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Paul Brest to Retire From Hewlett

Paul-BrestPaul Brest, the president of the Hewlett Foundation and author of Money Well Spent has announced he will be retiring in 2012. Anyone who has read this blog for a while knows that Paul and I don’t see eye to eye on some core principals of philanthropy. However, I think that Paul embodies a number of key characteristics of a model large foundation president. I hope that Hewlett finds a replacement cut from the same cloth and that other large foundations strive to find leaders with similar characteristics.

Paul recognized that foundations should pay just as much attention to the practice of their philanthropy as to the execution of their programs. Paul didn’t just pay lip service to the need for constant refinement of your approach to philanthropy. He funded and personally oversaw the largest, most important philanthropy program at a major foundation. In recent years, the Gates Foundation has ramped up their own philanthropy program. But most all large foundations do not seem to believe that funding the investigation and development of the philanthropic field is their responsibility.

Paul, a former dean of the Stanford Law School, had strongly held convictions about the best approaches to philanthropy. But he relished a good debate and was willing to change or modify his beliefs when he was presented with compelling arguments. The philanthropy blogosphere is full of what superficially passes for debate. But too often it is actually just two different points of view being presented over and over without any give and take or any modification of positions that might suggest the “debaters” are looking to build their understanding of philanthropy rather than simply seeking to win the argument.

Paul celebrated the idea that learning comes from failure. He oversaw the release of Hard Lessons, a major report on a Hewlett Foundation program that went off course. He also created an annual prize at the foundation for the program that made the worst grant each year. Far from trying to embarrass anyone, the worst grant prize is meant to encourage program staff to embrace and learn from their mistakes.

Paul, preparing to retire at age 72, recognized the value of social media to the field of philanthropy. Writing in the 2006 Hewlett annual report, Paul discussed the need and process for creating an online information marketplace for giving. At a time when few foundation professionals even read blogs or tracked social media, Paul took to heart my argument that if he was serious he should launch a blog as a platform for debate. A year later he launched his own blog on the Huffington Post platform and engaged in a level of constructive critique that is rarely heard in public within our field.

On his blog, Paul didn’t just make statements from a soapbox in the way that so many foundation hosted blogs treat the medium as a digital platform for their press releases. Instead, Paul fully understood the conversational aspect of blogging that sets it apart. For instance, Paul took on my arguments that strategic philanthropy is flawed in a multipart back and forth between the two of us. He added his thoughts to debates started by other bloggers. He reviewed important books being released in our field. He highlighted critiques of his book by other bloggers. He criticized as “virtually meaningless” the nonprofit rating system used by Charity Navigator (but in a move highlighting his willingness to update his believes as the evidence changes, he oversaw a grant to Charity Navigator when it sought to improve its rating approach). And he wrote a scathing indictment of the National Committee for Responsible Philanthropy’s position on how to assess foundations even while noting that Hewlett funds NCRP as part of their program to support the infrastructure of the philanthropic sector.

Paul doesn’t just accept the role of debate in building knowledge, he tolerates and encourages debate within his foundation’s own ranks. While I found his public sparing with me online and at conferences remarkable, I just about fell out of my chair when I read Letting Go, an article in the Stanford Social Innovation in which a current Hewlett employee made a case essentially at odds with the tenets of strategic philanthropy that Paul laid out in his book. Paul easily could have stopped the employee from publishing the piece, but instead allowed it and continues to engage in the debate publicly.

Paul was such a great large foundation president because he sees himself as a student of philanthropy, not just a teacher. It is easy for an executive who is put in charge of billions of dollars of philanthropic assets to assume that getting the gig must indicate that they are the one who knows what to do. But as I wrote recently, knowledge is a process not a destination.

What the field of philanthropy needs right now are senior leaders who see themselves not as the people who own the knowledge, but instead as student-leaders striving to help our field grapple with the many, many difficult challenges we face.

I wish Paul the best. As I said above, I frequently disagreed with his positions. While sometimes an opponent on means, Paul was a fierce believer in the value of the ends I seek: Building a better philanthropy.

Philanthropy Daily Digest 08/31/2011

Posted from Diigo. The rest of my favorite links are here.

Philanthropy Daily Digest 08/30/2011

Posted from Diigo. The rest of my favorite links are here.

Reinvigorating a Humanistic Philanthropy

This is a guest post by George McCully, president of the Catalogue for Philanthropy, co-creator of the Massachusetts Philanthropic Directory (MPD), and author of Philanthropy Reconsidered: Private Initiatives—Public Good—Quality of Life.

