'Free Markets and All That Stuff'
"Money and girls. Ideas came in third."
That's how Roger Hertog describes his priorities 45 years ago, when he was a young man going to City College at night and trying to break into the world of finance by day. Now retired from his role as vice chairman of Alliance Bernstein and married to his wife, Susan, for 42 years, Mr. Hertog is turning more of his attention to his third interest. Over the past 10 years, he has given away $100 million of his own money to support the ideas he believes in.
"Free markets, free minds, all that stuff," Mr. Hertog, a trim man with gray hair combed straight back, tells me on a recent afternoon in his vast corner office at Alliance's building in midtown. "All that stuff" has included supporting the Manhattan Institute, the American Enterprise Institute, Commentary magazine, the New York Historical Society (he's currently chairman), the New York Public Library (he funded a new branch in the Bronx) and scholarships for inner-city kids. He is also part-owner of the New York Sun and he used to have a stake in the New Republic.
He has given away another $50 million that his friend and mentor, the late Zalman Bernstein (founder of Sanford Bernstein, which merged with Alliance Capital), left for Jewish causes when he died in 1999. In the next 10 years, Mr. Hertog – who won the National Endowment for the Humanities medal for philanthropy last fall – expects that he will have to double both his own giving and that of Mr. Bernstein's fortune in order to spend these two pools of money before he dies.
Via this interview, he is announcing three gifts: $4.5 million to Princeton, $5.2 million to New York University's law school, and $1.5 million to Yeshiva University. At the first two schools, he is paying for the development of undergraduate courses that incorporate Jewish thought into their syllabi. And at the last, he is funding an honors program to introduce Orthodox Jewish students to the great ideas of the West.
On the secular end of things, he has already funded the Alexander Hamilton Center for Political Economy at NYU to the tune of over $2 million, and he is now engaged in figuring out how to replicate Yale's "Grand Strategy" course – a yearlong seminar on military strategy taught by Charles Hill, John Lewis Gaddis and Paul Kennedy – on a dozen or so other campuses across the country.
Though Mr. Hertog's ideological aims may seem to contradict those of the faculty and administrations at the country's major universities, he says it is important not to have "an adversarial relationship" with them: "You have to really find partners on campuses that are tenured and that have the ability, if you provide some venture capital, to write new courses, bring in some visiting faculty and create some fellowships."
Mr. Hertog has learned some lessons from other philanthropists' forays into higher education: Funding will be done on a year-to-year basis – i.e., no endowed chairs. There will be specific benchmarks for success, and if those aren't met, funding will be cut off. The focus will be on undergraduate courses rather than small graduate centers so that the greatest number of students will feel the impact. Mr. Hertog tells me that students will be surveyed about the courses with questions like, "How has this influenced what you would want to do in your career? Intellectually, how has your point of view changed about free trade or foreign aid?"
Mr. Hertog plans to be personally involved in figuring out whether a particular gift has yielded successful results. Right now, there are only four people (including secretaries) involved in his operation and there will be fewer than 10 when he's done hiring. He writes all of the checks himself out of a personal Vanguard account.
Not all of Mr. Hertog's philanthropic projects have worked out exactly as he planned. He had hoped, with his $5 million gift toward the creation of a new library branch in the Bronx, to be able to include after-school programs for neighborhood kids, offering them some of the instruction they weren't getting in class. Looking back, he says it was an "unrealistic" goal because of all the "politics" involved in public education.
But true to form, Mr. Hertog tried other approaches. He became involved in the New York Historical Society, which helps over 4,000 public school history teachers develop better curricula for their classrooms.
During the '90s, he and a few other benefactors also offered scholarships – 1,000 of them a year – to disadvantaged kids in New York, who could use the money to attend private schools. In the first year, 25,000 students applied. Though other philanthropists have continued this kind of program, Mr. Hertog has, you might say, taken out the middle man: He now gives generously to the city's Catholic schools. So much so that he received an invitation to the pope's Mass last month at Yankee Stadium.
On the surface, Mr. Hertog doesn't have much in common with the kids stuck in New York's worst public schools. But he certainly used to. Having grown up in a one-bedroom apartment in the Bronx with a single mother, Mr. Hertog tells me, "The only place you could actually go and think, not that I pride myself on such great thinking, but you'd go to the library." The first book he remembers reading there was Benjamin Franklin's autobiography, which he says sparked his interest in American history.
