Richard F. Chandler

Richard F. Chandler is the founder and chairman of the Clermont Group, an international business group with businesses in health care, financial services and electric aviation. He is also the founder of the social impact organisation the Chandler Foundation, as well as the Chandler Institute of Governance, a privately-funded, non-profit organisation established to support national leadership and good governance.

Investing Narrow and Deep:

The Art of Betting Big

By Richard F. Chandler

The Power of Focus and Simplicity

I grew up in a family retail business in a farming community in New Zealand. Our store, Chandler House, sold a range of merchandise, from home furnishings to women’s and men’s apparel. Being a small family business, my mother was the head of merchandising and my father took care of the administration. Every year, before winter arrived, my mother would visit the knitwear manufacturers and search for lines of men’s cashmere sweaters. My mother was courageous in her buying. She loved to purchase an entire production run and negotiate a big discount. When winter arrived, our store carried an “exclusive line” which she could sell at attractive prices. In the middle of winter, we would have the only cashmere sweaters in town as the other stores sold out their small orders. She called this approach “narrow and deep.” It is a principle I have applied to building my investment company. And it has delivered the same outsized results.

The High Cost of Diversification

Modern portfolio management theory advocates diversification of risk. This has led to the popularity of low-cost equity index funds and ETFs in recent years. These diversification strategies become self-fulfilling prophecies – until these crowded positions are unwound in a bear market. Warren Buffett, the investment legend, says that diversification is “diworsification.” It is for those who don’t know what they are doing. Many philanthropists have adopted a version of this portfolio theory, spreading out their donations in the name of prudence and risk management. Some of these philanthropic seeds land in good soil; however, many more fall on the rocks of good intentions, squandering an investor’s resources, time, attention, and energy.

The ROI of “Narrow and Deep”

Today, as the philanthropic industry searches for greater impact and effectiveness in capital allocation, the principle of “narrow and deep” can be powerful. It provides focus and simplicity, allowing capital to be concentrated on a few compelling ideas and opportunities, while also creating a host of practical benefits not possible through a more scattered approach. The “big bets” borne out of such an approach enable promising organizations to scale effective programs or launch promising new ones; they empower leaders to build out teams and innovate their operating models and systems.

They provide other advantages as well, ones no less important but more difficult to quantify. Big bets encourage leaps in leaders’ long-term ambitions by liberating them from short-term fundraising; they imbue a sense of momentum which can help attract further investment; and they empower organizations to strike weightier blows against the most challenging issues of our times.

The Track Record of Betting Big

This helps explain why, behind many of history’s great societal advances, one finds a donor – or a coalition of donors – whose narrow and deep investments made it possible. John D. Rockefeller’s US$ 100m “big bet” toward medical research helped eradicate hookworm disease and produced 23 Nobel laureates. Other issues where “narrow and deep” played a crucial role range from combating neglected tropical diseases to placing seatbelts in cars worldwide; from eradicating polio to reducing tobacco usage. Not only are such investments crucial in tackling societal issues, they are instrumental in building the organizations which most successfully combat them. The book Forces for Good examined 12 of the world’s most impactful nonprofit organizations; 11 had received a “big bet” donation, or a significant investment at a pivotal moment.

A Lack of Big Bets in Philanthropy Today

And yet a paradox exists in today’s social marketplace: many donors and social investors wish to fund social change, yet research shows that few are making the kind of big investments that often catalyze it. Only 2% of human-service organizations had received a big bet, according to 2016 research by the philanthropic advisory firm Bridgespan. And of the relatively small number of big bets being made, few are going toward social causes. Separate research by Bridgespan found that, excluding investments by the Gates Foundation, only one in five philanthropic big bets of US$ 10m or more were directed toward social change. The rest were channeled to lower-risk opportunities and recognizable institutions.

