How Institutions Take Risks
The Rockefeller Foundation's Judith Rodin on saving European scholars and building more resilient societies.
Steve Clemons: I’d like to talk about how institutions like the Rockefeller Foundation make decisions and take risks, and about the work of your philanthropy from inception to today—how Rockefeller started with global public-health questions nearly a century ago and today is working on city resilience and revaluing ecosystems.
Was public health an obvious choice in its time? Are your huge investments today in building a global network concerned with urban resilience an obvious choice? I’m interested in understanding how leaders and institutions decide to break new ground. There are reputational risks, institutional risks—and some efforts can fail. I am wondering if you can reflect as a leader on how you make these decisions and how they were informed by the past.
Judith Rodin: I think philanthropy is very privileged because it really is America’s risk capital. If we don’t take risks, then we aren’t performing in the way the public deserves. These are tax-advantaged dollars designed to take smart risks, not foolish risks.
And so philanthropy that does best, and as I have looked over the last 100 years at what we have done best, we have taken a lot of risks. You mention the field of public health, and what [the Rockefeller Foundation was] looking at the time was curing hookworm—and they had a separate program on ‘Negro literacy in the South,’ as they called it—and they realized when they were doing both that maybe hookworm and illiteracy were interconnected.
So out of that developed massive education programs—promoting wearing shoes, indoor plumbing, and the like. It was risky at the time to work on ‘Negro literacy’—pre-civil rights, there were many forces in the South who didn’t want ‘Negroes educated,’ who wanted to keep them illiterate, many forces who wanted to see them die of hookworm. So moving that forward and then recognizing that in this new field of public heath—sanitation, the sciences, not only medicine—[the Rockefeller Foundation] caused a transformation and revolution in almost all that we know about prevention today.
Clemons: How did the Rockefeller family and their foundation decide to take risks on China [100 years ago]?
Rodin: We are credited with bringing Western medicine to China. So why were they doing this? I think three things. First of all, the Rockefellers had their eye on the world. At a time in the early 1900s, who was thinking of the wider world? They were always fascinated by and committed to the big world out there. So they weren’t only focused on problems here, and you can see a debate between Carnegie and Rockefeller in their letters between each other as they are both setting up their foundations—Carnegie really wanting to focus on domestic problems and Rockefeller arguing that the way to solve America’s problems was to focus on the world’s problems, but that you had to focus on a lot of these individual populations initially.
Second, I think that they really thought deeply about the difference between charity and philanthropy. And so they wanted to solve problems at their root cause, and even today we are trying to tip systems, we are looking at root causes ...
Clemons: And that has been true from the beginning? Have there been flops?
Rodin: There have been loads of flops.
Sometimes the flops were not recognizing that we should have gotten out of something sooner. Certainly the [German] eugenics program in which we were heavily investing for a long time was one we should have gotten out of—and [they] were not looking at the results or reading the tea leaves properly. But they focused on philanthropy rather than charity and that was a root-cause issue.
And the third thing, and the thing that resonates for me most and the reason why I took the job as president of the Foundation—they called it 'scientific philanthropy' at the time but they recognized that in order to really be able to take risks, to take big bets, you had to measure along the way and you have to be willing to change based on feedback and results. This work isn’t like running controlled double-blind clinical trials, because of the recognition that you need to know in real time what is and what isn’t working, and change things, and fix things, and remodel. It is critical to really being effective and producing pretty extraordinary outcomes. They saw this early, and I have known through my career, and I’m an empirical social scientist by training, that unless you measure, monitor, diagnose, and then change in real time, you are never going to have big outcomes and you’re going to waste a lot of money. That is the problem with our federal government programs.
Clemons: Is what you are doing today and the risks you are taking tied back to your experiences in risk and social investment [as president of the University of Pennsylvania]?
