Eli Broad: 'We're In the Venture Philanthrophy Business'

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* The Wall Street Journal

* OPINION: THE WEEKEND INTERVIEW

* AUGUST 28, 2009,

'We're In the Venture Philanthrophy Business'

The business mogul and Democratic donor talks about education reform, and 'democratization of the arts.'

By NAOMI SCHAEFER RILEY

Los Angeles

"The unions no longer control the education agenda of the Democratic Party," billionaire philanthropist Eli Broad tells me. I'd say that's debatable. But to the extent it's true, the party has Mr. Broad, a ≠self-described moderate Democrat, to thank. The founder of two Fortune 500 companies (real estate giant Kaufman & Broad, now KB Home, and financial service firm SunAmerica, purchased by AIG in 1999) he is devoting his retirement years to philanthropy primarily K-12 education reform.

The Broad Foundation funds charter schools, including KIPP academies and the Green Dot network, as well as Teach for America. It trains reform-minded school administrators. And it offers financial rewards to urban school districts that improve performance through initiatives like merit pay for teachers. Mr. Broad tells me, "we're at a golden moment now," with a president and an education secretary who, he says, agree with his reform agenda.

The son of Lithuanian Jewish immigrants, Mr. Broad grew up in Detroit where he became the youngest person in the state of Michigan to pass the CPA exam. Since retiring, he and his wife Edythe, whom he met there, spend much of their time figuring out how to give away the $2.1 billion of the foundation that bears their names.

I sat down with Mr. Broad, a dapper gentleman of 76 with a full head of white hair and a handsome pocket handkerchief, one morning earlier this month at his foundation's headquarters in the Westwood area of Los Angeles. His office walls are covered with the biggest names in modern art (more on this in a moment), and his shelves are filled with photos of him and his wife posing with the biggest names in politics. I'm sitting closest to a shot of them with the Clintons.

Mr. Broad is not much for small talk, but then he has a lot he wants to accomplish. We begin with urban education. "Let's talk about why we have the problem to begin with," Mr. Broad says. He tells the story of how American education experienced a great leap forward after World War II with the GI Bill, which he calls "the biggest voucher program in history."

But for at least the past 30 years, American education has remained stagnant as other countries have moved ahead. "A classroom today in America, and the school day today in America is not different than it was 50 or 100 years ago. You still have a 10-to-12 week summer recess or vacation which goes back to an agrarian era. You still teach the same way. The classroom looks the same. The only difference is in some classrooms instead of blackboards you've got whiteboards with marker pens."

One of the biggest problems, he believes, is the apathy of American public when it comes to education. "Perception lags reality," he explains, "and their perception is what America used to be, not where we are now."

Last year Mr. Broad and Bill Gates gave $60 million for an initiative called ED in '08, which was supposed to make education a priority issue in the presidential campaign. On a scale of one to 10, Mr. Broad says the effort ranked a two. While it failed to "change the mindset" of the American people on education, he takes some comfort in the fact that the candidates talked about "standards, a longer school day, a longer school year in some cases, better teaching, and incentive compensation and charter schools."

But Mr. Broad is not waiting around for Washington to solve the education crisis. In 2002 the foundation launched the Broad Superintendents Academy, a 10-month management training program to prepare people from business, nonprofits, the military and government backgrounds to take leadership positions in urban public education. The theory is that people with experience in efficiently managing large organizations are the best ones to put in charge of unruly public school districts.

The 2009 class even includes Brigadier General Anthony J. Tata, a former deputy commanding general for the U.S. Army in Afghanistan. Robert Bobb, who was appointed emergency financial manager of the Detroit Public Schools a few months ago, is also a graduate of the program. He made headlines recently when, in order to cut back on payroll fraud, he requested that workers pick up their paychecks in person. More than 200 "employees" failed to show up.

Despite the proliferation of graduates of this program and another similar one for recent law- and business-school graduates, Mr. Broad has only sent one person to the Los Angeles Unified Public School District in his own backyard. The foundation won't waste talent on districts that don't want real reform. "If we put 10 fellows in there, they'd leave because they'd have to work with a terrible bureaucracy, a regressive teachers union and a mayor that talks a good game but isn't really interested in taking over the schools."

Which brings us back to the unions. Mr. Broad says that he doesn't blame teachers for organizing. "If you have poor management that's not doing the right job, you end up with unions filling the void and . . . page after page of work rules and thicker and thicker contracts. If you have strong management and the teaching corps is relatively pleased with the relationships, you do not end up with a strong regressive union."

