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This article by Kathleen McGinn Spring was prepared for the March

17, 2004 issue of U.S. 1 Newspaper. All rights reserved.

For the Rich, Giving is Also Different

Curt Bassett is in the business of separating the very wealthy from

their fortunes – but in the best possible way. Founder and CEO of

Princeton Social Capital, a philanthropic consulting and education

company just setting up offices on Alexander Road, he has some 20

years of experience in advising billionaires, as well as mere

multi-millionaires.

At first blush, giving away money would appear to be a snap, but doing

so well involves a plethora of legal and financial strategies, a fair

amount of thinking outside the box, and an ability to see into the

future. There is an increasing demand for these skills for three

reasons.

The first catalyst has to do with the long run of history. Many saw

the calendar flip on January 1, 2000, as a milestone, a time to

re-evaluate priorities. "There was a resurgence in social

consciousness," says Bassett. "It has to do with religion – or

introspection – at a major turning point. There was the idea that

‘we’re going to be a new generation.’"

The second reason for the surge in foundation creation is more

concrete, and has its roots in the very recent past. "Incredible

wealth was created over the past 15 to 20 years," says Bassett. The

engine was the stock market, and the biggest beneficiaries were

entrepreneurs. This new breed, made fabulously wealthy by chips, code,

and esoteric futures markets, are cut from the same jib as their

American forebears whose fortunes came from steel or rails.

"There is a conflict in those who created the wealth," says Bassett.

"It’s a conflict of ideals. Americans believe in creating a better

life for their children, but they revere the self-made man or woman."

That belief accounts for a good part of the third reason for a surge

in philanthropy. "Many wealthy people are reluctant to shower their

children with money," Bassett finds. But they don’t want the

government to get it either. The third option: charitable giving. Most

often, this philanthropy is expressed through a foundation, and that

is where Bassett’s new company comes in. It offers everything from

classes in philanthropy to foundation set-up to advice on non-profit

mergers and acquisitions.

Bassett is the grandchild of Idaho potato farmers. His parents grew up

on farms, but left Idaho to settle in Houston, where his father worked

as a civil engineer. A Mormon, Bassett studied finance at Brigham

Young University (Class of 1981) before earning a law degree from the

University of Houston. He was drawn to finance, and especially to

financial estate planning, he says, because "it was a new and exciting

field." Another reason is that he saw finance as "having a large

impact on society."

He began to sense some of the arenas in which money could make a

difference in people’s lives as a teenager, when he went on a two-year

Mormon mission to Colombia. "I learned about poverty," he says, "and

about social interest." He also learned an unexpected lesson. "I

realized that money won’t buy happiness," he says. "Many of those

people were happy. I saw that poverty wasn’t an ill in itself."

Back home, with his education completed, he went to work for noted

philanthropy consultant Paul Comstock, whom he considers his mentor.

He then built investment expertise at Kidder Peabody before moving on

to Renaissance Inc., a charitable trust administration company in

Indianapolis.

In 1995 Bassett joined Merrill Lynch, where he started that company’s

Center for Philanthropy and Non-Profit Management. At Merrill, he was

also head of a group that worked with philanthropic families of great

wealth. "The minimum client base was $100 million," he says. "I was

working mostly with billionaires." When he left the company, he was

director of Foundations and Strategic Philanthropy.

Not long before he left Merrill to go out on his own, Bassett attended

a conference on strategic philanthropy at which he ran into Stan Katz,

a noted expert on the subject. Katz, now on the board of Princeton

Social Capital, is faculty chair at the Woodrow Wilson School and

director of its Center for Arts and Cultural Policy Studies. The two

hit it off immediately, and Katz helped Bassett develop the idea for

his new company, which he believes will "fill in the gaps" in services

offered by others who advise philanthropists.

"The biggest gap," says Bassett, "is that philanthropy consultants

lack financial acumen. They can identify the best organizations, but

can’t evaluate financial sustainability. They lack the skill set." He

believes that Princeton Social Capital’s strength lies in "putting

together Wall Street financial proficiency with non-profit

proficiency."

