I walked into this recording thinking measurement was the hard problem in impact. I walked out thinking the hard problem is where you put it.
Alexa asked Thomas Knowles the direct version. How do the Gratitude families square what they do with the formal ESG universe, and are we putting too many limitations on getting good done. He didn’t throw out the rigor and he didn’t defend it either. He moved it. “It’s much more about aligning on the philosophical approach, the ethos of the business, what their why.” Then the line I wrote down: “they’re going to go off and run their business. They’re going to decide who to invest in and how to operate on a day to day, and the metrics are going to be in the rear view.”
That landed for me because it is mechanical. A baseball scout doesn’t draft off last season’s slash line. Last season was a different league against different arms. He drafts off the tools, and the line shows up later as confirmation. Thomas underwrites a founder or a manager the same way. By the time an impact KPI exists, every decision that produced it was made by a person you already chose. The metric is a receipt. You buy the operator.
So where does the scorecard go? Gratitude is a community of 150 family offices, and the obvious number for a business like that is how many. He refuses it. “We’ve never had a KPI on like number growth, right? It’s always been you know who’s the right people we want in the community.” The one he holds hard sits on the members, not the portfolio. “The one that’s critical today is the action orientation. Like we do not want to be a community of people that just sit around and talk about these ideas.” Did you move capital or did you come to talk. That is the whole test, and it is the only number in the building.
That same filter pays for his no. Alexa asked what he’s advising people against, and he named nature based solutions and natural capital, called them incredibly important, then said the quiet part: “the ecosystem around the investment opportunities is still emerging and pretty nascent.” No risk return profile to underwrite yet, so he takes the interest and redirects it into something that can be priced. Most platforms built on member demand can’t tell members no. He built the one filter that lets him.
Where I’m less sure. Underwrite ethos instead of metrics and I don’t know what keeps it from collapsing into taste. Thomas has an answer for his own shop. The co-founders led with their own capital, and the action filter does real screening work. I don’t think it generalizes to a platform without those two things, and I didn’t push on it in the room.
Then the thing the episode is named for. Donor advised funds. Over 100 billion, Thomas figures maybe double that now, no mandatory annual distribution the way a foundation has, mostly parked in money markets and passive ETFs at Fidelity and Vanguard and Schwab. Philanthropic capital, already given away for the tax benefit, clipping coupons for large asset managers. His last word on it: “But it has not happened yet.” Biggest pool, no pipe.
Last month in Assigned But Not Read, after talking with Roy Swan, I argued that calling something non-financial is a labeling decision rather than an economic finding. Reclassify it, then price it right. Thomas is working the same problem from the other side. He isn’t dragging the impact number into the financial column at underwriting. He’s buying the person who will generate it and watching the one behavior he can see. I don’t know which is right. At pre-seed, where I spend most of my time and where the founder is the culture, I suspect his version is the only one that works.
Full episode here: https://swimmingwithallocators.com/podcast/the-biggest-untapped-impact-money-pool-youve-never-heard-of/
With gratitude,
earn