In one of the foundation's brochures, you will find a picture of New York City Schools Chancellor Joel Klein embracing then-United Federation of Teachers President Randi Weingarten. The two are at a ceremony in which Mr. Broad awarded the city $1 million for improving student performance. Mr. Broad cites Ms. Weingarten's acceptance of a merit pay program for teachers in New York, albeit one based on school rather than individual performance. "Look, is Randi the second coming of Al Shanker?" Mr. Broad asks, referring to the UFT founder, whom many consider more moderate. "I don't know. But Randi is the most progressive national labor leader you'll find in education."

Mr. Broad tells me in no uncertain terms that it is time to get rid of education schools "they're the lowest ranking students at a university." And he is enthusiastic about all the change that is possible when urban school districts go bankrupt as Oakland, Calif., did a few years ago "or what happened in New Orleans, which is the equivalent of bankruptcy."

If people in the education world think Mr. Broad likes to throw his weight around, they should talk to people in the art business. Over the past 40 years, the Broads have built up one of the biggest private collections of contemporary art. (Several Jasper Johns paintings are hanging in his office.) He is a trustee of The Museum of Contemporary Art in Los Angeles and of The Museum of Modern Art in New York.

But it is the Los Angeles County Museum where the Broad influence has been most strongly felt. He gave a $60 million gift for an addition there the Broad Contemporary Art Museum, which opened in February 2008. The assumption was that he would be giving them his collection too. Instead, he announced that he would be holding on to his art and lending the museum the pieces it wanted to display. He laments that many museums only put out a tiny percentage of their collections. And he worries that small museums, in particular, suffer under the current system.

"Museums do not share their collections with other museums unless they get something in exchange. The Metropolitan will deal with the Louvre, but will they send their stuff to Memphis? No." The foundation has made over 7,000 loans of its works to over 400 institutions. "I think other museums ought to be doing likewise."

By all accounts it was Mr. Broad's wife who first became interested in collecting. But it is his sensibilities that have driven the foundation's mission. "I believe in the democratization of the arts," he tells me. "What do I mean by that? I think museums with some exceptions have a responsibility to educate a much broader public. And all too often, museum directors and curators are more interested in what their peers think or collectors like myself think than educating a diverse public." And then the businessman comes out: "I think museums, if you'll look at their attendance versus their budgets, it's sometimes hard to justify, the size of their budget versus how many people they're really serving when looking at other, you know, human needs."

Earlier this year, Mr. Broad bailed out the Museum of Contemporary Art, which was in dire financial straits. He pledged $30 million if the institution could come up with some matching funds. In a Los Angeles Times op-ed, a bid to drum up more support for the museum, Mr. Broad wrote: "This is not a one-philanthropist town." But looking around Los Angeles, one would be forgiven for thinking so. Mr. Broad has funded projects like the redevelopment of Grand Avenue, saving the historic Disney Hall, bringing the Ring Cycle to the Los Angeles Opera and starting the Broad Art Center at UCLA.

Mr. Broad says he is not in the "check-writing charity business. We're in the venture philanthropy business." Which is to say, he wants to see results. Even in areas that are outside what he really knows, he has found people he trusts to give him advice on where his money can have the greatest impact. He's given hundreds of millions of dollars, for instance, to fund research on embryonic and adult stem cells and genomics at universities from Harvard to UCLA.

Philanthropy on the West Coast is different, Mr. Broad has noted in the past. Los Angeles itself has fewer supporters of its civic institutions than New York or Boston or Chicago the city is spread out and the residents' roots are not so deep. But the newness is not necessarily a problem, as Mr. Broad sees it. "I think our foundation and other [Western] foundations are younger. I think our behavior is very different. If you look at the great Eastern philanthropies, they've been there a long time. The founders are long gone. Some of the entrepreneur spirit disappears when you have a lot of senior grant officers who don't want to make mistakes, who are risk adverse."

Mr. Broad lets out a little laugh. "Bill Gates doesn't worry about getting fired. I don't worry about getting fired. So, we're willing to make investments knowing that some are going to fail. I don't see that spirit of risk-taking at a lot of the great Eastern philanthropies."

Still, Mr. Broad takes his inspiration from those original East-Coasters. Paraphrasing Andrew Carnegie, he tells me: "Who dies with wealth, dies in shame."

Ms. Riley is the Journal's deputy Taste editor.