By George McCully

George McCullySeveral recent threads here on Tactical Philanthropy and elsewhere (see here, here and here) – on values and love in philanthropy; on the “blurring of the lines” between government, business and philanthropy; and on the relations between philanthropy and “nonprofits” – have raised questions of fundamental definition.   As such, they express the paradigm-shift that is currently transforming philanthropy, and the fact that the Old Paradigm was dominated by social sciences, to the neglect of philanthropy’s original, value-intensive, tradition.

Paradigm-shifts are not just lots of changes happening at once; they are fundamental and thorough transformations imposed on mature fields from their changed environments.  In the case of philanthropy’s late-20th-century paradigm, the change-agents are technological revolution, economic globalization, and the resulting new demographics of wealth, which are transforming philanthropy’s vocabulary (words), conceptualization (ideas), rhetoric (appeals), infrastructure, and modes of operation. 

From its first coinage in Aeschylus’ Prometheus Bound (460 BCE, line 11), and throughout most of its 2,500-year history, “philanthropy” meant “love of humanity” – caring for, nourishing, enhancing, developing what it is to be human, or human potential.   A philosophical dictionary of the Platonic Academy defined “Philanthropía” as: “A state of well-educated habits, stemming from love of humanity… productive of benefit to humans.”  The Greek word was translated by Romans into Latin as simply humanitas – ”humanity”, or “humaneness”.  Thus it was an educational and cultural ideal of self-development, doing good works – the core of the humanities and of our distinctive Western tradition of liberal education.

Lest we think this has nothing to do with us, it was in this sense that Alexander Hamilton, in the first paragraph of the first Federalist Paper, launched the Founders’ argument for ratification of our Constitution by noting that “It is commonly remarked” that Americans were at a new place in history, in which for the first time they could design their own government, for the betterment of mankind.  “This” he said “adds the inducements of philanthropy to those of patriotism.”  He was not talking about rich people helping poor people, or “giving back”; he was saying that the United States of America was intended to be a philanthropic nation, a gift to mankind, to improve the human condition.  To be “philanthropic” in this Classical sense was therefore, and still is today, quintessentially American—adding, as it were, the inducements of patriotism to those of philanthropy.

“The inducements of philanthropy” — an arresting phrase.  Yet by the close of the 20th century, under the presidency of social sciences over our field, the profound idea that education and culture express a love of what it is to be human, had lost all power of inducement.  The word itself was hardly ever used, and when we launched the Massachusetts Catalogue for Philanthropy Project in 1997, we were advised not to call it that, because it was pompous, pedantic, and meaningless (our advisors preferred “Catalog for Giving”).  This is how great ideas die — in this case arguably one of the greatest, most profound and influential, ideas in the history of Western thought.

Now fifteen years later, thanks to the popular media’s fascination with “celebrity philanthropy”, and certain prominent initiatives using the word, like the classically American Gates-Buffett Giving Pledge, it has re-entered our vernacular, even in commercial movies and television.  Of course people still don’t know what it means.

But that’s the faculty’s (i.e. our) fault, not the students’, and it impedes our productivity, so we have a teaching job to do — starting with ourselves, as in the discussion threads noted above. 

A high priority is to expunge from our vocabulary the useless, negative, and factually incorrect word “nonprofit”; preferable alternatives are “philanthropies” or “charities” (in law they are all “charitable corporations”).  “Nonprofit” is a meaningless term outside the tax code and related state laws of incorporation, because those organizations have nothing else in common.  Moreover, the MPD found that fewer than 10% of “nonprofits” are authentic philanthropies.

It would also strengthen our culture of philanthropy to integrate the late-20th-century social-scientific understanding with the original and long-authoritative humane tradition.  Philanthropy is “private initiatives for public good (the social-science procedural emphasis), focusing on quality of life” (the value-intensive humanistic tradition).  This clearly distinguishes it from business —  “private initiatives for private good (i.e., profit), focusing on material prosperity”, and government — “public initiatives for public good, focusing on law and order”.  With these definitions the “lines” are not “blurred”, though the activities may be (increasingly, we hope) combined.

Philanthropy Daily Digest 08/27/2011

Posted from Diigo. The rest of my favorite links are here.

