PANEL V

FILLING THE GAPS: THE ROLE OF FOUNDATIONS

Moderator: Jim Turner Association of Public and Land-Grant Universities

Mr. Turner said that the United States is unusual in the role played by foundations in economic development. “In the Rust Belt, where I come from,” he said, “industrialists and even their companies may die, but they tend to leave foundations behind that support their communities. This is a powerful tradition because it’s creative and it can be done through a grant process that looks at many good ideas. He praised in particular the Heinz Endowments of Pittsburgh, where he grew up. “The foundation has been a godsend,” he said. “It and several other family foundations are focused on Western Pennsylvania and how to make it better. It’s hard to think of Pittsburgh without them.”

How Innovation Clusters Are Reviving the Economies that “Urban Renewal” Destroyed

Christina Gabriel Bomani Howze The Heinz Endowments

Dr. Gabriel agreed with Mr. Turner that Pittsburgh is the fortunate beneficiary of entrepreneurs who were active a century ago, and that the Heinz Endowment indeed focuses its efforts on the local region. “But the idea,” she added, “is to treat the region as a living laboratory for problems that are national in scope.”

She began by referring to her title, which began: “2532 Neighborhoods, 992 Cities, 1 Million People.” These figures represent those who were involved in federally subsidized urban renewal projects between 1949 and 1973. “This matters to every one of us,” she said, “because the legacy of those urban renewal years exists in so many of our cities. Many of these projects are now considered failures, and these failures may be located very close to our universities and other



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PANEL V FILLING THE GAPS: THE ROLE OF FOUNDATIONS Moderator: Jim Turner Association of Public and Land-Grant Universities Mr. Turner said that the United States is unusual in the role played by foundations in economic development. “In the Rust Belt, where I come from,” he said, “industrialists and even their companies may die, but they tend to leave foundations behind that support their communities. This is a powerful tradition because it’s creative and it can be done through a grant process that looks at many good ideas. He praised in particular the Heinz Endowments of Pittsburgh, where he grew up. “The foundation has been a godsend,” he said. “It and several other family foundations are focused on Western Pennsylvania and how to make it better. It’s hard to think of Pittsburgh without them.” How Innovation Clusters Are Reviving the Economies that “Urban Renewal” Destroyed Christina Gabriel Bomani Howze The Heinz Endowments Dr. Gabriel agreed with Mr. Turner that Pittsburgh is the fortunate beneficiary of entrepreneurs who were active a century ago, and that the Heinz Endowment indeed focuses its efforts on the local region. “But the idea,” she added, “is to treat the region as a living laboratory for problems that are national in scope.” She began by referring to her title, which began: “2532 Neighborhoods, 992 Cities, 1 Million People.” These figures represent those who were involved in federally subsidized urban renewal projects between 1949 and 1973. “This matters to every one of us,” she said, “because the legacy of those urban renewal years exists in so many of our cities. Many of these projects are now considered failures, and these failures may be located very close to our universities and other 105

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106 GROWING INNOVATION CLUSTERS FOR AMERICAN PROSPERITY communities where economic activity is beginning to aggregate in innovation clusters.” This symposium is considering how we can create successful innovation clusters in more places, she said. “You cannot tell the story of the nation's strongest innovation clusters without recognizing the role that federal policy and federal funding played in making these clusters possible. You have to remember that every year since World War II, Boston and Silicon Valley have had hundreds of millions of current-year dollars poured into their research universities. After 65 years, it would be shocking if those places were not centers of innovation. All the other regions trying to innovate are trying to accelerate the process so it doesn’t take them all 65 years.” In the same way, she said, “you cannot tell the story of the nation’s economically distressed communities without recognizing the role that federal policy and federal funding played in making this economic distress inevitable.” She said that it was important to talk about these two issues “in the same breath.” An innovation cluster cannot be considered apart from where it is situated in its community. A cluster can indeed lift all boats, she said, but they cannot be successful if they are isolated. The Urban Renewal Movement She said that the urban renewal movement, which began just after World War II, was partly responsible for the shape of many urban communities today.1 A popular idea was that cities were declining because buildings were aging and street grid patterns were out of date. One solution proposed was to make the cities more attractive by removing aging housing stock and replacing it with malls, parking lots, and other modern structures. At that time, she said, the well-meaning foundations in Pittsburgh were “doing what you would hope foundations would do—taking the lead.” Richard King Mellon, head of the largest foundation in Pittsburgh, was involved, as was Mayor David Lawrence and the Allegheny Conference on Community Development. “The foundations started very proudly,” she said, “grabbing this issue of urban renewal before anyone else in the country. We took our smoky city and turned the area where the Allegheny and Monongahela Rivers come together into the Golden Triangle, a major success story. Because of this success, we felt we could do other things. So across the river, in Allegheny City, which is now called the North Side of Pittsburgh, hundreds of city blocks were bulldozed, including what were a beautiful park and vibrant weekend market. In their place is an empty 1 For an examination of urban renewal, see: Mindy Thompson Fullilove, Root Shock: How Tearing Up City Neighborhoods Hurts America, and What We Can Do About It, New York: Ballantine Books, 2005.