The Starting Point: Finding One’s Anchor

The social investor with both the resources and risk appetite to invest narrow and deep may find themselves overwhelmed with options – there are more than 1.5 million nonprofit organizations in the United States alone. In this swirling sea of seemingly endless opportunities and causes, finding an “anchor” to underpin one’s giving can bring focus. No particular anchor is “better” or “wiser” than another, yet the one that resonates most truthfully and powerfully is likely to be the sustaining force during the inevitable ups and downs of a philanthropic journey. History suggests these anchors tend to fall in one of four categories:

  • An ideology, such as the belief that only open, democratic societies can prosper, which informs George Soros’s Open Society Foundations.
  • An issue, such as the END Fund’s focus on preventing and treating neglected tropical diseases.
  • A sector, such as the Osprey Foundation’s investments in water, sanitation and hygiene (WASH) services.
  • A geographic region, such as Elma Philanthropies’ investment approach which prioritizes opportunities across the African continent.

Ideology: George Soros’s Open Society Foundations

The Financial Times named George Soros “person of the year” in 2018, describing him as “the standard bearer of liberal democracy and open society.” To date, Mr. Soros has set aside more than US$ 32bn toward philanthropic causes, mostly through his Open Society Foundations. Open Society Foundations invests worldwide and in support of a range of causes, all of which are informed by an ideology famously articulated by Karl Popper in The Open Society and Its Enemies in 1945: for a society – and a nation – to prosper, it must be open, and democratic, and resist authoritarianism, racism and intolerance.

Issue: The END Fund’s
Focus on Neglected Tropical Diseases

A group of parasitic and bacterial infectious diseases collectively known as neglected tropical diseases (NTDs) affect more than 1.5 billion of the world’s most impoverished people – 868 million of whom are children. Preventing, treating, and ultimately eradicating NTDs is the focus of the END Fund, and guides its sizable investments. Since its founding in 2012, END Fund, whose founding investor was the Legatum Foundation, has raised more than US $118m and treated more than 140 million people worldwide.

Sector: Osprey Foundation’s
Focus on WASH services

According to a 2017 joint report by the WHO and UNICEF, 2.1 billion people lack safe, readily available water at home, and 4.5 billion lack access to safe sanitation. Improving access to water, sanitation and hygiene (WASH) services is one of the Osprey Foundation’s guiding investment focuses. In its efforts across the WASH sector, the foundation employs a number of approaches, from providing grants and impact investments to advising on an organization’s strategy and operations. And its portfolio is global, ranging from sub-Saharan Africa to Latin America, the Middle East to academic research in the United States.

Geography: Elma Philanthropies’
Focus on Africa

The thread which unites – and focuses – Elma Philanthropies’ capital is geography, as the organization prioritizes investments in “African institutions and change agents” rather than international NGOs. Anchored in this geographic focus, Elma Philanthropies invests in a range of initiatives, from maternal care to early childhood development to HIV/AIDS prevention and treatment, and allocates capital through a number of vehicles, from general support grants to equity and debt.

Translating an Individual Vision into an Institutional Capability

Having found a compelling cause, donors must face the challenge of building an organization to deliver on it. It has not been uncommon for donors to hold their philanthropic organizations to lower standards of innovation and execution than they would expect of their businesses or financial investments. Too often, the effectiveness of philanthropic firms is hobbled by a culture of bureaucracy, bloated costs, and risk aversion.

Supported by Adaptive Structures and Systems

During World War II, Winston Churchill created the Statistical Office, a department outside the normal chain of command whose principal function was to provide the Prime Minister with continuously updated and unfiltered information, no matter how unpleasant or challenging it might be. Churchill knew that Britain’s victory depended on its ability to adapt to obstacles as they arose, and that such rapid responses would be effective only if key facts could flow quickly from the war’s front-lines to the government’s most senior decision-makers.

Structures and systems that encourage this kind of fast, ongoing communication are a vital component of narrow and deep investing. They create an organizational climate where the truth is heard and can be acted upon, allowing for iteration and improvement rather than sustained investments in “doing the wrong thing righter.” This type of insight can also help yield smart dashboards, allowing leaders to discern the stories told by data and calibrate strategies and allocations accordingly.

Animated by People and Culture

Jim Collins wrote in Good to Great: “If you have the wrong people, it doesn’t matter whether you discover the right direction; you still won’t have a great company.” The same truth holds for social organizations; even those guided by a compelling vision and supported by well-designed systems and structures need the right people and culture to make use of them. The right team fields a balanced, complementary set of skills, ranging from investment and business professionals who bring a business mindset and focus on outcomes, to those with deep experience in the social sector who can help build relational networks and navigate the territory. It sounds simple, yet it appears often overlooked: An adaptive, results-focused organization requires adaptive, results-focused people and culture.

