Entrepreneurial Philanthropy
Monday, April 23, 2007 / 8:30 am - 10:00 am
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Moderator
Betsy Zeidman, Director, Center for Emerging Domestic Markets, Research Fellow, Milken Institute

Speakers
Teresa Heinz Kerry, Chairman, The Heinz Family Philanthropies
Michael Milken, Chairman, Milken Institute; Chairman, FasterCures / The Center for Accelerating Medical Solutions
Don Randel, President, Andrew W. Mellon Foundation
Carl Schramm, President and CEO, Ewing Marion Kauffman Foundation

"A problem is nothing but an opportunity looking for a solution." Quoting her late husband, Sen. John Heinz, Theresa Heinz Kerry captured the aggressive and altruistic mindset driving numerous philanthropic foundations and individuals to do their part in solving today′s biggest -- and smallest -- societal ills.

Entrepreneurial philanthropy, said Michael Milken, is about "individuals having the opportunity to change the paradigm." And beyond just individuals, "foundations historically have been the most critical institutions in advancing society," said Carl Schramm of the Ewing Marion Kauffman Foundation. Whether the issue is the environment, health care, education or the arts, entrepreneurial philanthropists and foundations are continually looking for better, quicker, and more effective ways to aid their cause.

In 1999 researchers at Boston College predicted that over time more than $41 trillion of charitable donations would come from World War II and baby-boomer generations. Although that number seems massive, the total is nearing the mark eight years later. Today charitable giving exceeds $260 billion a year in the United States. The largest portion of this sum has come from wealthy, generous Americans. Individuals have donated more than four times than the amount of foundations and corporations -- and fewer than 10,000 families have contributed more than 20 percent of all donations.

Don Randel of the Andrew W. Mellon Foundation captured the most important theme of the panel: individuals do make the difference. Government institutions, burdened with bureaucratic, budgetary and personnel restrictions, seemingly have not been able to fully address and solve numerous social issues, such as inadequate public education or unaffordable health-care coverage. And Milken noted that institutionalized structures are difficult to manage. As a result, many needs are left for individuals and foundations with greater physical and financial freedom. For example, Schramm noted that the Ewing Marion Kauffman Foundation helped construct 85 new schools in just two years by taking a business approach and starting a REIT and building bloc fund to do so. One would be hard-pressed to find this pace of achievement from any school district functioning on its own.

The panel touched on the clear dichotomy between massive, slow, cash-strapped government and small, fast, cash-rich individuals. Yet members also emphasized that the key to entrepreneurial philanthropy is finding how to best utilize and spend large sums of money to enact substantial change and, more important, not to do harm. The key to this, as Randel said, is investing in the right people and supporting the best ideas. Milken supported this sentiment, arguing that "the role of entrepreneurial philanthropy is to identify the individuals who have the ability to make these things happen." Beyond this, he said, it is the role of philanthropic foundations and individuals to accelerate the speed at which other institutions, such as government and universities, research and solve problems. As foundations and individuals unveil and discover solutions, larger institutions can copy them to effect more change.

"Entrepreneurial philanthropy isn′t about inventing new things to cure," said Randel, adding that "it′s about finding more effective ways to get people to think about things that matter in life itself." Some "things" that the panelists have been concerned with are the arts, an area the Andrew W. Mellon Foundation continues to support; health care, an issue the Milken Institute has addressed; and education, a subject in which the Heinz Family Philanthropies invests.

Panelists emphasized the important reality that entrepreneurial philanthropy has in effect transformed charity into a business. Simply put, philanthropy is a business, and -- as any entrepreneur or business person would -- individuals and foundations continually search for innovative ways to make their services more effective for and responsive. To do this, charitable giving has increasingly become more targeted, either toward a specific issue, such as cancer (Milken), or a geographic area, like Pittsburgh (Heinz). In addition, philanthropy is now being put to the same tests as business, in terms of accountability, transparency, metrics of success and return on investment.

The biggest challenge to the effectiveness and longevity of entrepreneurial philanthropy, however, is leverage and scale, and each panelist was asked why the presence of widespread philanthropy was, for the most part, only found in the United States. Citing the presence of tax credits for charitable giving, Theresa Heinz Kerry noted that philanthropy "is the great strength of America." Schramm agreed, noting philanthropy is what is "unique about America′s foundations and its essence," shaped by a history of exceptionalism.

Milken pushed the conversation a step further, arguing that the real key to the future of entrepreneurial philanthropy will be to persuade other countries to jump on board. "Can we see the international community doing similar things that we see in the U.S.?" he asked. The panelists agree that the opportunity exists; with the 1,000 richest people in the world controlling more than $3.5 trillion in assets, the ability of a few rich individuals to enact significant changes is clear, and with issues such as education or health care becoming more interdependent and international, it is likely -- and necessary -- that philanthropists around the world collaborate.