As charities around the world face the biggest threat to their existence, there have been many calls for foundations to throw money at the problem to keep charities afloat, or to eliminate fundraising staff. But would doing so cause more long-term harm? Cherian Koshy says we need a ‘Ulysses Pact’ to ensure foundations and fundraising staff are still around to help future generations though their emergencies.
My daughter was born in 2016. On New Year’s Eve 2099, she will be 83 – the same age her grandmother is now. Perhaps she will watch the fireworks that usher in the 22nd Century with her grandchildren or great-grandchildren on her knee.
The date 2100 seems all at once so distant and yet so eerily close. I certainly will not be here to see it, but as we grapple with the uncertainty of our current events, it’s hard to imagine how my daughter, then, will think through the decisions we make today
A culture of now
I work in the arts so we operate based on a performance season, and I live in Iowa so we talk about a political cycle; but fashions have a season, businesses operate on a quarter, and schools on their own year. On the internet, relevance is determined matter in minutes or seconds.
For decades, economists, scientists, tech gurus, and philosophers have discussed the challenge of ‘short-termism’. As individuals, we tend to think and want short-term results. As nonprofit organizations, we look at fiscal years and strategic plans that might be, at best, three-to-five years out. As a culture, we are focused on the now.
When a crisis strikes, whether it be an economic one or political one or a health-related one (or potentially all three as events of 2020 indicate), we invite “temporal exhaustion” into our thinking. This term, coined by sociologist Elise Boulding, describes how our concern for today makes us incapable of thinking about the future. Today becomes more important than tomorrow. Tomorrow is more important than next year. Twenty, 50, or 100 years from now are not considered.
Short-termism manifests itself in many ways, such as desperation fundraising, arguing for endowments to draw down against principal, eliminating fundraising activities from the nonprofit etc. This type of thinking has culminates in several articles and blog posts circulating the philanthropic sector.
Before addressing a more coherent guide for thinking critically in times such as this, it is essential to dispel a few of the arguments made in these articles:
1 Have funders really stuck to the five per cent threshold?
Many of these authors argue that foundations have rigidly preserved a five per cent threshold of giving, preserving perpetuity over an immediate need. This statement is patently false and an article in the Chronicle of Philanthropy, citing a Foundation Source study, contradicts their claims, saying that “foundations gave more than twice the five per cent minimum…continuing a trend seen over the last five years among smaller and midsize grant makers”. Both small (<$1,000) and large ($100,000-$1 million) gifts grew the most.
The primary misconception – as King McGlaughon, President and ceo of Foundation Source, writes in the Stanford Social Innovation Review – is that private foundations are sitting on tens of millions or even billions of dollars in unused assets. King confirms that, based on IRS reporting of the more than 80,000 private foundations in the US, two-thirds have endowments of less than $1 million, but the median is actually $500K. The truth is that 98 per cent of foundations have less than $50 million in assets. Foundations with less than $10 million in assets gave out nearly 10 per cent of their assets in 2018. Foundations are helping now and open calls to create social pressure on them do nothing more than create an unhealthy ‘us versus them’ mentality.
2 Did foundations really stop giving after the last recession?
Next, many authors argue that a drop in giving at the end of the last decade’s recession occurred while money remained in foundation assets. Those same resources or (using one author’s logic and numbers of $30 billion) gave out a whopping $1.5 billion in grants each year for each following year contributing a minimum of $18 billion dollars to the nonprofit sector in the following 12 years. This is assuming no new money and no growth in giving, but we can easily tell from Giving USA that that number is much, much higher. In fact, giving to nonprofits from all institutional sources grew between 2017 and 2018 to just under $76 billion, while gifts from individuals decreased.
“It is not wrong to be emotionally connected to a current problem. It is illogical to make such decisions that have long-term irrevocable consequences with imperfect information.”
