John Tyler on The Kauffman Foundation’s Philanthropy in Education and Entrepreneurship
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Here are some highlights of my interview with John Tyler:
Ewing Kauffman believed in not just the power of education for the individual, but also for the family and the community.
Philanthropists are thinking differently about what it is they’re wanting to accomplish, but also how to go about accomplishing it.
We wanted to understand the entrepreneurial experience and the policies that might facilitate removing barriers to entrepreneurial activity.
It became real that I was looking at a 180-degree career change.
When considering a move in-house, make sure the culture of the company aligns with your own values, your own perspectives on your role and your responsibilities to the law as a lawyer.
To me, my faith is an important part of who I am and how I approach my interactions with people, with strategic thinking, and problem-solving.
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Greetings friends, this is Chris Batz, your host of the Law Firm Leadership podcast. In today’s episode, I spoke with a former big law litigator turned general counsel of a charitable foundation. You don’t want to miss this.
Just a reminder, the PDF transcript of this audio is available to download. Go to LionGroupRecruiting.com/podcast.
As many of you know, we interview corporate defense, law firm leaders, partners, general counsel, and legal consultants. You are listening to episode thirty-three of the Law Firm Leadership podcast.
Chris: Welcome to the Law Firm Leadership podcast. I’m your host, Chris Batz with The Lion Group. Today I have the pleasure of speaking with John Tyler, General Counsel, Secretary and Chief Ethics Officer of Ewing Marion Kauffman Foundation, also known as simply The Kauffman Foundation. John applies theory and practicals of his role to the Foundation’s programs, administration, and investments.
As a scholar, author and speaker, John is passionate about philanthropy, governance, social impact and investing and currently teaches two courses at Columbia University in New York City. Prior to the Foundation, John was a litigation partner at Lathrop & Gage and was in practice for ten years. He received his law degree and undergrad degree from the University of Notre Dame. Welcome, John, to the Law Firm Leadership podcast. It’s great to have you on the show.
John: Thank you, Chris. I appreciate the chance to be here and I look forward to our conversation.
The Charitable Legacy of Ewing Kauffman
Chris: John, can you provide a brief overview of the Kauffman Foundation?
John: The Kauffman Foundation was founded by Ewing Kauffman. Ewing Kauffman was an entrepreneur who started Marion Laboratories here in Kansas City in 1950. He grew that company to the point that in 1989 when it was sold to Merrell Dow, it had a billion dollars in sales. Mr. Kauffman generated wealth for himself and his family, but also for the community and many of the associates at Marion Laboratories. Ewing Kauffman was responsible for bringing the Kansas City Royals to Kansas City as an expansion franchise.
When Mr. Kauffman passed in 1993, he provided the foundation with seed funding of about 700 million dollars. We’re currently about 2.5 billion dollars. We’ve given away over 2 billion dollars for charitable purposes over the last 20 years or so. One of the other things he left us are our core mission areas. We didn’t just happen upon education and entrepreneurship in Kansas City. They were the areas in which Mr. Kauffman wanted us to make a difference.
Within education, our focus is very much on the urban core of the Kansas City area. Mr. Kauffman had one particular project choice that provided college scholarships to a group of ninth graders in some of the public high schools. He believed in not just the power of education for the individual, but also for the family and the community. He saw the opportunity in urban core to make a difference for people’s education.
When Mr. Kauffman died, he had recognized himself as an entrepreneur. He was certainly one of the first, if not the first successful entrepreneur to turn his philanthropy towards entrepreneurship. The Kansas City side is because he grew up in Kansas City, he started Marion Laboratories in Kansas City, he brought the Kansas City Royals to Kansas City and he thought it was important for his foundation to be a good citizen of Kansas City.
Chris: John, would you share with my listeners one of the successes that I’m familiar with, the Kauffman School?
Education in Urban Community
John: The Kauffman School is a charter school that the foundation started here in Kansas City. It’s fifth grade through twelfth grade. This past May, we celebrated our very first graduating class. Some of what we did as Mr. Kauffman asked us to do – evaluate programs, do research, be prepared as we start new things, but also take risks because we can’t deal with all of the unknowns, much less know them. One of the things we did was start the Kauffman Scholars program that brought seventh graders into the program with an eye toward college scholarships.
We kept hearing, “If only we had more time with our scholars, with the students in the program.” When you want to get more time with students, the next step is to start a school. That’s what our board had decided to do several years ago with management’s recommendation and all the research that went into it. Charter schools are public schools, so we do get public money into the charter school, but the Foundation continues to subsidize it to substantial degrees as well.
