Expanding opportunities in America’s cities
Speeches

Thank you Dean Wolch for such a gracious introduction. It is an honor and pleasure to be here.

And I can’t tell you how tickled I am to be introduced by a dean who bears William Wurster’s title.  Because without William Wurster I wouldn’t be here – wouldn’t be anywhere actually.

After World War II, as dean of the MIT School of Architecture, Wurster hired an incredibly talented young woman to be his executive assistant: Mary Dolan. A couple of years later, he convinced a rising, flamboyant architectural star who headed the design department at the New Bauhaus in Chicago to join the MIT architecture faculty: Ralph Rapson. Well, Mary Dolan – tipped off that Rapson was coming and that he was unattached – pretty much laid in wait for his arrival. Dad was pretty much cooked even before he arrived. The two were married by a New Hampshire Justice of the Peace within a year. And I popped out a few years later. I will always be grateful for William Wurster’s eye for talent.

And to have Harrison Fraker in the audience is not only a deep honor, but another reason I’m so delighted to be here. When my father retired after 30 years as the head of the University of Minnesota’s School of Architecture and Landscape architecture, he was pretty curmudgeonly about whoever would follow him. But Harrison was a joy. Not only was he a superlative steward of so much of what my father had built, but he was – as you all know – an innovative, brilliant leader who put his own indelible mark on a great school So thank you Harrison.

You know, it is really tempting to use the time you’ve given me to talk about architecture, planning, environmental stewardship and urban design. But I really couldn’t tell this audience anything it doesn’t already know if I did that.

That brings to mind a story about the late, great jazz drummer Art Blakey. It seems Blakey is driving the back roads of Louisiana to a performance, and he gets stuck behind a funeral procession. He can’t get by until the service is over. So he gets out of his car and saunters over. Eventually the preacher asks if anyone has anything to say about the deceased. Nothing, just awkward silence. So Blakey jumps in and says, “Well, if no one wants to speak about the departed, I’d like to say a few words about jazz.”

So let me talk a bit about my jazz – which is philanthropy in Detroit. I’m accordingly going to ask that you suspend a very natural inclination to tune out – to conclude that neither the world of philanthropy nor a posterchild of municipal devastation like Detroit has any relevance to your work.

I’ll ask that you bear with me because the challenges that Detroit faces – whether corrosive economic segregation and urban disinvestment, proliferating blight, increasingly brittle racial polarization, yawning health and educational disparities along racial and class lines, or others – are present to varying degrees in cities all across our country. 

And I’ll ask it of you because the philanthropic roles Kresge has taken on suggest that a very different form of distributive civic leadership may be necessary to confront those challenges.

Specifically, I’ll divide my remarks into three parts:

  1. The challenges Detroit faced over the last decade;
  2. Four roles philanthropy playing in helping re-set the city’s trajectory; and
  3. What those principles might suggest about the place philanthropy might occupy as we all navigate the turbulent, earthquake of a reality cities now face in our country.


I. Re-Setting Detroit’s Trajectory

The Nightmare Convergence

So first, some context about Detroit.

Seven years ago, Detroit was drawn into the vortex of a storm of unimaginable proportions and severity: The Great Recession knocked an already fragile economy to its knees; the housing foreclosure crisis crushed the economic and emotional lives of countless families; the automobile industry stared into the abyss of corporate bankruptcies; an all-consuming corruption scandal landed a charismatic, popular mayor and scores of his co-conspirators in jail.

The collision of these near-death experiences exposed and widened the underlying fault-lines that had already made Detroit synonymous with urban devastation, dysfunction and despair. The city narrative read like a municipal obituary.

That wasn’t the way that the residents of Detroit saw it, however. Please forgive the cliché, but Detroit was able to draw on an unusually deep mother lode of resilience. Maybe it grew from the great fire of 1805, when Detroiters came together to rebuild their homes and businesses, birthing their motto: “We hope for better things; it shall rise from the ashes.” It was an act of civic defiance against the destructive power of nature and humanity – a marker of collective resolve.

The question was whether the city was capable of summoning the same resolve some 200 years later – whether it had the imagination, courage and discipline to extract from a challenge of this magnitude the hidden opportunity for equally momentous change and potential transformation.

