Rip Rapson, the President and CEO of the Kresge Foundation, Joins Denver Frederick

The following is a conversation between Rip Rapson, the President and CEO of the Kresge Foundation, and Denver Frederick, Host of The Business of Giving on AM 970 The Answer in New York City.

rip-rapson-20-2_webDenver: Transformation of any institution is difficult, particularly one as venerable and respected as The Kresge Foundation. Therefore, it’s hard to imagine a more dramatic shift in strategy and direction than has occurred since my first guest assumed the helm there some 10 years ago. He is Rip Rapson, the President and CEO of the Kresge Foundation. Good evening, Rip, and welcome to The Business of Giving!

Rip: Thank you, Denver, it’s a pleasure.

Denver: I’m sure some of our older listeners remember quite well the S.S. Kresge Department Stores — I know that I do. So before we get into the work of the foundation, tell us about Kresge stores and how this whole thing got started.

Rip: S.S. Kresge had a simple idea way back at the turn of the century, and that was to provide what we would now call a “drug store format” to move goods and to get people to a luncheon counter. Over the next 20 or 25 years, he slowly chipped away at this. It started in the Midwest, where it began to spread throughout the country. By 1924, the Kresge “five-and-dime” had become synonymous with small town retail, small town social activity. And it was where everyone went to get their Cherry Coke.

Over the next 50 years, it grew and it grew and ultimately transformed itself into Kmart. It’s hard to remember, but in the early ‘60s, Kmart was really giving Walmart a run for its money. Sam Walton often said that they felt that they were just within a couple of business cycles of being essentially put out of business by Kmart. Little hard to imagine today, but true. It got big enough… and it got successful enough… that the family and Sebastian’s son basically made the decision that they would get out of the business. They would sell their interest in Kmart, grab the money, put it in a trust, and create a foundation. So that’s how the Kresge Foundation was born in the late ‘60s, early ‘70s.

Denver: Great background! Well, moving to the Foundation, if I look at some of my professional scar tissue, much of it was earned early in my nonprofit professional career doing Kresge challenge grants. And if I may dare say, it was truly a painful process. And this is pretty much the organization that you walked into when you took the reins of Kresge back in 2006. Tell us about that process, challenge grants,  and how they worked.

Rip: Well, 20 or 25 years ago, the Kresge leadership team came up with the idea that not only should they support “building campaigns” — which they had been doing for the better part of a half-century… it’s really some of the first giving that Sebastian had done in the ‘20s, ‘30s and the ‘40s, but it was really sort of checkbook philanthropy.  But in the early ‘60s and ‘70s, it struck them that if they could actually use their money through greater leverage… if they could say to a building campaign, “We will give you a chunk of money, so that by the time you get your lead gifts in, by the time you get all your corporate gifts in–  and you really have to turn to your individual donors, we’re going to give you an incentive package essentially to get those donors online in the hopes that over the long term, that will really increase your stability and your sustainability.”

So the Kresge Challenge Grant was born probably 25 or 30 years ago. At that time, it was seen as this audacious, almost intrusive way of getting institutions to raise money. And again, it’s hard to remember that, because now, 20 or 30 years later, this is absolutely standard practice in the fundraising business of nonprofits. But for the better part of 30 years, Kresge would come in the middle of a campaign, put money on the table and say, “If you match this, we’ll free the money, and you can get across the finish line faster and with a broader donor base.”

Denver: It will be the “capstone” to this capital campaign effort. So, you arrived at Kresge in 2006 and you bring with you, Rip, a really interesting background and a breadth of experience. You worked in the public sector as a legislative aide to Congressman Fraser; were the deputy mayor in Minneapolis. You have private sector experience working as a lawyer and doing a lot of pro bono work and, of course, nonprofit experience having led the McKnight Foundation. So given this background, give us a sense of how you imagined some different possibilities for Kresge… and then how you went about introducing them.

Rip: It’s such an interesting question. If I can peel it away just a little bit, Denver. Because when I was first approached to talk to the Kresge Foundation–when they were looking for a new executive in 2005-2006– I said to the search firm that I wasn’t particularly interested. Kresge was such a familiar brand, and as you suggested: challenge grants were all they did — they were the bricks-and-mortar folks — and in many ways, they had refined how to do this within an inch of its life. It was really almost an algorithm. You would construct a gift chart with a certain number at the top, and a certain number in the middle, and a certain number at the base, and you would sort of push the numbers through that frame.  And if it came out the other side in a way that seemed to meet the standard, then we became an ATM machine, and the money flowed.

Denver: And it was the same for every institution, no matter what the sector.

Rip: Every institution. So if you were the Harvard Medical School… or a hospice in San Diego… or an arts organization in San Diego, it didn’t make any difference.

And there was something valuable in that it really helped refine and streamline a lot of fundraising operations in a lot of places.

Denver:Same algorithm.

Rip: And there was something valuable in that it really helped refine and streamline a lot of fundraising operations in a lot of places. It created hundreds and thousands of buildings that probably would have been built anyway but might have been built a little faster and, in fact, might have really helped the capacity of these organizations cultivate individual donors. So, a long way of saying: I didn’t think I would add much value to that. As a matter of fact, in the first interview I had, one of the board members said, “Do you think we have too large or too small a staff?” And I basically suggested to them that I thought they have way too large a staff, that they really just needed a very high speed computer and a couple of administrative people — a little bit less obnoxious than that.

