Friday, May 30, 2008

Spreading the Manure

"Grantmaking is less like investing than it is like horse manure...[I]f all we do is focus upon the manure--I would suggest we are working with the wrong end of the horse!"

Jed Emerson, "Horse Manure and Grantmaking," Foundation News and Commentary, May/June, 2002.

I know, I'm brave to take on a six-year old metaphor. But I heard it invoked recently and thought I should actually read the article. Who can resist the image of horse manure?

So the basic idea is that foundations can and should do more than grantmaking (i.e. the horse manure). In particular, they should put some portion of their assets, corpus, or principal to work doing good. This is the call for socially-responsible investing, program-related investments, and the use of social screens. Good idea,no argument from me.

Problem one is the metaphor. With a projected intergenerational transfer of wealth in the trillions over the next decades, horse manure just isn't the right scale. Maybe it would have worked a 100+ years ago when cities depended upon horse-drawn trollies and carted off tons and tons of manure and dead horses from the streets each day, not to speak of the barrels of urine. But that was yesterday. How about cows? No, not noble enough for philanthropy.

I'm trying to get my mind around whether the "total assets of foundations" are the horse, the farm, the farmer's capital, the land, the rain from above. And as a professor once lectured, "We've got to distinguish the inputs and the outputs."

So, the metaphor is lacking. But on to problem two. Emerson focuses on the "corpus" side of the horse -- although acknowledging briefly that foundations may have other hidden assets. Some of these are quite important and are underutilized -- the human capital (i.e. knowledge) of staff and consulting networks, institutional credibility locally and nationally, local economic development impacts, communication capacities, and accumulated knowledge. Of course, these assets are unevenly distributed and of varying quality.

Problem three is that deploying foundation capital for social purposes has some drawbacks. One of my favorites is that making "market-like" social investments chews up lots of grant dollars and administrative resources. Sometimes, it might be more efficient to just make larger grants -- although this would diminish the salutory effects on nonprofits of paying back loans. A second challenge is that many relatively safe social investments produce "lite" social returns. This creates a real counting problem if we are honest about it. A third challenge is that program-related investments simply work better for projects involving real property -- housing, facilities, buildings. That's a good thing but it may skew foundation investments toward place-based development whose "people" impacts are sometimes questionable.

In short, social investing shares some of the philanthrocapitalist aspirations and shortcomings discussed in my last entry, Philanthrocapitalism to the Rescue?

Emerson concludes: "After all, at the end of the season when we come to harvest, our goal is to have the philanthropic equivalent of nutritious produce, healthy farms and sustainable communities--not the county's largest pile of manure."

I thought we spread the manure at the beginning of planning season. Never mind. One thing remains the same -- foundation hubris that it's about us.


Ron Robins said...

Interesting post. Nonetheless, I thought you and some readers might like to know about my site. It covers the latest global news and research on socially responsible investing. It's at

(I've been following socially responsible investing for about forty years.)

Good luck with your work. Best wishes, Ron Robins

Bob Giloth said...

Thanks for resource