Why Philanthropy Is America’s Unique Research Advantage
Centuries of philanthropic endowments, and a culture of giving back, support many of today’s research institutions—and could be powerful in shaping the future of American science.
The United States’ particular approach to supporting and carrying out science and higher education confers upon our nation a unique advantage. Our system of public and private higher education as well as private nonprofit research institutions is unequalled anywhere in the world. This system is reinforced and amplified by an array of support mechanisms for science and technology involving government, industry, and—unique in its scale, scope, and longevity—philanthropy. Developed in part organically and in part by the deliberate actions of government and individuals, this system gives the United States an opportunity to maintain leadership in science, engineering, technology, and medicine while driving innovation across all sectors. It is crucial that we understand and capitalize on philanthropy’s distinctive history, perspectives, and synergies within the overall system.
To understand this unique advantage, consider what the United States has in common with other major countries and economies and what is solely American. Support for science in the United States comes from four major sources. The first two are government and industry, sources that we have in common with other economically advanced nations. According to 2019 data from the Organization for Economic Co-Operation and Development, Israel, South Korea, Taiwan, Sweden, Japan, Austria, and Germany all spend a greater percentage of gross domestic product on R&D than the United States’ 3%.
It is the other two sources of support that are distinctly and uniquely American: current philanthropy and the vast scale of past, or legacy, philanthropy. The Science Philanthropy Alliance notes that philanthropists currently contribute support for 44% of basic science research conducted at domestic universities and nonprofit research institutes. This impressive number is joined by the legacy philanthropy that is held by universities in their endowments. The sum of the respective endowments of the more than 60 US institutions of the Association of American Universities (AAU) totaled nearly $400 billion in 2018. And this value continues to accrue. The combination of legacy and contemporary funding gives America’s research institutions an unmatched scale and diversity of resources that support an extraordinary array of scientific projects, particularly early-stage science where the ideas are not quite ready for government support. The scale at which this entire ecosystem of science and higher education works is America’s unique advantage.
Perhaps more generally, philanthropy is a long-standing and distinctly American cultural characteristic. Over more than two centuries, it has assumed a variety of roles in supporting science, technology, and medicine. In this article, I describe four historical epochs that have shaped the emergence of the American scientific enterprise. Identified in sequence, the epochs are dominated first by agriculture, second by industrialization, third by manufacturing, and today by digital information. This historical perspective illuminates how the philanthropy of the nineteenth century changed the landscape of science and higher education in the country, and how the exceptional collection of public and private research universities created in that era continues to shape the future today.
Over time, another feature emerged—the American cultural characteristic of “giving back” as a societal good. For the very wealthy, philanthropy came to be seen as a moral imperative. Over generations, this characteristic shaped the landscape of US science as well as the psyche of philanthropists and innovators themselves. The realization of these ideals has led to the creation of a remarkable set of institutions of higher education and research, and a large and diverse set of funding sources that have turbocharged America’s leadership and underpinned much of our economy, defense, and health.
The United States can extend its leadership into the future by explicitly recognizing its distinctive advantages and operating as a more wholly organized scientific ecosystem that intentionally incorporates philanthropy. This proposal is less a specific strategy than a recommendation that the synergy of our system of government, philanthropy, industry, and universities, all supporting science, technology, medicine, and innovation, should be consciously and actively considered when formulating national agendas and policies. Today, for the most part, philanthropy is left out of the discussion despite its long-proven role in leading science and technology into the future and improving the lives of people everywhere.
Four Epochs of American Economic History and Wealth Creation
Four epochs of innovation and wealth creation in the United States have had significant effects on our economy and society, as illustrated in Figure 1. These epochs provide a framework for discussing the future of science, higher education, research at universities and private nonprofits, and innovation, as well as the optimal roles of government, industry, academia, and philanthropy.