But to circle back, I said to the search firm, “I would be happy to talk to Kresge if they’d permit me to stretch the argument just a little bit…. Talk a little bit about what I thought private philanthropy could do, perhaps ways in which this insistence on a single tool for a single purpose in all circumstances might be limiting their alternatives…” thinking that it was just a friendly critique. I didn’t mean to be presumptuous or arrogant; I just thought they might enjoy having an alternative perspective.

So I walked in, and we just had a ball, because the trustees were intrigued by looking at the model a little bit differently. They also were deeply interested in trying to be more effective in Detroit — and we can talk more about that — but it turned into a much more extended conversation– both about what tools are available to philanthropy, what might their role be… How might that land in a place like Detroit where Kresge had very deep roots?– because the Kresge family had remained throughout its evolution in Detroit and remains there today.

Denver: And also Rip, when you arrived in Detroit in 2006 — this was now a couple of years before the Great Recession — it was a pretty “happening place,” wasn’t it?

Rip: Again, hard to recall, looking back, but Detroit had just elected what they call the “Hip-hop Mayor” Kwame Kilpatrick. He was a 31-year-old, brilliant…

Denver: Charismatic!

Rip:…charismatic, policy-smart, gregarious, former lineman for  Florida State University, All-American. He was just this incredible package. I remember walking in for the very first time to meet Mayor Kilpatrick, and he was just all confidence and energy. In some ways, he reminds me a little bit of Bill Clinton. He had a photographic memory; he was great on policy… and just moved a mile a minute.

Denver: Right. And you were the only person in the room when you were speaking to him.

Rip: Oh, absolutely! Although you were a very little person in the room when you were speaking to him– big, big presence in any number of ways. But Kilpatrick in 2006 and continuing until 2007 had really infused a sense of energy in Detroit, a sense of optimism. Here was this young, dynamic mayor with Big plans. There were cranes everywhere. We had just opened the River Walk; we had turned our attention to downtown in a more serious way. And people really believed that Detroit had finally turned the corner. The auto industry seemed to be in reasonable shape, and the prognosis was good. And then, any number of things happened in the next couple of years to demonstrate how shallow that really had been.

Denver: Yeah! It was like a harmonic convergence descended upon the city: the mayor goes to jail. And the auto industry just doesn’t go bankrupt, they are on their way to the graveyard, according to many. But in this scene, the philanthropic sector, led by Kresge, steps into a vacuum.  Really quite extraordinary when you come to think about it! How did you proceed?

Rip: Mayor Kilpatrick had his political difficulties, his legal difficulties. That would have been one thing. But he brought with him an entire administration. There are now 50 or 60 members of his administration that are  either serving time… or have served time. So it wasn’t just a collapse of a particular individual–a charismatic person– falling from grace. It was a collapse of the entire sector.

And as you suggest, the entire auto sector– because Detroit at that point was such a command and control economy– the auto supply chain was on the brink every bit as much as General Motors and Chrysler. It was a precarious situation because nobody was home!  The private sector was in the bunker, and the public sector was in jail. And so it became an interesting proposition for a place like Kresge, with disposable and discretionary resources to say, “Is there some role we can play? Not to step into the shoes of the public sector or the shoes of the private sector because, ultimately, we can’t really create jobs, and we can’t govern. But are there ways in which we can create civic scaffolding that will hold this community until we return to some sense of normalcy?”

And so we chose 8 or 9 discrete bodies of activity where we felt that philanthropic dollars could actually hold something in place, or create something new, or accelerate something that seemed to be moving in the right direction… and hope that we could hold that pattern for three or four years, or however long it took for the situation to right itself. And in retrospect, that is exactly what happened. We chose to invest in public transit– creating a light rail system.  And it’s something that the philanthropic and the private sectors don’t usually get engaged in, but we did. We launched an expansive land-use planning process, which is, again, something normally the public sector would do, but it really couldn’t. It wasn’t equipped to do that. We pumped an enormous amount of time and energy and thought into helping create a more robust arts and cultural ecology. We took a run at education reform. It was the broad spectrum of building blocks that any community needs in order to just stabilize, at least for a short while.

Denver: And the defining initiative of this effort was something called the “Grand Bargain.” What was the Grand Bargain?

Rip: As we were busy building this scaffolding over the period really of about 2008 to 2013, as much progress as we were making, it was becoming clearer and clearer that on at least two fronts, the city’s financial situation was untenable. On one hand, you had long-term debt that was just swamping the city: retiree benefits, creditor claims against bonds that we had issued, all sorts of complexity. And every year, there was a structural deficit in city hall. We just were spending at a rate that was outpacing our revenues. And so the Governor gave the city a number of chances to try to right its ship, and it just simply couldn’t. It could not balance its books; it couldn’t figure any way to make a dent in its long-term liabilities.

