Jumo

GOOD is a publishing and marketing company “for people who want to live well and do good”. Founded by Ben Goldhirsh, the son of the founder of Inc Magazine (a hugely successful traditional print magazine), GOOD was one of a handful of “philanthropy magazines” that launched in 2007. While the other “philanthropy magazines” folded, GOOD has evolved to encompass online content, live events, and now a kind of advertising/marketing agency that helps organizations do socially connected campaigns.

Now GOOD is buying Jumo. Interesting…

First off, why isn’t Jumo working on a standalone basis? While Hughes says that the organization had a “very successful start” and counts over a million users, in all my surfing of the philanthropic web I haven’t once found reference to activity on Jumo other blog posts saying how great it is going to be.

While people like Amy Sample Ward and Beth Kanter are far better sources to comment on the technology aspect of Jumo, from a donor perspective I must say I don’t understand the drive to create a social network based around nonprofits. Nonprofit and for-profit brands may be ways that people define themselves and thus be the sort of thing that people want attached to their online social persona. But for the vast majority of donors, nonprofits are not the central way that they seek to organize their social network.

GOOD on the other hand seems to be figuring out that there is a huge interest in social sector related content, especially when it is presented as an integrated part of the fabric of life, not somehow separate from politics, business, culture, food and technology. Rather than being for “donors” or “philanthropists” or some other adjective that applies to only a slice of people’s persona, GOOD proudly proclaims it is “for people who give a damn”.

So what will GOOD do with Jumo? Speaking to the New York Times, Goldhirsh said “I’ve always felt the real potential of GOOD was to connect people wanting to take action with the organizations and businesses that could help them do that, and Jumo is the connective tissue that will allow and enable that to happen.”

We’ll have to see how Goldhirsh puts that vision into action, but I’m struck by his choice of words. Rather than seeing a social sector-social network as a standalone entity unto itself, maybe it is the “connective tissue” that ties everything together.

Let’s imagine a 20-something Millennial. She works at a for-profit company importing sustainably grown coffee that hopes to turn a profit while leveraging the power of the free market to pull people in the developing world out of poverty. She listens to U2, makes microfinance loans on Kiva and loves Apple products so much that she wears a t-shirt with the Apple logo. She’s a political news junkie and is disgusted with both parties. She makes donations to nonprofits but feels that the products that she buys, people she votes for and where she chooses to work are just as important elements of her impact on the world.

Our 20-something Millennial doesn’t define herself by the nonprofits she supports.

She defines herself as someone who gives a damn.

What she wants isn’t a special place she can visit to express her social self before returning to the “real world” of work, life and play. Instead she wants a world full of work, life and play that is built around a connective tissue that infuses all of her life with meaning.

There is no work-life balance in our Millennial’s world. No need to “give back” as if her success in life somehow extracted value that must be repaid. There is only meaningful experiences that honor the many priorities of the individual: self, family, and member of the global community (and many smaller communities).

There is great need for nonprofit oriented transactional platforms, such as Global Giving, Charity Navigator and GuideStar. But I doubt there is a need for a nonprofit oriented social network.

I look forward to seeing what GOOD does with Jumo. If they pull things off, they might just move from being a content platform for people who give a damn to an immersive experience, extending across the online and offline worlds for a new generation that views social impact as the connective tissue that connects their interests and passions.

• Observers, who watch,
• Fans, who participate,
• Evangelists, who recruit, and
• Ambassadors, who represent.

Now there are all sorts of models like this that can be used to think about a community. So I’m not suggesting that this set of actors is comprehensive. But I do think it is a useful framework to think about the philanthropy community.

The Second Great Wave of Philanthropy thesis that underlies the way I think about philanthropy is predicated on the idea that we are at the early stages of a time period in which philanthropy goes from something that is the domain of the very wealthy to a practice that is infused across American culture. While all of America has always be engaged in giving, the Second Great Wave idea argues that a shift is happening from transactional donations to more sophisticated forms of private actions for the public good that encompass traditional giving but also other blended value ways of thinking about social impact.

When I talk about the Tactical Philanthropy Community, I’m referring to the community of people around this blog who watch, participate, recruit and represent the movement towards more effective forms of philanthropy. My interest in Matt Britton’s categorizations is the way in which it can help us think about the effective philanthropy movement and the roles that need to be played to make it sustainable.

