Chafuen on Think Tanks

Replacing The Indispensable: Leadership Challenges At Think Tanks

Champions of free-enterprise have always focused on the importance of ownership as essential to economic progress. In recent decades, especially after Instituto Libertad y Democracia, Lima, Peru, published “The Other Path” during the 80’s, many studies focused on the importance of clear and secure property titles. Ownership provides incentives to create, innovate, and produce. It also opens the access to capital and encourages better stewardship.

Think tanks are growing in size and number. Work to promote economic freedom usually takes place in non-profit think tanks and universities. Non-profit organizations tend to lack a clear ownership, especially after the founders have died or retired. Does this lack of clear ownership affect the success of think tanks as much as it affects the success of an economy?

Although one can easily define who owns a for-profit corporation, it is much harder to define who "owns" a non-profit. The charters and articles of incorporation define who governs and who and how one can, for example, change the mission, elect authorities or dissolve the non-profit. The dispute last year at the Cato Institute that led to a change in leadership was, in great part, a discussion about ownership.

These issues which can greatly affect the long term success of think tanks are not just a matter of law. Those who have devoted their lives to working at think tanks and those who have made important donations, are not legal owners, but how can we describe them? Are they “spiritual owners”? “Stakeholders?”

I have strong doubts about the usefulness of the "stakeholder" concept for for-profit companies. It tends to diffuse corporate responsibility. There might be more reasons, however, to include it in the analysis of non-profits.

There are a variety of stakeholders in think tanks. For example: Think tank employees who bring major resources to the think tank can be regarded as spiritual "shareholders"; if a donor gives money for a specific department of a think tank, those in that department also become stakeholders; donors who give relevant donations for general purposes, apart from being “spiritual shareholders,” are also stakeholders. All types of non-profit “ownership” are weaker than in a for-profit. No one can sell their shares and pocket the proceeds.

Owners of a private company usually provide initial capital and attract resources. Some also have responsibility for allocating them. Senior staff and star researchers at think tanks also bring resources to the organization and have some responsibility for their allocation. When that happens they become as quasi owners, or “spiritual owners.” The degree of ownership is in relation to the amount contributed.

Senior staff often bring more donations than what is contributed directly or indirectly by the board of a think tank. In investment firms, investors develop a relationship with their investment manager. When managers leave, they might start a new firm and usually take a sizeable portion of their clients with them. The same can happen at think tanks. After several leadership disputes, as the one that took place at the Pacific Research Institute in the 80’s, and with Citizens for a Sound Economy, CSE, in 2004, those who considered themselves spiritual owners of the organization but were displaced, formed new groups and took some of the stakeholders with them. Changes in the Pacific Research Institute led to the founding of the Independent Institute in Oakland, California in 1986. The dispute at CSE led to two organizations, Americans for Prosperity and Freedom Works.

In most transitions, so far, trustees have tried to retain the talents and resources of their former leaders. Such was the case at several of the most relevant free-market think tanks in North America. They include Reason Foundation, one of the first to make changes, Fraser Institute, Heritage Foundation, Competitive Enterprise Institute, AEI, and Cato. So far, only Chris DeMuth, the former President of AEI, severed most ties with his former organization. Bob Poole, Michael Walker, Ed Feulner, Fred Smith, and Ed Crane, continue to work, under different arrangements and formal titles, for the think-tanks they helped prosper. It is too early to know which transition worked better. The Foundation for Economic Education (FEE) had seven leadership changes. Leonard E. Read, its founder and spiritual owner did not leave a transition plan. Since the death of Read, until the arrival of Larry Reed, its current leader, FEE grew less than all the groups mentioned above. When the next transition comes, Reed, a talented intellectual entrepreneur, and his board, will be able to study at least one dozen cases that can serve as guides.

My views on ownership and transitions at think tanks have been evolving. During these last three decades I have been on boards of over a dozen think tanks. Two thirds had leadership transitions. Each was a new learning experience. So far, most boards realized the importance of stakeholders and “spiritual owners.” Most agree that improving our understanding of ownership is as essential for think tanks as for a healthy economy.