Rodin: There’s an important link. In my inaugural address at Penn, I talked about the West Philadelphia neighborhoods and the power of universities—that we had to move down from the ivory tower into the streets. I think recognizing the enormous power to do good requires engaging all the stakeholders, planning all together, not what you are doing to people, but rather what you are doing with them. Many university presidents were hunkered down, building walls. Every renovation we did—we did enormous construction then—we opened all the windows to the streets. We opened several campus streets to the broader streets.
Clemons: So what was the secret sauce of this? What led you to decide that investing in what was then a fairly rotten part of Philadelphia was something you should do?
Rodin: We couldn’t get anyone to invest in West Philadelphia at the beginning. We took money out of the endowment and made some of those early investments.
Many of the faculty screamed because they believed we should be investing in the English Department, and they were right. But this was a set of calculated tradeoffs in which we were convinced, and ultimately convinced our faculty colleagues, that (a) we had to do something different in the interests of the model of educating our children; (b) we weren’t going to be able to hunker down very long—someone was murdered out in the community my second month as president. So we had to fundamentally change the model without more police, and it wasn’t about busing our students around at night. The streets were totally empty at night because we were busing our students everywhere.
We developed small- and medium-sized businesses in the community. [We undertook] housing development [and] retail development, and we built a public school and said it is not a charter school, not for faculty kids, the opposite of what Columbia did at the time. You had to live in the neighborhood to have your kid go to the school, and we spent $1,000 a pupil for the first 10 years—and it became the highest-performing school in Philadelphia, and the third highest-performing school in Pennsylvania. But now it’s on its own, and it’s doing incredibly well.
Right now Penn invests no more money in West Philadelphia. Private developers are in there. Schools are built by the school board. It’s sustainable. But you have to ask yourself how. Rockefeller does not enter an area without having a defined and board-approved model for what our exit strategy is—because it forces us at our design stage to think about sustainability, which I don’t think many foundations do.
Clemons: So, with your 100 Cities Initiative [the Rockefeller Foundation’s competitive grant to help build cities’ ability to withstand disasters and other shocks], how do you compare what you did at Penn with this? How do you inculcate the desire to run cities differently? Or is that appetite already out there?
Rodin: When we started talking about resilience seven years ago, people would roll their eyes. Nobody actually understood what we meant or why we’d be interested in it. And now, whether it is because of the droughts, or floods, or the economic shocks, or the social shocks and social unrest, people really get the idea that they can’t predict everything. You can’t prevent everything. So how do you build a system or a person that allows you to fail more safely and rebound more quickly, against those shocks and stresses you can’t recover from?
I am struck by how strongly that realization exists in governments. Everyone talks about resilience now. Boston talks about how resilient they were after the marathon bombers. The president talks about resilience. So there isn’t resistance to trying to become more resilient; there is a lack of capacity and skills to get there.
We are going to try a suite of services. First, land use and infrastructure planning, but the other three are less obvious. One is social resilience. There [are] always the social-fabric issues that enhance resilience. We have a big-data partner in Silicon Valley which will actually take the data that cities have and turn it into a prevention and recovery instrument for them. This has never been done before systematically. The [next] is innovative financing. [World Bank President] Jim Kim will be announcing that the World Bank is going to create a tool kit for our cities, and they are going to use it to make cities creditworthy for private financing and create the kind of policies that allow private financing for infrastructure. The kind of infrastructure-bank ideas that we just created in New York, and Rahm Emanuel [created] in Chicago, can be generalized.
We then want the network to proselytize to and teach other cities. So we're hoping to establish a global movement, if you will, around urban resilience.
Clemons: So this swims right along with another interest of yours, which I know you've helped develop, which is impact investing. American philanthropy in Africa, where I know you're also working, to me often feels like the subject of a Sunday school volunteer exercise, in contrast to the more mercantile activities of the Chinese who are going in and deploying infrastructure, constructing dams, and building telecommunication facilities. The Chinese may very well be building and responsible for the middle classes in Africa 20 or 30 years from now.
I have been worried that our philanthropic support and partnering model with Africa is not sustainable. So my perception is impact investing could be a very different approach.