The Giving Pledge, for instance, appears to be an example of a number of philanthropy “fans” (major donors) stepping up to become “evangelists” who seek to recruit others to the philanthropy community. Members of the Pledge such as Gates, Buffett and Bloomberg are probably better understood as “ambassadors” who are coming to represent what philanthropy means today.

When I wrote recently about my belief that large private foundations should be participating as intermediaries in the Social Innovation Fund, I was essentially arguing that it is not enough for them to be “observers” or “fans”. While the roles of “observers”, “fans”, “evangelists” and “ambassadors” are all critical to a functioning community, I think that if the large private foundations are truly committed to effective philanthropy, that some of them should be stepping up to play the role of “ambassador” in the nascent government programs designed to focus money on effective programs.

What’s your role in the philanthropy community today? What role would you like to play in the future?

By Eugene Eric Kim

Recently I spoke at the GEO Learning Conference on collective intelligence. My focus is on collaboration, but thanks to the influence of my mentor, my frame has always been around maximizing collective intelligence for the greater good. While I’ve worked with foundations in the past, it was the first time that anyone in philanthropy had asked me to talk specifically about collective intelligence. In preparation for the talk I started thinking about great examples of philanthropy catalyzing collectively intelligent systems.

I couldn’t think of any. So I started doing some research. I still came up empty.

The basic premise underlying collective intelligence is simple. Sometimes, somehow, groups exhibit intelligence that far exceeds the sum of its parts. Ants are a great example of this. Individually, ants are – quite frankly – dumb. They do three things well:

• They carry heavy objects
• They leave trails
• They follow trails

In isolation, this list is not impressive. But in collaboration with others, ants do amazing things. They build ant hills. They form ant rafts. There are no heroic leaders in ant colonies. Leadership is distributed. All ants are both leaders and followers. And because of these properties, ants, collectively, are highly adaptive, and their intelligence scales. When you add more ants, the system gets even smarter.

What would happen if humans behaved more like ants? Fortunately, there are great examples of humans behaving collectively intelligent. The real challenge is finding examples of humans behaving really, really, really collectively intelligent. This is not simply an intellectual exercise. It’s a matter of survival. Our society is literally on a path of self-destruction, and the only way to avert disaster is to start behaving collectively more intelligent.

A little bit of collective intelligence is not enough. We need a whole lot of it.

The problem is that it’s hard for humans to act like ants, because unlike ants humans are smart individually. Perhaps smarter than is good for us. The way we like to attack problems is exactly the opposite of how ants attack problems. We like to centralize control. We like to understand problems to completion – or at least pretend we do – before attempting to address them. This is exactly the opposite of what we need to do to be successful.

By definition, a collectively intelligent system should be too complex for a single person or even a subset of the group to fully comprehend. Otherwise, the system would only be as smarter as that single person, which is to say, not smart enough. If we truly want to harness collective intelligence, we need to get over this idea that we need to fully understand the problem before we can act. That’s neither possible nor desirable.

I don’t need to rant about how slowly foundations move, or how they’re afraid to fail, or how they seem fixated on control and understanding at the expense of action. Foundations are experts at saying these things about themselves. The question is how can foundations start shifting their culture so that they can become better at both catalyzing collectively intelligent systems and behaving more collectively intelligent themselves? I think there are three ways to start.

First, most foundations need to stop thinking of themselves as funders. Giving money away is a valuable tool, but it’s not a high-leverage tool for solving the world’s most complex social challenge. Foundations don’t have enough of it, and there aren’t market mechanisms for leveraging it effectively. Foundations are fantastic at doing research and getting in the middle of systems, but they don’t leverage this expertise effectively. I think part of it is because they self-identify too strongly as funders. They need to think of themselves as movers of knowledge instead of movers of money.

This leads into the second thing foundations can do: Give knowledge away aggressively. The great thing about giving away knowledge is that, unlike money, it’s an abundant, accumulating resource. The more you give away, the more the world has, and you can give it away as often as you like.

Third, be courageous. I love what Sean wrote on this topic:

"The lack of external pressures, which gives philanthropy great freedoms, also requires us to draw on inner determination and discipline to achieve results."

In the face of structural resistance, change requires courage. "Courage" is a word that’s not used enough in philanthropy. I think that’s a shame, because we need much more of it in philanthropy and in the world. People need to acknowledge this, and they need to draw on it. The world is depending on it.

President Obama’s budget proposal for 2012 includes a $100-million idea that could revolutionize the way social programs are financed—or could put a ticking time bomb next to the heart of some of our society’s most needed social programs.

