A few weeks ago I wrote a post about the “inefficient” nonprofit marketplace that asked two questions: whether the nonprofit marketplace is any more inefficient than other markets (mutual funds, cosmetics); and whether improving the quality of information available about nonprofits will have a significant effect on the efficiency with which capital is allocated in the sector.
This post led to a great conversation with an active philanthropist and nonprofit Board member I’ve gotten to know who, it just so happens, is an investor herself and knows lots of active, successful investors.
Her observations, and the resulting questions, are the right ones.
She observes that people around her who are overwhelmingly deliberate about how they manage their investment capital are, in her words, quite often not deliberate at all about how they manage their philanthropic capital. Put another way, the majority of capital deployed for investment is deployed with the intention of maximizing financial return (whether or not that in fact happens due to systematic biases, crummy products, etc.), and it’s not clear that the majority of funding that she observes going into nonprofits even has the intention of maximizing social impact.
This brings me back to the great post by Renata Rafferty on Dinosaur Philanthropy from the Tactical Philanthropy Blog. Renata writes:
Those of “us” on the “cutting edge” of philanthropy…tend to navel gaze, looking ever more deeply into how our groovy new ways of thinking about philanthropy are….well, groovy.
On-the-ground reality in everyday communities, however, is more about gala slippers on the ground than eco-friendly boots on the ground. I live in an extraordinarily wealthy community, where millions change hands between individuals and families….and influence plays a HUGE role in where the money goes – but the influence has little to do with a real understanding or examination of community needs, community assets, and who is doing fine and deserving work…
Sometimes I feel like one of the few left on the dock watching the philanthropy boat sail away, leaving behind the well-intentioned, kind, caring, wealthy people who are so generous with their giving, but who just aren’t part of the “cool crowd.”
This all brings me back to my hope that we’ll right-size our expectations and the promises we make as we charge ahead (rightly) with efforts to improve the availability of information about the effectiveness of different charities. This is important, necessary work that will lay the foundation for how we think about and understand charities in the future. AND at the same time it is completely possible that the direct impact of this work on Renata’s “dinosaur philanthropists” (an intentionally provocative name to be sure) is that of a tree falling in the forest that no one is around to hear.
What I think we need also need are strategies that look hard at where most of the philanthropic (especially individual) philanthropic money is, how giving decisions for this money is made, and from there to think about actions that are likely to have direct impact on THIS crowd.
Put another way, solving the data transparency problem is absolutely important, but it’s kind of like giving a screwdriver to an investment banker – it’s not the tool she uses to do her work.