And so the Governor declared a state of financial emergency and appointed an Emergency Manager, a guy named Kevyn Orr who had run the bankruptcy for Chrysler– a brilliant lawyer from Jones Day, an African-American,  who was able to come into town and take a hard, long look at whether this was really a situation that could be moved forward in any reasonable way. He concluded that it could not. As hard as the city might work… and as hard as he might pull strings here and there around the edges, that we really needed to go into bankruptcy.

So in 2013, Orr recommended– and the Governor agreed– to declare a state of bankruptcy. The problem was this was a bankruptcy with no new assets, so how are you going to resolve creditor claims, or long-term pension obligations, or even the cost revenue imbalance in this government… without any new money?

The bankruptcy judge had appointed a mediator,  a guy named Judge Rosen, a federal district court judge. And Judge Rosen got a brainstorm. He thought, “Well, what are the assets that the creditors are going to go after?” It’s likely to be some lands, some parking garages, but ultimately, not much. What they are really going to go after are the holdings of the Detroit Institute of Arts, because the Detroit Institute of Arts is actually publicly-owned… or was publicly owned in Detroit. And so there was an argument to be made that all of the Van Goghs… and all of the Picasso’s in that collection, were subject to sale, liquidation, and could be used to satisfy the creditors.

Similarly, if you didn’t do that, the pensioners were looking at deep, deep cuts, and these were not gilded pensions. There were general pensioners who were probably getting a $19,000 pension, and the police and fire were probably getting a $30,000 pension. If we did nothing and brought no new money to the table, those pensions would probably be cut in half. So you’re looking at a 74-year-old retiree living on $9,000 or $10,000 a year.  It was just untenable.

So Judge Rosen — to make a very long story short — basically said, “Why don’t we create a device where we pool enough capital to essentially buy the art from the city, put it into nonprofit hands, and we’ll use the proceeds of that sale to buck up the pensioners’ stability and make sure that they don’t take a cut.” He and I were old doubles partners… tennis doubles partners 40 years earlier in Washington, D.C., and he called me for dinner.  He said, “I want to get the foundations together and ask whether you guys would be willing to step forward and underwrite that kind of fund.” And I said,  “Well, it seems like a terrific idea. How much are you talking about?” And he said “Oh, I don’t know. $500-600 million, a billion, here or there.” And I just laughed and I said, “Judge, we’d love to be helpful, but I just don’t think that’s going to happen.” But he persisted, and I said, “Well, all right. If you do float this idea, it’s important that you make it:  not about the art and not about the pensions, because foundations, I don’t think, can be seen as stepping in for the public sector in underwriting pensions.  Nor can they be seen as saving the art at the expense of people when you could put that same money to work for jobs, or technology, or whatever.” And so he came up with a construct which ended up carrying the day:  This fund, which ended up being called the “Grand Bargain,” would be used to accelerate the resolution of the bankruptcy. And the argument was that you can’t do any of the good that we had sought to do in the previous five or six years through the civic scaffolding if you were mired in bankruptcy for the next 10 years. Litigating over whether the art was held in public trust… or whether the pensions could be compromised, it would have just been a lawyer’s field day!

Denver: With the pensions, you’ve got state constitutional law against bankruptcy law… and we could still be fighting that, for all I know.

Rip: Yeah, we absolutely would be. And by putting together this fund, he was able to avoid that. So, to finally answer your question, the fund was $100 million of Kresge money, $125 million of Ford money, coupled with both national and local foundations who were able to get that number up to almost $400 million.

Denver: Fantastic.

Rip: The state of Michigan then matched that number, and we got a contribution from the Institute of Art itself. So we put together a fund that in total was almost $900 million.  And that did prove sufficient to both purchase the art, transfer it to nonprofit ownership, and protect the pensioners against deep cuts.

Denver: And that was an extraordinary collaboration on the part of foundations. You certainly don’t see that very often, but you were able pull it off. Maybe because of the dire circumstances there, it became easier to bring them all together.

Rip: Although, can I say, Denver……One of the things that I think people often conclude after looking at the Grand Bargain, is that there was this momentous, “lightning strike” moment where we had no choice but to step in and help resolve the bankruptcy. And that was all true.

My argument though is that it would not have been possible, had we not had that previous five or six years of experience creating this scaffolding — again, sorry to keep using the word — but we had put together a fund among 10 foundations to promote small business development. We  had six or seven foundations join us in our effort to create a more rational land-use policy for the city. We had 6 or 7 of the national foundations join us in helping build out the light rail system, and the list goes on and on. And so by the time the Grand Bargain proposition was put to us, we had, I think, developed some muscle around collaboration; we had developed some trust; we could easily pick up the phone and try to convince ourselves that, in many ways, this wasn’t so different from what we had done before.

What we didn’t know was the extent to which that was just the prelude to one of the most extraordinary suite of activities I think I’ve ever watched in corporate America as it relates to rebuilding of a city.

And so his influence in revivifying– giving life to the streets of downtown Detroit– has just been stunning…And he’s become, in some ways, the symbol of what corporate America can do with this double bottom line: doing well, by doing good.

Denver: That is an excellent point! You had built those relationships.  So often, I think, when you get into a crisis, you try to instantaneously create them, and you can’t.  You have to have laid the groundwork for it ahead of time.

