Tag: philanthropy

Rich People Should Help the Poor by…Making Smart Investments and Earning Big Profits

There’s a very provocative article on the New York Times website that criticizes Steve Jobs for his supposed lack of charitable giving:

Surprisingly, there is one thing that Mr. Jobs is not, at least not yet: a prominent philanthropist. Despite accumulating an estimated $8.3 billion fortune through his holdings in Apple and a 7.4 percent stake in Disney (through the sale of Pixar), there is no public record of Mr. Jobs giving money to charity. He is not a member of the Giving Pledge, the organization founded by Warren E. Buffett and Bill Gates to persuade the nation’s wealthiest families to pledge to give away at least half their fortunes. (He declined to participate, according to people briefed on the matter.) Nor is there a hospital wing or an academic building with his name on it. …the lack of public philanthropy by Mr. Jobs — long whispered about, but rarely said aloud — raises some important questions about the way the public views business and business people at a time when some “millionaires and billionaires” are criticized for not giving back enough… In 2006, in a scathing column in Wired, Leander Kahney, author of “Inside Steve’s Brain,” wrote: “Yes, he has great charisma and his presentations are good theater. But his absence from public discourse makes him a cipher. People project their values onto him, and he skates away from the responsibilities that come with great wealth and power.”

But why, to address Leander Kahney’s criticism, should we assume that Mr. Jobs has done nothing for the poor? He’s built a $360 billion company. That presumably means at least $352 billion of wealth in the hands of people other than himself. And that doesn’t even begin to count how consumers have benefited from his products, the jobs he has created, and the indirect positive impact of his company on suppliers and retailers.

To give credit where credit is due, the article does present this counterargument. It reports that Mr. Jobs told friends, “that he could do more good focusing his energy on continuing to expand Apple than on philanthropy.”

This is a critical point. Do we want highly talented entrepreneurs and investors dropping out of the private sector and giving their money away after they’ve reached a certain point, say $5 billion? Or do we want them to focus on creating more wealth and prosperity?

Interestingly, Warren Buffett used to understand this point (before he started arguing that politicians could more effectively spend his money). And Carlos Slim Helu still does:

Mr. Jobs, 56 years old, is not alone in his single-minded focus on work over philanthropy. It wasn’t until Mr. Buffett turned 75 that he turned his attention to charity, saying that he was better off spending his time allocating capital at Berkshire Hathaway — where he believed he could create even greater wealth to give away — than he would ever be at devoting his energies toward running a foundation. And last year, Carlos Slim Helú, the Mexican telecommunications billionaire, defended his lack of charity and his refusal to sign the Giving Pledge. “What we need to do as businessmen is to help to solve the problems, the social problems,” he said in an interview on CNBC. “To fight poverty, but not by charity.”

None of this is to say that charitable giving is wrong. I’m proud to say that my employer, the Cato Institute, refuses to accept money from government. This means we are completely dependent on private philanthropy.

But those of us who work at Cato understand that creating wealth—maximizing the size of the economic pie—is the most important priority. And if the pie is big, generous people then have more ability to make contributions to worthy causes such as school choice scholarship funds, the Salvation Army, or (ahem) America’s best think tank.

School Reform’s Shaky Foundations?

Philanthropy Daily has just published the most interesting review to date of my recent charter school philanthropy study (“The Other Lottery”). Scott Walter, an expert in charitable giving in the field of education, looks not only at the central finding (that there is no link between charter networks’ performance and the amount of grant funding they’ve received) but also extrapolates to what the findings imply about the nation’s top education foundations.

I’m curious to know if anyone else shares his interest in seeing the numbers crunched to allow education foundations to be ranked in terms of the performance of the charter school networks they have backed. Ping me on Facebook if you’d like to see that.

Fordham Institute Reviews ‘The Other Lottery’

Gerilyn Slicker, of the Fordham Institute, offers a brief review of my study of charter school philanthropy in the latest “Education Gadfly” mailing, including the following observation:

Note, though, that this analysis is not without fault. The report doesn’t break down spending by pupil (only reporting aggregate grant-giving), nor does it account for student growth over time or for how long the charter networks have been operational.

All three of these concerns are worth raising, and the first two of them were actually addressed in the paper itself. The aggregate vs. per-pupil grant funding question is discussed in endnote 15:

Note that total grant funding, rather than grant funding per pupil, is the correct measure. That is because enrollment is endogenous—it is a product, in part, of earlier grant funding. So, controlling for enrollment (which dividing by enrollment would do) would control away some of the very characteristics we are trying to measure: the charter network’s ability to attract funding.

