Strategic philanthropy reconsidered: Rationality and the hiding hand

Helmut K. Anheier and Diana Leat respond to Paul Brest’s “Strategic Philanthropy and Its Discontents”.

Introduction

In a recent paper one of the leading intellects and practitioner of philanthropy, Paul Brest, writes:  “The case for strategic philanthropy ultimately is based on the belief that the intentional, systematic, and rational pursuit of an outcome increases the chances of achieving it.[1]”  Underscoring this conviction is the use of terms like  `flight plan’ and related imagery for describing the sequence of decisions and actions towards intended goals or results.  It is the clearest statement of what strategic philanthropy is all about, and for this reason alone deserves a critical review.

Next to the strong premise of strategic philanthropy that the rational pursuit of intended outcomes along laid out paths leads to rational results, is a certain understanding that strategic philanthropy addresses, if not solves, some of the problems that plague other forms of philanthropy, be it charity or some other conventional version.  Whether strategic philanthropy is indeed such a remedy will be the topic of the second part of this blog.  Here we will focus on the notion of rationality.

Rationality and Philanthropy

At first sight, the premise of strategic philanthropy, i.e., the intentional, systematic and rational pursuit of an outcome, seems like a rather modest claim to make, and one wonders if, indeed, other forms of philanthropy would rest on fundamentally different grounds.  But underneath this modesty is a strong belief in rationality, of the mastery of the world, to evoke a Weberian image, and in the sense that some form of orderly change is possible if planed and executed well.

A statement in the concluding section of the paper, however, goes deeper, as Paul Brest contrasts his insights with the Burkian [2] fear that society, with its overwhelmingly complex tapestry of networks, institutions and organizations, its deeply embedded values and inert practices, lies “beyond the grasp of policy makers, and that heroic efforts to improve matters can have disastrous unanticipated consequences.” For the strategic philanthropist, action is better than no action; and any “flight plan” — however insufficient for navigating the complex and messy patterns of ever changing modern societies — is better than no plan at all. Strategic philanthropists can identify and grasp concrete facets of social causality, i.e., a ‘theory of change,’[3] and they can use them to achieve the desired outcomes. This seems to be the core premise of the rationalist approach to strategic philanthropy.

The Hiding Hand and Philanthropy

We would like to offer a different interpretation, and one that puts the belief in rationality in context, including its comparative advantage over other ways of philanthropic conduct such as charity or passion. It is Hirschman´s “The Principle of the Hiding Hand[4],” and to appreciate the significance of this principle, we should recall that strategic philanthropy, simply put, is a set of decisions and actions intended to achieve some desired outcomes under conditions of uncertainty and through ways and means that are beyond quick fixes and that require some level of flexibility, innovativeness, even creativity.  If that were not the case, we would not have to be strategic in the first place and could apply standard operating procedures.

Hirschman observed various cases of projects being started that from hindsight looked unrealistic, over-ambitious, dilettante even deceitful.  Past examples would include many of the infrastructure projects in 19th century America (‘digging a tunnel through that mountain is easy, and the new rail line will open up vast markets for industry to ship their products West’) or development projects in 1960s Africa or Asia (‘if we engage in import substitution, we will achieve really high growth rates and become an industrial economy in no time’).  Current examples might well include the energy transition in Germany (‘if we shut down nuclear plants, we will get green energy’), re-energizing the idea of Europe (‘if we have a new narrative, the European project will move forward’) and many others like water conservation plans in California, combatting climate change or rebuilding the Imperial Palace in central Berlin.

Hirschman argues that if the project planners had known in advance all the difficulties and troubles that were lying in store for the project, they probably would never have touched it – the Burkian fear Paul Brest evoked above.  But why did they, when not doing it seems more rational?  Put differently: why do some people – especially entrepreneurs, planers, politicians, and, yes, philanthropists – take on tasks that seem near impossible, that carry high risks and huge costs of failure? That is where the principle of the hiding hand comes in.  Hirschman writes:

          “Creativity always comes as a surprise to us; therefore we can
       never count on it and we dare not believe in it until it has happened.
          In other words, we would not consciously engage upon tasks
           whose success clearly requires that creativity be forthcoming.
        Hence, the only way in which we can bring our creative resources
         fully into play is by misjudging the nature of the task, by presenting
      it to ourselves as more routine, simple, undemanding of genuine
           creativity than it will turn out to be.[1]”

This is the “flight plan” of strategic philanthropy:  we can overcome political gridlock in the US, and we have a plan.  We can mitigate the adverse effects of climate change, and we have a plan. We can improve primary education, and we have a plan etc.

For Hirschman, by necessarily underestimating our creativity or resourcefulness ex ante, we may well underestimate to a roughly similar extent the difficulties of the tasks itself.  In a way, we trick ourselves “by these two offsetting underestimates into undertaking tasks which we can, but otherwise would not dare, tackle.[2]”

The principle is more than what sociologists call the preventive power of ignorance[3], or what in German literature has become known as ‘the ride across Lake Constance,’ where in a clear and bitterly cold winter´s night, a lonesome rider in search of a ferry to cross the lake mistakenly thinks that the wide snowy expanse he crosses is the flat land leading to the shore, and only to discover afterwards that he actually crossed the frozen lake itself.[4]  We are reminded of Karl Weick’s[5] work on the collapse of sense making under uncertainty, and his example of a group lost on a mountain, finding and using a map to escape — a map that turns out to chart terrain somewhere else. It is also different from the ´fantasy plans´ sociologist Lee Clarke[6] writes about, i.e., unrealistic plans made believable by the interplay of special interests and politics (e.g., the evacuation of Manhattan should the nuclear reactors on Long Island meltdown).

