Interview: Nick Jenkins

If you think giving money away effectively will be easy, think again, says Moonpig founder Nick Jenkins. The easy stuff has been done, the ‘low-hanging fruit picked’. What’s left are the complex and difficult problems. He talks to Caroline Hartnell about the ‘net effect’ – the need to apply your values consistently to your philanthropy and the rest of your life and to assess the overall effect of your giving, not just its effect on a particular group. He also talks about the freedom to experiment that comes with operating your own foundation – and argues that it’s vital to be honest when experiments go wrong.

First, can you tell me a bit about your philanthropic activities.

I have my own foundation, which I endowed when I sold my company [Moonpig] in 2011 and I’ve spent the last three years developing a strategy for it.

It has two pots of money, one of which is to support things that friends and associates are passionate about. This involves relatively small amounts. I won’t fund anything that doesn’t make sense, but I do probably do less due diligence. The other pot is for things that I actively seek out – I don’t respond to unsolicited grant applications.

How far have you got in developing the strategy for your foundation?

I’ve narrowed it down to surgical interventions in the developing world that can transform lives. There are a lot of conditions that are debilitating but not life-threatening, and they tend to be underfunded because people fund things that are life and death. Fistula is a good example. There are 2 million women in Africa suffering from fistula and it’s debilitating: they can’t work, they are ostracized. It’s not that expensive to solve but it’s not top of the pile because it’s not a killer. It’s going to remain beyond the reach of most healthcare systems in the developing world, so it needs to be funded philanthropically. It’s not particularly groundbreaking but the impact is potentially huge.

How do you decide what’s worth funding?

There are two criteria: one – will more money mean more operations? Sometimes – with cleft pallet for example – that’s not the case. You eventually get to the point where you’ve done all the easy ones. There are still lots of people who need the operation but they are so scattered that the problem becomes one of logistics rather than money. So you’ve got to be convinced that the money is going to result in more operations. Second, you’ve got to be convinced that the money is not merely diverting surgical time from one issue to another.

Whatever the intervention, it needs to add something to healthcare in that country and it takes quite a lot of hard work to make sure that your project is doing that. So my approach is to pick an area, learn about it, work out how you can be confident that these criteria are being met, and then focus the bulk of the money there.

If you’re going to do anything abroad, pick one country and get to understand it. I’ve picked Uganda – it was largely accidental. So we’ve identified a couple of issues and we’ve identified a country, and with the amount of money available, we could make a significant difference. Another consideration is that the administration costs are relatively less if you focus in this way.

Do you go to Uganda to see what’s happening yourself?

Occasionally, yes. But there’s a danger of spending 50 per cent of your money overseeing how you spend the other 50 per cent, so it’s got to be in proportion.

It’s often said that foundations are the risk capital of the social sector but very often they don’t live up to this idea. What do you think?

I think there’s a massive difference between donor-managed foundations and professionally managed foundations. When donors are clear about what can be done on their behalf, it gives the professionals much more latitude to take risks, but if there’s no guidance then professional managers will take a conservative approach.

It’s no different from venture capital investing. When I make an investment in a company, I don’t have to answer to anyone, so I can take decisions very quickly, and I can take what risks I like. You can have a hunch about things. I regularly make investments in businesses and not all of them work so I don’t expect everything to work. A venture capital fund has to do a lot more due diligence – it’s very difficult to take risks with other people’s money.

I can act quickly and take greater risks with my foundation too. I consult with the other trustees – my sister is a trustee and I have another external trustee who works at Shell. So we bounce ideas off them – but by and large we can act very quickly.

What sort of things does this enable you to do that professionally run foundations can’t?
It reduces the burden of measuring social impact. Ultimately, if you’re giving away your own money, you just need to be convinced it’s making a difference.

Let me phrase it differently. The impact measurement has to satisfy me. It’s not just about measurement of the impact of the project, it’s about understanding the net impact on society. I could design measurements to show that the lives of women treated for fistula have been transformed, but if you don’t look at the bigger picture, you might not see that you’ve taken a surgeon away from treating someone else, whose life is now immeasurably worse as a result. You have to understand the whole net picture, that’s my basic philosophy. A lot of organizations are myopic about that. They want to understand the impact that they have had on their beneficiaries without taking into account that they may be sucking resources from somewhere else.

You’ve talked about moving away from the ‘two-lane approach to life – destroying the world from 9-5 and repairing the world from 6-6.30. Can you explain?

You have to have a set of values and be consistent about the way that you apply them. A lot of people compartmentalize what they do rather than looking at their contribution to society as a whole. Take, for example, someone who has avoided their responsibility to pay taxes and then given a little bit of money to charity. The bulk of social issues are dealt with by taxation. Paying taxes isn’t as much fun as giving and recipients of tax-funded services are never as grateful, but if you shirk your responsibility to pay taxes, it isn’t offset just because you’ve given a bit of money to charity.

You are also an investor – is social impact investing something you’d like to do?

Some of the investments I make are in energy management and energy conservation, because ultimately I think that’s important. I obviously hope I’m going to make some money out of it but I enjoy investing in things that I believe in and think are useful. But it isn’t black and white. I would avoid anything I thought was going to do harm, but I’ve also invested in a personalized marshmallow business – it probably makes people smile. Green Energy Options, which I have invested in, was established as a normal profit-making business but it also helps reduce the carbon footprint.

Do you think that impact investing has the potential to be transformative?