With the private sector in its bunkers, the public sector in jail and the nonprofit sector hanging on by a thread, it fell to philanthropy and Detroit residents to offer an answer.

The problem was that the foundations working in Detroit had long believed that they led best by preserving their mantel of neutrality and avoiding stirring up a fuss.  In the immortal words of Adlai Stevenson: “It’s hard to lead a cavalry charge if you think you look funny on a horse.” And philanthropy did indeed think that it looked funny on a horse.

We had to get over it. We could no longer sit at the margins, hoping that our good intentions and charitable impulses would help the community slide through tough times.

A Shared Community Vision

One way to start was by getting clear about what kind of civic future we sought – the “vision” thing.

It’s easy for a concept like community vision to become trivialized, to become coated in a perfume of aspirational rhetoric. But the absence of that kind of vision had been utterly debilitating in Detroit. Without it, residents had no rational basis to hope that life for their children would be better. Without it, investors couldn’t justify taking deep risks. Without it, a new federal administration that genuinely wanted to help was befuddled about how it could.

And without it, my board at Kresge struggled to see what we could or should invest in that would make any difference in the life conditions for community residents.

It struck me that we had far more to work with than might have been apparent. So I sat down one Saturday and created a visual depiction of the efforts underway in the city that were being led by philanthropy, that were backed by real capital and that held the promise of taking root over the longer-term:

  • From creating a streetcar line along the city’s main avenue to creating supports for entrepreneurs and small businesses;
  • From drawing our anchor education and health institutions into closer relationship to their surrounding community to fostering a more robust arts and cultural ecology;
  • From creating a land-use framework to address blight to creating a monthly forum to align neighborhood investments among banks, foundations, public agencies and nonprofit intermediaries.

Called “Re-Imagining Detroit 2020,” the framework suggested a discernable, coherent and investible scaffolding that just might be sufficiently sturdy and durable to bridge to a time in which the public and private sectors resumed their rightful roles. 

Municipal Bankruptcy

But that resumption of rightful roles had to wait on the resolution of one small matter: the filing in 2013 of the largest, and arguably most intractable, municipal bankruptcy in American history, with some $18 billion of debt in play.  There appeared to be two roads to solvency:

  • The first was to reduce the benefits of the city’s thousands of retirees by as much as 60 percent. The average general pension was $20,000, so they would have to live on $8,000 a year. As despicable as this was, the creditors were deadly serious about it – they were prepared to go to any length to see their bonds and loans repaid.
  • The second option was to conduct a fire sale of the only real city asset of significance – the city-owned collection of the Detroit Institute of Arts. Better than reducing retirement benefits? That was certainly an argument the pensioners made. But it would have dismantled the crown jewel of Detroit’s cultural patrimony – and would have, by violating every deaccessioning convention of the art world, made the museum a pariah.

To take either road would have catapulted Detroit into a death spiral of unspeakably brutal, no-win lawsuits – litigating for a decade either the State of Michigan’s constitutional guarantee of the inviolability of pensions or the sanctity of an art collection that was arguably held in public trust. The city would not have survived in any recognizable form.

Who knew Woody Allen had this dilemma in mind when he observed: “More than any other time in history, mankind faces a crossroads. One path leads to utter hopelessness, the other, to total devastation. Let us pray we have the wisdom to choose correctly.”

Well, we did.  The choice we made was called the Grand Bargain, in which the foundation community led by Kresge and Ford created a $370 million fund, supplemented by $350 million from the state and $100 million from the art institute. The fund essentially purchased the DIA collection from the city, converted the museum into independent nonprofit status, and used the proceeds to safeguard the pensioners against substantial cuts in their retirement benefits.

Philanthropy’s risk capital equipped the bankruptcy court’s mediator to extract deep concessions from all of the creditors, enabling the bankruptcy to be concluded consensually and at light speed – within a year.

That resolution permitted us to move on with the task of community building. Let me turn to that next.

 

II. Four Roles Philanthropy Has Played in Detroit

Detroit's trip through municipal bankruptcy had the air of watching one's own autopsy, as every granular detail of this community’s challenges and shortcomings were laid bare for all to see.  But it also made clear that my Re-Imagining Detroit drawing of 2010 had been fundamentally correct – the community had put in place over the previous six years key building blocks for the city’s long-term stability, health and vitality.