Hirschman points out something different and altogether more positive:

           „While we are rather willing and even eager and relieved to
        agree with a historian’s finding that we stumbled into the more
         shameful events of history, such as war, we are correspondingly
             unwilling to concede—in fact we find it intolerable to imagine—
        that our more lofty achievements, such as economic, social or
          political progress, could have come about by stumbling rather
          than through careful planning… Language itself conspires toward
          this sort of asymmetry: we fall into error, but do not usually speak
             of falling into truth.[7]“

For us, this is the key to strategic philanthropy:  it kicks off a process towards some desired goal without fully knowing how to achieve it, nor knowing all consequences of intermediary steps or achieving the actual outcomes.  We may know some aspects of what is involved, be more certain about some facets or another, and we may even believe in the flight plans and metrics put forth, but we are engaging in a rather similar double underestimation.

In other words, strategic philanthropy means letting ourselves be tricked by two offsetting underestimations: first, that it can be done within our means and in known ways, and, second, that it is not that difficult after all and all can be achieved if only we are good at what we do. We argue that the dual independence of foundations from market considerations and the ballot box, gives them immense freedom to letting themselves being tricked.  No dominant stakeholder keeps foundation ambitions in check – and this is the source of their true resourcefulness and innovative potential, as we have argued elsewhere.[8]

Could it be that some or perhaps many of the proud achievements of philanthropy were of this kind:  taking on seemingly impossible tasks but believing they are achievable, while assuming that we have what it takes?  Would Rockefeller have founded universities otherwise?  Would the Green Plan have found its way to Africa, Ford and others funded the Civil Rights Movement, or some foundations supported the peace processes in Northern Ireland or the Middle East?  Would the various and often youthful strategic philanthropists in the Bay Area today go about their project if they really knew what was involved?  Hirschman would argue that the Hiding Hand protects latter-day venture philanthropists as it did the Rockefellers and Fords in times past.

Strategic philanthropy involves uncertainty.  And like the Weberian Protestants taking comfort in earthly successes as a sign of God´s grace[9], so do today´s strategic philanthropists look for reassurance in what they know best and made them successful:  performance metrics and plans of many kinds, based on their experience in the world of business, accounting, controlling and computer programming.  The emphasis on metrics may ultimately serve more as some form of psychological insurance policy under the Hiding Hand principle than a truly needed measure of performance or goal attainment.  As measurability approaches ‘plan-ability,’ the strategic becomes less important. Strategic planning acts as both encouragement (to attempt the task) and reassurance – if nothing else, a ‘strategy’ assures the Board, the donor and other stakeholders that things are under control: ‘we know what we are doing’, this is ‘considered’ and ‘professional’.

There is cultural component to strategic philanthropy as well. It brings a certain ‘can do’ spirit and institutional openness to the world of philanthropy – and perhaps that is one reason why it caught on more in the United States than in other parts of the world.  It also caught on in the UK, but more as part of the ‘audit society’ Michael Power[10] writes about and Third Way – Big Society rhetoric than the entrepreneurialism that often drives US strategic philanthropy.[11]  On the European continent, there may have been some debate, but few foundations would see themselves as strategic philanthropies, let alone act that way.[12]

Indeed, for the principle of the Hiding Hand to work, strategic philanthropy requires certain context conditions for creativity and innovations to take place and take hold while letting philanthropists be tricked.  It means that strategic philanthropy is more open floor architecture than flight plan, and characterized by some openness for re-inventing the wheel at least once if need be.  It requires a culture of accepting failure while rewarding trying as much as success itself. [13]

In terms of social science, it also means that many of the insights from organizational studies and sociology about innovations apply to the field of strategic philanthropy, as does policy analysis.  It would be worthwhile to formulate core propositions about what kind of organizational settings and structures are likely to create encouraging conditions for strategic philanthropy, just as it would be productive to apply principles of policy analysis on how best to take advantage of the Hiding Hand principle.

For if the dual under-estimation of creative potential and risk of failure are fertile ground for strategic philanthropy, by implications there are three other ideal-typical combinations possible, as the hiding hand can be present, partially present or absent altogether.  These combinations may be less advantageous for strategic philanthropy and indeed point to deficiencies, as Table 1 suggests.