…The main concern will be how to define success; in the real world, it is difficult, if not impossible, to agree on rigorous measures that make sense.

…If all government-financed programs were to rely on the social-impact-bond approach, the debate over measurements of success would more often than not set up social programs to fail, with a nonprofit’s program, not the unrealistic expectations attached to it, becoming the scapegoat.

And that could unwittingly undermine society’s support for government financing of programs to help the needy just at a time when relatively little support already exists.

Melinda Tuan, a co-founder of REDF and expert in social return on investment frameworks, writes:

I think very careful attention must be paid to the projected positive outcomes of a program and whether those are intended to generate cost savings for the government.

In my experience with social return on investment (SROI) at REDF, where we tried to calculate the social savings to society generated by nonprofit social enterprises that employed formerly homeless individuals, I clearly recall at least one important finding from that work.

We funded a fabulous nonprofit called Youth Industry that tried to get homeless youth off the streets and into wage-earning jobs in social enterprises such as a thrift store, bicycle repair shop, neighborhood restaurant, etc. The positive outcomes achieved in the lives of these homeless youth were remarkable. Based on follow-up interviews conducted two years after youth were hired at a Youth Industry enterprise, 72% of youth were still employed, and 45% were living in a stable home (as opposed to 81% homeless at time of hire).

However, the youth were also using more social services at two-years after hire than they were at the time of hire — which meant they were costing more to society than they had previous to being employed in Youth Industry social enterprise. Their “SROI” numbers were not good.

But the real story is that these were youth who were largely disenfranchised from society at the time of hire: 76% had used illegal substances, 68% had mental health issues, 41% had a previous criminal conviction; and as a staff members said, “they were not working the system, they wanted to get out of the system.”

The youth outcomes showing an increase in usage of social services provided by the government were a positive outcome for the youth. For example, they were re-engaging in society, accessing much-needed mental health services, and obtaining food stamps to feed themselves (as opposed to scrounging in the streets). In the case of these formerly homeless youth, costing more money to society was a step in the right direction towards their ultimate greater self-sufficiency and well-being.

Sean, I was glad to see that you cautioned any Pay for Success program be piloted using effective programs with evidence of success AND where positive program results would produce cost savings to the government. It would be a huge mistake to simply assume that cost savings are tantamount to positive outcomes in individuals’ lives.

Reader Jacob M comments:

While all this sounds great, to me the question whenever anyone sets up an incentive-based system that uses outcomes is a question of monitoring. No Child Left Behind’s effect on state education standards is probably the best recent example of this – when the Feds asked the states to hold their schools accountable for passing State tests, most states just dumbed down their tests so students would pass.

There’s a similar issue at play here. If the intermediaries get compensated for the outcomes which they fund, there better be some independent entity that is collecting the data and ensuring quality. Otherwise, there will be strong pressure, especially if investors get involved, to deliver on those outcomes.

While some of this pressure might lead to program efficiencies, it also will encourage people to game the system. Outright lying about outcomes might be possible to catch, but other more subtle methods such as “creaming” for the least needy may prove more difficult. And even if on paper outcomes may look good, the neediest people may become more likely to be overlooked.

I’ll respond to some of these comments tomorrow as all of them raise important points.

The US government frequently provides social services such as kindergarten readiness programs for disadvantaged children or employment services for welfare recipients by paying social service providers to deliver a program. The results of these types of programs are often not assessed and when they have been, their effectiveness has often been called into question.

Under the Pay For Success model, the government would contract with an intermediary for the delivery of specific results. The intermediary would then contract with one or more social service providers in a bid to create the results in question. If, and only if, the results were actually shown to have been achieved after rigorous evaluation by independent evaluators, the government would make payments to the intermediary.

While performance based contracts have existed for a while, Pay For Success adds another important layer – private or philanthropic capital that funds the intermediary during the time prior to them receiving success based payments from the government. Unlike a grant, in the Pay For Success model, the funders would have the potential to recapture their initial invested principal plus a rate of return. While it is expected that philanthropic funders will be the first entities willing to provide such funding, if the Pay For Success model is shown to work, impact investors or profit-seeking investors may become sources of capital as well.

The core innovation of this model is a transfer of the risk that a program will actually work from the government to the intermediary and its funders. Once the programs demonstrate their effectiveness, the government can reallocate its spending to now proven solutions.

While this model would be attractive to the government in a variety of cases, it is particularly compelling when program success will result in cost savings for the government, such as when employment training for welfare recipients reduces future welfare payments. Some government officials refer to Pay For Success as an opportunity to shift government spending towards preventative programs and thereby reduce the need for very expensive safety net services.