Well, there were so many actors in this drama. You’ve mentioned a couple with Gerald Rosen and Kevyn Orr; Steven Rhodes played a key role as well. But one key player from the private sector that really caught my imagination was Dan Gilbert, CEO of Quicken Loans.  Tell us what he has done for the city of Detroit.

Rip: It’s hard on radio to convey how much of a grin is evoked by the name of Dan Gilbert because he is such a force of nature in Detroit. In 2010 or so, Gilbert–who had run Quicken Loans– sold it, and then repurchased it.  He was kind of rebuilding the business. He was located out in one of the suburbs of Detroit, and he thought, “Well, I’ve a got a bunch of young people who are largely techies, and they’d much rather be in a downtown environment.  So, why don’t I take my 1,500 employees and move them into downtown Detroit and make a statement?” I think people thought that was a perfectly fine idea, and perhaps others might do the same.  And over time, they did.

What we didn’t know was the extent to which that was just the prelude to one of the most of extraordinary suite of activities I think I’ve ever watched in corporate America as it relates to rebuilding of a city. Because not only did Gilbert move his 1,500 employees downtown, he caught the curve just when it was billowing out. His employee base grew and grew and grew, and then something happened that I think nobody expected — he began buying buildings downtown. And Detroit, for all of its struggles, has this incredible physical architecture– “great bones.”

All of these buildings that had stood vacant for years and years and years were coming just at bargain sale prices. And so Gilbert began grabbing them up and filling them up with his expanding work base. Then, he would go to some of his suppliers– whether it was a designer, or an accountant, or a PR firm and say, “It would really be terrific if you were part of our campus…”

Denver: I bet it would be.

Rip: “…so why don’t you come on down?” He actually got Chrysler, for example, to move 70 of their PR people down for the first time. And lo and behold, within three or four or five years, right about the same time as the bankruptcy was really pushing up to the surface, Gilbert now owned 70, 80, 90 buildings. He now owns over 90 buildings, some – – I don’t know how you count it — 12, 13, 14 million square feet. He has 15,000 employees downtown. And he has been able to attract Blue Cross/ Blue Shield and some of the other major employers of the region into downtown.

And so his influence in revivifying–giving life to the streets of downtown Detroit– has just been stunning. He has also infused at least the central business district with a sense of young energy because his employees tend to be very young. They’re there for four or five or six years. He views his company less as a mortgage company and more as a tech company. He’s become very involved in helping tech startups, so he has a whole series of spin-off operations that encourage young entrepreneurs to get going, and he has filled a couple of his buildings with those folks. And he’s become, in some ways, the symbol of what corporate America can do with this double bottom line: doing well, by doing good.

I said, “It just seems so basic that you could run a public transit vehicle down that street without having to condemn buildings, without having to exert eminent domain, without having to do any of that. It just seems to me that you could do that fairly readily.”

Denver: It works for him as well. You’re absolutely right, you can’t overstate his contribution. It’s extraordinary! You alluded before to this light rail system, and that was a brainchild of one Roger Penske of auto racing fame, who really believed that there was a need for a critical connective tissue to the whole greater Detroit area. But as is so often the case, other people’s great ideas have you right in the middle of them. Tell us about it.

Rip: After I came to Kresge, I was asked by one of our trustees to have lunch with Roger Penske, and I didn’t know Roger Penske. I came from Minneapolis. Minneapolis is not particularly a car culture or a racing culture, so this was just a respected business guy.  But I had been told that Roger had spearheaded Detroit’s effort to have the 2006 Super Bowl go well, and that wasn’t a foregone conclusion. There was a lot of vacancy downtown; there was a lot of concern about crime, and there was a concern that the city really would not show well. And Penske moved in, spearheaded the effort. And by all accounts it came off great. The city looked good; it was clean; it was safe, and he actually translated a bunch of those initiatives into longer-term initiatives. He really is an icon in our community.

So, I went to a lunch, not really fully comprehending this. My board member said, “Well, so Rip, you’re new. What advice would you offer Roger for what he should do next after the Super Bowl?” And I said, “Well, I just drove down Woodward Avenue, our big, honking main street that’s like eight lanes wide.” It’s wild. It’s the first paved street in the United States. It’s called the M-1, Michigan One. Anyway, I said, “It just seems so basic that you could run a public transit vehicle down that street without having to condemn buildings, without having to exert eminent domain, without having to do any of that. It just seems to me that you could do that fairly readily.” And Roger kind of looked at me, I think, not knowing what that was about and didn’t say too much.

But over the next number of months, it turns out that he took it very seriously, and he worked with a number of key folks to build out the engineering construct to see whether that might be possible.  And he concluded that it was.

And so, many months later, he called a meeting of about  a couple dozen corporate leaders and asked me to come and said, “We’ve done the engineering… seems to work. I think we actually can build light rail between the river,  a full eight-mile stretch, which could then become sort of the backbone for a larger regional system, and we think it’s going to cost only about $100 million.” And I smiled, and I thought that was terrific. And he looked to me and he said, “And we need the first $ 35 million from you.”

Denver: Not so terrific.

Rip: Well, it was one of those existential moments, because sitting in a group of people who want to be supportive, who have done a ton of work executing an idea that was yours in some ways… a little tough to say: No!… But knowing that I had a board of directors who might not be so crazy about philanthropy building a streetcar system.

