I wrote a post a while ago called Paul Brest Needs a Blog (Paul is the head of the Hewlett Foundation). I’ve been an advocate for more people in philanthropy to start blogging in general. In the above mentioned post I wrote:
So why should foundations blog? It seems to me that the imperative is not for them to embrace technology so much as it is for foundations to join and begin to drive the online philanthropy conversation. [But] it is the two-way flow of information that blogs encourage that is important, not blogs themselves.
Even so I’ve noted recently that some people feel that I’ve pushed blogging rather than information sharing. As the conversation we’re all having unfolds I think it is important to take a step back and make sure we haven’t missed the forest for the trees. I wish I had expressed my thoughts with more clarity.
When Phil Cubeta recently asked why nonprofits should blog, astute reader Michele Moon asked:
I’m not entirely sure why it’s blogging, in particular, that’s the focus of discussion, especially because it’s now considered a little bit old-hat, Web 1.5. What is it about the format that makes it so essential to transparency and its tyrant? Is it actually blogging you want to see – personal, real-time updates and editorials, followed (if you’re lucky) by people who read, comment, and sometimes stick around to converse?… Why should it be blogging that we aim to do, or is that shorthand for more complicated online interactivity?
I’m guilty of using “blogging” as short hand for information sharing. I’ll stop making that mistake.
When economists speak about efficient markets they are talking about a situation where money flows to the organizations that can put it to the best use. Widely available, robust information is a critical factor for a functioning efficient market. Recently, in a conversation with Phil Buchanan and other readers on this issue I wrote the following (you can find the full thread here. The Chronicle of Philanthropy recently highlighted the conversation):
In an efficient market, investing is a zero sum game. Maximum returns are generated globally so the only question is matching an investor’s risk/return preferences. In inefficient markets, higher returns accrue to more “effective/smarter” investors. In a public benefit market, since all returns accrue to everyone, investors should desire an efficient market within which they could align their social investments with their personal values/goals.
The philanthropic capital markets are highly inefficient. Far more inefficient than any for-profit marketplace.
Therefore, it seems to me that making the philanthropic capital markets more efficient should be the number one priority of large funders who desire to be effective…
I’m not arguing that the public will make better decisions than the “experts”. I’m saying that efficient markets will produce better outcomes than inefficient markets. In the for-profit world, inefficient markets are great for “expert” investors because they can exploit superior information to generate outperformance of investment returns. But these inefficient markets reduce the total returns in the market by preventing capital from flowing to the best performing investments.
What I’m saying is that unlike in the for-profit market, “expert” philanthropist enjoy no advantage from superior information. The returns they generate accrue to the public, and so no “outperformance” is possible. Instead, they should be interested in the total market functioning at a higher level, since that is the only way to increase the social return on investment that accrues to everyone.
This is the challenge we face as a field. How can we ensure that the $300 billion that is given to charity each year is flowing to the organizations that can put the money to its best use? The key will be our ability to supply market participants with widely available, robust information. Blogs are one tool in this work. There are many others.