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107 SUMMARY OF PRESENTATIONS neighborhood. The street grid was cut off by a huge suburban-style Allegheny Center Mall, which we all now recognize was a mistake.” She referred also to a section of the city called East Liberty, which in 1928 was a vibrant economic zone. By 1970 it, too, was reshaped to resemble a shopping mall. Now the foundations have joined to remove some of the replacement structures and fund a community plan to resuscitate the neighborhood. Reaching out to the Hill District The third of the failed Pittsburgh projects she mentioned was the Hill District, playwright August Wilson’s neighborhood, between downtown and the University of Pittsburgh. The old street grid was severed, cutting it off from the downtown business district, and some 100 city blocks were removed to make room for what is now a large parking lot and a domed arena. It has virtually none of the amenities one expects in a vibrant neighborhood, such as bars and clubs, coffee shops, restaurants, lodging, banks and ATMs, gas stations, grocery stores pharmacies, and hospitals. These amenities are found instead in the areas surrounding the Hill District, such as the Strip District along the river below the hill and the South Side on the far bank of the river. Indeed, it is in these areas where new innovation clusters are springing up: robotics companies in the Strip District, software companies on the South Side, gaming companies just to the east of the software firms, arts companies in Lawrenceville just north of the Hill, and biotech and InfoTech firms just southeast of the hill and next to the universities. Connecting the Hill to High-tech Clusters Accordingly, The Heinz Endowments and other foundations have joined with community organizations to integrate the Hill District with these adjacent zones within the state-funded Pittsburgh Central Keystone Innovation Zone. This “PC-KIZ” features “direct and deliberate bridges” to connect the Hill to the surrounding high-tech clusters. One pilot project under development focuses on a 1929 building originally designed as a trade school for the Pittsburgh Public Schools. Its classrooms, high-bay shops and labs are being converted to support a holistic program for education and training along the entire K-12 and adult workforce pipeline with a focus on green jobs at all levels. The collaboration intends to connect the community to a new magnet high school, a university biofuels research and testing lab, a green building operating engineers training program, and a greentech-focused business incubator. In short, these neighborhoods can now become centers of true urban renewal if grassroots community participation is integral to the design.

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108 GROWING INNOVATION CLUSTERS FOR AMERICAN PROSPERITY The Improvisational Quality of Clusters Bomani Howze, also with the Heinz Endowments, noted that promoting a Hill District connection to the innovation economy could only begin by understanding the neighborhoods and learning how to optimize the impact of funding on neighborhoods. Likening the process of innovation to jazz, he suggested that renewing neighborhoods, too, can have a “free-flowing improvisational quality.” There can also be, he said, “organic freedom in the culture of a neighborhood that would lend itself to the innovation processes seen in technology centers—which in many cases are just down the road.” He said that today there are many development projects moving into the open spaces created by bulldozers decades earlier. “The real issue is how this can connect to community small-business development initiatives,” he said. The PC-KIZ, a state program, is an example of how philanthropic dollars can be complemented by other monies to attract private interest. “We hope that it will be industry-led,” he said, “so people will be trained for jobs that will come.” The objective is to attract small businesses of all kinds to the area. One hurdle is that shops and restaurants are absent, so the PC-KIZ is trying to encourage those amenities to move in, bringing the technology clusters closer together and helping revive the neighborhoods. Dr. Gabriel concluded with a recommendation for the federal government. She recalled working in the Technology Reinvestment Project during Clinton Administration, and said that six agencies were able to work together out of the same general fund and still be effective and quick at making joint funding decisions. In that case, the objective was to find ways to support dual-use technologies. She said the lessons learned in that exercise could directly assist the multiple federal agencies that want to integrate cluster formation with community issues, such as those being addressed in Pittsburgh. Building the Workforce and the Universities George W. Bo-Linn Gordon and Betty Moore Foundation Dr. Bo-Linn began by describing some unique roles played by foundations. First, they can identify “possible pockets of innovation and inflection points. We are not encumbered by an existing bureaucracy. In many cases the founders are businessmen and entrepreneurs who have long personal experience in finding and supporting those pockets of innovation and inflection points.” Second, he said, foundations are able to provide seed money outside the traditional funding process. This differs from the venture capital