His parents fled Germany in 1938 and Mr. Hertog was born three years later. "You're 8, 9, 10 years old, and you start asking yourself questions. You know, I have no relatives. I have basically one cousin and one aunt. All the others were killed in the Holocaust. And so you start to ask yourself troublesome questions. Why me? What happened to them?" From that point, Mr. Hertog says, he couldn't help but conclude that "America is a really unique place. You begin to take enormous pride in the ideas that have propelled the exceptional American story."
Inspiring young people to write the next chapter in that American story is what has prompted Mr. Hertog to begin giving to the university. The courses he is looking to sponsor "are designed for great leaders, for journalists, for people who are going to go into government, for teachers." Mr. Hertog refers to this as "retail philanthropy" – that is, you know the customers. "The university is the place that the smartest youngest men and women end up going to. It is the last time they all congregate in a relatively small area in relatively small classes, and they are, in effect, being paid to think, to learn. Now if you could get on the playing field to open up those young minds to all kinds of ideas, that is a potentially very high rate of return."
Then there is Mr. Hertog's "wholesale" philanthropy, as he refers to his part ownership of the New York Sun, a daily paper that started six years ago and now prints 100,000 copies a day. While the Sun loses several million dollars a year, Mr. Hertog says he has gotten a good return on his investment there as well. "The Sun is the first new newspaper in New York in 30 years. It's trying to provide an alternative view to the dominant competitors in the city. And I think it's done a pretty good job."
Mr. Hertog makes no distinction between the nonprofit and for-profit ventures that he funds, as long as the projects further the ideas he cares about. Tax deductions also don't seem to interest him much, and he rejects the perennial liberal complaint that a reduction in the capital gains tax will result in less philanthropic giving. The argument is that people use the charitable tax deductions to offset their tax bill, and if the capital gains rate is lower then people wouldn't need to.
It's "insulting," Mr. Hertog notes, "the idea that they couldn't possibly give money because they really cared, that they only care about money." He acknowledges that this is true for some people "and there's nothing wrong with it." But Mr. Hertog has studied the evidence and says, "We've just had a massive test of this idea. The capital gains rate has fallen tremendously. Philanthropy has risen."
Interestingly, Mr. Hertog has not taken advantage of one of the biggest tax loopholes that folks in his income bracket have available to them: the family foundation. He thinks it is "unfair" that he would be able to put a dollar into the foundation and "only have to spend a nickel" to get the nonprofit tax status. That foundations need only give out 5% of their endowment to retain that status bothers Mr. Hertog for another reason as well. When these institutions spend so little they exist in perpetuity.
He believes that foundations should cease to exist once the people who knew the donor directly are no longer around, so as to ensure that they are acting consistently with their donor's intent. When I ask him whether he is sure that his friend Mr. Bernstein would be happy with the way his money is being spent, Mr. Hertog laughs. "Well, I only knew him for 40 years." Mr. Hertog says he has no interest in having his own family oversee his fortune "for the next four generations."
Mr. Hertog seems like a happy man. But he does have a couple of complaints. It was easier to be a philanthropist in the 19th century, he laments. "Government wasn't a factor in society." Mr. Hertog explains that the landscape of institutions serving people back then was much more barren. "There were no libraries. So when Andrew Carnegie came up with this idea, it was a pretty terrific way to figure out how to put to use a huge amount of money." Carnegie built more than 1,500 libraries in the U.S. alone. "Think of Rockefeller, who funded the University of Chicago and Rockefeller University," Mr. Hertog adds. "I mean there was no such thing as medical research institution at the time."
But it is not merely the problem of living in a big-government era that makes Mr. Hertog's goal difficult. "It is actually harder to spend lots of money in the world of ideas than it is in funding science, or stem cell research," he tells me. "Or think of aid to Africa; there's a lot of opportunity to spend huge amounts of money," he notes. A skeptic might ask Mr. Hertog why he is not devoting his fortune to such obviously life-saving ventures as those. For his answer, Mr. Hertog returns to his study of history: "The thing that struck me early on was there was nothing more powerful than ideas, both for good and for ill."