One watch set right will do to set many by.

---American folk saying

It is a profoundly erroneous truism, repeated by all copy-books and by eminent people when they are making speeches, that we should cultivate the habit of thinking what we are doing. The precise opposite is the case. Civilization advances by extending the number of important operations which we can perform without thinking about them.

---Alfred North Whitehead, as quoted by F. A. Hayek

In a recent presentation to the Hewlett Foundation, Bill Schambra adroitly contests the sensibility of the foundation community’s current fascination with “strategic philanthropy.” For Schambra, the best tool in the philanthropist’s tool kit may be simple common sense. He proposes that instead of filtering grant-making decisions through complex rationalizations involving the development of theories of change and logic models, philanthropists should put more trust in the more pedestrian logic of people and their communities:

Above all, entertain the possibility that this particular community came up with this particular institutional response because it intuitively, non-scientifically understands that while it may not work everywhere and forever, it does work here, now, in its own backyard.

Entertain the possibility that local knowledge and traditional wisdom may be superior to scientific rationality when it comes to solving human problems.

In fact, entertain the possibility that “solving problems” is itself a skewed and biased framework for approaching this question, privileging expert analytical solutions, and diminishing the unspoken, accumulated, idiosyncratic wisdom of the local and immediate community.

The strategic philanthropy that Schambra dissects is heir to the tradition of “scientific philanthropy” that was developed a century ago when early foundations such as Carnegie, Russell Sage, and Rockefeller enlisted scientific and technical experts to guide their philanthropic endeavors in a deliberate move away from the “inefficiency” of traditional charitable giving.   With the development of scientific philanthropy began the sad and lasting effects of a misplaced metaphor.  In economic terms the calculation of “efficiency” without a system of prices and profit/loss feedback is largely meaningless.  In epistemological terms, the use of science in society isn’t as straightforward as the traditions of some forms of social science have tended to promise.

Strategic philanthropy, like scientific philanthropy before it, seems to be an effort to create a grant-making logic that can reflect the glory of both modern science and modern business.  Unfortunately, more than beckoning to us as a new shining city on a hill it has cast a philanthropic penumbra that is making our once-robust civil society a mere shadow of its former self.

Illuminating how philanthropy can best support a free and vibrant civil society requires us not only to reconsider how we have practiced philanthropy for a century but to recover a deeper understanding of the appropriate uses of knowledge.  The insights of Nobel laureate economist Friedrich Hayek can thus help amplify Schambra’s appeal to the value of local knowledge. 

In “The Use of Knowledge in Society,” (1945) one of his most important and most widely accessible essays, Hayek encourages his readers to recognize that there are in fact different sorts of knowledge that work differently in different circumstances. Appreciation for local knowledge had been obscured, Hayek argued, because “one kind of knowledge, namely, scientific knowledge, occupies now so prominent a place in public imagination that we tend to forget that it is not the only kind that is relevant.”  He wrote:

Today it is almost heresy to suggest that scientific knowledge is not the sum of all knowledge. But a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place. It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active coöperation.

The ultimate thrust of Hayek’s essay is to describe the fluidity and emergent properties of the price system as a contrapuntal to the logic of rational planning anchored on the fetishization of scientific knowledge. As Hayek shows, price signals allow both producers and consumers to make various nuanced “calculations” about opportunity and value and action.  These calculations, of course, are not merely input and output problems that turn into commands, but are rather complex and unpredictable processes that involve the mixing within the human mind of the information conveyed by changing prices with local knowledge and the subjective personal values. 

As we have noted, however, philanthropy’s core activity—the making of gifts—does not turn on the same application of market prices that informs the decisions of manufacturers about what to produce and the buy and sell decisions of consumers.  The explicit application of theories of change and logic models are poor imitations of the unplanned and un-manageable knowledge creation of the price system that gives rise to the fluid decision processes of the market.  But can the “common sense” Schambra offers as an alternative help the philanthropist make wise decisions?  Does common sense philanthropy make unnecessary the donor’s effort to investigate the causes of social problems in order to increase the chances of applying grant resources to do good rather than harm?

Again, Hayek’s framework can help us sort out the logic of philanthropic action.  He argues that “the price system is just one of those formations which man has learned to use (though he is still very far from having learned to make the best use of it) after he had stumbled upon it without understanding it.”  Other such spontaneously evolved social formations to which Hayek points include the Common Law and language itself.  These are institutions that have been developed “by building upon habits and institutions which have proved successful in their own sphere and which have in turn become the foundation of the civilization we have built up.”

In their disdain for practices of traditional charity such as alms-giving, with its deep roots in religious systems of spiritual duties and its frequent application within parishes and other localities, strategic philanthropists have nevertheless had to contrive other logics to substitute for the sorts of knowledge and values that were bound up in traditional practices and which signaled to those who knew how to interpret this information where their giving might be most needed and effective.

Beginning with the passage of the Elizabethan poor laws at the turn of the 17th century, and accelerating in the 19th and 20th centuries, the problems of philanthropy became  increasingly interpreted as economic and social problems to be attended to by political action rather than as spiritual duties or opportunities for the mutual assistance enacted within and among the associations and “little platoons” that constitute civil society.  (A classic literary representation of this shift is found in Scrooge’s famous response to the charitable appeal of the fundraisers who knock on his door, “Are there no prisons? . . . And the Union workhouses?. . . Are they still in operation?” )

Given this trend, which has approached apotheosis in today’s philanthropy, let’s consider more closely the nature of the modern economic problem.  If, as Hayek proposes, the modern economic problem is “how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know,” then we should look more carefully at the ways in which knowledge coordination might best transpire in the world of philanthropy today. 

