The Center on Philanthropy and Public Policy University of Southern California 2007-08 Distinguished Speakers Series October 25, 2007 Eli Broad Founder The Broad Foundations “Entrepreneurial Philanthropy in the 21st Century: Willow Bay in Conversation with Eli Broad” The USC Center on Philanthropy and Public Policy kicked off its 2007-08 Distinguished Speakers Series with an address from Eli Broad on October 25, 2007. An integral part of the Center’s work and its mission is to provide a forum for bringing together leaders in the philanthropic, nonprofit, policy, and business communities to consider the promise and potential of philanthropy for public problem solving, and what it takes to realize those aspirations. Eli Broad is a renowned business leader who built two Fortune 500 companies from the ground up over a five-decade career in business. He is the founder of both SunAmerica Inc. and KB Home (formerly Kaufman and Broad Home Corporation). Today, he and his wife, Edythe, are devoted to philanthropy as founders of The Broad Foundations, which they established to advance entrepreneurship for the public good in education, science and the arts. The Broad Foundations, which include The Eli and Edythe Broad Foundation and The Broad Art Foundation, have assets of $2.5 billion. The primary work of The Eli and Edythe Broad Foundation is to dramatically improve urban K- 12 public education through better governance, management, labor relations and competition. The Broad Foundation’s major education initiatives include the $1 million Broad Prize for Urban Education, The Broad Superintendents Academy, The Broad Residency in Urban Education, and The Broad Institute for School Boards. Willow Bay interviewed Mr. Broad at this event. Ms. Bay is a television journalist and author. Currently, she is Editor-at-Large for the online news and commentary site, the Huffington Post. In 2007 she served as executive producer and host of the Lifetime Television special and research initiative, “Spotlight 25.” Prior to that, she anchored CNN’s flagship financial news program “Moneyline.” At ABC, she was co-anchor of “Good Morning America/Sunday,” and a correspondent for ABC News. 1 MS. WILLOW BAY: I was lucky enough you believe in what you are doing. And we to be introduced to Mr. Broad shortly after I have a diverse portfolio. When you are moved to Los Angeles about seven years talking about K through 12 education ago by another one of your extraordinary reform in America, it's not an easy job. I'm civic leaders, Richard Riordan. And I also blessed with having 30 people in the happen to be a neighbor, so I call myself education part of our foundation. They are Eli's friendly neighborhood interviewer. always traveling, looking for opportunities. But as a journalist, I also obviously had the Scientific and medical research takes a little opportunity to cover Eli professionally and less effort, frankly. The arts and civic philanthropically. And I have a unique development, likewise. It's quite a opportunity right now to learn from you portfolio. firsthand, as a new member of the LACMA MS. BAY: We heard Esther Wachtell board. But what I don't get an opportunity describe your approach to solving to do very much is really to sit down and problems. You call it venture philanthropy. have a lengthy conversation with you about The subject of today's conversation is the extraordinary work that you do. So we Entrepreneurial Philanthropy. How would are all in this together for quite a treat. you characterize that as different from Full-time philanthropy, relatively speaking, philanthropy in the more traditional sense? is a new career for you, a third and award You said you don't write checks, you make winning -- congratulations again for investments. winning the Carnegie Medal -- in an extraordinarily rich and full life. But how MR. BROAD: Well, let me give you just does this career compare to creating, some history. Our family has had a managing, growing Fortune 500 foundation for over 30 years, and we would companies? write checks to good causes, good organizations, and so on. It's only been MR. ELI BROAD: It is actually a fourth really in the last eight years, with some career. My first career, which was short prior exceptions, that we really changed lived, was as a young CPA. That lasted and said that we wanted to identify about four years. Then Kaufman and problems or opportunities out there, Broad, and after that SunAmerica. So this whether it's K through 12 education reform, is my fourth career. How does it match? or whether it’s things in scientific and It's far more rewarding. I must tell medical research that others are not doing. everyone I'm working harder now than We don't want to just write checks to when I ran a Fortune 500 company. I feel maintain the status quo. it's a far more important calling than simply running a major business center for us. So that required a very, very different effort. And we're very different than most MS. BAY: You are working harder? foundations. Many foundations have a MR. BROAD: I'm working harder. grant cycle. They wait for grant applications and the like, review them MS. BAY: That would be hard for anybody carefully and then write a check. We don't who has seen anyone run a Fortune 500 do that. In fact, 90 percent of what we do company. Hard to imagine working harder are things that no one came to us with. than that. They are things we went out and looked at. MR. BROAD: You work harder because 2 MS. BAY: Give us an example of one of rather progressive. And somehow they end those. up getting fired by a traditional school board that wanted a change agent but didn't MR. BROAD: I'll give you a recent want to see any change once he or she got example in K through 12 education. there. So those things do happen. Washington, D.C. got a new mayor. He got the ability to take over the schools. He won MS. BAY: Have you ever changed your the election with 83 percent of the vote, mind on a grant? won every precinct in Washington. Had the courage in a district that is 90 percent MR. BROAD: After we've made it or African American to get an Asian American before? woman of great talent to become MS. BAY: After you've sort of taken a superintendent. We've been working with couple steps in that direction. him since the beginning. MR. BROAD: Well, not really. You So we're always looking for change agents, know, some of the grants we've made have people that are going to make a difference, given us far bigger returns, so to speak, people that are committed. And that is an then other grants. If you go back and look example of a place that we'll go into, as we at the last 30 things you did, you might not did in New York, the first day Joel Klein want to do five of them again with the became Chancellor. Things of that nature. benefit of experience. We don't wait for them to come to us. MS. BAY: You operate in this MS. BAY: Do you have a list of criteria entrepreneurial mode. Can traditional that you use when you make these foundations -- many of which are decisions, not about where you write the represented here -- borrow from that check, but about where you invest? philosophy, use bits and pieces of that to MR. BROAD: Well, in each case we look bring an entrepreneurial spirit to their own at -- let's call it a business plan. And we organizations? look at metrics, what are we trying to MR. BROAD: Well, we hope we're setting achieve, how do we measure student an example and we hope this is the new achievement, how do we measure other st philanthropy, the 21 century, that is very things within an urban school district? And different from philanthropy of the past. we monitor that quite closely. You know, I like to say there is a big MS. BAY: And what happens when difference between philanthropy and someone does not measure up? charity. Charity is just giving money to good causes. Philanthropy, I'd like to MR. BROAD: Well, when they don't think, is really investing, making a measure up, there are several conversations difference, improving institutions that exist that people have. And if they continue not and creating ones that are needed that do to measure up, we just stop funding. not exist. MS. BAY: And has that happened? MS. BAY: Do you use those same criteria that you've outlined in the way you manage MR. BROAD: Oh, it has happened. It has your investment portfolio? happened in several districts where they had change agents, superintendents that wanted MR. BROAD: You mean the Foundation's to really change a status quo, that were investment portfolio -- dollar portfolio? 3 MS. BAY: Dollar portfolio. progressive labor leader; Henry Cisneros, and a number of others I won't mention. MR. BROAD: Yeah. Well, let me say this: I spent most of my life really in finance and MS. BAY: You told the “FT” that after investing money. When we got serious, I you sold SunAmerica and after your decided that I didn't want to do that children were grown that you and Edye anymore. So I hired a chief investment started thinking about the big problems officer and a deputy chief investment facing America.