For funders, Pay For Success provides a new investment option, one where the financial return is directly dependent on social results. While many impact investment options exist that offer both a financial and social return, the two are rarely directly linked. Microfinance investors for instance earn a return based on the rate at which borrowers repay their loan. Microfinance may very well be a useful tool for creating social benefits, but the social and financial returns are two separate outcomes of the investment rather than the financial return being a result of the level of social benefits.

In other words, with most impact investments, the financial return can be realized even if the social return fails to materialize. Pay For Success funders on the other hand would receive financial returns that were directly dependent on the realization of social returns.

The Pay For Success model opens the doors to a wide range of capital – from market rate investment capital to philanthropic support – being used to finance innovative social programs that produce better results at lower cost to tax payers.

But at its heart, Pay For Success is not just a financing or cost savings program. Its success hinges on whether the intermediaries and nonprofits that participate in the program are able to deliver measureable results that are superior to current government programs. Pay For Success offers an opportunity for the social sector to showcase the potential of the current push towards results based philanthropy. If the program succeeds, the payoff will be a dramatic increase of funding for effective nonprofit programs.

The Pay For Success model will not be appropriate for all social services. For the model to work, the government and intermediary must be able to accurately track the results of the program. In areas like school readiness or employment services, the government is already tracking much of the data needed to determine the level of program success. But there are many areas in which program results are difficult to accurately track or the benefits are so long term in nature that it would not be feasible for the intermediary to finance the program since government payments for success would not be triggered until far into the future.

The Pay For Success proposal is a pilot program and we need to learn much more about the model before it can be determined whether the concept will work well in practice. In the early stages, Pay For Success programs should focus on areas where nonprofit programs have already undergone rigorous evaluation to prove their effectiveness and where positive program results would produce significant cost savings to the government.

The government is by far the largest funder of nonprofit services. Today, those funds are rarely dependent on the effectiveness of a given program. The Pay For Success model offers a promising approach to directing government funds so that they achieve better social results at lower cost to tax payers.

In the Fast Company article about baby carrots being branded as junk food, the carrot company CEO talked about how most all of the advertising companies who applied to work with them tried to make baby carrots more fun, but kept returning to their status as a “health food”. It was only the winning advertising company who completely took baby carrots out of the “should” category (you should eat healthy food) and put them into the “want” category (you want to eat this cool, fun, tasty product).

This weekend at the grocery story I ran into this new packaging of Mandarin oranges:

The basic concept is similar to the junk food baby carrot campaign. Note the plastic, shiny packaging, the “cool” character on a skateboard, the tagline “One of life’s sweetest pleasures”, and the “grab ‘n go” handle.

But the company doesn’t go all the way. The product was in the produce department, not in the snack food aisle, and they still stick the “healthy snack, naturally sweet” tag on the packaging.

Of course, while philanthropy does make people feel good and can be marketed in the “want” category, a major part of what makes people feel good is the idea that they are doing good for others. It is like a health food that only tastes good if you believe it is healthy.

In this hilarious segment of Curb Your Enthusiasm, Larry David finds out just how bitter the giving experience can be when he suddenly feels like his giving is in the “want” category instead of the “should” category. When he suddenly feels like his giving is something he’s doing for himself instead of others, his giving loses its meaning and value. (warning: some explicit language at the end of the segment)

(Click here to see the video if you are viewing this in an email)

So what’s the answer? I don’t know. But I do know that philanthropy shouldn’t be in the “guilt” category. Those things you do because you “should” even though you really don’t want to. I’ve always thought that the phrase “give back” when used in philanthropy sounds like the donor has “taken” something that must be returned (and in fact, I think many people think about giving this way).

As we explore new blended value propositions, I think it is important that we keep in mind the strange characteristics of philanthropy. It is like really tasty health food, or maybe junk food that’s good for you. But whatever it is, it is something people do enjoy and we need to embrace this aspect of the giving experience.

From Fast Company Magazine:

“Bolthouse Farms sells nearly a billion pounds of carrots a year… The company has been around for nearly a century now, but it boomed in the 1990s, with a breakthrough product… baby carrots were a hit… The really big deal, the thing nobody expected, was that baby carrots seemed to make Americans eat more carrots. In the decade after they were introduced, carrot consumption in the United States doubled.