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Think Tanks and Universities

Think tanks and the academy, in all likelihood, were united at birth. When Plato started his famous academy, his goals included deep philosophical discussions and leadership training. His academy lasted approximately nine centuries (400 B.C.-529 A.D.). The oldest university within Western traditions, the University of Bologna was started in 1088 out of the demands and needs of a collection (a university) of foreign students.

During the second half of the last century several efforts that started as think tanks developed into well respected universities. The Centre for Research and Communication in Manila, Philippines, founded by two Harvard graduates in 1967 gave birth to the University of Asia and the Pacific, which received its official status in 1995. In South America, the Torcuato Di Tella Institute, founded in 1958 in Buenos Aires, Argentina, transformed itself into the Universidad Torcuato Di Tella (UDT) in 1991. It is ranked consistently in the top 100 Latin American universities. Centro de Estudios Macroeconómicos de Argentina (CEMA) a think tank founded in 1978 and directed by “Chicago Boys” became the CEMA University. It is also ranked very high among universities focusing on economics. While UDT is more aligned with the Keynesian status quo, CEMA professors are inspired by Chicago and other schools of thought more skeptical about the benefits government intervention. In Brazil, the Getulio Vargas Foundation, founded as a think tank in 1944, developed into a major “mainstream” university-think tank complex, with a budget of over 400 million dollars.

In Guatemala the core of the group of businessmen and local leaders who started the Centro de Estudios-Económico Sociales think tank in 1958, founded the Universidad Francisco Marroquin (UFM) in 1971. UFM has turned into a major disseminator of free-market teachings. Its New Media portal serves as a repository of some of the world’s best material, mostly in Spanish, of the great Classical liberal books and video-taped lectures.

In the cases described above, after the founding of the universities, the think tanks became a secondary focus of donors and trustees. Both CRC and CEES still have their offices within the university premises. Taking advantage of the extended college community, they continue to produce research and educational products.

Other universities were started as complete separate entities by the same leadership teams that developed think tanks. In Chile, several trustees and directors of the Libertad y Desarrollo institute, one of the leading think tanks in the Americas, started the Universidad del Desarrollo. This university attracts over ten thousand students. Fifteen percent of them come from abroad. In England, the late Ralph Harris and Harry Ferns, of the Institute of Economic Affairs, (IEA) helped found the University of Buckingham. The University credits the IEA for playing an important role in its development. In Europe, Gabriel Calzada, who in 2005 founded the Instituto Juan de Mariana in Spain, recently launched the Online Manuel Ayau University OMMA.

What about the U.S. scene? Several think tanks are already developing “university” type products. Among them:

    • The Ludwig von Mises Institute, in Auburn, Alabama, has been hosting their Mises University since 1986. The one week course focuses on Austrian economics.

    • Cato Institute has its Cato University, usually taking place at the end of July.

    • A recent entrant to this market, the Acton University, organized by the Acton Institute, Grand Rapids, Michigan. Last year it attracted close to 800 students and professors from approximately 80 countries. It is the most international free society educational program in history.

    • The Atlas Network hosts a Think Tank MBA course for talented intellectual entrepreneurs, as well as a “leadership academy” as an online course to help enhance think tank talent.

Massive Online Open Courses, or MOOCs, are affecting universities as few other developments in the history of education. I would not be surprised if taking advantage of this technology some of the major think tanks, especially those with outstanding scholars on their staff, will soon develop into small boutique universities. Brookings started as a university, and still keeps the EDU suffix in its web address. Will it return to its roots? Will its competitor, the evolving American Enterprise Institute take the jump and create an “American Enterprise University?” Time and leadership will tell.

The new global scene and the new technologies are changing the optimum size of educational institutions. The lessons from Plato’s Academy, which took place in a garden grove near Athens, had an enormous impact on civilization. The evolving scene in higher education and the growth of think tanks will lead to new educational offerings that will have a major impact on the quality and quantity of policy studies and public policy education.