Philanthropy as a Business

In response to my recent posts on “philanthropy spending vs investing”, “paying for philanthropic advice” and “how much philanthropic advice is worth”, Phil Cubeta offers a post titled, “Why Philanthropy as Business is Foolish and Will Fail” in which he calls my posts “false poetry”.


We can jabber on about how this is really social investing, a philanthropic industry, a social capital market, but donors (or social investors) will likely see through the high quality, MBA-inspired, BS and realize that we are battening on their gifts, extracting tolls and levies and loads designed to make our cushy lives better. We are cynically exploiting the charitable motive, as capitalism exploits all motives…

…What then is the answer, if loads [fees] there must be? Align the load with social benefit. Have the entity extracting loads be mission-aligned with the donor. Have the load-extractor positioned within the donor’s circle of trust, love, and concern. Have the load-extractor be a beloved nonprofit, and mainstay of a community in which the donor and the donor’s family dwells in solidarity, kneels in prayer, or works as a volunteer in a spirit of shared service.

For those that don’t know the history, Phil Cubeta was my foil when I first started blogging. He welcomed me with open arms to the then budding philanthropy blogging community and then quickly skewered my writing (to my delight). When reading Phil’s rants, it is important to understand that he uses satire often and with relish. Phil has done much for philanthropy blogging and I credit him with reigning in my social capital market beliefs when I get out of line.

But Phil is dead wrong on this one.

To buy into Phil’s world view on this topic, you have to agree with him that 1) capitalism exploits the motives of all those who dare engage it, 2) that donors are best served when they receive philanthropy advice from nonprofits rather than for-profits.

I believe that philanthropy already exists within American capitalism and that it will benefit from embracing the financial systems that are used to fund for-profit enterprises. I do not believe that for-profit businesses and free markets produce the most social good (and neither do most economists who recognize that “externalities” exist in free markets). But I do think that financial markets are pretty effective at allocating funding to top performing companies and depriving poor performers of capital. Employing a more robust social capital market and encouraging donors to utilize all the tools at their disposal is not cynical nor exploitive but in the best interest of philanthropy.

I believe that philanthropic advice should be provide by both nonprofit and for-profit organizations. Donors should understand the incentives of the advisors they hire. Calling advisors (both nonprofit and for-profit) “fee-extractors” is just silly. Phil might wish that we could all exist in a gift economy where people simply helped each other out of pure good will, but frankly both nonprofit and for-profit employees need to earn a living. If they can do so in a way that produces significant social good as I demonstrated in a recent post, that’s something Phil should be celebrating instead of tearing down.