Then a couple of years ago, after a decade of steady growth, Bolthouse’s carrot sales went flat… So the company brought in Jeff Dunn, the former head of Coca-Cola’s businesses in North and South America.

Dunn was clear: He didn’t want a health campaign, one that talked about beta carotene or cutting calories. He wanted something more emotional, maybe something funny, something that appealed to impulse rather than responsibility — the kind of thing a soft-drink or snack-food company might do.

[The ad agency] unveiled storyboards with concepts for a series of winking, self-aware junk-food ads. One ad featured a baby-carrot-branded spray tan, endorsed by Snooki, the star of MTV’s Jersey Shore… In another, a sultry model, surrounded by billowing black silk, runs a carrot slowly across her lips as a voice-over purrs about indulgence — think Dove chocolates. The best one seemed inspired by a Mountain Dew commercial. A skater dude rides a jet-powered shopping cart through a desert pass, dodging baby-carrot gunfire. Things blow up. There’s a pterodactyl. "Extreme pterodactyl!" the voice-over yells."

"People will say, ‘You open the bag, it’s just baby carrots.’ Well, it’s just Lay’s potato chips, it’s just Doritos, there’s nothing special about them," he says. "They’re just cool and part of your life. If Doritos can sell cheeseburger-flavored Doritos, we can sell baby carrots."

By November, sales in Bolthouse’s test markets were up 10% to 12% over the year before, compared to minimal improvement or slight decline in a control group.”

In the article, Dunn reflects on his conflicted feelings about having promoted high consumption of Coca-Cola and the direct link between soft drinks and obesity. It is clear that he sees his effort to promote a healthy product, at the expense of true junk foods, as a kind of redemption process.

The article got me thinking about the most effective way to promote philanthropy. For the last hundred years Americans have given about 2% of income to charity. This percentage has been remarkably consistent during good times and bad. Maybe the key to increasing the amount given to charity is to get away from the “give because it is good for you” (good for your soul, good for others, something you “should” do) approach and embrace a philanthropy as junk food mentality?

Is the fast growing Kiva.org, that addictive little website that has captured the hearts and minds of 500,000 Americans from every walk of life, a sort of philanthropy junk food (I’ve called Kiva a gateway drug to social finance in the past).

Studies show that giving to charity triggers the same neural pathways as drugs, chocolate and sex so maybe marketing philanthropy as a junk food isn’t false advertising but actually closer to the truth than the moralistic “it is the right thing to do” approach that is so often preached.

I’m not convinced in the least that a philanthropy as junk food marketing approach would succeed or is even the right thing to do.

But it sure is intriguing…

Will they call the session Speed-Freak Philanthropy? If they do, I’m sure it will draw quite a crowd. But even if they don’t, if you attend the Council on Foundations conference this year, look for a session featuring Jason Ricci and find out how even the biggest foundations in the world can ditch the stunningly long seven month grant cycle for a system that is more in step with the fast moving world in which we live.

In 2007, New Profit launched America Forward, a bi-partisan effort to work with policymakers, legislators and other leaders to encourage the deployment of public and private resources towards supporting social innovation. It was America Forward that advanced the idea of the White House’s Office of Social Innovation and Civic Participation as well as the concept of the Social Innovation Fund, both of which have become a reality.

The Gathering will feature speakers from all sorts of backgrounds, but I’m intrigued to see that Steve Johnson is being given a prominent role.

Johnson is the author of Where Good Ideas Come From. I cited Johnson’s thinking in my post titled Philanthropy’s Period of Rapid Innovation. That post included the video below which does an excellent job of explaining the core idea of the book (note that this production style was used to similar effect by Bill Gates in conjunction with his recent annual letter).

(click here to view the video if you are reading this via email)

Johnson was also a speaker at a TED event in Oxford where he discussed some of his ideas in more depth.

(click here to view the video if you are reading this via email)

Johnson’s core argument is that good ideas do not spring forth from any one person or at any one time, but instead are the output of a dynamic process of refinement of other ideas and our own ideas. He points to evidence that periods of rapid innovation in various fields were supported by some sort of mechanism which assisted in the acceleration of idea exchange.

I believe that social media is acting as a platform for rapid idea exchange in the social sector. It is encouraging this rapid idea exchange that makes me advocate for transparency, for talking about failure, for the Social Innovation Fund to share all applications, and for foundation and other social sector blogs to embrace a conversational instead of a newsletter approach to blogging.

