A Standard of Philanthropy Worth Emulating

The Gilded Age of the late 19th and early 20th centuries was a period much like our own, with amazing new inventions such as the light bulb, the telephone, and the automobile giving birth to vast new industries and fortunes. But there was a profound difference in the way Americans felt about the creation of so much new wealth compared with how they feel today about the high-technology and Wall Street fortunes of the 1980s and 1990s.

A hundred years ago, a revolutionary ferment was roiling through society as a deep and bitter debate erupted over the lopsided distribution of the new wealth and the legitimacy of those large fortunes. The establishment of the first great foundations came about because people like John D. Rockefeller and Andrew Carnegie, who had been vilified as robber barons, knew that they had to return the overwhelming bulk of their fortunes to society for the capitalist system to be vindicated. “The man who dies rich thus dies disgraced,” Carnegie said in a famous formulation.

While liberal activists have tried to drum up the same kind of public concern about the gap between the rich and the poor today, they have not had tremendous success. Nevertheless, today’s multimillionaires and billionaires have much to learn from the message that the wealthy of a century ago took away from the public attacks on their accumulation of wealth. One would hope that the stories of this nation’s first philanthropists would inspire, even shame, the very wealthy to apply their creativity to charitable giving as expertly as they have to their businesses.

Perhaps no better example exists than the one set by John D. Rockefeller. To be sure, some would argue that Andrew Carnegie was the superior philanthropist of the day, because he exercised direct control over his donations and took pains to perpetuate sound, conservative business values. Rockefeller, on the other hand, has been criticized for delegating too much authority to experts and successors — many of whom not only modified, but even subverted, his values.

A closer look at John D. Rockefeller shows how enlightened his approach was, however.

The founder of Standard Oil studiously applied rational, systematic methods to his philanthropy, much as he had done so spectacularly in business. Although he maintained firm control over the financial aspects of his philanthropic projects, he also understood his limitations and yielded to the judgment of experts when it came to content.

Rockefeller’s ideal of philanthropy was not to enshrine his name and glory but to foster institutions that would take on a life of their own. That reflected his deeply conservative philosophy, forged in the Baptist Church, that giving should not promote dependency in individuals or institutions but should allow them to flourish and be self-reliant. If that entailed some ultimate loss of control, it also underscored the important truth that he saw himself as the founder, not the owner, of his philanthropic creations.

Because of the highly charged political atmosphere surrounding his wealth, Rockefeller gravitated to large, non-controversial objectives in his philanthropy — things unarguably good that would benefit all mankind. But he sought to avoid the sentimental or haphazard donations to an alma mater or a local museum or hospital that were so common among the wealthy.

Rockefeller’s founding of Spelman College and the University of Chicago were unusual steps for a businessman to take. Most of his colleagues believed that colleges were breeding grounds for anarchists and socialist agitators and directed their money elsewhere.

But Rockefeller valued education because it would equip people to compete on an equal basis. “Instead of giving alms to beggars,” he once said, “if anything can be done to remove the causes which lead to the existence of beggars, then something deeper and broad and more worthwhile will have been accomplished.”

Although he had never gone to college and knew little about educational curricula, Rockefeller did know a thing or two about building organizations. When he provided the money for the University of Chicago, which opened its doors in 1892, he saw his comparative advantage as that of being able to monitor closely the financial and administrative side of the school.

Rockefeller rejected all requests to name the University of Chicago after himself and only allowed his name to be mentioned on the stationery as its founder. For the first five years, this sphinx didn’t even set foot on the campus.

His absence had something to do with native humility, but there was also a certain craftiness at work. Rockefeller hoped to send a signal to a skeptical public that he did not intend to meddle with the university or exploit it for selfish purposes.

The chief reason that he stayed away, however, was that Rockefeller wanted Chicago’s citizens to assume financial responsibility for the school. Such was the power of the Rockefeller name that in 1910 — nearly 20 years after the school’s founding — he was still footing nearly 90 per cent of its bills. Everyone in Chicago assumed that if John D. Rockefeller stood behind the university, it scarcely needed their aid.

So Rockefeller did something breathtaking: He made one last gift to his beloved university, publicly announced his withdrawal, then left the university on its own forever. At that point, the Chicago citizenry recognized the treasure in their midst and rallied to its support.

Rockefeller believed that an effective philanthropist leveraged his money no less adroitly than a smart monopolist leveraged his power. As early as the 1880s, he came up with the idea of matching grants by insisting that other people contribute like amounts before he did so.

Rockefeller also imposed demands on potential beneficiaries as a way to bring about change. After it became clear that most of the nation’s medical schools were little more than shoddy diploma mills, it became a prerequisite for all medical schools that received Rockefeller money to upgrade entrance standards, institute four-year programs, and hire full-time teachers instead of the practicing physicians who picked up spare change by giving lectures on the side. That act revolutionized medicine, accounting in no small measure for America’s medical preeminence in the 20th century.

Rockefeller was a man of vision, but he realized that in an age when technological innovation had accelerated the tempo of history to a dizzying pace, the best thing a philanthropist could do was to set directions, not destinations. As the architect of a dynamic, changing business, he knew the world of the future would bear little resemblance to his own.

So when he established the Rockefeller Foundation in 1913, he gave it the creative freedom to change and grow and did not saddle future foundation executives with outmoded mandates. “Perpetuity is a long time,” he was fond of saying. Before long, the Rockefeller Foundation had developed a vaccine against yellow fever, stimulated the formation of public-health schools around the world, and later pioneered the Green Revolution.

The Rockefeller lesson is a critical one for today’s philanthropists. The founder of a philanthropy can leave his imprint by designating general areas of interest, by establishing a general orientation, and by governing an organization’s early growth. The rest should be left to posterity. Anyone who sets up a foundation runs the risk that future directors will someday alter or even discard his or her values — and that is a problem. But the alternative is the overweening hubris of imagining that we can foretell the future.

Ron Chernow is the author of Titan: The Life of John D. Rockefeller, Sr. This piece is adapted from a speech he delivered to the Manhattan Institute.