Rodin: Your diagnosis is exactly right. You know, Rockefeller started this field. Impact investing was a high-risk proposition. One of the things that really made this work is that we said our best role is not to invest our money in an impact-investing fund, but rather to build the infrastructure—the scaffolding, the plumbing, if you will, that would make this field take off.
We would hear over and over again, 'I know how to do the financial due diligence. I don't know how to do the social due diligence. So how do I know what social impact looks like? How do you know what a social outcome is?' You move from corporate social responsibility, which was a great thing, to really recognizing that companies can change their own business models in a way that does benefit people. Not every company is going to be able to do this. Not every company has that business model.
Clemons: Let me jump into a different area. I recently traveled to visit the Rockefeller Foundation Archives. Sniffing around, I ran across the Foundation’s refugee scholars' experiences before and during World War II.
I have two questions based on this. What was it like when you first discovered and learned about this extraordinary and complicated effort, both in saving so many scholars, but also reading about the tough choices the Foundation had to make about engaging in this effort at all and, to some degree, having to make hard-edged decisions on who should be saved and who not?
Rodin: I think they struggled because as a Foundation committed to solving problems at their root cause, they were asking themselves [whether] the root cause is Hitler, Nazism, a political climate of despair in which this kind of hatred can grow.
Clemons: But you had assessments from people about all of this in the early 1930s that were avant-garde assessments. If you look at the broad political climate in the U.S., there's no way that their reports from Europe represented conventional thinking in the United States. They were way ahead.
Rodin: Totally way ahead. Now, in retrospect, we might have both tried to pressure the U.S. government more. And in our approach today, we would have done that, as well as tried to save more people. I wish they had done that.
On the other hand, the piece that the Foundation did in the 1930s and early 40s was so extraordinary, Steve, because they were making life-and-death decisions. They came to understand that, again, quite early. This is clear in reading both the diaries of the program officers and the decisions that they made. Many of those saved had an enormous effect on Western society, and even on America's growth. You know, often the interest has focused on how many of these scholars came and worked on the atom bomb—and we all know that story—but there were many other major thought leaders, particularly across the social sciences. Philosophy and psychology and sociology, the best minds, and ...
Clemons: The efforts started out with folks in the public health arena …
Rodin: Because that's who we knew. So it was scientists, primarily in the medical and physical fields, that Rockefeller started with because that's who the Foundation was funding in those days in Western Europe. But very quickly and again, to the credit of our predecessors, they recognized that many others should be saved that had great potential for contributing to society if they were here and survived.
Clemons: Rockefeller had a process where people, nominators basically, sent in lists of who to save. Joseph Schumpeter, the famous economist, was active in nominating people. I think that this hasn’t really been recognized about Schumpeter, at least to my knowledge.
Rodin: I know. I know. And they did it despite it being so very tough. They had to say, 'OK this guy's too old,' you know, 'we're not going to get that much benefit.' So they made age decisions. They made field decisions. They made size-of-family decisions, because they were looking at thousands and thousands of possible refugees to rescue, and they could only save hundreds because they paid for all the family, and they relocated them if they were scientists. They set them up in laboratories.
Sometimes when I'm despairing, I think of who we didn't save, and we have to admit that part of the equation—but it's an amazing thing to look at all who were saved.
Clemons: My final question is: If you were to fast-forward 100 years from now, what risks will you have taken to solve what big deficits that society needed to tackle?
Rodin: Well, we really do think that society does need to tackle resilience. I think we spent our first 100 years looking at root causes because we thought if you look hard enough and you work hard enough, you can solve the world's problems, or at least those that you're trying to address.
And I think in the beginning of our second century, we are recognizing you can't, because the fact of the world globalizing, the complexity, the dynamism, the pace of change means that we can't solve all the problems. So, we've got to help ourselves rebound more effectively while we're trying to solve these things. We don't want to give up, but we've got to build that elasticity or we are moving towards a brittle economy, a brittle society, a brittle ecosystem. Everything's fragile and it's going to snap. And so we've got to try to make our systems less fragile.