Epoch 1: The Age of Agriculture
From the earliest days of the British colonies until about 1840, the US economy and society were largely shaped by agriculture. Science was an avocation, perhaps symbolized best by Benjamin Franklin and Thomas Jefferson. Higher education was almost all private and mostly associated with religious denominations. None of these early universities had the character of a “research university,” an approach to higher education that emerged in Europe, mainly in Germany, in the early 1800s. Harvard, Yale, Penn, Delaware, Princeton, and Columbia were all founded by 1754, with Michigan, Virginia, and Duke following in the early nineteenth century. During this time, which I characterize as Epoch 1, philanthropy was episodic and associated mostly with the support of religion.
The start of any new epoch is never exact, and there is often a 20- to 30-year period before each comes into full recognition. Nevertheless, by about the 1840s, change was clearly underway as the Industrial Revolution, pioneered in Britain, took hold in the United States.
Epoch 2: The Age of Industry
The second epoch, which extended from roughly 1840 to about 1930, saw dramatic, disruptive changes in industry, work and labor, the economy, and society. It was a remarkable age of technology and innovation as well as a time of financial innovation, the latter leading to the emergence of large company trusts that transformed the economy. For the first time in US history, individuals began to generate enormous fortunes.
The rapid accumulation of wealth gave rise to a new “culture of philanthropy” among the rich, driven by a sense that those who had accumulated great fortunes had an obligation to return those fortunes to society. This idea was articulated most famously by Andrew Carnegie in his 1889 essays that have come to be known as The Gospel of Wealth: “The man who dies thus rich dies disgraced.” In a remarkable 1963 history of this era, Merle Curti, Judith Green, and Roderick Nash noted that philanthropic giving in Western Europe amounted to less than one-half of 1% of annual national income, whereas in the United States, such giving amounted to about 2% of national income. The authors concluded then that there was nothing comparable anywhere in the world to the scale of philanthropy in America. This conclusion holds true today, as philanthropy remains a distinguishing aspect of the American national character and culture.
One particular focus of philanthropy in Epoch 2 involved founding new private, secular research universities based on the German model of universities developed in the early nineteenthcentury. Johns Hopkins University, founded in 1871, was the first of these “new model” universities in the United States, with professors serving as both instructors and researchers, and graduate students doing research and earning doctoral degrees. Over the next 50 years, philanthropic donations led to the founding of many more privately endowed and secular institutions that are today our leading private universities. A sampling includes Vanderbilt University, Stanford University, the University of Chicago, the Carnegie Institute of Technology, Rice University, Rockefeller University (founded as a research institute in 1901), and the Mellon Institute (later to combine with Carnegie Tech to form Carnegie Mellon University). Individual philanthropists may have been motivated to fund universities to leave a legacy and ultimately to foster innovative institutions that far outlive them. This aim was the case with Stanford University, founded in 1885 by railroad magnate and US Senator Leland Stanford and his wife, Jane, as a memorial to their deceased son and with the intent “to promote the public welfare by exercising an influence in behalf of humanity and civilization.”
While philanthropists were establishing new private institutions, federal policies were providing support to mostly public institutions of higher education. The Morrill Act of 1862 led to a system of new or repurposed land-grant universities stretching from Cornell in the East through Michigan and Iowa in the Midwest to California, Oregon, and Washington in the West. The Morrill Act of 1890 extended the system to other colleges and universities, including historically Black colleges and universities.
These institutions of higher learning were complemented by many extraordinary private, nonprofit research institutions founded in the middle and late nineteenth century, including the Smithsonian Institution (1846), Cold Spring Harbor Laboratory (1890), the Carnegie Institutions (1902), and the Institute for Advanced Study at Princeton University (1930).
Nonetheless, America would not lead in science and basic research until after World War II, when federal government funding began to grow rapidly. Thus, Epoch 2 is an era based more on invention, technology, and innovation than on scientific discovery. But Epoch 2 did mark the beginning of the philanthropic investments that continue to underpin our research enterprise today.