Philanthropy has a little bit of this dynamic, but not much. For the most part, foundation annual reports are ignored and seen as a compliance or PR document, not a source of wisdom. This is understandable since foundations do not have “shareholders” to which they need to report. However, while foundation CEOs may not need to write robust letters, doing so may be an opportunity to communicate with and influence stakeholders and other grantmakers.

Bill Gates’ annual letter – which he started at the suggestion of Warren Buffett, whose own annual letter to investors is voraciously read and reported on by the media – seems to have emerged as a good example of how grantmakers can use the format to communicate with and influence stakeholders.

I first wrote about Bill Gates’ letter and the influence of Warren Buffett the day before his first letter came out in 2009. At the time I speculated that Gates’ letter might emerge over time as a new standard for philanthropic leaders. I don’t think that Gates’ letter yet ranks up with Buffett’s, but I do think it is evolving and hope to see others follow his lead.

This year’s letter focuses on the opportunity that Gates’ sees to eradicate polio worldwide. This would represent only the second time a disease had been totally erased (with smallpox being the other one). Instead of simply reviewing the Gates Foundation’s activities, the letter makes a case for governments and other funders to join the polio eradication cause. Rather than just viewing a “win” as limited to polio itself, Gates’ argues that beating polio will “energize the field of global health by showing that investments in health lead to amazing victories.”

In addition to the letter, the Gates Foundation website features a video of Gates discussing the points in the letter. However, it is a video found in a blog post written by Gates just before the letter came out that really steals the show.

From a communications standpoint, this video is a home run. In under four minutes, the core message of Gates’ 24 page letter is illustrated powerfully. If Gates is serious about using his letter to influence others (and I think he is), then moving beyond the print letter to videos like these, that are actually likely to be viewed by policymakers and other foundation leaders, should be core to his strategy.

“From the donors’ perspective we need something more than metrics and annual reports that cements the organization’s commitment to social good. Nonprofits have typically relied on (been given a pass by) their corporate structure and the public accountability of their boards. I’d say both of these are not strong enough. Social businesses, particularly those that meet the standards of a B Corporation, are beginning to document and commit themselves contractually to social good. This is a step toward mission insurance, but the B Corporation* standards are written mostly to protect business owners, then the investors, then the customers. We need something that will work for downstream investors or donors.

And there is nothing available to ensure customers – be they the borrowers from a microfinance organization, the teen employed by a job training company, or the working mom seeking a new credential to better her job prospects – that the services they are getting are being designed and delivered with a measurable, enforceable commitment to bettering lives and communities.”

Lucy’s proposal was made in the context of her thinking about how we might insure that social enterprises, both for-profit and nonprofit, actually achieve their social mission. But I was struck by the way that the concept illustrates so perfectly the current paradigm shift in philanthropy.

Whereas philanthropy has historically been about the gift as a moral act by the donor, today more and more people think about philanthropy in the context of the results achieved by the gift. This historical view is embedded in the legal obligations of nonprofits. Nonprofits actually have no legal requirement to achieve results. Instead they need only have a socially beneficial mission and ensure that no benefit incur to the donors that support them.

The focus on results and the emergence of for-profit social enterprises turn this understanding of philanthropy on its head. What we need now is a legal understanding of social businesses that requires them to achieve social beneficial results while recognizing that having financial benefit accrue to supporters may in fact increase and accelerate social impact.

In a comment on Lucy’s post I wrote:

“We know there are documented examples of nonprofit programs creating harm (for instance it is well documented that the DARE program to "keep kids off drugs" has no positive impact and some evidence suggests that it increases drug use).

In the world of consumers, this would be stopped. If a drug designed to decrease the drug cravings of addicts was found to have no effect and possibly to increase cravings, it would be recalled immediately.

While I think it might be hard to "insure" that a social mission is met (just like it would be hard to "insure" that a for-profit became and stayed profitable), it seems very doable to "insure" to some degree of conviction that social programs meet minimum standards. The meeting of this hurdle would then flow upstream and greatly increase the chance of mission success.”

Today, the tax protection that nonprofits enjoy is dependent only on them having a social mission and ensuring that no financial benefits flow to donors. And yet we wonder why “evidence-based” social activity, performance management and the measurement of results is so rare.

While the challenges of measuring results are real and should not be underestimated, imagine the positive transformation that would occur if tax protection was dependent on the achievement of socially positive results and whether investor/donors benefitted from the organizations activities took a backseat from a regulatory standpoint.

Which entity should receive tax benefits? A nonprofit whose programs exacerbate the problems of the people they intend to help, or an organization – either nonprofit or for-profit – that actually helps people?