Shortly after meeting with Katz, Bassett set out to raise funds for

his start-up. Tapping a wide network of contacts made over two

decades, he quickly raised the money, a sum he won’t disclose, and put

together a board, which includes Joe Long, one of Texas’ leading

philanthropists, John Townsend, former head of investment banking at

UBS and current head of New York City-based Altman Foundation, and

Asad Mahmood, social investor and head of Deutsche Bank Microcredit

Development Fund.

Princeton Social Capital is a for-profit company. It works with

individuals, community foundations, and corporate foundations. All of

its fees come from philanthropists, as opposed to the non-profits and

for-profits it identifies as especially effective in meeting the

philanthropists’ stated social goals.

Carpet freshly laid at his company’s first address, where a number of

offices have new furniture, but no occupants, Bassett is interviewing

candidates for about 10 positions. He has already hired a social

venture capital analyst, a foundation consultant and program

specialist, a head of policy and research, a two social research

analysts, and an education research analyst. Some tasks will be

outsourced, and in other cases the company will take on outsourced

work from other firms, perhaps from brokerages looking for training

services. It is the early days, and facets of the structure of the

company are still up in the air.

The goal of its work, however, is clear. Princeton Social Capital

exists to advise the very wealthy on how to make their money a

catalyst for good, or at least for advancing causes that matter to

them. In the past, that might have meant investing the money so that

good works could be perpetuated for decades, for centuries. That is

still sometimes the case, but not always.

Some philanthropists now want to give away all of the money they have

earmarked for charity within a short span of time. There are two

reasons for this. Look to the high profile legal wrangling over the

future of the Barnes foundation, the Philadelphia-area home of one of

the world’s greatest collection of art, for one. "The Barnes is a

great example of a foundation that tried to prevent deviation from the

founder’s intent," comments Bassett.

Warring Barnes’ factions claim, on one side, that the founder would

never want the school and museum to leave its Main Line home, and on

the other, that it is doomed to financial ruin if it does not move

into the city of Philadelphia. This, says Bassett, is a classic

example of the conflict that can arise as a foundation ages. "You

don’t want renegades to take over," he says, "but it’s hard to

anticipate changes in society."

Put the money to work while you are alive, or direct that it be spent

soon after your death, and you have a greater chance that your wishes

will be carried out within a societal framework you understand.

That is the obvious reason for not aiming to set up a financial

structure that will dole out money in perpetuity. But there is another

reason. "There is a double bottom line," says Bassett, "financial

capital, and social capital." The latter is the good that compounds

and rolls forward, compounding still more as it does. For example,

money given away to educate teens in parenting skills could result in

hundreds of babies raised in loving, stable homes. Those babies,

growing into strong, caring adults, could do an even better job with

their children. Pass it along, and the money, while no longer growing,

could earn dividends in the form of thousands of promising children.

Philanthropists are appreciating the value of such social capital more

and more. But there does not have to be a either-or choice between

financial and social capital. Bassett talks about a philanthropist who

wanted to give money to a hospital. He worked with that individual on

a plan that would allow the hospital to do good, while at the same

time preserving the philanthropist’s capital for further giving.

It worked like this. The donor and the hospital worked out a plan

through which the hospital borrowed $1 million a year for 10 years,

and the donor paid the interest. The interest rate on the hospital

loan was so much lower than the return the philanthropist was able to

get on his money that, after 10 years, he was able to pay off the $10

million loan from investment returns alone, preserving the capital for

further giving.

This is thinking outside the box, and Bassett stretches the box

further still when he suggests that there are circumstances when a

philanthropist can do the most good by not giving his money to a

charity, but rather by giving it to a for-profit company.

