The following column, "Blue Meridian Partners: A Collaborative Form of “Big Bet” Philanthropy Aims to Give $1B to Youth Programs," was originally published in the Nonprofit Quarterly.
Blue Meridian Partners is a relatively massive endeavor. Why do you feel it is so important to get this particular effort off the ground now?
Stan Druckenmiller: More than anything else, we feel an acute sense of urgency. We as a nation have been funding programs for disadvantaged youth for years. I deeply appreciate the hard work and generosity of everyone who has contributed and fought to make the lives of young people better. But make no mistake: We are losing this fight. Badly. It is not even close. While we've supported the expansion of some very promising organizations and programs—Harlem Children's Zone (HCZ), for example—overall, across the nation, we're not moving the needle. The prospects for poor kids are not improving. By many measures, they're getting worse. There's got to be a better way to help more kids and young people.
Nancy Roob: On the flip side, we have seen what's possible with bigger bets and bolder thinking. The growth of Edna McConnell Clark Foundation (EMCF) grantees like Youth Villages and Nurse-Family Partnership shows what can result when the highest-performing nonprofits and their leaders are supercharged with large amounts of capital.
But such large-scale investments remain shockingly rare. Research by the Bridgespan Group recently found, in a typical year, that philanthropy has made only one or two "big bets"—grants of $10 million or more—a year on social-service organizations. And I would argue that most of these bets, including those that EMCF and our co-investors have made to date, haven't been big enough. We have not yet fully invested all it takes to bring a program to scale.
As I've said before, Blue Meridian's investments will be big bets: They will be flexible, unrestricted, long-term (5-10 years), tied to performance, and total up to $200 million for each organization. These investments will help our grantees to expand their impact directly, by allowing them to strengthen their work, grow, and serve greater numbers of youth, as well as indirectly by helping them increase their influence on the child welfare, educational, judicial, and other systems that affect children's lives.
What do you believe is keeping philanthropy from making "big bets" today?
Stan: As a private investor, I've been successful by making a few big concentrated investments rather than a lot of little ones. That's pretty much my approach to philanthropy, too: Look for the really big ideas whose potential impact on society is huge and back them to the hilt. I think it was Mark Twain who said, "Put all your eggs in one basket, and then watch that basket." Closely.
But that's not the way most philanthropy works. People want to diversify―a little money here, a little money there—and the resulting impact on society is diluted and disappointingly small.
Nancy: The culture of most of philanthropy and government is to fund programs, not whole organizations. If it costs X dollars to deliver a program, let's get that cut down to the barest possible minimum. Instead we should be investing in innovation that will expand a program to 20 more places at a lower cost.
Moreover, no single funder can provide a nonprofit with all the resources it needs to make a big impact. It's a Herculean task for even the best nonprofit leaders to piece together funding to meet payroll, let alone pay for "luxuries" like data collection and growth. Most leaders are limited in their imagination because they have to worry, "How much money can I raise? And, based on that, what can I get done?"
Even the strongest programs for disadvantaged youth are woefully undercapitalized, so they don't have a fighting chance to succeed and grow. By changing the capital flow, Blue Meridian Partners hopes to allow the most effective leaders in the sector raise their ambitions on how to tackle problems at scale. As I've said elsewhere, without large, long-term investments of growth capital for organizations with proven results, we'll continue to salve but not solve our big social problems.
Is it really possible to make progress toward solving deep social problems, even with the big bets you intend to make?
Nancy: We know there isn't a single "silver bullet" that will eliminate all of poverty's harmful effects on children and youth. Our charge at Blue Meridian is to find interventions that will have outsized impact by reducing significantly, if not removing altogether, some of the obstacles blocking kids' paths to successful adulthood. We need to insist on and invest more in evidence, so we can better distinguish proven programs from promising ones, and increase our support to those nonprofits with the greatest potential social impact.
Stan: We absolutely think it is possible. When we started Harlem Children's Zone, I was confident Geoff Canada was building something special. Luck played a part, but what made it possible for Geoff to realize his vision was a long-term commitment of capital that gave him the freedom to think big and the ability to execute successfully.
Nancy: There are a growing number of programs with empirical evidence that they help young single mothers raise healthier children, that raise students' test scores and keep them in school, or prevent young adults aging out of foster care from falling by the wayside. From this pool, as Stan noted, we're looking for organizations whose expansion will not only transform the lives of many more, but influence and improve the public systems that play a decisive and not always constructive role in the lives of many disadvantaged children and youth. So if we're not "solving" problems, we're making a serious dent in them—and showing philanthropists and policymakers ways to address these problems more effectively.
Is organizational growth among grantees Blue Meridian Partners' primary objective?
Stan: We want our grantees to benefit more children and youth across the country, and we expect they will do this by expanding. But we also hope they will have an impact on still more kids by influencing others. Growth and expansion might come in different forms. One of the things that excite me about Blue Meridian Partners is that we can help more organizations achieve impact beyond their walls.
Nancy: In many ways, Blue Meridian Partners is our answer to the question, "Growth to what end?" Before making any investment, we will ask ourselves, and ask a nonprofit to answer, "How will the growth of this organization address the needs of economically disadvantaged children and youth on a national level? What impact would scaling this organization make on deep social problems? How would systems, such as child welfare, schools and juvenile justice, operate differently as a result to help even more kids?"
So, then, how will you define success?
Nancy: I wish there was a simple answer! Measuring the success of an individual investment will be relatively straightforward, because these metrics will be spelled out in the scaling plan of every grantee we invest in. For example, program A will reach so many kids within so many years and help X percent of them achieve Y and Z.
Defining success for Blue Meridian Partners and its investment portfolio as a whole will be more challenging, because we will be investing in different kinds of organizations working in different domains with different goals, and it's hard to compare apples and oranges and pears. But another measure of our overall success will be whether we can demonstrate the effectiveness of an innovative vehicle for collaborative philanthropic investments.
With such large bets—up to $200 million—how will you manage against risk?
Stan: I think it depends on how you define risk. I'd argue the greater risk is to continue down a path where we have diluted philanthropic investment, where the best programs have to fight and claw for funding sometimes just in order to keep the lights on, and where scale is a pipedream.
Nancy: Blue Meridian Partners is building on the approach EMCF has developed and tested over the last decade-and-a-half and taking it a step further. We are able to reduce risk by our intensive due diligence, rigorous selection process, and the accountability framework we create by linking future investment payout to performance metrics.
We realize that very few organizations will be able to meet our exacting criteria, much less absorb an investment as large as the ones that Blue Meridian envisions. So even as we're seeking to spark nonprofit leaders' imaginations of what is possible, we are proceeding in a very practical, sober way. Our initial planning and development grants are designed to help prepare an organization—and Blue Meridian—for a large investment, but only if a scaling study shows a viable pathway to success.
Isn't it going to be difficult for the co-investors in Blue Meridian Partners to reach agreement on investment and other decisions?
Stan: From talking with our board, with our donors, and with our staff, I can tell you that everyone involved in this is committed to investing in what works, creating efficiencies, and, most important of all, improving the lives of America's disadvantaged kids.
Nancy: Our initial governance structure is intentionally designed to be temporary. We want to remain flexible as we figure out how best to achieve our goals. And as we learn this, the governance and composition of the partnership are likely to evolve.