With the charter school, you cannot have selective admission. You can prefer certain zip codes, but you can’t be selecting the best and the brightest. The zip codes that our school targets are the six zip codes in the Kansas City area that have the lowest literacy, highest murder, crime, and unemployment. It truly is urban core and a place that makes for a very difficult journey if you are a student in those zip codes. Mr. Kauffman wanted us to identify, accept, and pursue challenges.
With only one graduating class from our charter school, I think our journey is only begun as we look to have a long-term positive effect on many more classes of students. We don’t know and won’t know for a while whether this has worked or not, but so far the indications are pretty good. Of the hundred or so fifth grade students who entered eight years ago, 39 of them have stuck with us and graduated from high school. All 39 of those students have been accepted into colleges. Now, college isn’t for everybody, but making sure that college is an option for everybody is a big core part of what the school tries to achieve. The most recent information that I’ve got is 37 of that class will be going to college.
Chris: I love how Ewing had this vision and knew that it started with making a lasting impact in these communities in Kansas City.
John: What Mr. Kauffman knew was the enormous talent and the enormous potential that these folks have. There are different barriers that interfere with their ability to maximize that talent. When that talent gets maximized, those individuals benefit and the entire community benefits.
1 Million Cups
Chris: Let’s pivot to entrepreneurship. What has Kauffman Foundation done to spur that creative gene inside of everybody?
John: Our entrepreneurship focus, per what Mr. Kauffman asked us to steward, is much more national in focus, in our grant making, the programs that we operate and the activities that we undertake. Now that doesn’t mean we don’t do entrepreneurship in Kansas City. We’re very involved with the entrepreneurial community in Kansas City and very supportive of it. In fact, a lot of the things that we do at a national level were started here in Kansas City.
An example of that would be our 1 Million Cups program. Our 1 Million Cups programs started in Kansas City on Wednesday mornings with hosting two entrepreneurs in our facility. We’d hear about their story, their hopes, their strategies and plans for achieving those aspirations. This was always designed as a way for the entrepreneurship community in Kansas City to come together, to share knowledge and experiences, and to provide feedback. We get the chance to be part of those interactions and to keep our fingers on the pulse of the entrepreneurial community. That started six or seven years ago. Now, through really no strategic effort on our part to promote it or encourage its growth, it’s now in 180 communities around the United States.
180 communities heard about this program, contacted us about how to do it and we’ve provided the framework for how to do it. It’s very much grass roots where entrepreneurs in the community take ownership and leadership. We do meet at least once a year with the community organizers so they can more formally learn from each other about how to do this well.
Chris: I actually remember attending some of those events myself. It was always so fun to network with business owners. There were investors that would show up.
John: Yeah, one of the challenges is the fact that the Foundation is a 501(c)(3) charity. That means our activities have to be charitable exclusively in furtherance of charitable purposes. But entrepreneurs generally are not charities so we have to balance that with Kauffman’s charge to us for entrepreneurship. My colleagues and I have to make sure that what we are doing is consistent with Mr. Kauffman’s donor intent and the legal parameters that we must operate in.
Even with something like 1 Million Cups, it’s not charitable to have a foundation supporting entrepreneurs making pitches for investor money. Now, it can be in certain circumstances, but not as a general proposition. We’ve got a rule for entrepreneurs who are presenting – it’s educational, it’s learning, but it can’t be pitching. Even though there might be some investors in the space; there’s not deal-making that happens or can happen at our events. That’s something that we work with the organizers around the United States to make sure that what they’re doing is charitable. That’s a persistent threat to entrepreneurship work that in some ways is taken for granted in the Kansas City civic work and the education work because education actually is more fundamentally and inherently charitable, whereas entrepreneurship is actually not.
Chris: From your perspective, what’s changing in the foundations/philanthropy business?
John: There are a number of things that are going on in the private foundation space and philanthropy as a larger unit of which foundations are a part of. In the last few years, we’ve seen the more formal emergence of some new structures around foundations and formalized philanthropy.
Things like the Chan Zuckerberg Initiative, which is a limited liability company that Mark Zuckerberg and his wife, Priscilla Chan use for their philanthropy. It has charitable activities, charitable dollars and the foundation side of what they do is constrained by the charitable laws. Because they’ve got a whole LLC side of what they do, they don’t get tax benefits for what they do out of the LLC, whereas everything that goes into a foundation gets some tax exemption and tax deductions.
Pierre Omidyar, the founder of eBay, had the Omidyar Network going back maybe 20 years ago now. He has been thinking differently about structuring and formalizing the structure of his philanthropy. John and Laura Arnold out of Houston have just restructured their philanthropy similarly with some limited liability company structure to complement a private foundation structure.