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109 SUMMARY OF PRESENTATIONS approach in that foundations can take longer to examine a project, pursue a deeper due diligence examination, and support more capacity building. With its flexibility and stature, a foundation can take risks, act quickly, and catalyze consensus. He noted that the tradition of philanthropy was being enriched by “a whole array of Silicon Valley entrepreneurs who have been enormously successful, and who are putting their money into foundations. The difference is that the living founders play a key role in their foundations. They want to know that something’s happening, that innovation is occurring.” Third, the stability, resources, and freedom from political pressures allow a foundation to stay with a project for the long run. Gordon Moore, he said, believes that for large, important problems, it may take a decade to have measurable success. Hence the Moore Foundation takes deep due diligence in assessing opportunities and will commit resources for multiple years. “He feels that if you want to see change, then you have to commit to it.” A Profile of the Foundation The founding agenda of the foundation was to “make a positive impact on the world for generations to come.” The Gordon and Betty Moore Foundation, founded in 2000, is already the 10th largest foundation in the United States and has provided grants of almost $2 billion. Its primary program areas are environmental conservation, science (mostly U.S. science, especially at California Institute of Technology), and the San Francisco Bay Area program. A notable ongoing commitment is the foundation’s role in funding the new Thirty- Meter Telescope on Hawaii’s Mauna Kea which, when completed, will be the world’s largest optical telescope. Program areas, he said, are organized around large-scale initiatives with high potential for success. He likened these initiatives to business decisions. “We need to have a strong case,” he said. “Tell us why it’s going to work, how much it’s going to cost, what the measurable outcomes are.” He said that measurable outcomes are a “defining quality” of the Moore Foundation, because of its objective to have “enduring impact. We try to leverage each program as much as we can— ideally, we try to contribute about 25 percent to 35 percent. If we can’t find collaborators to come in with us, we tend to think it isn’t time for that project to more forward.” A Focus on California From 2000 to 2009, 58 percent of the foundation’s awards went to recipients in California ($810 million, in 938 grants) and 42 percent outside California ($981 million, in 677 grants). Among grants to California, organizations were $291 million to the “San Francisco Bay Area,” which for the Moore Foundation extends from Santa Cruz to

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110 GROWING INNOVATION CLUSTERS FOR AMERICAN PROSPERITY Sacramento. The majority of the California money—57 percent—was spent on science. Grants in California went mostly to the UC system, with 56 percent going to Caltech and 39 percent to the UC state system. A special focus on science spending is the Marine Microbiology Initiative, which is helping a young field to grow. Gordon Moore believes that science should be able to move as quickly as possible from basic research into application, where application is appropriate.” The foundation also funds new ways to publish scientific knowledge quickly, as shown by PLOS, the Public Library of Science. “We believe that dissemination is key,” he said, “so PLOS was in large part catalyzed by Moore. We also work with Google Earth to document what forests are being preserved, what ice caps are melting, what are the effects of drought and other climate change. We can’t know that without instrumentation, and Moore has a particular interest in that.” Another theme of the foundation is to support scientific discovery before its application. “We seek the best scientists to do the best type of science,” he said. “We don’t know what is going to have applications in advance, but the best science inevitably has application.” A Commitment to Nursing Another major commitment of the foundation, the San Francisco Bay Area Program, contains several activities, two of which support nursing: the Betty Irene Moore Nursing Initiative and the Betty Irene Moore School of Nursing. The primary theme is workforce development, which is shaped by the foundation’s conviction that more and better nursing education and training are essential to keeping the quality of health care high and the costs low. U.S. health care accounts for about 16 percent of GDP, said Dr. Bo-Linn, and 45 percent of all private-sector jobs added in 2007. “It’s the economic engine right now. Hospitals support 1 of 10 U.S. jobs. In 2006, with “ripple effects” included, hospitals supported almost 14 million jobs and almost $2 trillion in economic activity. Hospitals are the largest employers in most communities.” “What’s the driver of health care?” he asked. “Hospitals,” he answered. “What’s the driver of hospitals? Nurses. And here we face a problem.” He said that the shortage of well-trained nurses is “enormous,” and consequently the foundation has developed partnerships with over 71 institutions, investing in universities and directly supporting the development of nurses and nurse educators. When the foundation concluded that there were not enough nursing faculty in California and nationally, it allocated $100 million to create a new nursing school at UC Davis. To date, he said, the foundation had directly supported more than 1,100 individuals to become frontline RNs and nursing educators. He said that high-quality health care saves money and lowers health- care costs, offering several examples. One was that some 80 percent of