Let me suggest four roles that philanthropy played to make that possible.

Role No. 1: Helping Set the Table

The first role we played was to help set the table for discussions about some of the city’s most difficult, politically charged issues.

The circumstances of 2008-09 demanded penetrating and courageous discussion about the historically intractable – and stubbornly perpetual – structural impediments to equality in Detroit. And those discussions had to be linked to tangible actions.

Nowhere was this truer than in the city’s inability to agree on how to reverse the spread of blighted and abandoned land. Of the city’s 380,000 individual land parcels, more than 75,000 are vacant or blighted – a landmass the size of San Francisco.

Not only did the Dresden-like images so favored by national photojournalistic essays make the task of reclamation seem impossible, but the blight created a poisonous concoction of danger, health risks and economic instability that was a scourge on neighborhood life.

And it was compounded by population decline. Detroit’s population – once some 2 million residents – had fallen to 700,000 people, distributed over 140 square miles – a mass that could hold San Francisco, Boston and Manhattan, with room left over for St. Paul. There is simply not enough tax base to spread high-quality municipal services equally across that expanse.

The combination of blight and depopulation led Mayor-elect Dave Bing to announce in 2009 his intention to, in effect, shrink the city’s footprint by developing a masterplan that would concentrate city services in still-healthy neighborhoods. The reaction was scorching: Many residents were livid at the thought that they could find themselves in neighborhoods deprived of basic services, or that they might be forced to move.

Realizing that he had stepped on a political third rail, the mayor asked Kresge if we would help. We agreed, provided that the customary high-level planning be conjoined with a robust community engagement process.

I was able to convince one of the nation’s foremost urban planners, Toni Griffin to lead the technical part of the process, assembling a half-dozen teams from throughout the world to assess the city’s natural conditions, promising employment hubs, transit patterns, housing conditions, potential areas for blue-green infrastructure or urban farming and the like.

The key was to interweave the two strands, with the sophisticated technical analyses feeding into an unprecedentedly rigorous and expansive community engagement process.

It was a labor-intensive, but highly virtuous, loop. We called on every conceivable method to draw on community experience, values and wisdom: from social media and Internet-based tools to targeted canvassing and door-knocking; from mass phone mobilization to intimate gatherings in people’s homes and places of worship. The process eventually actively involved more than 100,000 residents, businesses and other stakeholders.

Despite any number of struggles, we were able to produce Detroit Future City, a 400-page decision-making framework for every dimension of community life.

At the plan’s unveiling in 2013, one of the community co-chairs termed it “the People’s Plan” – remarking that for the first time in memory residents had been drawn meaningfully into a public decision-making process, infusing it with equity, legitimacy and staying power. When Mayor Mike Duggan took office a year later, his administration placed the plan at the core of its efforts to stabilize and rebuild the health of Detroit neighborhoods.

 

Role No. 2: Helping Build Community Capacity

The second role philanthropy played was to contribute to increased civic capacity.

The scope and complexity of challenges staring Detroit in the face in 2009 quite simply outstripped its capacity – the capacity of any city probably – to confront them. That wasn’t an indictment of people already laboring to make things better, but instead an acknowledgement of the unprecedented level of human ingenuity, skill, and persistence that would be necessary to move to different ground.

So we had to invest both in the inside game of skillful and committed people who already lived and worked in Detroit and in an outside game of energetic and well-trained people who were new to Detroit, but galvanized by the possibility of daring innovation and enduring change.

The trick was to create a respectful and effective balance.

On one hand, we invested deeply in Detroit residents: funding citizen-based planning efforts like Detroit Future City; providing neighborhoods with pools of money they could regrant for community improvements; increasing our support to help human service, health, environmental, educational, arts and community development organizations weather the downturn.

But we also sought to attract external resources to the city. There was enormous value in attracting fresh perspective that could supplement and elevate the dignity and power of received culture, talent and commitment. Together, the inside and the outside helped thicken the membrane of Detroit’s civic capacity.