Denver: It’s a bit unusual.

Rip: But I said: Yes.

Denver: Deal with the board later.

Rip: Yeah. So anyway, to make a complicated story short, Roger basically said, “Look, if you do the $ 35 million, I’ll sell the naming rights.  We’ll find the rest of the budget, and we’ll also figure out a way to lease cars because I’m good with moving stock.” So, it all came together.

But it has been, over the last decade, one of the most complicated, controversial, unorthodox projects that you can imagine. But the first cars just rolled into town.  They’re testing them out, and we hope to open the line next year.

So, I’ve tried to suggest that what has happened in Detroit over the last decade is the playing out of a series of roles on the part of philanthropy that perhaps aren’t so unusual… That there are five or six ways in which philanthropy actually can create an environment for investment that can be played in many communities across the country.

Denver: Fantastic. Let me ask you an overarching question about all of this:  How unique is this Detroit experience– where the role of the foundation has moved from philanthropy and education and advocacy, to really playing a critical role in policy? I know some people don’t think it is an appropriate role of philanthropy, but I’d be curious as to whether you think this is a one-off… or perhaps a precursor to the changing role of philanthropy and that of the foundation CEO.

Rip: I’m asked a lot to come talk around the country about Detroit, and the temptation is always just to lay out the Detroit story because it’s inherently interesting. But what I found is that when you do that, people essentially raise exactly the question you’ve asked, which is, “That’s fine, but isn’t this really so unusual that we really have to put it on the shelf? And it’s  interesting color commentary, but it doesn’t really have much to do with…

Denver: Not transferable.

…Pittsburgh or Cleveland or Charleston, West Virginia, or any number of other places.”

So, what I’ve tried to do is the second part of your question.  I’ve tried to suggest that what has happened in Detroit over the last decade is the playing out of a series of roles on the part of philanthropy that perhaps aren’t so unusual… That there are five or six ways in which philanthropy actually can create an environment for investment that can be played in many communities across the country. It doesn’t always have to be philanthropy. It can be a United Way; it could be a strong business consortium.

Denver: What are some of those roles?

Rip: Well, for example, I think because philanthropy has this enormous privilege of being able to take a longer view, it can ask the harder questions. And so, for example, when Detroit was really struggling with land use… with all of this blight, and we had 70,000 blighted parcels and vast swathes of land that looked like Dresden after World War II, it was imperative that we figure out how to convert those unproductive parcels into more productive uses. You just can’t sustain a community with that level of disinvestment and abandonment.

It was almost impossible for the public sector to have that conversation. It was really almost a political third rail because it immediately implicated, “Are you going to move me from my neighborhood? Are you going to condemn me? What are you going to do? Where will I go? Where will the jobs be?” On and on and on.

I think philanthropy, in particular Kresge, felt that we sort of had a table setting role, that we could introduce a conversation, frame it up, bring in the resources we needed to have the conversation in a meaningful way.  And that’s exactly what we did for the better part of two or three years. We had this extraordinary blending of high-level technical experts coming in and taking apart the land-use possibilities, and combined that with one of the most robust citizen-engagement processes any city has ever seen. Then… this interesting creative tension zone in the middle where technical experts meet community wisdom, and that was interesting. But at the end of the day, we were able to formulate something called the “Detroit Future City” Plan, which is a sort of investment framework for the city. I think that’s a good example of trying to find places where the community conversation… or the community temperature… generally makes it very difficult for either the private or the public sector to enter.

…there are lots of ways of thinking about how philanthropy can be a catalyst, serve as glue, promote innovation, take risks… a whole suite of things that vary from place to place, but that are remarkably constant in  their broad arc of aspiration.

Denver: And I know now that you’re the Chair of “Living Cities,” which is just a wonderful organization. You are really able to take some of these learned lessons and try to transport them to other cities around the country.

Rip: Yes. Kresge just convened in Los Angeles something called “Drawing on Detroit,” where we try to gather 16 to 18 communities from across the country who were interested in one part or another of what had happened in Detroit. Some people were interested in how we had promoted small business development. Others were interested in land use. Others were interested in arts and culture. Others were interested in innovative financing mechanisms to promote mixed-use housing and commercial development. And what we essentially did was then flip the script. We said, “Which of these ideas is of interest to you, and what are the resources you need in order to execute on them?”

We’ve done a little mini-grant program back into these 17 communities, and they’ve all come up with really interesting ways of customizing the work to their purpose. You can’t just take the Detroit experience and plop it down in the middle of Columbus, Ohio. But there are ways in which the broad, animating principles, I think, have applications. So it ties together both of your questions. I think on one hand, there are lots of ways of thinking about how philanthropy can be a catalyst, serve as glue, promote innovation, take risks…a whole suite of things that vary from place to place, but that are remarkably constant in their broad arc of aspiration.

Denver: And another recent initiative of yours is something called “Reimagine the Civic Commons.” And I know you’re doing this in partnership with a number of other foundations in four cities: Chicago and Detroit, as well as Akron and Memphis. What does this reimagination look like?

