Laura and John Arnold use philanthropy to help balance inequities and plant seeds for change.
Laura and John Arnold use philanthropy to help balance societal inequities and plant seeds for change
Although a bird’s-eye view of Houston stretches for miles through the windows of the Laura and John Arnold Foundation’s headquarters in Uptown, visitors needn’t look beyond the serene lobby to be dazzled. Light sparkles on a large Tara Donovan sculpture and illuminates a pensive self-portrait tapestry by Chuck Close, artworks that appear as purposeful as they are spectacular. Donovan’s cube structure is built from a gazillion small metal pins. Close’s tapestry relies on the warp and weft of thousands of woven threads. Both pieces could be metaphors about the result of tedious processes, like the work of the Arnold Foundation.
Though there is no such thing as an ordinary mega-philanthropist, the Arnolds are young (in their mid-40s), glamorously wonky and unimpressed by the typical rewards of high-dollar giving. They don’t make the rounds of black-tie galas or appear to care about seeing their name on new buildings.
They launched the foundation in 2010, about the time they signed the Giving Pledge initiated by Bill Gates and Warren Buffett, determined to give back muchof their fortune to society.
Though the Arnolds are not Houston’s wealthiest couple by a good stretch, with a net worth of about $3.3 billion, their giving sets a high bar. The couple and their foundation distributed $287 million in 2017, putting them at No. 8 among the Philanthropy 50, the Chronicle of Philanthropy’s annual list of the nation’s most generous donors, and No. 11 on Forbes’ list of America’s Top 50 Givers. Since establishing the foundation, they have distributed more than $1 billion.
Their multifaceted, multiissue foundation employs about 100 super-smart people across three offices (including New York and Washington, D.C.). They hesitate to call it a “do tank,” buzz-speak for an action-oriented think tank. But the foundation is tackling vexing problems in arenas that have not traditionally been influenced by philanthropy.
“There are a lot of ideas floating out there, and our value add is finding the ideas, putting them through a due-diligence process and testing them. We help start pilot projects around those ideas; evaluate them; then, if they’re successful, try to incorporate them into policy or practice,” John Arnold said. “There’s not a shortage of ideas on how to improve the world; there’s a shortage of implementation of those ideas. That’s really where we come in.”
The Arnolds have helped to initiate and influence major conversations (and some notable progress) in arenas that most recently have included bail reform, alternatives to arrest, pharmaceutical pricing, the integrity of academic research and political gerrymandering.
By necessity, some of the work involves politics and controversy. John Arnold has tweeted that he is “an equal opportunity special interest pot stirrer” since the far-left press has called him “the next Koch brother” and the farright has dubbed him “the next George Soros.”
“We view philanthropy as an engine of innovation — the risk capital for policies that could be superior alternatives but that governments aren’t incentivized to try,” Laura Arnold said.
The Arnolds are both proud “products” of public school systems and professional parents. John, the son of a Dallas lawyer who died when he was 18, is a mathematical savant who became a wonderkind natural gas trader at Enron straight out of college, then joined the billionaire ranks when he founded the hedge fund Centaurus Energy, which he closed in 2012. Laura, a Harvard and Yale University-educated lawyer who grew up in Puerto Rico and Florida, came to Houston to help launch the exploration company Cobalt International Energy. The couple met on a blind date, and married 12 years ago.
Though they have historically been publicity-shy, the Arnolds seemed genuine, warm and welcoming during our meeting in October.
What brought you down this path?
Laura: We were at a change in life — in a financial position to determine how we spend our time, with the enormous responsibility of setting an example for our children and for our families. We don’t believe in dynastic wealth. We started investing in the low-hanging fruit — education reform — KIPP, Teach for America, YES Prep, the charter schools. After a few years, it became clear that the inequities in education are really reflective of deep, endemic, systemic failures of broader social systems.
John: When we decided to start giving away more money, one of the first things we did was a broad survey of all the different types of programs in the United States, trying to find the most effective organizations. We learned a couple of things: First, the evidence on what worked was not convincing. Second, most of the programs that are really effective are already at scale. So the probability of finding a new program that’s highly effective and passes a cost-benefit test is remote. We started thinking, OK, this is going to be harder than just writing a few big checks. Focusing on policy seemed like the best way to achieve scalable and sustainable change and improvement in people’s lives.
