Gilded ivory towers

The Wall Street Journal has reported a huge donation of $300 million to the University of Chicago Business School by former student David Booth.  While investing in human knowledge looks like the kind of thing that philanthropists should be doing, in the book we do wonder whether this type of mega-donation to an already successful institution is really the best way of getting maximum leverage (although it is fair to point out that the Chicago Business School’s endowment is only a sixth the size of Harvard’s).

The WSJ suggests that Booth’s donation is motivated by gratitude to his alma mater for the contribution of what he learned there to the success of his Dimensional Fund Advisors investment firm. Fair enough, but philanthrocapitalists are increasingly interested in how to incentivise future research rather than simply reward past performance. Hence the growing interest in prizes. Britain’s most popular tycoon, Sir Richard Branson, launched a prize last year to promote research into technologies to beat climate change. But the leader is probably the X-prize foundation, which has already scored a success with its space flight prize and is now looking at genomics and energy efficiency.  In a recent interview with Matthew for the Economist, the man behind the X-prize foundation, Peter Diamandis, predicted that we could see the world’s first billion dollar prize in the near future.

Topping up university endowments that have been hit by the financial crisis may be a safe bet for philanthropists.  But perhaps philanthrocapitalists should be looking to get more impact from their gifts by leveraging public money (as Atlantic Philanthropies did in Ireland), reforming research institutions (as Eli Broad has done in genomics), or using incentive prizes that Diamandis claims can unlock investments ten times the value of the original purse.