I really appreciate the way you use the language of investment to talk about philanthropy, and I think the long-term outlook is very important, but I have a question about messaging.
Whenever I use the word “invest” when talking about Wokai, the China microfinance non-profit with which I work, the person’s next question is always, “So, what’s the return?” I’ve answered this question several ways:
1. Highlighting the long-term impact on China’s society
2. Explaining the way in which contributions made to fund loans for entrepreneurs in rural China can be recycled (once the original borrower repays the loan)
These answers rarely seem to satisfy the person I’m speaking with. I think it’s because many of these people either work in finance or are active investors, and the word “invest” activates a completely different part of the brain than a word like “donate” or “contribute.”
I’m wondering if you have experienced a similar cycle of questions in your own work, and how you have approached them. One of my favorite posts of yours was the one about the distinction between spending and investing, but I’m starting to think that this language might be more prevalent among people who talk about philanthropy every day than among the wider population of potential contributors.
Leslie brings up a really good question. Is it appropriate to use the word “invest” when there is no financial return to the investor/donor? Jed Emerson is the person who developed the concept of “blended value”, the idea that all organizations produce a blend of social and financial value. At the World Economic Forum conference that I attended in November, we were talking about whether something was “social investing” or “philanthropy”. Jed just about screamed “It is all just investing!” (Jed has a way with words).
Not all philanthropic giving is “investing”. George Overholser has laid out the difference between philanthropy that seeks to “buy” social good and that which attempts to “build” nonprofit organizations. Only “build” philanthropy is a type of investing.
In my post where I laid out why I was “investing” in FORGE, I didn’t use that word simply because it is the “cool” way to talk about philanthropy these days. I used it because my investment in FORGE was meant specifically to help them build a better organization. I have zero expectations that my donation will be used to serve refugees. I expect my money to be used by FORGE to build their organization so that they can better pursue their mission in the future.
Back to Leslie’s question. The word “investing” is correctly used in philanthropy if a donation is designed to build an organization. It is also appropriate if it is structured as a loan or donation to an individual that is expected create future benefits. Wokai’s donor/investors are making an investment. But the “return” is accruing to the people receiving the loans.
Let’s say I could make a financial investment in which all returns were paid to my child or to a friend of mine and the principal would be repaid to me. Clearly, that investment is producing value. Clearly it is an “investment” even though the returns do not accrue to me.
But these sorts of investments are not well understood. I do think that the shifting language can be confusing to donors. The best way to illustrate the concept to donors is to show them what the return is and point out that if that return accrued to them, they would clearly be making an investment. The fact that the return accrues to someone else does not change the nature of the transaction as an investment.