Epoch 3: The Age of the Corporation and of Government Support of Science and Technology
Epoch 3 begins roughly in 1920 and ends in 1980, encompassing the rise of the modern corporation and the emergence of federally funded science as a force for transformational societal change. This postwar period of Epoch 3 is a reference point for many of today’s science policymakers and decisionmakers, yet one can argue that this period, roughly 1945 to 1975, is an anomaly. The extraordinary expansion of government funding of science, technology, and medicine during this period was unprecedented and remains so. That sharp increase leveled off after 1975, after which it grew more slowly—at more typical rates.
Given this framework, one can argue that we misunderstand the history and strength of the US research enterprise by underestimating or even ignoring the long-standing outsize role of philanthropy. Today, philanthropy has re-emerged as a strong force, and here I seek to recontextualize this period of Epoch 3.
During Epoch 3 overall, corporations emerged as a force for use-inspired basic research, some of which created major breakthroughs in science and technology. AT&T and its famed Bell Laboratories produced many innovations and discoveries. Two of the most famous are the discoveries of the transistor in 1947 and the cosmic microwave background in 1964. IBM Research discovered high-temperature superconductivity and pioneered the field of nanotechnology with the invention of the scanning tunneling microscope, among other discoveries. The invention of the microprocessor by Texas Instruments and Intel underpins all of microelectronics today. Discoveries by scientists and engineers at Bell Labs, IBM, Texas Instruments, and Intel were all later awarded Nobel Prizes. Hughes Research Laboratories invented the ruby laser in 1960, while the Xerox Palo Alto Research Center (Xerox PARC) became legendary in the 1960s and 1970s as the source of innovation and invention that helped enable the computer and digital information age we live in today.
Epoch 3 was also one of innovation in management as symbolized by Alfred P. Sloan’s approach at General Motors. Sloan created both the organizational model for the large corporation and the marketing idea of creating products that would be affordable for people at different levels of income and at different stages of their lives. From 1923 into the late 1930s, he led GM as it surpassed Ford to become the most successful US automobile and large truck company. Yet despite his enormous influence, Sloan’s personal fortune was large but nothing like that of the fortunes in Epoch 2, nor like the fortunes being made today in Epoch 4 by company founders such as Bill Gates, Jeff Bezos, Larry Page and Sergey Brin, Elon Musk, and Mark Zuckerberg. These individuals have driven their companies to enormous size, and they have maintained a large percentage of ownership in their companies.
During and after World War II, in the second half of Epoch 3, science emerged as a new and powerful force for change, particularly after a transforming vision for a “science-oriented America” described by Vannevar Bush in his now-famous 1945 report, Science, the Endless Frontier. The report’s thesis was that the federal government should take responsibility for and sharply increase its funding of science and technology and, critically, that it should conduct this research largely at the nation’s colleges and universities. I’ve already remarked that, as a result of adopting this strategy, the federal government’s support for science writ large exploded, growing to great heights through the 1960s.
This new approach to supporting scientific and technological research solidified America’s system of research universities, represented today by the 64 US member institutions of the AAU. It also ensured that America has had a well-educated science and technology workforce, even if the scale is insufficient. We continue to rely on foreign undergraduates coming to the United States for graduate research in science, engineering, and medicine and staying to augment American graduates.
One unanticipated consequence of this postwar policy was the retreat of philanthropy from the support of science. Consider the history of such funding at the Rockefeller Foundation. After occupying a central role in US science funding through the first half of the twentieth century, the foundation decided in the early 1960s that support for basic science was now the responsibility of the federal government. The foundation turned its attention to other areas of need such as overpopulation and agriculture, leading to its role in creating the Green Revolution. Philanthropies that were established during this period tended to have science as a small part of their portfolios.
