September 2008
Philanthropy as risk capital
One of philanthropy’s greatest strengths is its freedom to take risks,to fund important yet unpopular causes that government or the private sector cannot or will not support, and stretch the boundaries of what is possible.
If someone asks you what words you would associate with the term “philanthropy”, the chances are that you might say “wealth”, or “giving”. It’s unlikely, however, that you would say the word “risk”.
Whilst understandable, that would be a mistake. People often don’t realise the invaluable role that philanthropy can play in taking adventurous steps that others cannot – or will not.
Today, for example, the combat of AIDS is a mainstream cause, one championed by many. Yet, as recently as the early Eighties, it was a virus shrouded in fear, and whose victims often died in shameful silence. Part of the reason for this shift is the courage of donors moved by a keen sense of social justice, who put up their dollars, pounds, euros or yen while their governments initially refused to. Donors such as Julie Toskan Casale, the founder of MAC Cosmetics, whose company has raised almost $130million for its AIDS Fund.
A valid critique of philanthropy is that it is unaccountable to the general public. Whilst we share those concerns and encourage philanthropists to their work with the greatest transparency and in broad consultation with stakeholders, this “flying below the radar” function can be particularly useful in addressing unpopular causes. Governments by necessity are accountable to the general public for how they spend tax revenue. This leads governments often to fund those initiatives and approaches with a proven track record of success. That is the correct and responsible thing to do. But herein enters an important role for philanthropy – to fun those risky, new ideas and support them in the incubation phase – proving the seed capital, supporting the evaluation of the new models, correcting flaws. And when ready delivering those new ideas to other funders, including government.
If we focus philanthropy only on the proven, the accepted and the known, we miss out on one of philanthropic capital’s most important functions. On Wednesday, 15th October we will be hosting a discussion with philanthropists on the topic of risk under the title: Where Funders Fear to Tread. Please be sure to visit our web site in the upcoming weeks for a transcript of that conversation.