Rip: The premise is that we have in almost every major city’s midst a set of assets that are underutilized, and that are often not fully accessible to low-income populations for any number of reasons. It may be the geography; it may be cost; it may be patterns of use; it may be any number of things. But when you stitch together libraries and swimming pools and parks and other democratic spaces, the premise is that we ought to be able to figure out a way first, to stitch those together more… that there ought to be better connective tissue among them. Just moving around, getting from one place to another ought to be interesting. You can almost create sub-districts.

And second, we ought to be able to figure out how to program more effectively to make these places more inviting, so that people will feel that, in fact, these are genuinely democratic institutions of municipal government. So, we’re going to see what this looks like. And the good news is that in Philadelphia, they have taken this concept way beyond where we probably could have taken it.  The mayor has just gotten the voters to agree to a big new bond issue that will impart — actually, it’s the tax on sweet drinks — to essentially underwrite the cost of renovation and reprogramming a lot of these civic assets like libraries, like public parks.

…there are endless ways in which arts and culture can help animate space, can help give community a different sense of voice…

If you can increasingly push that kind of creativity into the public decision-making process, you get better decisions. That there is a quality of innovation… and entrepreneurship… and out-of-the-box thinking that helps you deconstruct problems and put them back in a different way.

Denver: Let me move on to another aspect of this. You have said, Rip, that one cannot understand what has happened in Detroit without understanding how critical the arts and culture communities were to the reimaginative use of  blighted and abandoned properties. Tell us about that, and give us a couple of examples, if you could.

Rip: It’s so tempting, I think, Denver to think about arts as something that exists on the margins. We’ll get to the art museum when we have time. We’ll endure the idiosyncrasies of these performing artists on the street. The premise in Detroit has been, and I think it’s increasingly a premise shared by other communities, is that arts can actually be central to helping the revitalization and the reimagination of disinvested places. We’ve used the term called “creative placemaking,” which is probably too fancy, but essentially is using acts of creativity to a reimagined place.

And when you think about the reclamation of an abandoned house and turning it into a performance space… when you think about merging urban gardening with youth employment… with youth mural projects, there are endless ways in which arts and culture can help animate space, can help give community a different sense of voice. And fundamentally, I would argue, that if you can increasingly push that kind of creativity into the public decision-making process, you get better decisions. That there is a quality of innovation… and entrepreneurship… and out-of-the-box thinking that helps you deconstruct problems and put them back in a different way.

And in a place like Detroit, where we have gotten really stale in how we do our problem solving — we’ve been doing it the same way for a very long time, it hasn’t worked very well — the opportunity for arts to get into the mix and actually push and prod and cause a different chemistry to occur, I think, is a really powerful thing. And there are just endless examples in a place like Detroit, or actually in virtually any community that you look at– whether it is Detroit, or even a strong market city– whether in Boston or New York, where the arts have redefined what it means to engage with a place.

Denver: I think a great example of that in Detroit is The Flower House. Tell us about that.

Rip: The Flower House was an idea hatched by a couple of artists who thought, “Why don’t we take a house that is going to be torn down anyway, and contact the 50 greatest visual artists in the world that we can think of who are capable of working with flowers. Give them a sort of canvas to work on.” And so they brought in… I think the number was 30 different artists from all across the world.  Each was given a hallway… or a room… or a roof garden… or something to program. And it was just a glorious sort of reimagination of this very blighted, rundown place. It stood up for a couple of weeks while the flowers stayed fresh. And they gathered… thousands and thousands of people who walked through–folks mostly from the neighborhood.

Denver: It’s a wild place. I’ve seen it. It is just remarkable!

Rip: It’s remarkable. And when the flowers had led their useful life, they didn’t try to keep it going; they let it fall apart. They knew the house was going to be demolished anyway, and they took the vacant lot, and they’ve re-purposed it to a flower garden. And so it’s now an ongoing garden that sells flowers to local markets.

Denver: I’ve read a lot about the Detroit experience. I must say I always thought that arts were nice to have.  But in looking at what’s happened in Detroit, I really have a new appreciation as to how essential they are. You really do have to have them. They really do become part of the fabric of the community– just like housing and security and all those other things that we need.  And I know that you and Kresge deeply believe that.

Rip: We certainly do. I think the only gloss I would add to that is that they are also small businesses, remember? This is an opportunity for people to come in and get a foothold. What we’ve seen is that a lot of the artists who have come to Detroit don’t make a ton of money, but they do make a living. They’re able to, one way or another, figure out how to translate art into economic activity. Detroit has a great avenue called the “Avenue of Fashion.” It used to be where the African-American middle class got all of its clothes and materials for any number of things. And it, like so many places in Detroit, has fallen into disuse and disinvestment over the last 20, 30 years.

One of the things that occurred early on in my tenure was the creation of a program called “REVOLVE” in which we used  pop-up arts to reinvigorate the avenue– just to demonstrate that you could do creative things with these old, abandoned storefronts. It started just with a couple of small pop-ups and slowly, slowly expanded into a much more elaborate program that ended up becoming  “Motor City Match,” which is a major initiative of Mayor Duggan’s administration to locate small businesses and provide them with capital and space and technical assistance to repopulate this avenue. And now Livernois Avenue, the Avenue of Fashion, is giving some signs of returning to what it once was– which is this hub of community activity and pride and economic energy.