Epoch 4: The Digital Gilded Age
Epoch 4, the epoch we are living in today, began around 1980. It was initiated by a set of changes in law and regulation in the late 1970s that led to the creation of new and extraordinarily large individual fortunes. By the year 2000, after these new businesses and fortunes had grown, there was substantial annual growth in philanthropic giving. Somewhat coincidentally, federal investment in scientific research began to level off during this period, while corporate reorganizations led to lower investment in companies’ industrial laboratories.
Key policy changes in the late 1970s took place in areas as diverse as taxes on capital gains, the regulations governing large pension fund investing, and the deregulation of many industries, beginning with the airline industry. Finally, the Bayh-Dole Act of 1980 permitted universities and private nonprofit research institutions to own the intellectual property and patents developed by their faculty and students, even if their work was supported by a federal research grant. Together, these regulatory changes created a constellation of new opportunities for finance and wealth accumulation that coincided with the growth of information technology.
The inventors and creators of new companies, often backed by venture capital, were now able to retain a large percentage of ownership in their startups. This phenomenon was especially true of software companies that showed success quickly, expanded rapidly using retained earnings, and, as such, did not need large additional capital infusions. Meanwhile, partners in venture capital and private equity firms often made fortunes comparable to those of technology company founders.
From a philanthropic point of view, this remarkable period has a clear and undeniable parallel with Epoch 2, often called “the Gilded Age.” In 1990, the United States had 66 billionaires. Today it has 613. About half of these individuals made their fortunes in finance and investing or in the technology and information sectors of the economy. The total wealth of US billionaires rose from about $240 billion in 1990 to $4.18 trillion in March 2021. Adjusted for inflation, these values still show a tenfold increase over 30 years. Rather clearly, Epoch 4 is a second Gilded Age.
Today we also are witnessing a continuation of the American cultural imperative to give back to society, echoing Andrew Carnegie’s exhortation to avoid dying a billionaire. The Giving Pledge campaign, begun in 2010 by Bill and Melinda Gates and Warren Buffett, asks wealthy individuals to pledge to give the majority of their wealth to philanthropy or charitable causes. This giving will mostly persist long after the founders are gone. Carnegie’s famous admonition in 1889 and the Gates-Buffett Pledge of 2010 are thus bookends, 120 years apart, reflecting the distinctive cultural role of American philanthropy.
The rise of today’s new philanthropists somewhat coincided with changes in funding for US science. The end of the Cold War in 1990 removed the strongest rationale—that of defense—for funding basic research in the physical sciences. At the same time, more and more research is carried out by large teams using expensive equipment in areas that are at the intersection of disciplines, such as the Human Genome Project or CERN’s Large Hadron Collider. This practice is far removed from the single investigator model characteristic of science in earlier times. The research ecosystem finds itself greatly transformed, and with issues ranging from health disparities to climate change to far-reaching discoveries, there is once again a need for leadership.
Recognizing all of this, in 2013 six foundations—the Alfred P. Sloan Foundation, the Howard Hughes Medical Institute, the Gordon and Betty Moore Foundation, The Kavli Foundation, the Research Corporation for Science Advancement, and the Simons Foundation—came together to establish the Science Philanthropy Alliance with the objective of encouraging and accelerating philanthropic support for basic science. The alliance has grown to 30 members whose combined endowments are estimated at $110 billion—a measure of the potential benefit to science from this newly energized philanthropic sector.
Since its formation, the Science Philanthropy Alliance has advised philanthropists and foundations about the importance of science philanthropy and how to increase the effectiveness and scope of their giving. Our opportunity is to recognize more clearly—and take more consciously into account—the unprecedented scale and scope of America’s growing philanthropic enterprise and to maximize its returns for society, leaving a legacy at least as durable as that left by the philanthropists in the first Gilded Age.
