Microsoft founder Bill Gates changed philanthropy on the way in and again on the way out. Gates learned from and built on the foundational organizations launched by Andrew Carnegie, the Rockefeller family and Edsel Ford. The manner in which he is sunsetting the Bill and Melinda Gates Foundation might be a lesson for future high net-worth philanthropists.
That’s what Amir Pasic, Ph.D., the Eugene R. Tempel Dean of the Indiana University Lilly Family School of Philanthropy, thinks about the announcement last week that the foundation will not only spend down and close, but that Gates will give it all but 1% of his personal fortune, which right now is $108 billion.
According to its 2023 financial data, the foundation has total assets of $76.9 billion with net assets of $70.4 billion. The data showed roughly 2,100 employees and more than 11,700 grantees.
“I think it was a bold move by a foundation grounded in their history,” said Pasic. Just as Gates changed the look and impact of a general purpose foundation, future philanthropists will be using other methods to impact society, according to Pasic. “We have to have faith in learning and discovery for the future, see how subsequent wealthy people take the mantle of what has been learned from Gates,” said Pasic.
“That learning and discovery have to continue in the service of humanity,” he said.
Harvard University has been in the headlines for $400 million is federal grants being terminated. While the university has sued, the image of a university with an endowment exceeding $50 billion suing might not tell the complete story and that’s often where nonprofits are failing, Pasic said.
The student newspaper, The Harvard Crimson, reported that much of the $53.2 billion endowment is earmarked for financial aid, scholarships, faculty chairs, academic programs or other projects, according to the school. The school has $16.5 billion in unrestricted funds which might still be tied up.
The endowment resents “not a pool of fungible financial resources but thousands of agreements that were made with various donors,” said Pasic. “The only way to change those is to go to a court of law. The agreement made with a donor in 1885 that was made in the pre-combustion engine era no longer applies,” he said. There might also be borrowing against the endowment.
There are also societal issues, such as community news reporting disappearing and schools not teaching civics or including civil society in civics learning. An example of the failure of including civil society into learning is a recent Lilly Family School of Philanthropy survey showing just 5% of respondents thought they had an interaction with a nonprofit when between 10% and 12% of the U.S. adult population is employed at one.
“Many of our young people are graduating without knowing the basics of our political system,” he said. People often don’t realize the importance of the sector in the community’s fabric, even when they are on the elliptical equipment at a YMCA, he said.
The change is also being seen in new philanthropists using limited liability corporation, donor-advised funds, digital currencies, and other conveyances to transfer wealth for impact.
There is change afoot in how wealth is spent for civic good. It is a “time of some criticism of the sector,” said Pasic. There’s also the sense from “the confines of a university that education probably has not been imaginative enough in terms of thinking about alternative ways” the sector should be organized, he said. “When the ’69 tax act came out, people thought the 5% payout for foundations was meant to be a floor and now it has become a ceiling,” said Pasic. “We at the universities should have been thinking a little more imaginatively about what are some other ways we could be organized, regulated so when a crisis like this came around there would be more constructive options to look,” he said.
He said that the curriculum at the Lilly School is constantly examined for updates and pivoting to sector needs. “We are living in remarkable times,” said Pasic, and civil society needs to rethink processes to adjust for the future.