Nonprofit Raises $7.6 Million in Venture Capital

The for-profit GOOD buying the nonprofit Jumo has gotten a lot of press, including the New York Times. While the unusual (but perfectly legal) transaction has stirred up some debate about what it all means, I think the far more unusual and interesting story is the deal to transform the nonprofit CouchSurfing into a for-profit so it can take on $7.6 million in venture capital.

According to Forbes, the nonprofit CouchSurfing, which seeks to connect global travelers with locals through arranging a free place to stay, has changed from a nonprofit to a for-profit B Corporation and received venture capital from Benchmark Capital and Omidyar Network.

I have so many questions, I better just get them out:

  • Helping people find a free couch to crash on is a nonprofit activity?
  • The organization barely has any revenue, but Omidyar was more interested in providing for-profit venture capital than a nonprofit grant (Omidyar does both kind of funding)?
  • Stories abound of a new tech bubble in privately held companies, but are venture capitalists seriously now willing to invest in “not for profits”? Aren’t there enough money losing “for-profits”?

Whew. OK, now that I got that skepticism out of the way, let’s look at the broader implications.

According to the co-founder of CouchSurfing, the deal is about maximizing the organization’s social mission:

“The non-profit structure is not ideal in enabling innovation to occur in terms of regulatory oversight and various auditing requirements,” says Daniel Hoffer, CouchSurfing’s co-founder turned President and CEO. “B Corporation status allows us to take investment money and be nimble and flexible while sticking with our social mission.”

Hoffer goes on to say that the first order of business will be “aggressive hiring” to better serve the organization’s three million members. Now if you take as a given that CouchSurfing is serving a social mission, then clearly suddenly have the resources to engage in aggressive hiring to serve their rather large membership is a very good thing.

I’m struck by this tidbit in the Forbes story:

“The news is timed one month after another couch surfing website, Tripping.com, announced it had secured over a million in seed funding from Quest Venture Partners and a group of undisclosed angel investors. Tripping.com only claims “thousands” of members and one has to wonder whether CouchSurfing developed a sudden inferiority complex upon hearing news that its smaller, new, for-profit rival was suddenly flush with cash.”

Inferiority complex? Or did CouchSurfing just make the completely rational decision that they’d be crazy to remain a nonprofit if the for-profit capital markets were better able to provide them the money they need to grow and thrive?

All it really means to be a nonprofit is that you agree to never distribute excess resources for the personal use of the people who contributed the capital to create the business. In exchange, those contributions are deemed tax deductible. For-profits are not restricted from having a social mission and the language is so loose to qualify as a nonprofit that almost any “mission” can qualify. For instance, the nonprofit National Cattlemen’s Beef Association lists their primary “mission” as “increasing consumer demand for beef”.

Now switching between tax statuses or letting a for-profit buy a nonprofit raises all sorts of important questions. But at the end of the day, all of the concerns get down to questioning about whether a tax deduction was granted for a charitable gift that resulted later in producing a profit for someone.

Never mind that the government provides tax incentives for all sorts of for-profit activity (and all money losing for-profit investments are tax deductible), I just don’t find the risk that someone, somewhere might get a tax deduction for something that ends up turning a profit as all that disturbing. If that’s the risk, I’ll take the potential return of certain nonprofits gaining access to significantly more resources so they can accelerate their social mission.

Just as their are rules about how for-profits and nonprofits must conduct themselves, it is a given that we need well thought out laws to govern how for-profits can buy nonprofits or nonprofits can become for-profits. Those laws already exist, but innovations like B Corporations that are meant to strengthen and improve these laws should continue to be expanded.

Look, I don’t know if CouchSurfing’s “social mission” should qualify as a tax exempt nonprofit. But I know that nonprofits are starved for growth capital. The true distinction between a socially driven business and a profit driven business isn’t about their tax code election. The distinction is about the collective decisions the organization makes over time and who those decisions are intended to serve – public or private benefit.

We’re going to see a lot more deals like these over time. I’m all for vibrant debate about whether the deals are good or bad for the public, but let’s be sure we debate the true merits of various approaches to furthering the public good instead of wringing our hands about the surface level tax code issues.

Philanthropy Daily Digest 08/26/2011

Posted from Diigo. The rest of my favorite links are here.

Philanthropy Daily Digest 08/25/2011

Posted from Diigo. The rest of my favorite links are here.

The Decline Effect & “Proven” Nonprofit Interventions

One of the great buzzwords of the effective philanthropy movement is the idea of “proven effective” programs. Since so many nonprofit programs are never tested and are based on ideas that have little research behind them, it makes sense to encourage the funding and deploying of programs that have proven to be effective. While sensible, I think this concept can be dangerous unless funders and nonprofits understand that “proof” is a process, not an event.