Pretend for a moment that the authors are correct about a five per cent giving ceiling. That means the amount in endowment corpus supporting a minimum of one quarter of all philanthropic activity in the country is actually approximately $1.5 trillion. The reduction of principal assets or an increase in payouts not only put foundation jobs at risk now and in the future but also hampers the foundation’s ability to partner with nonprofits over the coming years. This is the existential crisis to be concerned about above all else.
3 Do today’s problems take priority over future problems?
And here lies the truest problem with these arguments: the assumption that the greatest problem is today’s. Today’s problems are the most felt; but that does not necessarily make them the most important. To make such a statement would require God-like omniscience and omnipotence to place ourselves as the universal arbiter of importance. This is not to discount the problems of today. They are in fact problems with dire consequences, many of which are life and death.
In behavioral economics, the term often used is “present bias” or “time discounting”. So pernicious is this effect on our brains, that scientists have documented the fact that the closer we are to the present, the less rational and the more emotional we become (as proven by grocery buying!). It is not wrong to be emotionally connected to a current problem. It is illogical to make such decisions that have long-term irrevocable consequences with imperfect information. In the current economic environment, the act of reducing principal reserves is actually hyperbolic discounting, since the foundation would be asked to increase payouts as principal has shrunk, in some cases substantially.
Take the example many authors have used – if we had drained the reserve in 2008 or expended all medical research for H1N1, where would we be in the subsequent years or today? There will be novel problems next year, ten years from now, and a hundred years from now – problems that the foundations of today will help solve. We need for them to preserve the resources that we cannot, so that we can collectively plant trees we will never see yield fruit.
Three problems with short-termism
There are three challenges to short-termism that impact nonprofits and should guide our decision-making today.
1 Short-termism invites institutional corruption
In businesses, short-termism is neglecting long-term investment. As Harvard’s Malcolm Salter argues, institutional corruption may not be unlawful but it weakens organizations’ ability to achieve espoused goals and erode public trust. In the nonprofit sector, the assumption behind these manifestations is that every nonprofit ought to continue to exist and exist in its exact form prior to the current crisis – what I’m affectionately calling “BC”.
In fact, this current crisis reveals areas where overcrowding and duplication exists. It also creates the opportunity for mergers and consolidations that would create greater impact and efficiency through combined resources and talents. The funding calls today from both businesses and nonprofits are knee-jerk salvation cries. In most cases, these are legitimate concerns that should be addressed. However, it is essential to recognize that not all nonprofits (like businesses) have operated in a way deserving of continued funding. Foundations have obligations to their founders/missions/directors that should continue to guide their decision-making process as they further the public good. Funding in the manner suggested by some authors creates a moral hazard.
2 Short-termism colonizes the future
Prior to the founding of the United States, Scottish philosopher David Hume wrote, “The origin of civil government is that men are not able radically to cure, either in themselves or others, that narrowness of soul, which makes them prefer the present to the remote.” In Hume’s view, representative democracies were designed to protect the future, potentially at the expense of the present. Our presentism has many causes, but the effect is that the people of tomorrow – whether they are citizens of our country, future citizens, or global citizens – are granted no claims and given no weight. As Australian philosopher Roman Krznaric writes: “We treat the future like a distant colonial outpost devoid of people, where we can freely dump ecological degradation, technological risk, nuclear waste and public debt, and that we feel at liberty to plunder as we please.”
The use of resources today is precisely the same argument made by those opposed to solutions for global problems such as pollution and climate change. The Avot of Rabbi Nathan reminds us to “never be afraid of work that has no end”. We are all working on issues that have no end. Disease, homelessness, hunger, the arts and culture, are all problems that will always be with us. We will never win this fight. No amount of money today will solve all of the world’s problems today, nor will they prevent future unknown crises to come. Our job is to work together to keep on fighting for better not “solved”.
3 Short-termism is unethically self-interested
While it is potentially possible to argue that individuals may be ethically self-interested, such an argument is impossible for nonprofits. For social causes, each nonprofit believes it is best off in the short term by minimizing their personnel costs or raising short-term capital. In the long term, wisely chosen cooperation can pay off way beyond its initial costs and increases efficiencies.