Image by Sean Percival. Click to enlarge.

TechCrunch describes the first iteration of Groupon (refering to founder Andrew Mason’s The Point service for nonprofits) as a “Boring Social Good Thingy”. The company pivoted when Andrew launched the side project Groupon and then pivoted again when it moved from a simple “Daily Deal Widget” to what TechCrunch calls a “Social Commerce MONSTER”.

The illustration then suggests a possible next pivot for each company. For Facebook, the next pivot is labeled “The Next Google (or Friendster)” referring to the potential for Facebook to emerge as the most powerful web company in the world or fade away as early social network leader Friendster has done.

The next pivot for Groupon is labeled “Walmart”, essentially taking the “Social Commerce MONSTER” label and projecting that Groupon will go on to become a leading retail company. I think the best way to understand my post on Groupon as a social enterprise is to re-label the next pivot for Groupon as “Walmart (or a Social Enterprise MONSTER)”.

Who knows? As the first iteration of Facebook shows, how a web company starts off doesn’t necessarily dictate what it will become. But on the other hand, Groupon is alone among the listed companies (or any major web company to the best of my knowledge) that began life as a social enterprise.

Today it was announced that Clara is leaving Nonprofit Finance Fund to lead the F.B. Heron Foundation, arguably the country’s leading practitioner of impact investing.

Under the direction of their VP of Investments, Luther Ragin, the FB Heron Foundation has invested 35% of its $240 million endowment in market rate impact investments and deployed another 8% in program related investments. To the best of my knowledge, no other foundation of their size has an impact investment allocation approaching the level of F.B. Heron’s commitment.

While F.B. Heron does not rank as one of the largest foundations, it is large enough to act as a model for its bigger peers. With Clara Miller leading the foundation and Luther Ragin overseeing impact investments, the foundation just became one of the most important foundations to watch.

Reader David Geilhufe:

“I think we need to be a bit more deliberate in applying the social enterprise label… But I do agree this could be the emergence of a multi-billion dollar corporate citizenship program AND virtually every corporate citizenship program would benefit from aspiring to be a social enterprise. But calling these things social enterprises takes away from the folks who build businesses from scratch for social impact.”

Reader Carrie Varoquiers:

“I do also wonder how we collectively define a social enterprise. By including Groupon it seems that we should also include Chevron as social enterprise since they provide us with the energy we need to turn on our lights and fuel our stove tops and power our cars in order to heat our homes and feed our children and get to our jobs every day. I would argue that Chevron has a much stronger purpose than Groupon, in terms of actual societal value. What about Genentech? Or Google? Are they social enterprises? If you are going to call Groupon a social enterprise, then my answer is definitely yes.”

The definition of social enterprise has been debated many times. While some people feel that only a nonprofit should be considered a social enterprise, I believe that the term has come to mean an organization that exists primarily to create social impact. The tax election that the organizations chooses should not matter, but their goals should.

Since I do not believe that Groupon’s primary goal is to create social impact, I probably shouldn’t have used the term social enterprise so loosely. But I do think that what Groupon is doing is fundamentally different than corporate philanthropy and the G-Team concept has the potential to bake social impact into the corporate DNA of Groupon.

In her post about G-Team, Christine Egger of Social Actions wrote:

“Groupon and The Point are two sides of the same coin, grounded in a shared theory of change: people’s resistance to doing something that benefits communities/businesses/themselves diminishes when they know in advance that they will be joined by others who want to do the same thing.”

Because Andrew Mason founded The Point first, then realized that the same concept could be used in a for-profit context and now is bringing The Point’s social impact focus to Groupon via the G-Team, I think it is fair to argue that social enterprise activity is taking place.

Look at it this way. The Point is clearly focused on social impact. If Groupon can serve as a dramatically more powerful platform for social impact via G-Team, the fact that G-Team is embedded within a for-profit doesn’t make it less worthy of praise.

It is for this reason that David’s statement that “Calling these things social enterprises takes away from the folks who build businesses from scratch for social impact” rings flat for me. I couldn’t care less if someone struggles with a good heart to try to achieve social impact. I care about the actually achievement of social impact. If it can be achieved at a higher level and wider scale within a for-profit company that mints money for its shareholders, I’m far happier with that outcome than if the concept stays within a definitionally pure “social enterprise” whose leaders “built it from scratch.”

Unlike a for-profit entrepreneur who might make a ton of money and then go searching for something good to do, Groupon is effectively the outcome of a social entrepreneur figuring out how to create social impact, then going looking for how to make money using the same concept and then returning to social impact.

