First of a series on financial infrastructure and right-sizing capital
In the last autumn of his life, Harold Alfond spent one afternoon sitting on a dilapidated metal chair outside his garage, on property he had on Lake Pendleton. He was looking over the spreadsheets with his friend Greg Powell, thinking about the children he would never know, but who would know his name.
He died soon after at the age of 93, of cancer, in 2007.
The two men – Alfond, an entrepreneur-turned-philanthropist—and Powell, the head of his foundation, had already decided to embark on an experiment that Alfond would never see the results of: His foundation would give $500 to every child born in Maine, to be used for higher education.
“The world was a lot of simpler when the world consisted of him and me and only one vote counted,” Powell likes to say, and said in an interview. Then he paused and added. “I miss his wisdom. I tried to learn as much as I could about his way of looking at the world.”
Alfond left behind a family fortune, the result of his sale of Dexter Shoe Co. to Warren Buffett in exchange for shares in Berkshire Hathaway. Today, the Harold Alfond Foundation has $1.4 billion in assets, after giving away hundreds of millions over the years to causes in Maine. It recently announced another $500M in commitments, including $100M to the new Roux Institute in Portland.
A select group of foundations invest in financial and economic infrastructure. The Harold Alfond Foundation’s size, focus on the relatively small state of Maine – population 1.3 million — and its commitment to innovation made it stand out when I was looking into recently announced initiatve to turn Portland into a tech hub through a new alliance with Northeastern University called The Roux Institute.
It was David Roux’s gift that grabbed the headlines. The founder of private equity firm Silver Lake Partners, which has $83 billion of assets under management, is a flashier presence, likely a present-day billionaire. But the Foundation gave an equal sum to the new Institute, to be paid out mostly in scholarships – $100M. Meanwhile, its steady efforts over 70 years have seeded a new generation of trained workers and entrepreneurs and a generation of Maine residents who may – the results will shortly become clearer – have learned one of the hardest lessons of economic security and wealth building: the value of investing small amounts over time. The whole is greater than the sum of the parts.
Harold Alfond’s story was once better known. The son of Russian-Jewish immigrants, he never went to college, but had a job as a odd shoe boy – literally looking for single shoes – at a factory in Kennebunk The knowledge gained led him to work with his dad to start one shoe company, and then to found Dexter. He’s credited with establishing the first factory outlet store. Warren Buffett reportedly said that buying Dexter was his worst deal ever.
Not for the people of Maine. Curious, I went looking – not hard – for pieces of Alfond’s legacy. The Foundation’s gifts to colleges throughout Maine have created workforce skills programs and entrepreneurship and innovation hubs, including one at Thomas College in Waterville. Of course it’s hard to know how exactly how the statewide effort to teach families the value of investing affects anyone’s mindset, but Alfond’s long-term view, his story and his emphasis on entrepreneurship ripple through the state.
Heather Kerner found three mentors through programs that have received funding from the Foundation, she guesses. With their help, seven months ago, she launched a company in Canaan, Maine, (population 2,500). The Good Crust sells frozen pizza dough to restaurants and breweries, health food stores, and to schools and institutions for fundraisers. She’s already distributing up and down the Eastern seaboard, and has eight part-time employees.
It’s not just any pizza dough – it’s made from flour ground in a grist mill from Maine-grown wheat in the agricultural center of Somerset County. (The grist mill is owned by her twin sister). An accomplished home baker, Kerner saw a fit not only for the rising health consciousness of consumers but for restauranteurs who want dough that does well in wood-burning ovens.
It’s not just any company, either. “If you want to focus on how philanthropy can spread, and the thread of entrepreneurship,” she said. “I’m an occupational therapist who worked for many years with special needs children. One reason I started the company was to provide jobs for them.”
Many of the entrepreneurs that I interview today have jobs front-and-center as one of the central missions of their companies. It sets today’s entrepreneurs – New Builders – apart from most high-tech entrepreneurs, whose first focus is to scale, which often means growing with as few employees as possible.
Scaling A Mission-Driven Company
Yet, Kerner is scaling, too. She is about to take out commercial loans through Coastal Enterprises, a community development finance institution that is another part of Maine’s financial infrastructure funded by the Harold Alfond Foundation. With the loan, she is acquiring a small production facility. If she can make 6,200 dough balls a week, which she says should be easily possible, she will be able to reach $1 million in gross sales within two years.
She was aware of the Foundation’s role in her enterprise, and aware of the value of the $500 grants to her two sons, as well. It’s not so much the amounts, she says, but that the Foundation made it so easy via direct deposit, for her family to add to their accounts. “Because of them, both of my boys have college savings accounts,” she says.
In fact, the Foundation’s first efforts to reach all the children in Maine didn’t work very well: Only about 30-40% of children signed up. So the Foundation found a way to trace birth records, and sweetened the deal, upping the grant when parents participated. Since 2008, the Foundation has made more than $60 million in grants to 120,000 kids. With investment returns, the total savings is now $280 million.
Is that enough to make a difference, as the first children graduate and reach for the money? Powell used to fret about that, he said. He believes it will make a material difference, especially for the people – about 60% – who don’t go to college.
The Foundation has also become focused, especially through connections with Roux and Northeastern University, on bringing companies and innovators to Maine who will help create reasons for people to move to Maine and live there. It’s attacking the root of Maine’s central problem – a rapidly aging population – by building a rich financial infrastructure. By 2028, the state economist’s office projects that the working age population will decline 3-4.5%, while the population of people over 65 is projected to grow more than 44%.
Business owners today meanwhile, cope daily with one of the symptoms: not enough workers for Maine’s booming tourism business.
Indeed, the lesson may be that plugging holes in any economy is too much for any one foundation, even a dedicated one. But that’s what sets entrepreneurs, and perhaps some of the foundations they start, apart: Given a problem too big even to fully conceive, they start building.
Which brings to mind one other part of Harold Alfond’s legacy: sport.
“He realized in a state of limited resources, if you got people to work together, you could accomplish more,” Powell said. “In 1996, when we were first really putting our nose to the grindstone, we had competing applications for upgrades to recreation facilities from the Boys and Girls Club and the YMCA.”
Alfond told them: If you all get together and create the best recreation and community center on the planet, we will fund it. To this day, the Boys and Girls Club and the YMCA operate a joint facility with a $23 million endowment, one of the few, if not the only, such combined facility in the country, Powell added.