An example of strategic philanthropy at its best is the Community Foundation for Northern Ireland, which managed to bring together people from opposing groups during the Troubles. Another example is the Stavros Niarchos Foundation’s creation the hugely ambitious cultural centre in Athens, Greece.  By contrast, hype philanthropy present itself as the solution, as some European foundations did in 2009 when they announced their very own war on poverty. Timid philanthropy prefers to err on the side of caution, such as the foundations that refuse to fund the street magazine ‘Big Issue’ in Britain. Finally, dilettante philanthropy is one that genuinely believes that they have the solution to problems that have evaded generations, such as the Bill and Melina Gates Foundation in its earlier days.  Some might also describe Mark Zuckerberg’s belief that his gift can reform the school system in New Jersey as an example of this kind of philanthropy.

Of course, each of the types in Table 1 deserves much for attention, and comes with many implications yet to be explored.   One implication may well be that the Hiding Hand principle helps understand why foundations tend to put in place under-capitalized projects.  Another insight would be why many foundations have no clear exit strategy when embarking on complex longer-term projects:  they simply do not know, and knowing could well be counter-productive and invite Burkean ´better to do nothing´ reactions.

Concluding Thoughts

In conclusion, we argue that there is more to strategic philanthropy than a belief in rationality and the laid-out plans that come with it.  Strategic philanthropy is more process involving trial and error than putting in place known procedures.  It is also more than the intentional, systematic, and rational pursuit of an outcome, as Paul Brest writes,[1] and there are other ways that increase the chances of achieving objectives: through the creative acts of ‘inventing and re-inventing the wheel’ as we are ‘falling towards success,’ as Hirschman would have put it.

References

[1] Brest, P. (2015, April 27). Strategic Philanthropy and Its Discontents. Stanford Social Innovation Review. Retrieved from www.ssireview.org/up_for_debate/article/strategic_philanthropy_and_its_discontents

Brest, P., & Harvey, H. (2008). Money Well Spent. A Strategic Plan for Smart Philanthropy, New York, NY: Bloomberg.

Frumkin, P. (2006). Strategic Giving. The Art and Science of Philanthropy. Chicago, IL: Chicago University Press.

Porter, M. E., & Kramer, M. R. (1999). Philanthropy’s New Agenda: Creating Value. Harvard Business Review, 12, 295-30.

[2] Edmund Burke (1729-1797) was an English political philosopher and statesman who is often seen as laying the foundations of modern conservatism. Lanford, P. (Ed.). (1981-). Writings and Speeches of Edmund Burke (Vols. 1-9). Oxford: Clarendon Press.

[3] Theory of change is a term used in philantropic practice to refer to the assumptions, factors and actions needed to bring about intended outcomes.

[4] Hirschman, A. O. (1967). The principle of the hiding hand. National Affairs, 6, 10-23.

[5] Hirschman, 1967, p. 13.

[6] Hirschman, 1967, p. 13.

[7] The term preventing power of ignorance describes the phenomenon that people underestimate the amount of norm violations and this ignorance concerning the true number stabilizes the system of social norms. Popitz, H. (1968). Über die Präventivwirkung des Nichtwissens. Dunkelziffer, Norm und Strafe. Tübingen: Mohr.

[8] Schwab, G. (1828). Der Reiter und der Bodensee. In Gedichte. Erster Band (pp. 364-366). Stuttgart: Cotta.

[9] Weik, K. (1995). Sensemaking in Organizations. Thousand Oaks: Sage.

[10] Lee, C. (1999). Mission Improbable: Using Fantasy Documents to Tame Disaster. Chicago, IL: University Of Chicago Press.

[11] Hirschman, 1967, p. 13.

[12] Anheier, H. K., & Leat, D. (2006). Creative Philanthropy. London: Routledge.

Anheier, H. K., & Leat, D. (2013). Philanthropic  Foundations: What Rationales?. Social Research, 80:2, pp. 449-472.

[13] Weber, M. (2002). The Protestant Ethic and the Spirit of Capitalism: and Other Writings. (P. Baehr & G. C. Wells, Eds. & Trans.). London: Penguin Books. (Original work published in 1905)

[14] Power, M. (1997). The Audit Society. Rituals of Verification. New York, NY: Oxford University Press.

[15] The Third Way was a position of the labor governments in the late 1990s that viewed market, government, and voluntary associations in a potentially synergistic relationship in solving social welfare problems of advanced market economies. The Big Society policy of the Conservative Party in Britain in the 2010s positioned the voluntary sector as a constituting element of society as such, a vision which borrows heavily from the US system of self organization.

Prochaska, F. K. (1990). Philanthropy. In F. M. L. Thompson (Ed.), The Cambridge Social History of Britain 1750-1950, Vol. 3, (pp. 357-394). Cambridge: Cambridge University Press.

Kendall, J. (2003). The Voluntary Sector: Comparative Perspectives in the UK. London: Routledge.

Ishkanian, A., & Szreter, S. (2012). The Big Society Debate. A New Agenda for Welfare?. London: Edward Elgar.

[16] Anheier, H. K. (Principal Investigator) (2015). Positionierung und Beitrag deutscher Stiftungen: Erste Ergebnisse einer repräsentativen Umfrage. Hertie School of Governance & Universität Heidelberg (Centrum für Soziale Investitionen), Briefing Paper 1.

[17] Anheier, H. K., & Leat, D. (2006). Managing creative philanthropy. In Creative Philanthropy (pp. 216-228). London: Routledge.

[18] Brest, 2015.