…sometimes, those things that we can’t measure are not always the most important things to measure, and vice versa. I think some of the extraordinarily valuable things just are very difficult.

…I think there is a softer, more qualitative quality to what the arts lend to community– which is the sense of community vibrancy, the sense of community engagement, the sense of community identity.  And those are really tough things to quantify.

Denver: That’s spectacular. How are the arts faring, Rip, in this  data-driven culture we have in philanthropy now? Evidence that the investment in arts and culture is getting the ROI that funders and others want…. Is it hard to measure, and is there an expectation that it will be measured?

Rip: It is hard to measure. I think sometimes those things that we can’t measure are not always the most important things to measure, and vice versa. I think some of the extraordinarily valuable things just are very difficult. I think at some level you do want to try to track whether arts organizations, arts activities  can be sustained. After putting a lot of subsidy into a program, does it really spit out the kind of returns that you want? I think we just can’t avoid that kind of analysis.

But at the end of the day, I think there is a softer, more qualitative quality to what the arts lend to community– which is the sense of community vibrancy, the sense of community engagement, the sense of community identity.   And those are really tough things to quantify. It doesn’t mean you can’t measure them; I think you just measure them somewhat differently. I think you tell stories about them.

Denver: A narrative.

Rip: Yeah. I think you get people together who can share experiences, I think you have folks try to inspire young people with example. I think these can be proof points, which is not exactly the same as quantitative measurement.

Denver: Let me get back to your organization for a minute, if I may. How difficult was it for you to change the corporate culture at Kresge? For all I know, Rip, you still may be changing it. It was a revered institution; it had a very clear brand, as we discussed.  And it’s never easy to get board members and staff, particularly those who’ve been around for quite a while, to go along with transformational change. How difficult was it, and how did you go about doing it?

Rip: I would be less than candid if I didn’t admit that it was very difficult. The Kresge that I walked into in 2006 had a very clear brand.

Denver: It sure did.

Rip: As a matter of fact, the first annual report I did when we had  hard copy annual reports was a brick! I just thought everyone would know that came from Kresge, because that is what we did. And when I came, it wasn’t my intention to necessarily deconstruct what Kresge did. I thought we could make it more responsive. I thought we could get into the campaigns a little bit earlier. I thought we might diversify the kinds of organizations we supported. Because one of the things that happened with the Kresge Challenge Grant is that larger organizations became increasingly sophisticated about how to game our system, how to fill out the gift charts, how to make sure that their campaign would work– often staffed by a large development staff. Absolutely nothing wrong with that, but it meant that a lot of the smaller organizations just couldn’t compete. They just couldn’t assemble that kind of sophistication.

So, my initial assumption was that we would tinker around the edge and try to make it a little bit more responsive. But I actually asked the board if I might take six months… even before I began… to go around the country and canvass folks about how they believed the field of fundraising, the field of philanthropy, had changed, and where Kresge’s place was in all of it. And what became really clear was that the field of fundraising had really caught up with Kresge. All of a sudden, Kresge’s $1 million dollar gift to build a new lecture hall was being dwarfed by a $ 25 million gift from an individual, or  $5-million dollar gifts.   And we were just a box to check off. We were no longer the driving, precipitating factor in the success of a building campaign. So, that was one piece of information.

The second was…and you asked earlier about this… I think an attitude that philanthropy could play a more proactive role in taking on some of the defining issues of our time. When you think about building campaigns, buildings are important; it can be life and death. If you’re trying to revitalize an icon like the Statue of Liberty, there is nothing more important. But so often — you might be just simply adding to an arms race of a new dormitory… or a new wing of a hospital that may or may not be directly responsive to what a community’s highest and most pressing needs are.

I encouraged our trustees and our staff to think more broadly and say,”If we have always funded in the arts, we funded in education, we funded in healthcare, we funded in human services: is our money going to the highest and best niche where we can make a difference? Or, could we at least step back and consider the possibility that there are other uses for our money?” And that took a very long time. But the response back from both the board and from our staff was:  “Probably, yes! We can increasingly seed the ground to other individual donors and institutional donors to do the building work, but perhaps the programming for the buildings… or perhaps the programming in community could become elevated.”  And  I adopted a simple concept:  a depreciation of the assets. Each year, we would take a look at our capital challenge to understand how much of that continued to have value, and how much could we strip away and replace with something that looked a little bit different and performed a little bit differently. And by, I would say, Year 6 or so, we had completely flipped the proportion. When I came, we were doing 99% capital challenge grants; six years later, we were perhaps doing 1% capital challenge grants.

Denver: Listening to you and to some of your counterparts that have been on the show, you all make a really powerful case about how these disciplines must be inter-braided to achieve system change and optimal impact– things like artists getting involved in creative problem solving… in working with the engineers who were putting the new transit system in. But when I look at foundations, they still list their five to seven program areas. So I want to ask you: Do you see this changing? … Where the way you describe your programs, the way you describe what you do… is more reflective of how you’re helping these communities in a holistic way?