It is important to remember that nonprofits are designed to be instrumental not inherent; nonprofits have no value in-and-of themselves. They only have value only if they serve some common good and some defined beneficiary. It is precisely the principles of short-termism that short-circuit good fundraising and management practices, which provide not just organizational sustainability, but also contribute to the sustainability of the entire philanthropic sector.
No nonprofit is an island, so when the sector appeals to short-termism, the perception is that the sector is incapable of being effective in doing its work.
And herein lies the largest problem: the advocacy of some entities toward short-termism continues to erode the already low levels of public trust in the nonprofit sector. The best that can be said of NGOs in the current environment from the lastest Edelmen Trust Barometer is that they are ethical but incompetent. By pitting funders against nonprofit practitioners, or fundraisers against the donors, we continue to erode the public’s faith that collaborative solutions can be found. We all lose in this reckless game of Hungry, Hungry Hippos.
One final, and very important, caveat is that it is appropriate for funders to give more, whether as individuals or institutional funders – certainly as a fundraiser, I encourage it. But at a time of economic peril, it is important to not try to draw lines of winners and losers. Many are anxious and worried, institutional staff included. Where I think the line should be drawn is at nonprofits asking funders to make irrevocable decisions that would imperil their ability to conduct future help. The line should be drawn at eliminating fundraising departments/staff in times of crisis. Institutional donors are uniquely situated to be able to provide much needed resources far into the future, unlike businesses, governments, or some individuals.
Towards a framework for long-term thinking and sustainability
I take the view that the moral obligation to future generations is relatively incontrovertible.
With that in mind, in 1978 Dr. Boulding proposed an elegantly simple approach that asks us to expand our idea of the present to two hundred years (one hundred years forward and one hundred years backwards). In her view, the 200-year present “will not make us prophets or seers, but it will give us an at-homeness with our changing times comparable to that which parents can have with an ever-changing family”.
It’s time for those addressing the important issues of the day to work together to sign a Ulysses Pact that binds us to the 22nd Century. As you’ll recall, Ulysses wanted to hear the Siren’s song. He ordered his men to put wax in their ears and bind him to the mast so that he would not be able to jump into the sea. He then ordered them to not change course and to attack him if he escaped his bonds.
So too do we need to follow the examples of Ulysses and more modern examples such as the Welsh Minister of Future Generations (Hungary has one too). Oxford Universityhas created the Future of Humanity Institute. Look for forthcoming books from Roman Krznaric and Toby Ord on long term-thinking or read Go Long: Why Long-Term Thinking Is Your Best Short-Term Strategy, by Dennis Carey and others, for a business perspective.
In our organizations, we need not necessarily create an office of future generations next to the fundraising office. However, it is important for our evaluative tools as an organization to exceed the oft-used yearly financial plan or five-year strategic plan to assess the impacts of our organization on future generations, 20, 50, or 100 years hence. In practice, this might mean creating a Ulysses pact amongst our staff as we might set a seat for a beneficiary at a board meeting.
There is also amazing inspiration from a wide variety of other sectors, especially art and music. Longplayer is a self-extending composition that started in 2000 and will not repeat until 2999. Future Library is a forest that will supply paper for books to be printed in 100 years. Wu-Tang Clan has an album that my daughter can enjoy on her 87thbirthday; it’s not legally permitted to be distributed until 2103.
Without a keen focus on long-term thinking and sustainable structures towards future generations, we will always be tempted to heed the siren’s call of short-termism. For my daughter’s sake, I hope we bind ourselves to the mast, hearing its call but never succumbing to it. The children of the 22nd century depend our restraint.
- Cherian Koshy is development director at Des Moines Performing Arts and a member of the Rogare Critical Fundraising Network.
Other blogs by Cherian Koshy:
- OPINION: ‘The end of donor-centred fundraising and the last fundraiser’
- NEW IDEAS: The fundraiser’s duty to ask – a philosophical rationale