Let me mention just a single example.

We created the Detroit Revitalization Fellows program to provide stipends and executive development certification to 30 mid-career architecture, economic development and planning professionals, placing them for two-year stints in organizations playing a pivotal part in the city’s revitalization. 

We are in our third cohort. Of the 100 fellows, one-third have come from Detroit, one-third were Detroiters who had left the city but wanted to come back, and one-thied had no connection to the city. The overwhelming majority have stayed, creating a high-capacity network of emerging leaders that has materially influenced for the better countless dimensions of city life.

Role No. 3: Encouraging the Return of Private Markets

The third role we played was to encourage private markets to return to Detroit.

Much of philanthropy’s work is focused on places and circumstances where the market has failed low-income people.

And yet, philanthropy struggles with how to influence private markets. Engaging with the private sector is not in most foundations’ wheelhouse.  It implicates profoundly complex investment and financial expertise. It’s a very long-term game. So, at the end of the day, we resort to either doing unsustainable work-arounds or trying to apply Band-Aids to the most egregious expressions of market malfunction or neglect.

But we concluded in Detroit that we had to wade into the pool and test leverage points that might draw markets back into the city.

We began by focusing on small-business development.

For the better part of a century, Detroit has been an economic monoculture – with a command-and-control automobile industry telegraphing precisely stipulated production requirements into every nook and cranny of its vast supply chain. Innovation and creativity were everywhere, but entrepreneurship was in scant supply – or, at least since Henry Ford rolled his first Model T off the assembly line a century ago.

The Kresge, Ford and Kellogg foundations took the lead in creating a $130 million fund called the New Economy Initiative, designed to put in place the kind of infrastructure that entrepreneurs and small businesses need in order to get started and grow: back-office supports, mentoring and networking opportunities, early stage capital, affordable space and many others.

The resulting vibrancy has been breathtaking. Restaurants, tech firms, service businesses and arts activity are reweaving the fabric of the city – serving as a magnet for young people eager to make their mark and giving former Detroiters a reason to return home.

The second way we took aim at markets was to use social investment tools – non-grant sources of capital such as loans and loan repayment guarantees – to support key redevelopment transactions.

Until just recently, the most elementary financial equation didn’t pencil out in Detroit – returns for residential and commercial projects were insufficient to meet the costs.

We turned to philanthropic social investment capital to peel away the top layer of risk for market-rate lenders. We needed to make it safe for them to invest in proof points. And we needed enough of those proof points to begin bending the financial viability curve.

It has worked. More and more mixed-use, mixed-income projects are coming on-line, demonstrating to investors that they can obtain a return on their investment independent of philanthropic capital. 

The trick is, of course, how to ensure that this engagement with private markets – whether small businesses or mixed-use residential and commercial projects – inures to the benefits of Detroit residents. Trickle-down is not an equity strategy. We’re working hard to put bumper rails in place to guarantee that these moves are genuinely inclusive.

Role No. 4: Serving as a Guarantor of Value

The fourth role we played was serving as a guarantor of value.

Kresge invested in key public infrastructure projects that signaled to businesses and residents alike that Detroit possessed the kind of amenity structures essential to any city’s quality of life:

  • We committed the first $50 million to the $300 million reclamation of the Detroit Riverfront, converting an industrial wasteland into a heavily used and deeply beloved front-porch for city residents.
  • We converted a soulless traffic intersection into Campus Martius Park, whose human-scale and flexible programming introduced a vibrant heartbeat to downtown life.
  • We spurred the revitalization of the century-old Eastern Market, repositioning it as the regional food hub for the city’s more than 1,000 community gardens and neighborhood markets.
  • We invested in scores of neighborhood projects to repurpose blighted and abandoned properties, renovate parks, or reclaim other community assets.

These investments significantly contributed to investor confidence. Perhaps the most remarkable example was the decision of Dan Gilbert, the CEO of Quicken loans, to relocate the company from a suburban location into downtown. Six years later, Quicken has more than 13,000 of its own employees downtown, has invested more than $2 billion dollars to purchase and rehabilitate 100 buildings, and has spurred more than two dozen other businesses – with perhaps another 5,000 employees –  to join them. Dan is crystal clear that he would have done none of this in the absence of an urban quality of life that Quicken’s young workforce insists on.

