Opinion: Foundations Would Do More Good if They Embraced the Unknown

“Known knowns” and “unknown knowns” are common terms in the intelligence world as well as in project management and strategic-planning circles.

A known known is a fact you are aware of. A known unknown is something you know is likely, but you don’t have a clear sense of how that thing will occur or manifest.

For example, the possibility that a government-offered program could be reduced is a known unknown. The possibility is clear; whether it will actually happen and the potential timing are unknown. An unknown unknown is the thing you aren’t even aware of yet, let alone what it will look like, that will affect what you are doing.

But even though philanthropy emphasizes strategic planning, it is most comfortable with known knowns and actively discourages (both consciously and unconsciously) things that are unknown. Foundations would do better in promoting social change if they developed a greater level of comfort with the unknown.

Philanthropy is hard work. The number of worthy causes and strong nonprofits in need of support often seems endless. And the need for money almost always exceeds the supply of available funds.

That’s why foundations have developed sophisticated methods to help them decide how best to allocate funds to causes and organizations that match their missions.

Most foundations seek extensive information about prospective grantees to inform their grant-making decisions. And well they should. But those processes are effectively training foundation professionals, boards, and grantees to think in ways that limit philanthropy’s potential as society’s risk capital.

Grant makers conduct research on potential grantees specifically to gain enough of an understanding of another organization to feel confident in making a transaction.

But that due diligence work — in the form of grant applications, reporting, and evaluation requirements — has had unintended consequences. By seeking to document every known known, grant makers have created the expectation that there are no unknowns.

However, if an obvious and effective solution to every social-change problem were known, then solving social ills would simply be a matter of providing sufficient resources to those solutions. But that’s clearly not the case. Social and environmental challenges are complex and many are ever-evolving. That’s why they require continuous exploration, experimentation, and creative solutions, many of which we most likely haven’t identified yet.

‘I Don’t Know’

When was the last time you heard a program officer say “I don’t know?” When was the last time you heard your executive director say “I don’t know?” Have you ever heard a grantee in a discussion about a potential grant say “I don’t know?”

Foundation professionals aren’t comfortable saying “I don’t know.” They fear appearing unknowledgeable to their boards. They fear appearing uninformed or not diligent to their peers. Often foundation due-diligence processes take scores of grantee hours so that foundation staff members can answer any question their colleagues, board members, or peers ask them. Foundation reputations are regularly built on the rigor of their due-diligence process. And program officers are praised for their in-depth analysis or thoroughness as every ‘i’ is dotted and ‘t’ is crossed. As a result, program officers and founders have created approaches that limit risks to the point where:

• They miss out on effective models for social change.
• They train their grantees to propose projects that will clearly work — rather than ones that are experimental — and have the potential to be transformative.
• They distract their grantees from their work by taking so much time to find out every answer.

And they inadvertently train their boards to value the same things.

Foundation executives fear supporting organizations or programs that look different from what they’ve supported in the past and what their peers are funding. As a result, nonprofits have unintentionally conspired to homogenize what a nonprofit should look like. Organizations (and the teams that lead them) that don’t fit that mold have significant difficulty gaining access to grants, regardless of their potential for social impact.

The prevalence of restricted grants is a sign of just how obsessed foundations are with known knowns. We deny known unknowns and blind ourselves to the possibility of unknown unknowns as we tie nonprofits to strict budgets and predetermined spending allocations.

In contrast, venture capitalists also do a tremendous amount of due diligence but expect that there will be both known unknowns and unknown unknowns.

Of course, some fundamentals absolutely must be known inside and out by the founding team, but the very nature of trying something new means that there will be unknowns. When evaluating potential investments, venture capitalists ultimately invest in teams as much as — if not more than — they do in the knowns of the business.

It’s extremely common in the start-up world for an organization to shift course — to gain new knowledge through experience and change the direction of the business or the business model in response to that new knowledge. And good venture capitalists expect that to happen. A large part of their educated gamble is that the team is the right team to incorporate new knowledge and make the company better, stronger, more responsive to market needs.

A common concept in the venture-capital world is that investments are making bets on the jockey, not the horse.

More Candor About Uncertainty

We think foundations need to adopt elements of that approach. Of course, program officers shouldn’t try to be venture capitalists; the analogy only goes so far. But the presence of unknowns doesn’t mean that grantees haven’t done their research, that they don’t have incredible potential, or that more diligence is necessarily needed.

The presence of unknowns when a grant is awarded doesn’t mean that program officers haven’t done their homework or due diligence.

It may well mean that the organization is trying something new, something that doesn’t look like past programs. It may well mean that the team is trying to be bold, to make a big difference. It may mean that they’re trying one horse and being honest about the fact that it may or may not be the right horse to win the race.

So how will foundations be ready to step toward the unknown?

The first step is for courageous program officers to get comfortable with known unknowns. That means telling their boards or peers “we didn’t ask that question because it wasn’t essential to our recommendation and decision-making process” and “we think this approach has potential and is being led by the right team, even if they don’t have every answer.”

Those foundations must then support their grantees with unrestricted funds as they, together, learn from the unknowns and explore what truly solves the complex social ills we’re all trying to eradicate.

Dahna Goldstein is a Bretton Woods II New America Fellow. She was previously founder and CEO of PhilanTech and teaches technology entrepreneurship at Georgetown University. Jessamyn Shams-Lau is executive director of the Peery Foundation, illustrator, and co-author of “Unicorns Unite: How Nonprofits and Foundations Can Build Epic Partnerships.”