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Dear Colleagues,

In my last letter I shared some thoughts on the importance of “failure” in the chain of experiences that can ultimately lead to major breakthroughs, and only touched on risk.  But the concept of risk is inextricably linked to failure – common wisdom holds that the greater the risk, the greater the potential “reward,” with the corresponding acceptance of an increased chance for “failure.”  “Nothing ventured, nothing lost” on the one hand, but on the other, “nothing ventured, nothing gained.”  

But what does risk mean for a foundation?  

In pursuing a truly extraordinary gain, the ultimate risk for for-profit and not-for-profit entities is enterprise failure – literally going out of business – but financially, foundations don’t really have to worry about enterprise risk. Our endowment may decline dramatically (as ours did in 2008), but we’re still able to make substantial grants, albeit reduced.  

One of my colleagues observed that one of the greatest risks we should bear in mind, however, is our potential for inadvertent harm to the organizations we support.  Through the asymmetry of the funder/grantee relationship, we risk (with our funding) either inducing them to drift outside their strategic focus, or requiring burdensome and costly procedural grant conditions.  

There is, of course, also the risk that a foundation investment (grant) will not get the desired return (outcomes). Even so, the foundation’s ability to make further grants is unaffected by the loss, and as I’ve said before, the surprises that result when grants do not get the anticipated outcomes can ultimately allow us to learn, build on those lessons, and progress even further as a result.  

So the greatest risk for foundations seems then, paradoxically, to arise when we do not enable and encourage our grantees to take risks.  Foundations are markedly positioned to support well-conceived, novel concepts—the possibly transformational ideas that government and private investment capital won’t fund.  But placing big bets on big ideas requires a willingness to stay with an issue for a very long time; a comfort with contribution not sole attribution; an understanding that eventual results will require qualitative as well as quantitative measures; and an acceptance of the possibility of complete failure as an opportunity to learn and progress.  In other words, highly ambitious aims entail high risks.   

In the year ahead, we will continue shaping the future role we want the Gordon and Betty Moore Foundation to play, with a special focus on considerations of aspirational reach and the risks associated with such ambition.  How much do we want to “swing for the fences,” knowing that we might strike out? As Gordon Moore has told us often, if we—the Foundation and its grantees—succeed all the time, we aren’t being risky enough. 

Steven J. McCormick

President, Gordon and Betty Moore Foundation