Let me single out one of those investments – the most ambitious by far: our effort to introduce light-rail transit.

If there was ever an environment that was toxic to public transportation and mass transit, it’s been the Motor City and its surrounding counties. Eight years ago, Kresge and key corporate leaders concluded that the situation was an intolerable obstacle to regional economic opportunity. We announced our intention to finance, construct and turn over to a public transit authority a light-rail line to run along the city’s major artery, Woodward Avenue.

The streetcar line would create connective tissue among commercial, medical, educational, cultural and civic institutions up and down the avenue and be the first leg of a comprehensive and seamless regional public transit system capable of connecting city residents to suburban job and service centers.

It would cost $150 million.  Kresge committed the first 50 – conditioned on the private sector and federal government providing the balance. One would have thought that from the public sector’s perspective, this would be a welcome solution to an irresolvable problem. 

Not.

Conjure any conceivable obstacle the public sector could throw up – and then multiply that by seven – and you get the picture. The City of Detroit insisted on controlling the design, even though it was the wrong design and even though the city didn’t have any money to pay for it. The Federal Transit Administration couldn’t figure out how to adapt its rules to a private-philanthropic consortium that didn’t fit into its normal regulatory protocols. The state legislation authorizing the requisite regional transit authority was riddled with trip-wires.

But the consortium called on every piece of political, financial and personal capital it possessed to navigate the project to final approval. And it worked. The line will open next month.

 

III. Four Principles That Will Guide Kresge in the New Era

Those four roles helped convince the Detroit bankruptcy judge that the city had in place the essential bedrock to anchor renewal. Events are beginning to prove him correct, as the city continues to stabilize its finances, redesign and normalize municipal services, grow its tax base through diversified commercial, industrial and residential activity, and begin a pivot to more intensive neighborhood investment.

But the question remains what relevance this has for other American cities. Let me offer two preliminary observations:

  • First, the Detroit experience suggests that it is possible to mobilize a broad spectrum of civic actors to take on some of the most stubbornly resistant problems facing urban America. If we can do it in Detroit, we can certainly do it in other cities.
  • Second, we are all entering what, in Department of Defense parlance, is a VUCA environment: volatile, uncertain, chaotic and ambiguous. The prebankruptcy experience in Detroit was similarly VUCA. I would accordingly propose that the four roles I’ve articulated may have relevance to how American cities navigate in this new terrain.

So let me try to project those four roles forward – to offer four principles that may shape philanthropy in a new political order.

 

The first principle: local dynamism

Cities have long been America’s great incubators of genius, creativity, possibility and opportunity. They offer the density of people, activities, skills and ideas that serendipitously or intentionally circulate, ricochet, recombine and catalyze, creating the preconditions for innovation.

The question is the fate of these qualities in the face of increasingly formidable headwinds. For example, federal deconstruction of signature national programs, or – perhaps not in California, but everywhere else – state preemption of local environmental, employment, or zoning ordinances, or reductions in discretionary spending programs, forcing local units of government to make zero-sum choices about the lives of their most vulnerable citizens.

I think the answer has to be yes – that cities’ complex networks and diverse subcultures will increasingly provide the engine to dismantle politicized, stale and unproductive approaches to persistent problems in favor of new or imaginatively recycled solutions.[1] And I believe this form of radical problem-solving can move into the void created by federal retrenchment and state obstruction because it is at the local level:

  • Partisanship is suspended in favor or pragmatism. 
  • People can witness and feel the benefits of investing for the future.
  • Transactional alliances morph over time into enduring networks of trust and mutual support.
  • Civic culture is formed, layering through successive generations an accretion of shared history, accomplishment, norms and aspirations.

And, perhaps most practically, because it is at the local level that virtually every national policy is implemented and managed, shaped by the ebbs and flows of daily community life.

Just one illustration.

It has become axiomatic in most planning and economic development circles that 21st-century economic development is a regional proposition: that the imperatives of globalism, combined with the democratization of technology, the borderless reach of labor markets, the disconnect between housing and job centers and countless other centrifugal regional forces make it impossible to pursue economic development within the confines of a single municipality.

