answer than I have today. I’m sort of fascinated by the life cycle of ideas.  Impact investing– or mission investing–sometimes they’re used interchangeably–was an idea I think that started out with a lot of hype.

Denver: It sure did.

Brad: There were sort of evangelicals for it… and zeal. The skeptics were saying that “that’s all great,” but you can’t get anywhere near market returns with these kinds of investments. There are not enough investment vehicles out there to absorb the amount of money that is in foundations and in the capital markets.  Because remember, impact investors are also trying to influence the  trillions of dollars that are in the capital markets….

Denver: That’s exactly right. That’s the whole name of the game.

Brad: Name of the game! But, what’s happened, of course, is that there is a market.  And because there’s a market, instruments and investment vehicles were going to get created.  There are a lot more options for mission investing and a lot more sophistication about it, and a lot more opportunities to do it. And what we’re seeing:  In an earlier period a number of foundations began to do what was called “negative screening.”  They  were trying to make sure that there wasn’t anything toxic or embarrassing in their investment portfolio–something that was totally contrary to their mission. Then they sort of thought about: “Well, can we put money in social investment funds… like mutual funds… which promised not to do anything bad.”

But now there are a growing number of foundations that are saying: “Well, can we take all,  or part of our endowment and proactively make equity investments in nonprofit or for profit enterprises that are actually furthering our mission?”  For example, you’re an environmental funder; you’re using grants to fund really early stage causes for which there’s no market solution. You’re using something called program-related investments– which are essentially subsidized loans for charitable purposes– that are permitted by the IRS to fund things for which there is something of a market, but not a full-blown market. And then you’re making straight-on equity investments in things like alternative energy and this is all related to your mission. So I think there’s actually a lot of potential. We’ve done some surveys on this.  60% of the foundations we surveyed said they had not done mission investing,  and they had no plans to.  So the orthodoxy is still something of a church and state. You have an investment team that invests your resources, and their job is to maximize return with which you can fulfill your charitable purpose.  They’re almost like two separate entities residing within the foundation.

Denver: What Heron did is:  they broke down those walls and made everyone part of one team. And I think that cycle you talked about,  it’s called the Gartner Cycle. And this happens in so many different cases.  I think it first happened with internet shopping, where everybody thought people would go to the internet,  and nobody would go to department stores. Of course, that’s not what happened. But then we look now 10 to 15 years later, and that’s exactly what has happened.

I think it’s also happened in online education. I remember Judith Rodin of Rockefeller was on the show.  When she was the President of the University of Pennsylvania, she said they were all terrified it was going to put them out of business.  But after a couple years, she realized that wasn’t going to happen. But now you look and you say: “My goodness, online education really is going to change the face of education in this country!”

Brad: But I’ll tell you, there’s something I still worry about with impact investing. And actually this came back to me  when Mark Zuckerberg and Priscilla Chan announced the creation of their LLC. And we got a lot of press calls on this, and the press calls were really interesting because  the angle the press were taking: they’re just doing the LLC because it’s a better tax deal. And none of them seemed to be focusing on–what I find potentially the most perplexing, or troublesome about LLCs, about impact investing… and this is the lack of transparency.  Because the way an LLC works is, it doesn’t have the same disclosure requirements as a private foundation. So, all you have to do on the tax return for an  LLC is have a line which has the gross number for your charitable expenses, and doesn’t actually break them down by each individual grant you made. What that means is that what we know about Mark Zuckerberg’s philanthropy will be precisely what he chooses to tell us. And the thing with impact investing too…because there are no disclosure requirements for impact investing… there’s no way for you to look at the tax return of a foundation and determine which of those investments in their investment portfolio were impact or mission-related, and which were not. And they don’t have to tell you that.

Denver: That’s right.

Brad: I think the potential is quite high in human nature for PR and hype around this in all these claims– that ultimately are not verifiable because you don’t have an independent data source. And the irony I find about this is: when you look at the Mark Zuckerbergs and the Silicon Valley breed of philanthropist, and you look at impact investors, these are people that to do their job and make their fortunes, rely on incredible access to data and information. But they show relatively little concern about providing data and information about their own philanthropy to make the world a better place.

Denver: I also find with impact investing, one of the paradoxes is that you’re trying to get both a social return and a financial return. Well, if you’re trying to get a social return, you would want to take whatever you’re doing and make it open source and share it with everybody. But if you share it with everybody, that would eat into your financial return. So almost embedded is a conflict which is very, very difficult to resolve.

Brad: Yeah. When I first started working in this field, I actually started with the international division of the YMCA of the USA. And I remember the guy interviewing me, a very wise mentor, he said: “Well, the one thing I really have to understand about you is: are you comfortable living with ambiguity?” And I think this whole field of philanthropy and social investment is fraught with ambiguity and contradictions. I think somebody once told me: “Look, nobody really got to be a billionaire by being a nice guy.” So the way that these fortunes have been accumulated– which have produced these great foundations– in some ways, is in pretty sharp contrast to the wonderful things these foundations are doing in the world. And there are these contradictions in impact investing.  The highly competitive, secretive nature of the investment world does sort of go against this. And I think it’s the same thing; I think it’s really about Silicon Valley. We all labor under the illusion that we have access to all this wonderful free open information through Apple devices and Google and all.  Google itself– is a remarkably un-transparent corporation.

Denver: You have to worry about stuff like that. I know that Facebook has just started this big effort with nonprofits to raise money on their Facebook pages.  But you’ll be doing all that fundraising on their platform, not yourplatform. And I don’t think that a lot of nonprofits can turn their backs on the opportunity, but that information is going to be controlled by Facebook, not by your organization.  And they can change the rules at any time they want.

