Are We Rising or Sinking?

(This is a guest post from Brian Walsh, head of global social engagement for LiquidNet, who is covering the Council on Foundations Conference for Tactical Philanthropy)

By Brian Walsh

There’s a giant statue of a mythic figure partially submerged in the sand of the marina at the new National Harbor where the Council on Foundations conference was held. Depending on your perspective, this figure is either rising triumphantly or sinking desperately. I can’t think of a more apt metaphor to frame one’s perspective on the future of philanthropy coming out of this conference.

At Tuesday’s mini-Summit on Philanthropy and the Economy, held at the Commerce Department, former Clinton Treasury Secretary Robert “Rubinomics” Rubin declared that the current macro economic situation is the most challenging and complex set of circumstances that he’s witnessed in his adult life, and warned that no matter who becomes the next President, for the near term there will be reduced corporate returns, increased demands for services, and a decrease in the capability of government to respond. Clearly, there will be an increased demand put on philanthropy to help fill the looming gap, even as foundations see reduced returns on their endowments.

Rubin went on to lament the “unconscionable number of poor people we have in a very rich country” which he presented as not just a moral issue, but an economic one. He sees the importance of bringing the poor into the economic mainstream as necessary for the United States to remain competitive in the larger historical transformations occurring in the global economy.

Later at the same mini-Summit, former Speaker of the House Newt Gingrich offered hope that we are entering a phase of unprecedented technological achievement at a scale never before seen in human history. Gingrich predicted (not so subtlety) that the coming decades will see the “greatest explosion in human creativity in perhaps the entire history of the world” and went on to exclaim that “it’s almost incomprehensible how much knowledge is coming down the road; the scale is just daunting.” He railed against bureaucratic structures as hindrances to innovation and encouraged people interested in social change to follow their passion where it leads them, experiment, and take big risks.

Matthew Bishop of the Economist (and coiner of “Philanthrocapitalism” phrase) concluded the mini-Summit by heralding the “fifth golden age” of philanthropy that we’re potentially entering (the first three occurring in Britain beginning with the Tudors; the third starting with the Industrial Revolution in the U.S. and ending around 1932).

The hallmarks of this new age Bishop claims we’re on the threshold of include the fact that we are in an extraordinary period of entrepreneurial wealth creation, we face immense social challenges, and we are seeing new business models and techniques being applied to address these challenges. He talked about the need for “big, risk-taking innovation capital” provided to the “social problem solving community.” Bishop also highlighted the ‘hyper-agency’ role that philanthropy can play with its “ability to mobilize resources at a scale that gives you more power to focus on a particular problem.”

During the Q&A, Miles Rapoport, President of Demos (the publisher of “Just Another Emperor? The Myths and Realities of Philanthrocapitalism” pamphlet by Michael Edwards) questioned Bishop on the ability of this new age of philanthropy to lead to the social transformation that Rapoport believes is necessary. In his response, Bishop essentially argued that if you can’t beat them, join them, in that it’s best to harness the tools provided by recent technological innovations to improve society. Market-based capitalism isn’t going anywhere soon.

Back at the brand-spanking-new Gaylord Resort, something did seem to be stirring in the salons and ballrooms.

I saw “traditional Foundation” professionals asking Ashoka founder Bill Drayton how they can encourage “social entrepreneurs.” Social Ventures Partners Executive Director Paul Shoemaker was asked how the tools of “venture philanthropy” can be applied to typical grant-making. X-Prize founder Peter Diamandis advised how more organizations might use “prize philanthropy” and competition to spur social innovation. The “Next Gen” rave-ish reception (a departure from the typical conference cocktail party, complete with the admittedly-yummy “Next Gentinis”) highlighted the online capabilities being developed to further democratize philanthropic involvement and bring new voices to the conversation, using technology to solicit ideas for change from a wider audience.

All of which is very exciting and seems very promising.

But there’s a larger opportunity out there. Philanthropy in America is a $300 billion annual market. As Ed Skloot of Duke University said during his session on Venture Philanthropy, the philanthropic field is “bereft of a marketplace that aggregates and uses capital well.” From my perspective, the philanthropic marketplace is terribly inefficient. To be sure, I am not claiming that individual nonprofits are inefficient – although certainly some are – nor am I making a judgment about the efficacy of individual nonprofits – though certainly some could be more effective. Rather, it seems to me that there is enormous room for improvement and increased efficiencies in the way in which we as a society provide resources to the causes that require resources. It’s a question of reducing transaction costs. This is a big challenge – and a big opportunity – and I’d be interested to hear from others on their perspectives for fixing our broken philanthropic marketplace.

I leave the conference as an optimist, and am excited about the possibilities that lay ahead (or is it lie ahead? I hope my 7th grade English teacher doesn’t Google me).

By the way, the title of that statue (by J. Seward Johnson, Jr.) in the sand is “The Awakening.” In my view, we’re in the midst of the next great wave of philanthropy that is now awakening , bringing with it a period of collaboration, innovation, broader engagement, and social progress. For my company, Liquidnet, an electronic marketplace for institutional investors, we’re tremendously excited to be participating in this new era through our Global Social Engagement, whereby we are committing one percent of our revenues towards addressing social challenges.

It’s an exciting time.