In the latest Age of Inventions newsletter, Anton Howes wonders why we don’t have a modern equivalent to the funding mechanism that helped create the Great Exhibition of 1851 and other events that provided benefits to the public without government backing:
The Crystal Palace from the northeast during the Great Exhibition of 1851.
Image from the 1852 book Dickinsons’ comprehensive pictures of the Great Exhibition of 1851 via Wikimedia Commons.
As I’ve mentioned before, exhibitions of industry were not just celebrations of technological progress, but could become engines for progress as well. For the inventors, artists, and engineers who exhibited, the events were a direct inducement to improvement. And for the public who visited, the events exposed them to what was possible, encouraging them to raise their demands as both consumers and citizens, ideally inspiring them to become future innovators too.
But how was it all paid for? Unlike its national-level precursors in France, the Great Exhibition was not a state-run event. Even more remarkably, its organisers also failed to raise anywhere near enough private subscriptions to cover their costs. Instead, they used something that called a “guarantee fund”.
Instead of asking for donations from supporters up-front, the organisers asked them to commit to covering the exhibitions potential losses up to certain amounts — to be paid only if the money was required. Based on the security provided by this crowdsourced guarantee fund, the organisers then raised an ordinary bank loan in order to get the cash they needed to actually hold the event. Crucially, the guarantors didn’t actually have to spend anything unless the event made a loss, and if the event broke even or even made a surplus thanks to ticket fees, then they would never spend a penny at all. (Luckily for them, that’s exactly what happened in 1851, and for many later exhibitions too.)
What’s interesting to me about the guarantee fund is that I can’t quite think of anything quite like it today. There are perhaps more individualised versions of it, like when a neighbour or friend acts as a guarantor for a mortgage. And governments sometimes provide guarantees for certain sectors or industries too. There have also been a few profit-making versions of it in certain industries, where the guarantors potentially get some share of the upside too (“Names” at the Lloyds of London insurance and reinsurance market sounds similar, though even these are disappearing). But I’ve not seen anything like what the Victorians did, essentially using a guarantee fund to leverage philanthropy.
This is surprising to me. It seems like it has a lot of major advantages, especially for those who might want to replicate the exhibitions of industry today, or indeed for any kind of capital-intensive philanthropic endeavour that could eventually be expected in some measure to pay for itself. (I can’t help but think it would be useful in efforts to speed up the de-carbonisation of the economy, for example — a potential application that I’ve been exploring in my conversations with the people at Carbon Upcycling.)
Consider that with a guarantee fund anyone able to afford the risk could considerably increase the philanthropic value of their assets. Say that you could afford to donate £100 right away, but could donate three times that amount at a pinch (e.g. by having to liquidate some funds in shares). You could thus guarantee £100 each to three different causes, potentially without ever actually having to donate it, and knowing that in the worst case scenario you would never have to spend more than the £300 you can afford.
After all, those signing up to the guarantee fund essentially chose what their maximum liability would be if the event were to make a loss. If they were confident in the event’s success, then they probably believed that they would not have to pay anything at all. And if not, they had at least named the maximum donation they might eventually be asked to give.
