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Discovering the economic power of philanthropy

By Kelly Davis

There’s no question that San Diego has benefitted from big-hearted, deep-pocketed philanthropists, whose charity has helped bolster the region’s hospitals, cultural scene and educational institutions. So, what are the catalysts that motivated these philanthropists to make such investments in the region? That’s one of the questions that UC San Diego’s Center for Research on the Regional Economy and Indiana University’s Lilly Family School of Philanthropy seek to answer as part of a study, currently underway, that will explore the role philanthropy plays in the growth of regional economies. The plan is for this pilot study to then provide the foundation to analyze the economic power of philanthropic investment in other communities. Earlier this month, we chatted with Patrick Rooney, associate dean for academic affairs and research at the Lilly School, about the study, why San Diego was selected as the focus region and what the research team has learned so far.
This interview has been edited for length and clarity.
Extension: Tell us about the study.
We’re trying to understand this intersection between philanthropy and capitalism and economic development, and under what circumstances do philanthropists intentionally think about economic development. Is there a virtuous cycle of growth? So, for example, you might have an entrepreneur who has a capitalistic success…there’s a liquidity moment and they decide they want to do something bigger and better philanthropically. Under what circumstances do they think about, Alright let’s make San Diego a better place in terms of attracting more jobs, attracting more investment, attracting and retaining top talent. So, how do you attract scientists, senior managers and leaders and so on to this area and keep them here? And / or how do you get other new venture capitalists to make new investments that might lead to other philanthropic events as well? Some of the older cities you see where they have a harder time attracting and retaining talent and attracting and retaining capital, and so you can get into kind of a death spiral. So, we want to look at this as: What are the circumstances in which philanthropy can help create this virtuous cycle… a cycle of growth and investment and reinvestment both through capitalistic investments and also philanthropic investments. And, many times, it’s people who are making these venture capitalistic investments who then have significant assets to invest philanthropically. And sometimes they choose not to make any philanthropic investments, right? It’s, like, It’s my money, I worked hard, I’m going to keep it.
So, you’re looking for what that trigger is?
Yeah—are there triggers? So ideally we would [look at this] in San Diego and other cities and make comparisons. The long plan is to be able to benchmark and compare other cities. So, yeah, a trigger or a stimulus. Is there something in the DNA of the community? Is there something in the public policy? So, does the mayor, the governor, the president of the local community foundation, do they do things that are activist, or is it getting people together and it just happens through networking and informally, or does it not happen? Is it just kind of an accident?
Why was San Diego chosen as the first city to focus on?
[UC San Diego Extension Dean] Mary Walshok has an incredible Rolodex, and this was a good starting point in terms of being able to knock on doors and have people answer them for case-study interviews. And, also, it’s a desirable place to be, so you have people who want to be here just because of the weather and whatever else they like about it …. And there’s also a lot of wealth creation that’s coming out of here—there’s these liquidity opportunities that you don’t see in every city. So, it was kind of an interesting case study as a starting point.
Scalability is often an issue in philanthropic efforts—ensuring the effort will grow and become sustainable. Will this study look at that problem?
When we think about philanthropy writ large, you see sometimes philanthropy plays the difference between helping an institution that’s already good become great. So you look at UC San Diego—it’s gone from being a small, nascent organization and, essentially within one or two generations, to what it is now. Philanthropy has been a huge accelerant in that.
And sometimes individual donors … may start a new [charity] and say, “We think this new charity is necessary to fill this gap that we have identified.” And it may be a beautiful and perfect and logical and inspired idea, but its impact is delimited by either the dollar amount from the original donor or the time frame of the gift and they’re kind of making a bet that this will have a multiplier effect— [that] people will recognize the beauty or the compassion or the humanitarian help it’s providing and others will come in, whether it’s to backfill or build up or sustain. That sustainability might be reliant on other philanthropists, but many times, what you really need to scale in a really big way is taxpayer support and that may or may not happen.
And that could be all about timing.
It could be timing, who’s the mayor, who’s the governor, who’s on city council. In fact, I’ve talked to some foundation executives who’ve said that sometimes it’s hard to make the right bets philanthropically and see them subsequently thwarted by politicians who either don’t join in on that bet or do the exact opposite and thwart it in some important way.
Do you find that the stronger the philanthropy is in a region, the more it tends to stay there?
There’s a saying that most politics is local. Most philanthropy is local. Most individuals give most of their dollars to local causes. Religious giving tends to be predominately local …. A lot of giving to the arts is very local. So, there are national arts organizations that are supporting [local] organization, but most people don’t give to the arts at all. So, to the extent that they do, it’s usually to the museum that they take their kids or their grandkids to, or that their parents took them to that has either an aesthetic or an emotional connection.
As part of the study, you’ve been doing interviews with philanthropists themselves. Anything interesting that’s jumped out so far?
Some of the individuals are very hands-on as donors—not a big surprise because they’re entrepreneurs —and then others are more hands-off: OK, I have this wealth, I want to give back, but I don’t want to get too entangled in those details. And then others, they may create an operating foundation that’s working on that specific cause and only that cause. I think that one of the patterns you see is the role of philanthropic values across generations. So, if mom and dad, grandma and grandpa had a philanthropic bent, the child as an inheritor, or the child as a wealth creator, or both, are more like to be philanthropic and motivated by philanthropy than they would be if mom and dad, grandparents, were agnostic to or hostile to philanthropy. And I think the role of religion and religious values still resonates. So even if people are not making religious gifts, a lot of time it may be that their religious values are motivating their giving.
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