If you have the wrong people, it doesn’t matter whether you discover the right direction; you still won’t have a great company.
Jim Collins

The Importance of Shared Values in Collaborative Partnerships

The great social issues of our time require multi-level and structural solutions – the kind of solutions only possible with cross-sector partnerships built on both shared purpose and shared values. For entrepreneurs or investors used to “going it alone” in the private sector, this kind of partnership can seem unnecessary, or perhaps even uncomfortable. But governments, NGOs, the private sector, and fellow social investors all have a role to play in building and broadening prosperity. Proceeding on a shared purpose without shared values is unlikely to succeed. Setting the right foundational values is essential for success in big bet partnerships.

The Art of Timing: Seeing and Seizing a “Kairos Moment”

The ancient Greeks had two words for time: chronos, or chronological time, and kairos, meaning the right time or the ideal moment. Narrow and deep investments achieve their greatest impact when they reach organizations and leaders at inflection points – at a “kairos moment.” Investments rushed without proper due diligence can prove rash; capital deployed after an opportunity has passed can achieve a fraction of what it might have otherwise. But investments deployed during a “kairos moment” connect capital with need and catalyze transformation. Recognizing such moments is an art. Acting upon them requires structures and systems that allow for fast communication, and a team and culture well-versed in moving at speed.

Daring to Achieve Greatly

We stand in a moment of great opportunity. There has never been more capital in the philanthropic sector or more sophisticated vehicles and approaches to put it to use. Today’s philanthropist has sophisticated tools at their disposal to measure outcomes in almost real-time, and they have global networks of peers with whom they can learn and collaborate. In a practical sense, big bets have never been more possible. And when one looks around at the unacceptable levels of poverty and illiteracy that persist, or the suffering and diminished opportunity still faced by so many, one sees that such big bets have never been more warranted.

In addition to the many organizational and practical considerations, a narrow and deep investment approach requires a deep reservoir of courage, for it carries with it not only the possibility of transformation but also the risk of failure. The only way one can avoid this prospect is to remain in the shallower waters of certainty, betting safe and investing small – which might be the greatest risk of all.

Collaborative Values:

Setting the Right Foundations for
Big Bet Partnerships

In order to take on big challenges, social investors can achieve more when they partner with others. From the start, effective partnerships must be aligned on a purpose that is common and specific. A shared purpose, however, is only half of the equation. Effective partnerships also need shared values. Below are model values that can help a collaboration thrive.

It is important to recognize the limitations of one’s own ideas and experience. Each of us have much to learn from each other. We should value listening above our desire to be heard.

All-In Commitment

In a partnership, every party is responsible. When we have ambitious aims, we operate at our strongest when each of us feels a sense of ownership and urgency for the work being done. It is important to be committed to constructively contributing our ideas and insights, our skills and strengths.

Unity in Diversity

We all bring unique perspectives and expertise – diversity is a strength. When we work to develop a shared approach instead of insisting on a particular view, we elevate the good we can achieve together over our individual perspectives and beliefs. The key is to practice collaboration, not negotiation.

Beginner’s Mind

Having a beginner’s mind means being keen to explore, reflect on, and learn from others and consider alternate ideas. When we are not anchored in our own frameworks and truth but are willing to challenge our assumptions and frameworks with fresh eyes, we are able to work with an open mind.

Respectful Disagreement

Partnerships are about taking risks, being audacious, and making big bets. It is inevitable that there will be differing opinions on the best way to do things, but conflicts can be processed with respect and dignity. When we do not shy away from unconventional ideas, but seek and provide candid feedback, it is possible to resolve issues by focusing on the collective shared purpose and values.

Richard F. Chandler

Richard F. Chandler is the founder and chairman of the Clermont Group, an international business group with businesses in health care, financial services and electric aviation. He is also the founder of the social impact organisation the Chandler Foundation, as well as the Chandler Institute of Governance, a privately-funded, non-profit organisation established to support national leadership and good governance.

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