Well, our experience in Detroit suggests that maybe it’s not quite that simple:

  • First, cities like Detroit have had to create relatively self-sufficient economic diversification strategies in the face of debilitating capital flight to the suburbs.
  • Second, the urbanity of cities like Detroit offers a unique competitive advantage derived from a market niche and workforce specialization profile that is hyper-local. When you’re not speaking with colleagues far away, you’re speaking with people close by, tapping the catalytically creative effects of proximity.[2]  Although not to the extent of the Bay Area, Detroit has, for example, exerted an increasingly powerful gravitational pull in health care, high tech and the creative and entertainment industries.
  • Third, working at the city level clarifies what you are trying to achieve – and what you should measure. It makes it your job to employ the folks, that in many cases, the region has left behind. It makes it your job to steward the city’s existing clusters into the next economy. It makes clear that it is not your job to grow the region's economy and hope that some of it spills over.

 

The second principle: an amplified commitment to equity, justice and opportunity

I just came from a meeting Thursday of some 200 philanthropists in Los Angeles focused on how to level the playing field for low-income and otherwise marginalized people. That impulse toward pursuing equality and justice will grow and accelerate within the philanthropic sector.

That is a dauntingly ambitious aspiration that could readily swamp the sector’s most heartfelt and committed efforts. But, in the face of perniciously resistant systems that suppress opportunity through bias and discrimination, and in the face of ever-widening disparities in health, education and economic mobility based on race and class, there is no choice but to step up. As James Baldwin observed: “Not everything that is faced can be changed, but nothing can be changed until it is faced.”

Although the possible intervention points are virtually infinite, I suspect that we will increasingly see foundations trying to help local institutions and residents build the muscle of community problem-solving. Whether through preserving affordable housing, ensuring transit access, attacking the upstream determinants of poor health outcomes, or otherwise, citizens must be equipped to engage meaningfully with – and indeed shape – those institutions whose policies, practices and networks of power set the ground rules for community life.

Let me use the example of environmental activism. 

Jacob Remes, an historian of disaster response, observed: “Disasters are not blind. We have this rhetoric of disasters affecting rich and poor equally and that’s just not true.”[3] Remes is correct: we have to see climate change for what it is – an existential peril that threatens to multiply and calcify existing social and economic fault lines between haves and have-nots.

And yet, historically, neither the environmental community nor urban and regional planning processes have effectively tapped the unique knowledge, needs and perspectives of low-income residents in the design of climate resilience measures.

Kresge’s environmental program takes direct aim at that. We’re underwriting collaborations in almost two dozen cities that are drawing low-income communities fully into efforts to mitigate and adapt to the pressures and shocks of climate change – particularly in coastal cities. And we’re supporting efforts that enable low-income people to share in the economic and social benefits of clean energy, green infrastructure and other urban energy resilience efforts. This may not be new in northern California – and it is certainly not new to the college, with its extraordinary commitment to social justice and environmental sustainability –  but it has begun to change the way local environmental activism is playing out in other parts of the country.

 

The third principle: democratization of the civic commons

In such a deeply divided America, we have to excavate new and more powerful forms of what Bowling Alone’s Robert Putnam calls bridging social capital. To this audience in particular, I want to suggest that elevating the connective potential of places is a good way to start. 

Places define us. We attach to a place with an emotional energy and a sense of long-term commitment that defines how a community works, how individual identity is formed, how collective norms are constructed. [4] When we’re able to connect to a park or a neighborhood or a bay through an individual or shared experience, there’s a magnetic pull. You forge an emotional bond with your community. You want to stay committed. You want to invest. You want to build a future. These are the preconditions for civic transformation.

And yet, our collective under-appreciation and neglect of so many of our civic assets – libraries, parks, recreation centers, neighborhood schools, trails, gardens – has frequently led us to forget that they are more than physical spaces – they are the embodiment of inclusive, democratic values, open to and owned by all residents,  an antidote to spaces whose pay-wall precludes the full breadth of civic participation.

The local recreation center providing an alternative to Lifetime Fitness. A police precinct station doubling as a community conference center. The neighborhood library substituting for Barnes and Noble.