Student growth over time, as noted on page 5, cannot be measured using the California Standards Tests, because it reports results as averages of subgroups of students at the classroom level, not as individual student scores. And since the CST is the only source that has broad-based performance data for all charter and traditional public schools in the state, it is the only dataset that can be used to measure the performance of all California charter school networks. Fortunately, good controls for both student factors and school-wide peer effects are available, and the study’s results are consistent with earlier research, where it overlaps with that research.

The final concern, network age, is not one that I directly addressed in the study. There are a couple of reasons to expect it would not have much of an impact on the findings, however. First, a cursory look at the age of some of the top networks shows no particular pattern. American Indian and KIPP are both a decade old, and rank #1 and #7, respectively, out of 68 networks. Oakland Charter Academies and Rocketship are just a couple of years old, and rank #2 and #4, respectively. Similarly, some of low performing networks are brand new, while others, like GreenDot (ranked 42nd), are also over a decade old.

Second, in Appendix E, I show that network size and network academic performance are not significantly linked to one another. And since network age and network enrollment are likely to be strongly positively correlated with one another, it would be surprising if network age were correlated with performance when enrollment is not. That said, I’d probably include network age as a control in future, if I repeat the study, just to be on the safe side.

Ranking the Charter School Networks

Much of the response to the study I released last week has focused on the relative academic performance rankings of California’s charter school networks. That wasn’t the point of the study, which focuses on whether or not philanthropy + charter schooling can replace venture capital and competitive markets as a mechanism for scaling-up the best education services. Rather than try to fight the tide, I thought I’d just share the relevant rankings in an easy-to-link form, and once the debate about them dies down we can return to the larger policy point.

With that in mind, the first table below lists the top 15 charter school networks in terms of performance on the California Standards Tests, adjusted for student factors and peer effects. For comparison, two non-charter schools are included: the academically selective elite public prep schools Gretchen Whitney and Lowell–both of which feature in most lists of the top public schools in the country. There are 68 networks with the necessary data, but the lowest grant rank is 61 because eight of the networks received no philanthropic funding at all.

Next is a list of the charter networks that philanthropists have invested-in most heavily, with a view to replicating their models. Notice the minimal overlap? I repeat this comparison in the study with Advanced Placement test performance, and find the same pattern (it’s just slightly worse).

Every one of the above networks received substantially more grant funding individually than the top three highest achieving networks… combined.

New Cato Study: Philanthropists Are Replicating Charter Schools…at Random

In December of 1993, Bill Clinton remarked that figuring out how to consistently replicate great schools was the central education policy problem of our age. A generation later, it still is.

As someone obsessed with solving that problem, I wanted to know how well our current strategies for achieving it are working. One strategy in particular has attracted the bulk of the funding and attention over the past decade: philanthropists teaming up with what they consider to be the best networks of charter schools, and funding their growth. To find out how well they’ve been picking the winners, I compared the total amount of grant funding received by each of 68 California charter school networks over the past 8 years to the academic performance of those networks. The study is available here.

The correlation between grant funding and performance on the California Standards Tests turns out to be negligible (0.1). In fact, it’s half the size of the correlation between performance and the length of the networks’ names. As a check on those findings, I also ran the numbers on AP test performance. Those results are slightly worse: though the correlations are also negligible in magnitude, they’re actually negative in sign—more grant funding is associated with minutely worse AP performance.

In a nutshell, it’s as if philanthropists have been doling out funding to charter school networks by the same random lottery process by which oversubscribed charters are obliged to accept new students. While this will of course be viewed as a great disappointment by a great many people, it is better to have this information than to continue to labor in ignorance. There are places where excellence in education does routinely scale-up, and documenting them is the subject of my next project….

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Does Scholar Self-Interest Corrupt Policy Research?

The New York Times recently ran a story portraying the Gates Foundation as the puppeteer of American education policy, bribing or bullying scholars and politicians into dancing as it desires. Rick Hess, of the American Enterprise Institute, feels that the story misrepresented his position on the potentially corrupting influence of foundations, making it sound as though he were referring to the Gates Foundation in particular when in fact he was referring to the impact of foundations generally.

Hess told the Times, among other things, that

As researchers, we have a reasonable self-preservation instinct. There can be an exquisite carefulness about how we’re going to say anything that could reflect badly on a foundation. We’re all implicated.

Next Monday, the Cato Institute will publish a study titled: “The Other Lottery: Are Philanthropists Backing the Best Charter Schools?” In it, I empirically answer the titular question by comparing the academic performance of California’s charter school networks to the level of grant funding they have received from donors over the past decade. The results tell us how much we should rely on the pairing of philanthropy and charter schools to identify and replicate the best educational models. Considerable care went into the data collection and regression model. As for the description of the findings, it’s as simple and precise as I could make it. I doubt it will be hailed as exquisite.