Imagining the Way Forward
The strategy for optimizing the return on America’s assets in science, technology, and medicine will be different from the one articulated 75 years ago in Science, the Endless Frontier.Today we must take account of the still large-scale funding of the federal government, recognize the applied nature of research carried out by industry, and include in planning and strategy-making the significant and growing pipeline of private wealth and philanthropy. Echoing the Gilded Age, when philanthropists founded new private, secular universities, today’s philanthropists are directing large donations to the creation of new colleges or schools within existing universities. For example, John A. Paulson, the hedge fund manager, donated $400 million to Harvard to endow the John A. Paulson School of Engineering and Applied Sciences. Stephen A. Schwarzman, co-founder and leader of The Blackstone Group, donated $350 million to MIT as the foundational gift to create the Stephen A. Schwarzman College of Computing.
Going forward, making good use of philanthropy is the key to sustaining America’s unique advantage. Any new strategy must be formulated with an eye on global R&D spending, but for America, science policy and strategy developed both inside and outside of government should integrate philanthropy into the enterprise. With the scale of science philanthropy growing, philanthropy will bring a different and distinctive voice to the table. Philanthropy can bring new perspectives to discussions about policy and strategy precisely because the sector uses a different model of support for science, has different ways by which its programs are evaluated and implemented, and, crucially, has a higher level of risk tolerance, often supporting proposed scientific ideas well before those ideas are sufficiently developed to earn government support.
The conscious integration of philanthropy into the national science and technology enterprise will require at least two changes—one in how philanthropy is viewed by government, and the other in how philanthropy is included in the national enterprise of science policymaking. The first change recommended is to ensure that the possibilities of philanthropic-public partnerships are considered by all sides as a way of making scientific progress more rapidly and more coherently. While this change may seem simply one of coordination and awareness, there can be enormous synergy and benefit from an awareness and cooperation that lead to partnering for the benefit of all.
A prime example is the US BRAIN Initiative (Brain Research Through Advancing Innovative Neurotechnologies), launched in 2013. The BRAIN Initiative was the first government-supported science grand challenge problem of the twenty-first century, and it grew out of a unique example of philanthropy partnering with government by catalyzing the effort at its earliest stage. Early on, three foundations supported a meeting of about 40 scientists gathered to consider the opportunities at the intersection of nanoscience and neuroscience. The idea of mapping the functioning human brain emerged, based on the well-founded expectation that tools expected to become available because of advances in nanoscience would make the feat possible.
Subsequent meetings sponsored by The Kavli Foundation led the government, mainly the National Institutes of Health and the National Science Foundation, to join in developing the grand challenge plan for this work. Within 18 months, and with leadership from the White House Office of Science and Technology Policy, the NIH, and the NSF, President Obama announced the initiative in April 2013. Today, the BRAIN Initiative is a $5 billion neuroscience initiative extending over ten years and is a prime example of philanthropy front-ending major government support and partnering thereafter. This initiative compellingly illustrates how science can be advanced when there is synergy among government, philanthropy, and social need. A coherent and cooperative partnership among government, universities, private nonprofit research institutions, philanthropies, and industry is one way forward for America.
The second change would be to recognize that philanthropy brings a distinctive voice to the national conversation about science, technology, medicine, and innovation, a voice that could be useful if given a greater presence on public and private committees and advisory boards. At the federal level, all cabinet departments and independent agencies have advisory boards, but many do not currently incorporate representatives from the science philanthropy community. Adding a philanthropic voice to these advisory committees—some of which currently include voices from industry—could help extend and diversify the overall US science ecosystem, convene novel partnerships, and catalyze cooperation between diverse groups to fill gaps in funding with the goal of maximizing benefits for society. Of course, philanthropies will need to be mindful of their participation, taking steps to be transparent regarding their intentions and to address and avoid perceived and actual conflicts of interest as necessary.
Philanthropy and the nation’s remarkable group of public and private research universities are America’s unique advantage. If we enable the synergistic interplay of government, philanthropy, universities, and industry in support of our needs in science, technology, health, defense, innovation, and higher education, the United States can continue to reap the benefits of scientific leadership well into the future.