Brad: What’s really interesting is… We have a very good partner in China…called the China Foundation Center.  They’re not formally connected to us, but we have a partnership relationship. And there’s a raft of new charity laws in China. And one of them actually has language in it that would require nonprofits who are raising money online, to only use government-approved online giving platforms. So, we like to think how different China is than the US, but basically you’ve got the Chinese government in China, and you’ve got Facebook in the US.

Denver: There you go… That might be our lead! Let me ask you about one last initiative at the Foundation Center…one that you just launched this summer.  It’s the website dedicated to budding young philanthropists.  Tell us about youthgiving.org.

Brad:  This is a great project actually. It came to us from a wonderfully inspiring family foundation– Frieda C. Fox Family Foundation,  and some other partners that are really actively trying to promote the involvement of young people… in some cases, as young as eight years old in becoming philanthropists. And a lot of this comes from family foundations that are dealing with successive generations in the family, and they’re really wrestling with the problem. It’s one thing for the founder, and maybe the next generation, to be dedicated to the foundation.  But how do you keep the successive ones involved? And they said: “ There is a movement, and we would like to explore this movement.  We’d like to see how big it really is, and create an information platform to connect all the different initiatives around the world on youth giving, and also to grow the amount of youth giving that’s going on.”

So, we developed this in tandem with a number of partners, youth giving foundations, and  coalitions of youth giving efforts. And we were quite surprised; we found a much wider universe of youth giving programs that are really inspiring, really exciting.  As you would expect from anything with the word “youth” in it…an enormous amount of energy. And actually the initial name of the platform and the project was going to be “youth philanthropy,” but when we did the user groups in the design process, we found that very few young people relate to the word “philanthropy”.

Denver: Interesting!

Brad: They relate to the giving; that’s what it’s about. And so we changed it to “youth giving.”

Denver: You listened.

Brad: We listened; we learned a lot. And I think that’s part of the problem with our field.  We’re very much wed to our terminology. When you think about it– what philanthropy is about, it is about giving!

Denver: It really is. Let me close on this, Brad. In this world of philanthropy of ours, is there anything that really concerns you that we’re not paying enough attention to… and you really wish more people were?

Brad: Yeah. To get back to a theme that’s been laced through our entire conversation, I do worry about the lack of transparency, and the lack of transparency around new forms of philanthropy and impact investing. Because I think the ability to turn that into great claims hype and self-promotion–especially in a world where self-promotion is the new modesty–is real. And I think we see too many examples of people who do not really want to be transparent about their philanthropic activities.  When they get in trouble in their business and their personal lives, they try to pull the rabbit out of the hat– the great grant they made for a cause.  But it’s a little bit too little… too late. So, that’s one thing.  

The other thing I worry about is  that if we look at philanthropy like an industry… and it is an industry…$800+ billion in assets is real money. If you look at Europe, there are over 140,000 of what they call “ public benefit foundations”  whose assets collectively probably surpass those of the US, and whose charitable expenses are roughly the same.  China– our partner there– has uncovered more than 3,000 of what are considered to be foundations in China. We have partners in Colombia, Mexico, Brazil, all over the world. This is a growing, hot industry. That’s great, but it’s an underperforming, inefficient industry. And I do think it’s incumbent upon the field to get its act together on information, on sharing knowledge, reducing duplication, and looking before you leap.

When you’re a newly-minted philanthropist, and you decide you’re going to save the world through charter schools, or virtually anything, it’s a safe bet that you’re not the first person who has ever done it. To make it much easier, when I think of lowering the transaction cost:  finding out who else is funding what you’re interested in, and learning what they already know– that’s something this field needs to do to really begin to punch above its weight.

Denver: Absolutely! So what do you have for us at foundationcenter.org… and some of your other websites?

Brad: Lots of stuff, probably too much stuff, where we have fertile minds  and active programmers and great staff. But one thing we have done recently, we have lots of websites and lots of sub-websites. We’ve mentioned some of them today,sdgfunders.org, youthgiving.org, glasspockets.org. But if you just go tofoundationcenter.org, we just redesigned and relaunched it. What you’ll see at the top of it looks very familiar; it’s a search bar.

And what we’ve allowed you to do… through some very ingenious data science in the back-end:  we’ve allowed you to type anything in that search bar, and you’re searching all the content in the Foundation Center.  You’re searching more that 5 million grants; you’re searching more than 140,000 foundations; you’re searching 20 years of digested news stories about philanthropy; you’re searching an open archive of over 20,000 pieces of research funded or published by foundations; you’re searching everything that’s on all these websites we talked about, and you will get to see it all in ranked order.. So if you want a quick fix…that will take you where you need to go, and you can go right to the other sources.

Denver: And the one that I go to every single day of my life isphilanthropynewsdigest.org.  I just love it. Beside your website, Brad, do you have any physical locations here in New York City and around the country?

Brad: We sure do! You can come to our office.  It’s at 32 Old Slip, which is down here in the financial district of New York, Tuesday through Friday, 11:00am – 5:00pm. We have an open library; you can search our databases for free; you can look at books…remember what those are?  and we have staff there that can help you find how to fund your dream.

Denver: Great! Well, Brad Smith, the President and CEO of the Foundation Center, thanks so much for being on the program this evening. There’s an awful lot going on in the world of philanthropy and, as always, the Foundation Center is in the center of it all. It was a real pleasure having you here.

Brad: Thank you very much!