I think where impact investing will make the biggest difference is in funding innovation, finding more effective ways to solve social problems rather than throwing lots of money at the same solution. With healthcare in Africa, there are lots of things that have been done through a bit of innovation and a bit of investment that massively reduce the cost of medical interventions, cheaper forms of diagnostics, for example. The person who can deliver a cheaper, quicker HIV test will dramatically affect the health of people in Africa. They might make money out of it if it gets rolled out commercially, but it’s innovation that needs to be funded. If you can reduce the cost of an HIV diagnostic from $20 to $1, everybody wins.

If you make an impact investment, what sort of financial return are you looking for?

All I’m concerned about with my foundation is its overall impact, so if I have all my money invested in social impact investments, and they bring a smaller financial return, but I’m happy with the impact that those investments are having, that would be fine. If on the other hand I invest in social impact investment funds and the financial returns are great but the social returns are negligible, that’s fine, too – I can take the profits and give them away. Whether the social return comes during the investment process or as a result of spending the proceeds is neither here nor there.

It always seems to me short-sighted that the larger, more professionally run foundations tend to regard any lessening of financial return as unacceptable, even if investments are having a positive social impact.

I don’t understand it. I think it’s partly to do with foundation organization. Traditionally, there’s been a distinction between the person responsible for making the money and the person responsible for making sure it is spent for a social return. But with impact investing, those two roles are starting to merge. I don’t see any problem in that, but I can see how slow-moving, traditional foundations might struggle to get their head round it.

You probably need to structure things in a different way. For example, if you find an amazing company that is developing diagnostics equipment that will reduce the cost of healthcare in Sub-Saharan Africa, and you think that the company is going to do really well, because if it finds a cheaper solution it will sell a lot, this is something you may want to invest in. And if one of the aims of your charity is to improve healthcare in Sub-Saharan Africa, that’s a wonderful way to do it.

What do you think foundations and other institutional investors could take from the way that you operate as an individual philanthropist and investor?

I think that it helps to have a more holistic approach to the net impact of what you do. As an individual, I am able to have a much more flexible, broader approach to how I satisfy myself that money has been well used.

I suppose the downside is that lack of accountability allows individuals to act on whim?

This is where discipline is required – some things can appear to make sense, but if you really examine the evidence, you see that it doesn’t stack up. The other thing is that sometimes an experiment will fail. With pilot schemes, for instance, you’re saying ‘we have a hypothesis, we think that if we do this, the effect will be that’, but you don’t know, because it’s an experiment.

If your hypothesis proves wrong, how do you see that pilot scheme?

There’s a good example from the things we’ve been doing with ARK [Absolute Return for Kids] of which I’m a trustee. We’re experimenting in India with different ways of helping disadvantaged children in education. Some things we thought would make sense haven’t quite worked, for all sorts of cultural reasons. Our approach has been, ‘we did this as an experiment, we learned something from it and we’d like to share that so at least other people won’t make the same mistake.’

Organizations often try to sweep failures under the carpet, but it comes back to this point about what you do in your day job and what you do in your charity. People, particularly businesspeople, take risks all the time in their jobs. If you’re investing in start-up businesses, you expect seven out of ten to fail, but you expect one of them to be so successful that it will offset the impact of the rest. I don’t understand why people don’t expect failure in the social sector if you’re at the cutting edge of experimenting.

The important thing is first to recognize the failure and be honest about it, and second not to pretend that it was really a success but to spread that learning so other people don’t make the same mistake!

People try to hide failures all the time, partly because fundraisers don’t want to see failure and partly because donors somehow think that the same rules don’t apply in the social sector as in commerce.

As a donor what message can you give to charities about sharing failures?

Personally, I want honesty. I want to know, when they’re telling me the story, that they’re telling me the whole story. I was talking to a cleft palette charity who said ‘£150 will put a smile back on a child’s face’. You only have to analyse their accounts to work out that they’re spending £2,000 per child. They’re raising £40 million and doing 20,000 operations – simple calculation. The figure of £150 was what they thought people were prepared to pay. They spend 50p in the pound raising their money so what it actually costs is £1,000 per child. As a donor, I think £1,000 per child is actually good value but I would have preferred a more honest and transparent approach.

Donors need to be more realistic. Complex social problems are expensive and difficult to solve. Don’t expect your few pounds to transform the lives of thousands. In the UK, particularly, if social problems could be solved by throwing a little bit of money at them, the state would have solved them a long time ago. But all the low-hanging fruit is gone, so what we’re left with is the more complicated issues. On the other side, charity fundraisers want to convince everybody that just a little bit of money will go an enormous way, and donors want to believe it. Donors need to be more realistic about the fact that not everything works and that you can’t over-egg the results. There’s a bit of education needed on both sides.

Philanthropists sometimes say it’s harder to give money away well than to make it. Do you agree?

It is hard to make money, but I’ll go back to my earlier point. So many people I’ve met in the same position as me have thought, ‘right, I’ve made a bit of money, I’m going to take two weeks off and change the world.’ Several years later, they are still struggling. In the UK, as I’ve mentioned, the low-hanging fruit has been picked. We have created a society that picks up the low-hanging fruit, and that’s a good thing.

You go to India or Africa and there’s still a lot of low-hanging fruit, but you still need to invest time in understanding what you’re doing. You think ‘I’ll build a school’, but that’s not the problem. There are lots of schools in Africa, mostly because people like us go and build them. The real problem is providing enough trained teachers, so unless you’re having an impact on the number of teachers being trained, you’re not really changing the situation.

That’s why it’s important to think through the net impact of what you’re doing, and not just the localized impact. Are you actually adding anything to the system as a whole or are you just reshuffling things?

Nick Jenkins is an angel investor, entrepreneur and philanthropist. In 1999 he started http://www.moonpig.com, the internet greeting card retailer. In July 2011 he sold the company and endowed his own charitable foundation. He also runs his own portfolio of private equity investments.


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