The journey highlights the way that for-profit organizations have access to significant capital while nonprofits do not. The fact that Andrew could attract the capital needed to build the fastest growing business in history using the same “theory of change” that drove The Point, but could not attract that sort of capital while running The Point illustrates the disadvantage nonprofits have when it comes to growth capital.

It seems to me that building Groupon was probably the best way for Andrew to create social impact, because doing so gave him the capital he needed to grow The Point via G-Team.

I’ll leave the debate over the semantics of “social enterprise” to others. But Groupon’s G-Team is a project to follow and Andrew Mason is a social and for-profit entrepreneur to watch.

Back in 2007, 26-year-old Andrew Mason was working away on a website called The Point. The concept was that people would pledge to take some sort of social action – give money, volunteer, join a campaign – but they would only follow through on the pledge if a certain number of other people made the same pledge. This allowed someone raising money via The Point to tell a potential donor that they could pledge $100, but would only have to make the gift if at least 100 people made the same pledge. In this way the donor would know that they would only have to give the money if the nonprofit was going to get $10,000 and fully fund the project.

The Point quickly joined Social Actions and during the FORGE event in late 2008, Andrew approached me about setting up a Tactical Philanthropy community project on The Point.

It turns out that just about the same time, Andrew was launching a little side project called Groupon that would apply the tipping point concept to buying discounted goods and services. That little side project exploded in popularity and the now 29-year-old Andrew is the CEO of a multibillion dollar company.

But Andrew’s social entrepreneur roots are still solidly in place. The Point is still operating and recently Sharon Schneider argued that Groupon might be the most successful social enterprise ever. Sharon’s argument rested on the fact that Groupon deals are not just for restaurants and spas, but also drive increased traffic to nonprofit museums, offer discounts on local sustainable food and other products and services are offered by nonprofits or result in some sort of social good. For instance Groupon has offered deals on Kiva.org microfinance credits (which Oprah pointed to as a “best holiday gift”) and offered what was effectively matching funds for donations via Donorschoose.

Now Groupon is focusing directly on social impact activity. Since Groupon has dramatically higher brand awareness than The Point, the two organizations have teamed up to launch G-Team on the Groupon website.

Here’s how Groupon explains the new platform (Andrew is known for his sense of humor, telling the NY Times during the rumored Google takeover that he couldn’t talk on the record with them unless they wanted to talk about his true passion… miniature dollhouses):

“Long, long ago (2008), Groupon was born out of a group action and fundraising platform called The Point. As the Groupon community grew, our collective consumer power helped people get great deals and discover fun ways to experience their cities.

After a desert vision quest where we invoked our ancestral spirits, we are repossessed with The Point’s powers. Newly inspired, we’ve devised a way to connect Groupon users with their communities in a different way—with G-Team. Groupon followers who want to do good, have fun, and make a real impact can now join forces through G-Team campaigns.

G-Team campaigns range from ridiculous flashmobs to fundraisers that benefit local community organizations. Every G-Team campaign connects you with enough people to achieve something awesome that you couldn’t have done alone.”

G-Team isn’t just replicating The Point, it is combining the offering of Groupon and The Point.

One of the examples explaining the service is a Groupon discount where buyers can get an $80 bike tune-up for just $35 (so long as enough people sign up). However, since this is a G-Team joint effort with The Point, the offer also includes the fact that if the discount tips, a local bike cooperative will fix up 100 broken bikes and donate them to disadvantaged youth.

In some ways, G-Team looks like a cleverly designed corporate philanthropy effort. One in which Groupon gets “good karma” credit for the social good offered by the companies that use their service. But unlike much of corporate philanthropy that is almost wholly disconnected from the for-profit activities of the company, G-Team seems perfectly aligned with the strengthens of Groupon.

I’ve written recently about Facebook founder Mark Zuckerberg’s philanthropy. But with Andrew Mason we have a true social entrepreneur who seemingly stumbled into an unbelievably profitable business venture. While Zuckerberg and other signers of the Giving Pledge should be rightly applauded for their efforts to give money generated in business to social impact organizations, the next frontier is business leaders who figure out how to embed social impact into the DNA of their profit engine.

With the launch of G-Team, which has the potential to deliver social impact as well as increase revenue for Groupon, we may be seeing the emergence of a multibillion dollar social enterprise.

(A special thanks to Christine Egger for pointing out G-Team to me)