Laura: Philanthropy pales in comparison to government in terms of financial resources on a problem. We spent a lot of time thinking about the role of philanthropy in this ecosystem. You’ve got the private sector, the state governments, local governments, the federal government, universities.
You are so results-driven. Which of your projects to date do you consider most successful?
Laura: It’s a very hard question to answer. Policy change has such a long trajectory. And we focus deliberately on very hard issues, where there’s very little to no evidence base; where there are significant vested interests who have dominated the conversation; where you really have to engage in mind-set change and in data calibration; where you at least have to think, “What are we even talking about? What do we know, what don’t we know?”
We have had significant successes — pension reform being one of them. In criminal justice, risk assessments being another. But I wouldn’t necessarily call those the most successful things we’ve done because in every area we focus on, there is huge potential for change. They’re just at different stages of development of the problem.
John: If you give a dollar to a new building, you can point to the brick and say, my dollar did this. You have that tangible outcome. In policy, you don’t know — did my dollar help create the change? In a number of areas where we work, we are considered the thought leader or have been a primary driver.
How is the foundation structured?
Laura: It is a C3 family foundation. We don’t distinguish in our giving between a C3, a C4, a PAC or whatever. If we have an issue, we want to work on that issue. Obviously, we stay within the lanes of compliance and organizational form. Most of the people in this office focus on the “do tank” piece — the research, the policy recommendations, the data. Our C4 takes policy ideas and initiatives and implements them at a state or federal level, via advocacy. That’s where you would find more political work such as a ballot initiative or a specific legislative proposal. We’re also relatively active just in traditional political giving.
So “the work” involves everything. Generating an idea in and of itself is never enough; it will just sit on a shelf. You have to somehow mobilize support so an idea becomes reality. Sometimes that requires a law; sometimes that requires a ballot initiative; sometimes that requires discussions with government officials. All of that we do, through the right vehicles.
As co-chairs of the foundation, how do you divide your responsibilities?
John: Naturally some division happens, but we’re both deeply involved in all the areas we work in. Laura: We’re together all day long, which is actually very sweet.
You have a huge, impressive staff.
Laura: We’ve been blessed and honored to have a team of true superstars. People are just blown away not only by their intellectual power but also by their humanity. These are people who truly could be doing anything, and they have chosen to devote their lives to changing the country. It’s this really incredible moment for philanthropy, and for us, and for our communities, that these people have honored us with their careers. We just try to get out of their way and not cause too much trouble so they can do what they do best.
How did your previous careers inform what you do now?
John: There’s a lot of similarities between investing and philanthropy. In both, you’re putting money into a project, hoping for results. The diligence and thought process is very similar.
Laura: Although philanthropy’s much harder because you’re not making widgets. With an investment, there’s only one outcome you care about, right? In philanthropy, you could be measuring the wrong thing, and it’s hard to measure. There could be ancillary consequences. It’s very hard to gauge at any point whether you’re succeeding. One of the many reasons John was successful at energy trading was that whatever the market was doing, even in the face of contrary arguments, if he believed something, he had faith in himself — at the same time being open to redirecting if he viewed the evidence as sufficiently strong. You have to have this force of conviction … because the milestones get fuzzy.
Are your kids engaged in philanthropy yet?
Laura: They are 10, 9 and 7. If you ask our kids what we do, they’re just now starting to understand what it means. We take them to the Food Bank and do things all parents should do. But I wouldn’t want them to do only charity work. We have to find ways of showing kids that we’re all part of this world together. The kids are a work in progress.
The art you display is amazing. What are we looking at here in John’s office?
John: A Baroque painting by Cecco del Caravaggio of the Penitent Magdalene, another Baroque piece by a Flemish artist of a troubled man trying to get cured by the bishop, and then a couple of African sculptures. We collect a mishmash from African tribal works to some Old Masters. Most of the work is modern.
That sounds like a de Menil mix.
Laura: I’ve really come to empathize with the de Menils’ approach because as a collector you fall in love with pieces, you make mistakes, you evolve, you mature. The collection reflects all of that.
John: We were running out of wall space at the house, so we started bringing some of the nice pieces to the office.
Laura: It is great to live with art. We spend so much time here; if you don’t bring them where you live, you don’t see them as much as you’d like.
“We view philanthropy as an engine of innovation — the risk capital for policies that could be superior alternatives but that governments aren’t incentivized to try.” Laura Arnold, philanthropist