Now’s the Time to Sunset Perpetuity
By Charlene Seidle
Philanthropy is falling short of its core duty to bend the arc toward justice and to “repair the world.” We are attracted to the perception of success through conventional funding of symptoms rather than systemic change. We continue to support models of engagement that are no longer relevant to the current generation. We apply old solutions to problems or we deny there is any problem until it is too late. We criticize those like Marc Zuckerberg who are looking at unorthodox investment models for problem-solving, seeking to apply a theory of change through all means possible, caring more about the desired outcome than any specific means or tactical tool to get it done.
Nowhere is this more troubling than in the area of endowment-building. Endowments consume capital that, from a policy perspective, should be available for experimentation and aggressive risk-taking, and in doing so they actually prevent problem-solving.
Take for example just a very few of our more pressing communal and societal challenges
- Our beloved State of Israel is a democracy struggling to take hold; our generation has received the privilege that those who came before us could only dream of, to be part of nation-building in our historic homeland and to lead with our core Jewish values and ideals. In a recent article, acclaimed Israeli journalist Ari Shavit posited that we have ten years, until 2025, to ensure Israel remains a democratic Jewish state. Time is of the essence.
- The Syrian Refugee crisis is perhaps the greatest humanitarian disasters of our time. Millions of people have been displaced, hundreds of thousands have been killed or seriously injured; we are witnessing a genocide in real times while the hollow refrain “never again” echoes from our past.
- Climate change threatens the well-being – and survival – of all who share our planet. We are seeing its sweeping effects already in real-time through scarce natural resources, widespread drought, severe flooding. Those who are the most vulnerable – the climate refugees – are on the frontlines of the rampant and profound impact of this environmental catastrophe.
- In our own Jewish communities, while we invest much of our efforts into keeping struggling institutions alive, we are losing opportunities to invest in a diverse spectrum of cutting-edge engagement opportunities that speak to this generation and the next. Judaism is the Madonna of religions – reinvention and adaptation are core to our experience, yet somehow we have lost sight of this in our efforts to keep the status quo.
Never before have we had such challenge in so many human life experiences. Never before have we had so much capital to address societal problems aggressively and with the highest tolerance for risk.
And yet. The tables have turned. Philanthropy, which should be the “ultimate outsider,” defying and challenging norms and barriers, has instead become an institution.
Every dollar we put into endowment for a specific organization or prescribed cause robs both the current generation AND the future generation.
- The current generation because these are funds not being invested in solving current social problems. Instead, we perpetuate a bad system by passing on the problems we have created.
- The future generation because significant endowment building for specific organizations or causes ascribes our institutions, solutions and priorities to generations that follow us in the most paternalistic of ways. We are telling them that we have no confidence in their ability to decide which organizations will thrive and which should be shut down. We are communicating that complacency is valued and that an organization that has long outlived its core mission of effectiveness should still be in business simply because WE think it is important now. How can we be so arrogant?
James Tobin, the economist credited with coming up with the term intergenerational equity, was a staunch supporter of endowments. He said “The trustees of endowed institutions are the guardians of the future against the claims of the present. Their task is to preserve equity among generations.” His contention is correct. His conclusion is not. In fact, it is the opposite. A focus on current endowment building in particular perpetuates intergenerational inequities as we kick the can down the road. Solving the problem or at least taking the most risk in aggressively doing so is the best equity we can create for future generations.
In an August 19th New York Times op-ed entitled “Stop Universities from Hoarding Money,” Professor Victor Fleischer points out examples of university endowments gone wrong. But we in the Jewish community should pay careful attention. These are hallmarks, portending trends that could be in our future. For example, last year, Yale paid about $480 million to private equity managers as compensation to manage about $8 billion in Yale’s endowment. In contrast, of the $1 billion the endowment contributed to the university’s operating budget, only $170 million was earmarked for tuition assistance, fellowships and prizes. Private equity fund managers also received more than students at four other endowments Professor Fleischer researched: Harvard, the University of Texas, Stanford and Princeton. Adding insult to injury, state and federal taxpayers are footing the bill to provide student grants and loans in lieu of the use of these robust endowments. And promising and talented young people were barred from attending these worthy institutions because of financial limitations.
We are already seeing signs of this troubling direction in the Jewish world. Locally, at least one of our Jewish institutions (which provides outstanding services to those it cares for) has chosen in each of the last couple of years either not to make a distribution from its sizeable endowment or to make a minimum distribution. In the meantime, vulnerable people are not being served.
Large synagogue endowments are also a troubling trend. Synagogues can play a wonderful role for some, but in our area with a synagogue affiliation rate of less than 10%, and an engaged Jewish community for whom synagogue is not their institution of choice, we are sustaining institutions and sequestering resources that may be irrelevant to the next generations. This doesn’t mean that the next generation will not be Jewishly engaged, but rather that they will express their Jewish identities in ways that are new and different and relevant to them but still rooted in the most core of Jewish values.
It’s time to sunset perpetuity. Endowments use resources that should be available for risk-taking, fast failure and iterative systemic change. The terms of endowments are often highly restrictive with assets that are paltry compared to the exacerbation of the social challenge. We may be failing the generations that follow us while we try to help them.
That leads me to a final plea. The BEST legacy we can leave is a next generation of leaders and community members that feel well-educated, well-prepared, well-supported, respected and ready to take on the challenges of their time with vigor, commitment and inspiration. Rather than spending our time accumulating endowments, let’s invest in our best human capital – and then get out of the way and let them lead!
Charlene Seidle is the Executive Vice President of the Leichtag Foundation which works to ignite and inspire vibrant Jewish life, advance self-sufficiency and stimulate social entrepreneurship in coastal North San Diego County and Jerusalem.