Rip: Well, your previous question was about culture change. In many ways, this is a continuation of that question. You’re absolutely right. If version 1.0 of Kresge was our capital challenge grants, version 2.0 was the development of these discrete bodies of focus — human services, education — where we were trying to aim at a slightly higher objective. I would argue that version 3.0 is exactly what you’ve suggested— which is to understand the interconnection among those systems. But boy, oh boy, is that hard!  Not only do you have the received tradition of 50 years of philanthropies organizing its stuff this way, but it’s just innately difficult for subject matter experts to cast 18 degrees to their right to figure out how a health issue is defined slightly differently by an environmental issue.

One of the ways we’ve tried to break into that mindset is by focusing on place. In our work in Detroit, it’s actually a very straightforward proposition. You can’t think about transit without thinking about education, without thinking about the location of your anchor institution. You can’t think about those without thinking about your workforce. All of the systems are just completely bumping into each other and ricocheting around. So, what we’ve said is, “Why don’t we take a number of the places in which we have more than one grant type — so, Memphis, New Orleans, Oakland — and understand how our health grant, for example, could or should somehow be connected to our environment grant, or to our community development grant, or to our human services grant.” And so, we will follow one of our teams into a place but then ask all of the teams to at least ask the question of whether there isn’t some relationship of one to the other.

And this became most clear to me when I took a trip three or four years ago down to New Orleans. We gathered all of our grantees from New Orleans around the table. There was an environmental grantee and a health grantee and a human services grantee and education grantee. None of them had ever met each other; none of them had ever spoken with each other, and certainly our program staff hadn’t met the acquaintances of the others. I came back and I said, ” Why don’t we essentially use New Orleans, as well as a couple of other places, and see what it would look like to to have these things be mutually informing.” Again, it may be that we just invest side by side– that there’s no true inter-braiding– but it’s also possible that increasingly, we might pursue investments that are jointly developed.

And that’s what we found, that our environment team is increasingly talking with a health team about environmental health. I mean, you can’t talk about the threats of climate change and rising water in New Orleans without thinking about it as a health proposition …or as a workforce training proposition.  I think it’s hard to do in the abstract. I think our colleagues who have national programs find it very difficult to braid these programs together. My way of trying to bust that up just a little bit is to try to do it in a place-based way, and then maybe you can build it out from there.

…when you talk to a young entrepreneur, they have chosen to come to Detroit rather than New York because they actually think they can make a difference. It’s a community of a scale that is not unmanageable. It’s a community that is beginning to develop new musculature around taking risk and starting something new, and forming a different sense of community. 

Denver: Well, it’s always hard to do these things when people are involved, but it sounds like you’re on your way. Let me close with this, and perhaps this will neatly sum up much of what we discussed this evening. For someone out there listening who decides to visit Detroit today, how different would it be from them taking that very same trip five years ago?

Rip: It is like walking to a different planet. When I came 10 years ago, nobody was on the street after six o’clock in downtown or in midtown areas. Our river front was essentially just beginning to come back to life as the front porch of the community. It was hard coming from a place, as I did, in Minneapolis where there was a lot of street life, a lot of vitality. But, more than anything, I think what you would see now five years later… in addition to street life and kids and grownups on the street doing all sorts of activities…is that intangible sense of optimism. I think 5 and 10 years ago, people really weren’t sure that the narrative was wrong… that Detroit was such a difficult place struggling with such deep, profound racial division, issues of illiteracy, joblessness, youth disengagement — I mean the list just went on. It was really, in many ways, the poster child for urban failure.

I think now there is a very different sense of the possible — and I’m sorry to be hokey or sound like the Chamber — but when you talk to a young entrepreneur, they have chosen to come to Detroit rather than New York because they actually think they can make a difference. It’s a community of a scale that is not unmanageable. It’s a community that is beginning to develop new musculature around taking risk and starting something new, and forming a different sense of community.  

And yet it is a community with this extraordinary, rich heritage. When you think about the cultural power of a place like Detroit — when I go abroad, and I mention Detroit, everybody knows Detroit. And it’s not just because of the autos. It could be Motown. It could be the black middle class moving in in the mid-20th century. There are just so many qualities of this place that I think make it unlike a lot of American cities. It’s unlike a lot of American cities, but it’s also the emblematic American city.

I think what I would say that the possibility of returning this emblematic city to a position of greatness and sustainability and health and vitality is no longer seen as an impossibility. It’s seen as not only a possibility, it’s seen as an imperative!  And I think that’s an energizing place for a community to be.

Denver: And it owes a lot to the Kresge Foundation for all of that. For people to learn more about Kresge, and what you’re doing in cities, and your other programs, your website would be?

Rip: Kresge.org

Denver: Well, Rip Rapson, the President and CEO of the Kresge Foundation, thanks so much for a wonderful conversation. I was just thinking the other day, in this age where people are glamorizing failure: “Don’t be afraid to fail! I won’t invest in an entrepreneur unless they fail two or three times.”  They wear failure like a badge of honor in Silicon Valley. I think what you said about it is still the most refreshing and sensible thing that I’ve heard yet, which is:  “When you’re going to fail, try not to.”  It was a real pleasure to have you on the program, Rip.

Rip: Pleasure is all mine. Thank you!

        


The Business of Giving can be heard every Sunday evening between 6 and 7 PM Eastern on AM 970 The Answer in New York and on I Heart Radio. You can follow us at bizofgive on twitter and at facebook.com/businessofgiving.

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