Kresge and three other foundations[5] have launched an effort to amplify the power of the “civic commons,” encouraging local decision-makers to connect these discrete public spaces into networks of socially activated, multi-purpose civic hubs. In Memphis, tying the library, a park and the riverfront into a seamless public square that creates a gateway to the water. In Philadelphia, upgrading and repurposing Fairmount Park to attract a more diverse economic and social demographic. In Detroit, creating a new urban park to connect two neighborhood university campuses and to accelerate the revitalization of the adjacent residential neighborhood. 

 

The fourth principle: social investing

It’s easy to think of philanthropy as a glorified, gilded, ATM machine, dispensing grants once the assiduously encrypted entry code is punched in. And to be sure, we sometimes behave exactly that way. 

But individual philanthropists, institutional investors and foundations of every shape and size are rapidly developing increased fluency with an even broader set of financial tools to accomplish social return: low-interest loans; loan guarantees; direct equity investments; pay-for-performance bonds; bank deposits earmarked for socially responsible loans.

This expansion of capital has enormous implications – particularly in a likely era of shriveled government budgets:

  • These tools can make larger amounts of long-term capital available to nonprofits, furnishing the latitude to be more creative and ambitious in pursuing expansion or transformation. 
  • They can, as I described from our experience in Detroit, peel away the top layer of risk in a transaction, creating a pathway for private sector investors to participate in socially driven projects.
  • They enable foundations to first define the problem and then reverse-engineer, assembling the combination of tools that will most effectively line up against the problem’s component parts.
  • And they enable a philanthropic investor to recapture some of its funds and recycle them into future efforts.

Kresge has announced that fully 10 percent of its corpus – or $350 million – will be dedicated to social investments through 2020. The Ford Foundation recently made a similar commitment – that translates to an extraordinary $1 billion. Watch for others to join the train.

But also watch for leaders in this space – particularly Kresge, Ford, Omidyar, and MacArthur – to construct platforms that will make it easier to connect high net-worth individuals, smaller foundations and other institutional investors to organizations and activities generating social and environmental returns.

 

Conclusion

Kurt Vonnegut observed: “I want to stay as close to the edge as I can without going over. Out on the edge you see all kinds of things you can’t see from the center.” In this dizzyingly fluid environment, it strikes me that that is exactly where philanthropy needs to be.

But I want to suggest that it is also where the people in this audience need to be.

Each of us – individually and collectively – has the responsibility to clarify, amplify and stand by the values that guide our work.

We need to decide whether our future landscape will be based on impulses of enlightened long-term vision or on a reflexive embrace of risk-aversion and short-term self-advancement.

We need to decide whether that future will usher rhythms of equity, fair play and opportunity or fall back on the halting constructs of differential treatment and privilege for the few.

We need to decide whether that future will aspire to robust stewardship of the common good or tacitly sanction a hunkering down into silos of fear that attempt to deny the forces of equity and social change and wall off compassion for the less fortunate.

Those decisions will require a healthy dose of optimism – even idealism; words that may sound quaint in the coarseness of the current political environment. But, under the circumstances, to be anything other than an optimist – anything other than an idealist – strikes me as a profoundly unproductive use of our time.

So please stay engaged. Continue to hold up lighthouse examples of exemplary creativity and courage and progress. It’s what we need. It’s what will carry us forward.

Thank you for listening so patiently. Good luck and good night.


[1]With thanks to Steven Johnson, Where Good Ideas Come From (Penguin Group: New York: 2010).

[2]With thanks to Teresa Lynch, Principal of Mass Economics, Boston, MA.

[3]Interview with Remes in Edelson, Josh, “Disaster capitalism doesn’t work,” Salon.com (November 2, 2012). www.salon.com/2012/11/02/historian_jacob_remes_disasters_arent_natural/. See also Remes, Jacob, Disaster Citizenship: Urban Disasters and the Formation of the North American Progressive State (forthcoming from the University of Illinois Press).

[4] See generally McMahon, Edward, “The Place Making Dividend.” Planning Commissioners Journal, “No. 80, page 16 (Fall 2010).

[5]The Rockefeller, Knight, and JPB Foundations.