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111 SUMMARY OF PRESENTATIONS the Moore Foundation grantee hospitals had reduced hospital-acquired complications, he said, including • 66 percent fewer central-line bloodstream infections, saving $25,000 per avoided case. • 60 percent fewer ventilator-acquired pneumonias, saving $12,000 per avoided case. He also said that grantee hospitals were working to reduce hospital readmission rates. Another program area of the San Francisco Bay Area focus is science education, which is “investing in the future,” he said. The foundation sustains ongoing support for informal science education, increased professional development for teachers, enhanced classroom teaching of students, and development of more competent teachers. The Foundation also supports the science and technology museums of the San Francisco Bay Area and other science rich educational institutions. In closing, he noted with satisfaction that the Moore foundation was created in perpetuity. “So we’ll be around to see fruits of our labor.” Discussion Dan Berglund of the State Science and Technology Institute (SSTI) asked two questions: whether the locally oriented foundations, such as Heinz in Pittsburgh and Danforth in St. Louis, had a mechanism for collaboration with one another, and whether the large national foundations had begun to support entrepreneurship. Dr. Gabriel, speaking for Heinz, said that the foundations did talk to each other, for example through the Council on Foundations and various affinity groups that meet regularly. She said that Heinz also worked as closely as possible with the state, and is studying how to make a bigger difference nationally. “We’ll never have as much money as the federal government,” she said, “but we can be more flexible, and a little flexible money can often make a big system work better.” On the second question, she said that the world of foundations was undergoing a “sea change” as the newly rich become philanthropists. “There is a lot of social entrepreneurship,” she said. “There’s a huge backlog in 501(c)3 applications.2 Everyone wants to start a new social enterprise, and there’s so much foundation money out there. Innovators in the field of philanthropy are asking how we can push the envelope in order to do the things that are most needed to address problems that have been intractable for a long time.” 2 501(c) is a provision of the United States Internal Revenue Code that lists non- profit organizations exempt from some federal income taxes.

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112 GROWING INNOVATION CLUSTERS FOR AMERICAN PROSPERITY “Giving While Living” Dr. Bo-Linn agreed with Dr. Gabriel about the “huge amount of money made recently by entrepreneurs,” many of whom are “giving while living.” The Gates foundation, he said, will self-terminate 50 years after the death of the founders. He saw a move to areas of social responsibility, measurability, and transparency. “These problems are so huge,” he said, “that it requires working with private industry and government to affect policy. Foundations cannot influence either pending or actual legislation, but we can educate, convene consensus, and catalyze movement.” Dr. Wessner asked whether the Moore Foundation had tried to broaden its commitment to hospitals by attracting more matching grants from state or federal governments. Dr. Bo-Linn said they have not gone to the governments for such in-kind matches, for various reasons, but that they do collaborate with other foundations, private industry, and the grantee itself. “There is a consortium of grant-making bodies,” he said, “who work often with each other.” Helping Spend Recovery Money Well Dr. Wessner asked what other needs were most pressing to the foundation representatives. Dr. Gabriel said that with the sudden spending triggered by the Recovery Act, many recipients needed help to determine the best way to spend new money. For example, she said the Pennsylvania Workforce Investment Board had asked Heinz for assistance. “They told us they were graded on how fast they spent the funds, but they couldn’t spend it on staff and they didn’t want to just shovel it out the door to the usual suspects. People who are not already in the system and don’t already know how to navigate it are going to lose.” Heinz was able to fund a person who was well acquainted with the right community organizations and had experience with workforce investment who was able to help the board seek out and secure a more diverse pool of providers. “This is a once-in-a-lifetime opportunity,” she said. “We have to make sure it lifts all boats and doesn’t further polarize us.” Mr. Turner asked how organizations like the Moore Foundation, which often reflect the efficiency and leanness of the high-quality organizations that generated their endowment, were able to choose grantees that were equally efficient. Dr. Bo-Linn said that a large part of capacity building is finding the right people. The Moore Foundation had discovered that the people who work in NGOs do so by choice and bring to their mission real passion. At the same time, he said, it was not always possible to measure all the activities of grantees by Six Sigma standards.3 “The engagement in broad social enterprise, distressingly, may be more 3 Six Sigma is a certification program improving measurable results in organizations. .

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113 SUMMARY OF PRESENTATIONS like jazz,” he said. “We often innovate as we go, trying to stay engaged, to stay together, rather than get that melody out as efficiently as possible and demanding that you do it in half the time you did in the first cycle.”

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