Eli Broad, Co-Founder, Broad Foundations: On Being Unreasonable

June 28, 2012
Eli Broad, Co-Founder, Broad Foundations: On Being Unreasonable

Over the course of a career that has spanned five decades and four industries, Eli Broad, who turned 79 this summer, has helped build two Fortune 500 companies, KB Home and SunAmerica, and, with his wife, Edythe, created the Broad Foundations, which focus on public education reform, scientific and medical research, art and culture, and civic projects in Los Angeles.

Needless to say, Broad has been asked many times to share the secret to his success. His new memoir, The Art of Being Unreasonable: Lessons in Unconventional Thinking, sheds some light on the path that took him from a job as an accountant in Detroit to fortune and fame. As Broad tells it, a good deal of his success stems from his willingness, over the course of his adult life, to take the kinds of chances others thought ill advised. What's more, he writes, he invariably succeeded because he and his partners did their homework and found a "niche where we could flourish."

As Broad explained during a recent conversation with PND, he hopes people looking to emulate his approach will read the book and "learn from my successes — and, frankly, some of my mistakes."

Philanthropy News Digest: Your book celebrates the benefits of a certain kind of unreasonableness in terms of one's career path. Were you always unreasonable, or is it something you grew into?

Eli Broad: Oh, I've always thought of myself as being reasonable; it was others who thought I was unreasonable, because I'm demanding and always asking questions and not going with everyone else's flow.

I didn't start to think about unreasonableness until my wife, after we were married for several years, gave me a paperweight with a George Bernard Shaw quote on it that read: "The reasonable man adapts himself to the world. The unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends upon the unreasonable man."

PND: One thing I really enjoyed about your memoir was the chapter on asking "Why not?" What are some of the things you've learned by asking that question in a business context, and how has it influenced your approach to philanthropy?

EB: When I was a kid collecting stamps I remember reading in one of those magazines that were sent to stamp collectors that Chrysler International was selling one-kilo boxes of stamps that had been cut from envelopes collected from around the world. I took a streetcar to their office and bought a box for I forget how much. I then advertised a hundred stamps for $1.95 in the stamp magazine. I became Eli Broad, postage stamp dealer, age thirteen. And people would write to me as if I were a forty-year-old. By the time I was sixteen, I had saved enough to buy my first car, a 1941 Chevy, for $200.

You see, I've always asked, "Why not?" And people would always say, "It's never been done this way. You can't do it." I'd listen to what they had to say, but most of the time I went ahead and did what they said I couldn't do. And they'd say I was being unreasonable.

In philanthropy, my wife, Edythe, and I decided a long time ago not to give money just to maintain the status quo. We want to make a difference, whether it's in education reform, scientific and medical research, the arts, or other areas. So if we think something ought to be happening that isn't and we ask, "Why isn't this happening?" and don't get a good answer, we'll be inclined to fund it. But only if the program, whatever it is, meets three criteria: it will make a difference in twenty years; it wouldn't happen without our support; and the right people are available to make it happen.

PND: Did you have a model, either an individual or an institution, in mind when you established the Eli and Edythe Broad Foundation in the 1960s?

EB: I've always admired Andrew Carnegie and what he did in establishing libraries, colleges, and universities, and for what he said once: "He who dies with wealth dies with shame." I also agree with something someone else once said: "He who gives while he lives also knows where it goes."

PND: Is that why you and Edythe signed on to the Giving Pledge, the campaign started by Warren Buffett and Bill and Melinda Gates to encourage billionaires to give at least half of their wealth to charitable causes?

EB: We were going to do that anyway, so when Bill Gates and Warren Buffett came around we decided to up the ante from 50 percent of our fortune to 75 percent. We hope that sets an example for others to follow.

PND: The Broad Foundations today focus on four areas — public education reform, scientific and medical research, art and culture, and civic projects in Los Angeles. What's the common thread connecting those interests?

EB: I'm not sure there is a common thread. Each came about in a different way. For instance, we started supporting public education reform initiatives after traveling to countries like Japan, South Korea, China, India, and Finland. At the time, about fourteen years ago, we realized American children were not getting the education they needed if the United States was going to maintain its preeminent role in the world. We came to the conclusion that our system of public education was broken and needed to be changed and strengthened to empower teachers and students to succeed. Since then, we've done a number of things in the education space, from helping to create a cadre of new public education leaders through our Superintendents Academy and Residency initiative, to creating a million-dollar prize that's designed to encourage urban schools to boost student achievement and close the achievement gap between ethnic and socioeconomic groups.

We believe the public education system needs to be reformed in other ways, too: our students need a longer school day and school year; we've got to expand digital learning and push more resources into classrooms; and more mayors and governors need to be involved. That kind of change ishappening, albeit slowly.

Our interest in scientific and medical interest came about a different way. After one of our sons was diagnosed with Crohn's disease, I did a lot of research and learned that no one had yet figured out the disease's cause or a cure. So I thought, "You know what? All these young scientists, doctors, and researchers have theories and thoughts about the disease but they're not getting funding from the National Institutes of Health or elsewhere, because they're not established." Soon after that, we went into the venture research business in inflammatory bowel disease, which led to other things. For example, it led to my giving a grant to a man by the name of Eric Lander who was decoding the genome for the federal government.