In 2010, the New Yorker published an article titled The Truth Wears Off, that looked at the existence of the “Decline Effect”, the seemingly inevitable way that when scientific studies are repeated over and over, they tend to follow a path of diminishingly positive results.

In the article, Jonah Lehrer wrote:

“The test of replicability, as it’s known, is the foundation of modern research. Replicability is how the community enforces itself. It’s a safeguard for the creep of subjectivity. Most of the time, scientists know what results they want, and that can influence the results they get. The premise of replicability is that the scientific community can correct for these flaws.

But now all sorts of well-established, multiply confirmed findings have started to look increasingly uncertain. It’s as if our facts were losing their truth: claims that have been enshrined in textbooks are suddenly unprovable. This phenomenon doesn’t yet have an official name, but it’s occurring across a wide range of fields, from psychology to ecology.”

Lehrer’s article incited a flood of angry letters and emails claiming that he was undermining scientific research and drumming up a controversy that doesn’t exist. However, my reading of the article (and Lehrer’s responses to his critics) suggests a much more modest claim is at the heart of his article.

Human knowledge is an evolving concept.

For all the perceived precision of a large study “proving” that something is true, the fact remains that over time our understanding of facts and truths change.

Lehrer explains a number of reasons behind what is know as the “Decline Effect”. Taken together, much of the issue has to do with human cognitive biases and behavioral issues in the way we process information. For instance, Lehrer points to the way that scientific journals seem to greatly prefer to publish studies that prove something to be true, so scientists have a significant incentive for their studies to find these results.

But even if you peel away all of the messiness of the human practice of scientific study, you are still left with the idea that seeking truth is a process not an event.

Lehrer writes:

“The decline effect is actually a decline of illusion. While Karl Popper imagined falsification occurring with a single, definitive experiment—Galileo refuted Aristotelian mechanics in an afternoon—the process turns out to be much messier than that.

[The Decline Effect is so troubling] Not because it reveals the human fallibility of science, in which data are tweaked and beliefs shape perceptions. (Such shortcomings aren’t surprising, at least for scientists.) And not because it reveals that many of our most exciting theories are fleeting fads and will soon be rejected. (That idea has been around since Thomas Kuhn.) The decline effect is troubling because it reminds us how difficult it is to prove anything. We like to pretend that our experiments define the truth for us. But that’s often not the case. Just because an idea is true doesn’t mean it can be proved. And just because an idea can be proved doesn’t mean it’s true.”

Now the silly way to react to the decline effect is to turn our backs on science and decide that if it cannot present us with the unquestionable truth, then it doesn’t work (this is the message that some of Lehrer’s critics through he was pushing). The more useful way to react is simply to understand that the concepts of “truth” and “fact” are far less rigid and concise than we tend to treat them. The search for truth, for “proven programs” will not end some day when we finally, finally, finally discover the real truth.

As Ralph Waldo Emerson said, “Life is a journey, not a destination.”

What this means for nonprofits and funders who want to direct their resources towards programs that actually work is that doing so will always be a continuous process. There will never be a a final, definitive study that tells us the “truth” of the best way to eradicate poverty, to end obesity, to give every individual the opportunities they deserve.

But that doesn’t mean we should lower our ambitions nor reject the scientific process. Instead, I think that Ted Cadsby, writing in the Harvard Business Review had it right when he argued in favor of adopting a mindset of “provisional truth”:

“Provisional truth requires that we think of our explanations as hypotheses — always subject to replacement based on new information or alternative ways of structuring existing information. Provisional truth means challenging our interpretations with disconfirming evidence and alternative perspectives. Provisional truth does not preclude drawing conclusions or taking action; but it demands that we be skeptical about our first reasonable explanations in the realm of complex problems. It keeps us humble and mentally flexible, constantly asking ourselves if we’ve really got everything figured out and responding, "Probably not."

But of course the scientists among you will recognize that the skepticism embedded in the idea of “provisional truth” is in fact a core aspect of the scientific process. The Decline Effect doesn’t discredit the process of scientific inquiry. Instead it simply lays waste to the fetishism of the scientific process that deludes people into thinking that we can at last completely understand and control our world once we discover “the truth”.

Philanthropy Daily Digest 08/24/2011

Posted from Diigo. The rest of my favorite links are here.