Gotta Go Through It
After 13 years in the community foundation field, I have reached my personal take-off point. You know the place … you have what you need to go beyond the next incremental step and really take off. It’s risky but, oh, so rewarding. I am emboldened.
When did my turning point happen? It was mid-September at the national conference for community foundations in New Orleans. Yup, your run-of-the-mill professional development experience. So for everyone out there who dismisses the importance of professional development, I can personally vouch for its value, even for old timers like me.
Here are my musings:
I want to change the world, but I always get stopped by the “money wall.” How long must we wait for money to catch up with our dreams?
This quandary got me reminiscing about a book I used to read to my daughter, We’re Going on a Bear Hunt by Michael Rosen. When faced with a challenge like the money wall, I picture the family latching on to those famous lines, “we can't go over it, we can't go under it, we gotta go through it!”
And that’s the challenge – how do we go through the money wall? In the community foundation field, my money wall is nearly 100 years old. Since 1914 we have been working off some basic, steady and strong principles: Endowment. Perpetuity. Spending policy.
Endowment is powerful – money is invested to support year-to-year projects, programs scholarships and operations. The original charitable gift that creates an endowment is known as the corpus, and as an institution we pledge to protect the corpus in perpetuity.
Perpetuity – we’re talking forever. How can we do that? Perpetuity is possible because of a framework that is disciplined, thoughtful and patient, and it involves certain procedures and policies.
Spending policy – this self-discipline is crucial to maintaining an endowment in perpetuity. Each year we only distribute a small portion of an endowment’s value as grants. By prudently investing any earnings above the amount that is distributed, over time the endowment will continue to grow, and grants will exceed the original gift that created the endowment.
Truth be told, I have always been a fan of building “patient capital.” But what if your aspirations and opportunities outpace your spending policy? What if the need for community capital is so great that we need to deploy a gush of charitable dollars now, rather than a slow trickle over time?
I am beginning to see a place for both approaches in my world: patient capital that adheres to the key principles of a perpetual endowment, but balancing it by deploying charitable capital in a way that incites us to do more – and be more – than we might have ever thought possible.
So how can we do it? This question first occurred to me when I arrived in Louisville almost four years ago. While our community foundation has an admirable $350 million in assets and distributes over $30 million in grants each year, our discretionary grantmaking represents just about $500,000 of that total amount. That’s quite a money wall. Most of our grants are restricted or advised by our donors and distributed to charities that match their interests.
That means little money is left for the dream. So how can we assure that this great city stays great? How do we care for our most needy? How do we provide more capital for entrepreneurs? How do we make sure people have access to amenities like a great play, an inspiring jazz concert or enchanting opera? How do we make sure that our schools teach, engage and prepare our children for what comes next? And how do we support a community that is green, clean and violence-free?
We are fortunate to live in a community of incredible human capital, but we need to think creatively about our financial capital and unlock it for social good. What if investment portfolios weren’t just a means to an end but helped us achieve that end? How can we put money to work in the community that looks for a social, economic or environmental benefit as well as a financial return?
It’s time to better leverage our assets, consider reinventing our revenue strategy and turning the idea of endowment on its head. Our foundation is exploring ideas for deploying capital right here in LOUISVILLE in a fresh way, reframing the concepts of investing and grantmaking.
Could our community foundation become a community accelerator? Could we change the world by first changing our hometown? It’s a big question, but we gotta go through it.