"There was a billionaire out of Los Angeles," he recounts. "He felt he

had found a cure for melanoma." He had identified a Nobel prize winner

who wanted to put $30 million into trials for a vaccine. The

scientist’s company was aiming to cure an especially vicious cancer –

and also to make money. That, says Bassett, is an example of a "double

bottom line." Both social and financial, the strategy can be the best

way to achieve a good outcome. "It can be easier to raise money from

investor than from donors," he says of one plus of this form of

philanthropy. The giver might not be able to get the biotech going on

his own, but his investment might give it the start it needs to

attract more investors.

As one of its services, Princeton Social Capital will help identify

such for-profit philanthropic opportunities along with non-profit

opportunities.

Are there any hot trends in philanthropy? One very popular trend, says

Bassett, is the granting of micro-loans, through which individuals,

often living in Third World countries, are given enough seed capital

to start a small business. Asked for one more popular new philanthropy

recipient, he points to charter schools. One of his own favorite

non-profits is the Princeton Charter School, where his daughter,

Elise, is a seventh grader.

These are just two of thousands of possibilities for grantmaking.

Before helping philanthropists to evaluate and chose among them, the

new company aids them in developing a vision. Most philanthropists

Bassett has worked with – a group that ranges from age 30 up and that

consists largely of entrepreneurs – come to him with some idea of what

they want to do, but no specific plan. After shaping the vision, his

company helps with developing foundation legal structures, governance

strategies, a financial plan, a social investing strategy, a strategic

grantmaking strategy, and administrative set-up.

Princeton Social Capital will even provide advice on non-profit

mergers and acquisitions. There are any number of niches where

non-profits are competing for the same dollars to accomplish the same

goal. A philanthropist with an interest in furthering that goal might

be able to do more good if the organizations to which he was donating

joined forces. Where that is the case, Bassett’s organization could

offer help with the delicate task of urging the non-profits to give up

some autonomy, meld boards, staff, and volunteers and move forward

together.

Similarly, an arm of a non-profit might appeal mightily to a donor who

is not particularly interested in the other functions of the

organization. In that case, a spin-off might be in order. Bassett

emphasizes that in either case his company would be working for the

philanthropist and would collect its fees from him, and not from the

non-profits.

A central service that Princeton Social Capital performs is

encouraging, and forming, family involvement, an area of philanthropy

has undergone a tremendous change.

"There was an article in Fortune in 1997," says Bassett. "It was

called ‘The Disinheritors.’" The article profiled profoundly,

heretofore unimaginably, wealthy corporate executives, including Bill

Gates and Warren Buffet. "They were very public about the fact that

they wanted to give a majority of their money to foundations," he

says. "They intended to give their children enough to have seed

capital to regenerate, but not enough to live off the wealth and never

have to work."

Others are following the lead. A good number of Bassett’s clients have

told him of twin fears: They don’t want their children to wreck their

wealth, and they don’t want their wealth to wreck their children. "The

challenge of wealth creators," he says, "is to transfer the values

that were critical to creating the wealth." Given too much money,

however, hard work tends to fall by the wayside. But not right away.

While it is axiomatic that the third generation becomes a bunch of

wastrels, Bassett says it takes longer. "In my experience," he says,

"it’s the fourth or fifth generation that destroys the wealth." What

happens is this. Around about the third generation, the adults decide

to use the family wealth as lifestyle capital. They spend, but they

don’t work. "Their kids see a disconnect between effort and reward,"

he says. "Then it’s squandered and fought over."

Without a family-wide focus on doing good, perhaps by creating useful

products or by helping to advance a cause, "wealth is all about us,

rather than about the other," says Bassett. "When the focus is inward,

it creates narcissism."

Meanwhile, Bassett himself appears to be in no danger of falling into

a life of indolence. "Our plan is to be national," he says. "And we

will move quickly. We will open offices in San Francisco, Houston, and

Chicago within a couple of years."

If the effort is successful, Bassett will be in a position to worry

about the effect of substantial wealth on his child. "I’m already

teaching Elise about money," he says.

Princeton Social Capital Inc., 821 Alexander Road, Suite

115, Princeton 08540. Curt Bassett, CEO. 609-275-6677.

Www.princetonsocialcapital.com

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