Leverage

The head of an exceptionally successful (and incidentally “well leveraged”) nonprofit organization gave this succinct definition of philanthropy’s favorite buzz-word: “If I give a dollar and you give a dollar, and we get the guy next door to give a dollar, we each got 200 percent leverage. The budget may be $1 million, and we’re still $999,997 away from it, but we’ve got excellent leverage.”

More and more observers of philanthropy and fundraising treat LEVERAGE as an automatic fraud alarm, and it is hard not to agree with them. The nonprofit executive’s illustration perfectly illustrates why: The word is meant to imply (indeed, in most common usage it actually means) that someone has done something timely and clever that induced others to do a great deal more toward the same goal.

The image of a lever- “a rigid bar pivoted on a fixed point and used to transmit force,” according to The American Heritage Dictionary-was meant to invoke the moving of great objects with diminished force. Yet often it is used to describe things done by any group of people that they would otherwise have done anyway.

In finance, LEVERAGE typically describes the amassing of huge investments or big profits without using a great deal of one’s own money. In that context, most leverage is smart borrowing and good timing. Yet quite often it involves more than a little hucksterism, too, as when a borrower induces several banks to lend millions of dollars apiece to a shaky venture, urging each lender to take comfort in the presence of the others. From such leverage, great S&L debacles are born.

“This grant leverages the contributions and talents of many participating organizations in the community,” said a foundation report. The clear implication: By making this grant, we induced “many organizations” to take part in something that would not otherwise have interested them. By further implication, the sum of all those efforts will be worth far more than we, the frugal foundation, are planning to pay. Now, here is the reality in that case, as in so many others: The “many organizations” were already rolling ahead on the project in question, and the foundation’s contribution simply helped one left-out group to join the caravan, rather than being stranded on the roadside. That was kind of the foundation, and maybe a good thing for all involved. But was it leverage?

In financial circles, the word still means only one thing. It gets out of control-sometimes comically so-when it slips the boundaries of finance and begins to describe everything else. “The paper leveraged a lot of creative thinking in the child-welfare field.” “We leveraged more media from this event than from any of our previous efforts.” “The presentation got excellent leverage in terms of feedback.” Oh, dear.

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