Philanthropy 2.0

Lots of people have used the terms “Philanthropy 2.0”, “New Donors” or other phrases that suggest that something has fundamentally changed about the field of philanthropy. The subtitle of this blog is “chronicling the second great wave of philanthropy,” which also implies that something new is replacing an older approach (I described the second great wave in one of my first posts on this blog three years ago).

Today, I want to discuss the graphic below, which lays out one take on the difference between Philanthropy 1.0 and Philanthropy 2.0. This graphic comes from a new report from BBMG a branding and marketing firm. The report is titled From Legacy to Leadership: Is Philanthropy Ready for the New Consumer?

Here’s my quick take:

Altruism vs. Enlightened self-interest: I might replace “altruism” with “sacrifice” or “obligation”. But either way it gets to the idea that donors have begun to shift to thinking about philanthropy as a non-zero sum game. Giving to a nonprofit does not benefit the nonprofit and hurt the donor, if done right it can enhance the well being of everyone involved.

Problems vs Solutions: I think philanthropists have always looked for great solutions, but there is a way in which solutions have gotten more attention recently. For instance, microfinance has captured so much attention due to the solution itself. It is not the plight of poor women in India that so many donors are focusing on, it is the solution of microfinance.

Services vs. Impact: Focusing on delivering impact is probably Philanthropy 3.0. But donors today are focused more on results or “outcomes”. They are getting more interested in the difference a nonprofit’s programs are achieving rather than the activity the nonprofit is engaging in.

Single donors vs. Community of believers: Donors have always gathered in various communities, but today there are more and more people thinking about co-funding, funder collaboratives and other ways that they can leverage their giving through interacting with other donors. In addition, as nonprofits move from fundraising to “friend raising”, they are recognizing the power of building a community of supporters and donors are beginning to see the value of this community as well.

Donations vs “Sustainable Revenue Streams”: I’m guessing the authors of the report meant earned income when they wrote sustainable revenue. There is more of a focus on earned income, but sometimes I worry that elevating earned income as somehow superior to donations forces nonprofits to shift their attention away from their mission. Donations are sustainable. In fact, the volatility of donations is lower than GDP and so on a national level donations are more sustainable and predictable than income. But there is a push for a more sophisticated approach of understanding how a nonprofit can create a sustainable business instead of hoping to close the budget each year.

Top-down vs. Bottom-up: This is the big one. This is the core of my original definition of the second great wave of philanthropy: “While the traditional top-down hierarchical system describes the way Rockefeller’s foundation distributed grants to charities, which then provided services for the public, a flat structure is the model of the Second Great Wave. This shift acknowledges that no one person or entity has all the answers and instead leads to a virtuous cycle of information feedback. The philanthropists of the 21st century will be smaller in size, but much larger in numbers than the philanthropists of the last century.”

Few vs Many: I agree here too, except I think the point is captured in top-down vs bottom-up. The “democratization of philanthropy” is in full swing. In 1980 about 6% of Americans were invested in the stock market. By 2000, it was more than 50%. The baby boomers that fueled that move during their retirement planning years are now retiring and hitting peak giving years. I would suggest that today something like 6% of Americans are engaged in proactive, intentional philanthropy, but that within 20 years we might push that number north of 50%. While the exact numbers are up for debate, I think that directionally the trend is clear.

What do you think of the Philanthropy 1.0 vs 2.0 framework? Plenty of people told venture philanthropists in the 90’s that they weren’t doing anything that the Ford Foundation wasn’t doing in the 1950’s. Philanthropy does have a tendency (like most fields) to always believe that “this time is different” and that everything has changed. Does the New Donor even exist?

Let me know what you think.

Note: You can learn more about the BBMG report by reading Lucy Bernholz’s take here (she focuses on an entirely different segment of the report) and you can read the report yourself by clicking here.