PND: Lander helped establish the Broad Institute. Tell us a bit about how that partnership came about.

EB: While I was in Cambridge, Massachusetts, in October 2001 to be inducted into the American Academy of Arts and Science, Edye and I ducked into Eric's lab and we were blown away by the robotics and computers going twenty-four hours a day and all the bright, young researchers from Harvard Medical School and MIT who didn't want to go home because they were so excited about the work that was being accomplished there. So I said to Eric, "When are you going to be done with this?" And he said, "April 2003." I said, "What do you want to do then?" And he said, "I'd like to try and create an institute to take all we've learned and get it to clinical applications." I said, "Okay, what do you need to do that?" He said, "I need $800 million." And I said, "I hope you get it somewhere."

Well, he approached a lot of people, and he couldn't do it, so I told him we'd put up $100 million if Harvard and MIT would do likewise. And that's how the Broad Institute got created. Since then, it's become a huge success and today is number-one in the world in genomics.

PND: How did you get involved in the arts?

EB: Many years ago I was founding chairman of the Museum of Contemporary Art in Los Angeles, and then I got involved in a number of other projects in the city that people thought could never happen, including the Walt Disney Concert Hall designed by Frank Gehry. I could go on, but everything we've done is really different than just supporting the status quo. It's making a difference, creating things that didn't exist, that probably should exist, and will make a difference twenty, thirty years from now.

PND: You mentioned some of the work you're doing through the Broad Prize for Urban Education. Has that prize helped to improve public education in the United States?

EB: Absolutely. We're seeing results. There are some cities that haven't received the prize but have put in their contracts with their superintendents to get the Broad Prize within x number of years. So it's creating competition. And the districts that win the prize feel very good about it.

PND: Is it more difficult to affect change in public education than in other fields?

EB: Oh, absolutely. You know, we believe in teachers. Some 95 percent of all teachers are great, but they work in a system that's broken, that has all sorts of work rules that don't let them do all the things they need to do to succeed, and that diverts too much money into central office bureaucracies and not enough into the classroom.

Recently, the Council on Foreign Relations came out with a report that said education is a national security priority, not least because 70 percent of adults in this country — people between the ages of 18 and 24 — are not qualified to serve in our increasingly high-tech military. That's astounding. If we want to maintain our standard of living, if we want to be a secure nation, we've got to improve public education and we've got to do it quickly.

PND: Is it important, in your view, for Giving Pledge dollars, yours and those of other Pledgers, to be used sooner rather than later?

EB: Yes, I believe so. Warren Buffett and others may have a different view, that if they make a whole lot more with their money now instead of giving it away, eventually there'll be even more money for philanthropy. But Edye and I believe in giving while we're still alive. And we don't just give money; we've also got great people at our different foundations helping the institutions to which we give with their business plans and in other ways.

PND: How do you respond to the growing chorus of critics who say that philanthropy is an activity of and for wealthy elites and that, as such, it is inherently undemocratic?

EB: Well, I don't agree with that at all. America has a long, proud history of philanthropy, and I think it is important for the wealthy to give back. Through our philanthropy in education, for example, we are working to help transform bureaucracies so that students and teachers have a chance to succeed. Governments can and should be doing this themselves on behalf of the students, teachers, parents, communities, and democracies they are supposed to serve. Unfortunately, too many are not. I think philanthropy has the ability to step in and ensure that underrepresented voices in our democracy are heard, especially when government considers this too risky to do.

Let's not forget, over the twenty-eight years since A Nation At Risk was published, public education spending in this country in real dollars has tripled, while student achievement has gone nowhere. We used to be number one in the world in terms of high school graduation rates. Now we're closer to twenty. We used to be in the top five in mathematics and now we're twenty-fifth or thirtieth. We have a failing system that people are trying to defend, and when people like Edye and I or Bill Gates get involved in trying to change it, they say, "Oh, that's not democratic." I don't agree. I think what we're doing furthers democracy, and that those who want to maintain the status quo are undermining the strength of our democracy.

PND: Why did you decide to write a memoir?

EB: Over the course of my career I've been asked time and again, "How did you start two Fortune 500 companies in two different industries?" And more recently, after my wife and I really took the plunge into philanthropy, people have asked, "How do you do all of that?" So I thought if I wrote a book about how I've done all these things, people could learn from my successes — and, frankly, from some of my mistakes. I hope the book is helpful to young people, to entrepreneurs, and to others in a variety of fields.

PND: What advice would you give to young millionaires who are eager to use some of their wealth to make the world a better place?

EB: I think a lot of them are doing it already. Look at John Arnold, who was probably the most successful trader of oil and gas contracts. He recently announced plans to close his fund to focus on philanthropy. I think what I'm doing, and what others are doing, is setting an example for other young millionaires who want to make a difference.

Regina Mahone spoke with Broad in May. For more information on the Newsmakers series, contact Mitch Nauffts at mfn@foundationcenter.org.