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This week I’ve been chasing a lot of disparate research threads. I’ll be writing them up in the weeks to come. But in the meantime I’d like to discuss how it was that the Victorians managed to put together such gigantic events like the Great Exhibition of 1851 — all without government funds.

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.

If the Great Exhibition was anything to go by, then the amounts that people were willing to guarantee were far, far larger than anything they’d have been willing to donate up-front. After many months of costly campaigning, the up-front subscriptions came to no more than £65,000 (after costs). The guarantee fund, however, came to a whopping £350,000 in only a matter of weeks, especially after the railway contractor Sir Morton Peto got the ball rolling by putting himself down for £20,000. For the pre-Internet age, that’s an astonishingly huge sum, raised within an astonishingly short time. Without the existence of the guarantee fund, the organisers would never have had the resources to build the famous "Crystal Palace", and they certainly would never have been able to hold such a massive event so rapidly. The guarantee fund not only mobilised more funds, it mobilised them more quickly.

I’m not yet sure how or when the guarantee fund disappeared (or even where it came from originally). The last I can think of, from when I was researching the various exhibitions organised by the Society of Arts, was an exhibition of "art and industry" in 1935. (That one made a loss, so the organisers had to call upon the guarantors.) But regardless of when it disappeared, I can’t help think that it would be easier than ever to get a guarantee fund to work today — especially given the existence of the Internet, and with all of the innovation currently going into making altruism more effective and financial contracts more secure. When it comes to urgent, expensive, and potentially self-sustaining philanthropic projects, the guarantee fund seems like a neglected resource.