Philanthropists are thinking differently about what it is they’re wanting to accomplish, but also how to go about accomplishing it. Connected to what it is they want to accomplish and why some of these alternative structures become more useful is the ability to engage in policy discussions and policy change. Private foundations and charities are prohibited by federal law from engaging in political campaign activity, but a private LLC is not. A private LLC can actually do some things that don’t have the charitable regiment that they have to comply with or the policy regiment. Private foundations are prohibited under most circumstances from lobbying. Without going into the nuances of it, foundations can advocate, educate, but they can’t cross the line into lobbying. A limited liability company can actually lobby.
These LLC structures allow more flexibility for policy engagement, which not everybody is supportive of. In our society today, there is some skepticism about concentrations of wealth. There are some folks who view foundations – and they’re particularly skeptical of the LLC structure foundations – as concentrated wealth that philanthropists have an outsized influence on.
Better Understanding the Entrepreneur
Chris: For Kauffman Foundation, what needs to happen on a policy basis, both state and federal laws, to meet some of those mutual goals that the Foundation has?
John: We do quite a bit of work in the entrepreneurship policy space, less so in the education policy space. Our education mission is focused on high-quality education for all students in the Kansas City metro area. We support public schools and charter schools providing that education, less so private schools. The key is the student and the quality of educational opportunities for students. That has required less involvement on the policy side of things, although we have been involved in smaller ways.
On the entrepreneurship side, a lot of what we’ve done in our entrepreneurship activity has involved engaging policy makers and engaging the ecosystem, which includes policy at federal, state and local levels. We wanted to understand the entrepreneurial experience and the policies that might facilitate removing barriers to entrepreneurial activity. Entrepreneurship is never going to be easy, but there are ways that it can be made easier and more efficient for entrepreneurs to go about their business.
We’ve supported and conducted a lot of research. Prior to involvement, there was little to no research around entrepreneurship. We were an impetus for a lot of that happening. If we can better understand the entrepreneur, the entrepreneurial experience, we might be able to better shape what entrepreneurs do.
Some of our research shows entrepreneurship – companies less than five years old are the source of nearly all net new job creations. Entrepreneurs create jobs. Entrepreneurs contribute to the economy. Entrepreneurs contribute to higher quality standards of living based on the innovations that they undertake, the services they provide, and the new products they generate and bring to market. Now, it’s not all entrepreneurs. The big companies that we’ve got today were at one point entrepreneurial ventures. The economy needs the cycle of entrepreneurs bringing in disruptive ideas and disruptive companies into the marketplace and into creativity. Some of that is facilitated by policy change.
“A 180-Degree Career Change”
Chris: John, what was it like being a litigator and partner of a large law firm that moved into the general counsel role of a foundation?
John: It was and in many ways continues to be a fascinating evolution. It was a very different transition both from the perspective of the nature of the work that I was doing as a litigator. Part of the reason I went to Lathrop & Gage law firm was because I saw its lawyers being involved in the community and its support for lawyers doing such. As a lawyer for those ten years, I got involved in the community as lawyers do.
When my predecessor here at Kauffmann announced that she was leaving, I had people from Kauffman encourage me to throw my hat in the ring for the job, but I kept saying to them, “Well, I’m a litigator. You don’t want a litigator.” A lot of the community involvement that I had was in the education space, so the opportunity to help contribute to the foundation’s education work was very appealing. My father was an entrepreneur, so the opportunity to contribute to the Foundation’s entrepreneurship work was appealing. As a Kansas City resident and as an admirer of Ewing Kauffman the opportunity to contribute to his legacy and steward his assets was very appealing.
Once I became a finalist for the position, it became real that I was looking at a 180-degree career change, both in the substantive practice areas and in the environment that I would be working in, from law firm partner to in-house counsel. It was also, as my wife and I talked about it, an opportunity that was too good to pass up and it has proven to be a great decision that we were able to make.
Advice for Going In-House
Chris: What advice would you give about going in-house?
John: For folks considering going in-house, get a sense of the culture of the organization. As part of that, certainly, it’s the people, how they work with each other, with processes, and especially how they interact with the lawyers. Do the business people make the decisions? Are the business people relying on the legal team to make the decisions? Or do the business people make the decisions and want the lawyer to cover their butt? Those are very different types of cultures and different types of responsibilities for the lawyers.
Different companies use the legal department and the lawyer(s) in it differently. Try to get an understanding of that and make sure whatever that culture is, it aligns with your own values, your own perspectives on your role and your responsibilities to the law as a lawyer.
Personal Life | Family, Faith, Reading & Music
Chris: John, were you recently in some beautiful place for vacation?
John: My family just got back a week or so ago from beaches in Rhode Island. We were in the Point Judith/ Narragansett area. My dad’s from northern Connecticut. He’s got family that’s still in that area. My wife and I, and five of our six children, and my parents planned a summer vacation to go back and visit with as much of my dad’s family as we could get to during that time. We also then spent three or four days on the beaches of Rhode Island and the Atlantic.