In other words, how might philanthropy help us solve the economic problem, which is merely, in fact, a knowledge problem?

Hayek elaborates on the challenges:

The economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them. We cannot expect that this problem will be solved by first communicating all this knowledge to a central board which, after integrating all knowledge, issues its orders. We must solve it by some form of decentralization. But this answers only part of our problem. We need decentralization because only thus can we insure that the knowledge of the particular circumstances of time and place will be promptly used. But the "man on the spot" cannot decide solely on the basis of his limited but intimate knowledge of the facts of his immediate surroundings. There still remains the problem of communicating to him such further information as he needs to fit his decisions into the whole pattern of changes of the larger economic system.

In such terms, the wisest donors will need to develop more confidence in the knowledge possessed by the “man on the spot,” in today’s terms usually the principals of the charity or community organization that is seeking resources.  Such confidence must be developed not merely through the charity’s ability to tell a story that tugs at the heart strings, however, nor by the executive director’s willingness to adapt his programs to the logic model of the foundation.  Instead it should come primarily through the social capital developed in trusting relationships and through people doing things together.  This necessitates, as Schambra enjoins, that donors get out into the community to see organizations at work and to talk with those these organizations ultimately purport to help.  These observations are not to be construed as scientific field studies but as opportunities for the application of common sense. 

Schambra provides some pointers:

Is its parking lot full of cars? Is the lobby echoing with noise, bustle and confusion? Is this where people tend to come first, when they encounter problems of any and all sorts, whether or not listed on the group’s mission statement?

Do local residents and community elders have a high opinion of it? Does the neighborhood value it enough to protect it from vandalism and graffiti, and to support it with volunteer time and small donations?

While recipients of charity are not usually voting with dollars, such observations can tell us whether they are “consuming” the services offered by a community organization, whether they are participating beyond mere consumption by volunteering their time to community efforts, and whether there is in fact a spirit of cooperation and even friendship in the air that is a hallmark of a healthy civil society growing.

Does the graduate education and technical knowledge of the foundation staffer become useless in such relationships?  Not necessarily.  Foundation staff members are often in the enviable position of having the opportunity to survey the broader field of philanthropic activity and social entrepreneurship, and even social science research, to uncover new insights, strategies, and programs that can enhance the knowledge and practices of local nonprofit organizations.  This is a luxury many executive directors don’t have.  But this knowledge must not be presumed to be the most important knowledge available.  It has to be accommodated to the knowledge that is discerned by those working on the street.

Unfortunately, foundations have priced this knowledge far too richly for the budgets of most charitable organizations. The transaction costs of fundraising alone can be exorbitant, and donors, whose requirements and processes drive up those costs, have been increasingly loath to pay for development and “overhead” organizational costs.  Keeping up with the specific grant formats, deadlines, and idiosyncracies of each foundation they approach, not to mention figuring out how to align program activities with the evaluative proof of success increasingly sought, inevitably eats into an organization’s budgets of time and money. As Schambra points out, the ultimate costs of developing and implementing a program that aligns with the foundation’s theory of change and logic models can soon outpace the social value of the intervention itself.

Scientific and strategic philanthropy also distort philanthropy by too closely associating knowledge with power.  Donor intent has often become code for “the donor (or the expert at the foundation) is always right.”   This stifles an environment of shared participation in discovery and opens instead a cautious divide between foundation personnel and their counterparts in nonprofit organizations.   When the strategically devised program fails, who’s going to take the blame?  Philanthropy by experts also further distances the person at the ultimate receiving end of the gift chain from bringing his own local knowledge to bear on creating workable strategies for improvement.  John McKnight’s asset-based community development work has shown time and again how often the experts, failing to ask people what they themselves believe the problems are, miss the diagnosis, and thus certainly prescribe the wrong cures.

In the end, the business of philanthropy is less about the application of theories of change and more about the judicious and prudential application of knowledge that is as often tacit as explicit.  Just as nonprofit organizations learn to read the signals in their communities and act on them, donors and their staff need to bring common sense to bear more heavily on their deliberations and decisions.

Will common sense lead us astray?  At first, while we re-learn to use it, there is every likelihood that mistakes will be made.  In commercial enterprises we call these mistakes “losses,” and good businesses learn quickly how to adjust their actions and change the figures at the bottom line.  In philanthropic enterprises we do not enjoy such clear profit and loss signals, but the work we do to help coordinate knowledge in society can still play an important role, not only in improving the ways we help one another through beneficent activities but also in bringing to light social knowledge and social learning that can enhance social coordination and even market processes.

Eventually, in a world of common sense philanthropy we will develop new patterns and new tensile strength in the fabric of civil society.  We may not ever calculate the efficiency of our giving but we will be more confident in one another.  We will develop new “rules of thumb” that will help us, first, to do no harm and, ultimately, to recognize without having to prove the profit in the philanthropic enterprise.  We may even develop new philanthropic maxims and new Copy-Book Headings that become as widely replicable and as socially beneficial as the guidance of one watch set right.