Chris: Can you make some reading recommendations?
John: I have a tendency to have three or four books that I’m reading at any given time, some of which are geared towards research I do for the scholarships, and the teaching, speaking and publishing that I do. I enjoy that type of reading, so it’s not as much work as it might be for some.
Also, I always have some sort of a fiction novel that I’m reading at the same time. I have a tendency to really like spy thrillers or history thrillers that are fiction. I really like Daniel Silva a lot. He’s got a particular character, Gabriel Allon and David writes in present-day geopolitical senses as well, which is really interesting.
Along the lines of Tom Clancy-type but without the detail – Tom Clancy is another writer that I like – Mark Greaney has a character called the Gray Man. Steven Berry is an author who does current novels with a historical context or even some historical spy-type thriller novels. He’s had a couple of things around Thomas Jefferson, Abraham Lincoln, and the Romanov Dynasty. Sometimes it bounces back and forth between current day and historical, in a fiction sense, but rooted in history. Those are fun novels to read.
Chris: You had also shared a real interest with me about music and a band you are a part of. Elaborate about what you guys do.
John: I did use the word band, but that perhaps overstates it. It’s a group of us who are friends. We get together and play. A lot of the stuff that we would do as a band is we would play charity gigs and play for free. Very often we would put ourselves as a band up for a bid in the auction so people could bid on us to go play their birthday party or their block party or something like that. The charity isn’t paying us to play and yet the charity then makes money off of us playing based on the bidding.
Chris: Finally, you had shared with me that your faith is an important part of your journey. You’re active with your local parish and the local diocese. Share a little bit about that and the Cristo Rey story.
John: Largely through upbringing, I’m Catholic. I went to Catholic school first grade through law school. My wife is a cradle Catholic. I’m not sure that saying I’m Catholic really says how faith intersects with my professional life much less my personal life, but to me, it is an important part of who I am and how I approach my interactions with people, with strategic thinking, and problem-solving. That doesn’t mean that I sit around and pray over things and hope to be guided somewhere, but I try to treat people with respect, to listen, and be thoughtful in what I’m communicating. Those things, to me, have a strong component of faith to them as far as trying to get to the right place for the right reasons and in the right way.
Part of the community involvement that I mentioned earlier was very much around education – served on the board of directors for O’Hara High School, the Diocesan school board for the Dioceses Kansas City St. Joe, and currently on the board of the new St. Michael the Archangel Catholic High School. When I was on the school board for the dioceses and was president of that school board, Dick Miller had an idea of bringing a Cristo Rey to Kansas City. He’d heard about the Cristo Rey model founded by Jesuits in Chicago. I had the privilege of being involved with the work that led to the early planning for how to bring Cristo Rey to Kansas City.
Cristo Rey is a Catholic high school. It’s college prep programming. The model is that students go to school four days a week and they job share and they work one day a week. Five students would be going to school four days and working the fifth day. One works on Monday, another works on Tuesday, etcetera, in the same job with businesses in the Kansas City area that have real work for these students to do, but it’s also the type of work that can be job shared among five students. The businesses then pay for these students to attend Cristo Rey and that payment covers their tuition because Cristo Rey’s focus is urban students and free/reduced lunch eligible. It’s an urban core school serving urban core students/urban core population. The high school students get a high-quality education, but also get real-world work experience, understanding of how a business works and how to engage professionally in a business environment.
It’s been in Kansas City for about 15 years or so. It’s a wonderful model and has done great, great things in Kansas City. I couldn’t continue my involvement with Cristo Rey because they wanted to get money from the Kauffman Foundation, so I couldn’t join their board and keep my job here at Kauffman with it providing a grant.
Chris: Tongue in cheek, if you could make one correction to the IRS code, what would it be?
John: Oh gosh. Well, if I could only make one correction, I would do away with most of it probably.
Chris: Oh, do away with the whole thing?
John: We still need taxes, so we still need to be able to fund the government, but boy there’s a lot of that code that can be done away with it seems to me.
Chris: Are you telling me you’re a flat tax kind of guy?
John: Not necessarily flat tax, but a more simplified approach to taxation would make sense.
Chris: Okay. John, thanks so much for your time today. It’s been a pleasure and an honor. I appreciate it.
John: No, thank you, Chris. I’ve enjoyed it and I appreciate it. Perhaps to tie my last comment into our work at Kauffman, one of the things we regularly hear from entrepreneurs as it relates to taxation is “Can we get a more simplified tax code?” A more simplified tax code would facilitate entrepreneurship. Thank you, Chris. I’ve appreciated our conversation and the chance to engage with your listeners.
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