Social Venture Partners & Passionate Social Investing

I’m one of those people who uses words like “investing”, “leverage” and “impact” when I talk about philanthropy. For some people, this sort of language seems to imply a passionless approach to philanthropy. As if investing was nothing but a number crunching exercise.

But having spent part of last week at the Social Venture Partners conference, I can tell you that social investing is anything but passionless. The social investors who attended the conference (about 200 of SVP’s 2,000 members) are deeply passionate about philanthropy and the causes they support. They are so passionate that they want to be sure that the work they do actually produces results. The focus on results is a result of passion rather than a barrier to emotional connection. The front page of the Social Venture Partners International website reads: “SVP is a network of individuals who care passionately about making the world a better place.” Yet somehow, discussions of social investing, or for that matter any analytical approach to giving, is painted by detractors as lacking passion.

I’ve been steeped in the world of investing since I was a teenager. For me, words like “investing” are not dead and boring, but instead are full of passion and life. So I want to revive a conversation we had on this blog almost two years ago. In early 2008, I wrote a post about information sharing and efficient markets in philanthropy. My friend Phil Cubeta read the post and wrote:

The logic here can become relentless and destructive. What this tends towards a lists, like league tables in a sport, with the best at the top. It leads then to managing a nonprofit by the numbers, to get the rating, and it leads to shutting down those that don’t rank high. We then have the tyranny of the metrics, however much arbitrariness is built into them…

The world you want – are you sitting in corner office reading a spreadsheet?

I repeat my response to Phil then to add some color, some passion, to the debate about social investing:

Are the philanthropic capital markets I envision boring and lifeless with endless spreadsheets and numbers to crunch? Not in the least.

Economics is often called the “dismal science”. I know that many people think that finance is boring. But the vision of financial markets as nothing but numbers and spreadsheets does not capture the reality. Do investors buy stock in Apple because they spent hours and hours processing spreadsheet calculations? No. While at the end of the day, buyers of Apple stock believe that the return on capital being generated by the company will make for a profitable investment, the information they use to determine that are not just numbers. The way in which Apple has captured the imagination of the consumer, (an intangible piece of data that cannot be added to a spreadsheet) is by far the most valuable asset that Apple has and it is a major reason why investors have flocked to the stock.

Have you ever watched CNBC, the news channel of the financial markets? It is far from some kind of spreadsheet crunching lecture. Every day, investors or all types come on the show and make passionate arguments for why certain companies are good investments. While numbers and calculations underlie much of their thinking, it is the story, the human story of the companies they discuss that take center stage.

Warren Buffet is widely considered the best for-profit investor of his generation. Does he sit in a corner office reading a spreadsheet the way that Phil suggests? The quote below is from noted investor Whitney Tilson (Tilson is a huge fan of Buffet and a fellow columnist of mine at the Financial Times):

If the future were predictable with any degree of precision, then valuation would be easy. But the future is inherently unpredictable, so valuation is hard — and it’s ambiguous. Good thinking about valuation is less about plugging numbers into a spreadsheet than weighing many competing factors and determining probabilities. It’s neither art nor science — it’s roughly equal amounts of both.

The lack of precision around valuation makes a lot of people uncomfortable. To deal with this discomfort, some people wrap themselves in the security blanket of complex discounted cash flow analyses. My view of these things is best summarized by this brief exchange at the 1996 Berkshire Hathaway annual meeting:

Charlie Munger (Berkshire Hathaway’s vice chairman) said, “Warren talks about these discounted cash flows. I’ve never seen him do one.”

“It’s true,” replied Buffett. “If (the value of a company) doesn’t just scream out at you, it’s too close.”

Taking liberties with Tilson’s quote, I would argue that donors should not “wrap themselves in the security blanket of metrics” because “the lack of precision around measuring the impact that nonprofits achieve makes them uncomfortable.”

World-class investors do not sit in their office crunching spreadsheets all day. Neither should world-class donors. But the underlying logic of both should be that of achieving the highest return on investment.


  1. What you say is spot on Sean – I think that society as a whole (include those individuals that the nonproits serve) would get a great benefit from social investors that combine their passion with metrics.

    If social investors just use metrics, then they are potentially missing out on supporting organizations and initiatives that are improving, but have not yet met specific measures.

    Equally true, if social investors just use passion or their feelings, then they risk supporting organizations and initiatives that are not effective, or that may even cause harm to those that they are trying to serve.

    The same is true at the nonprofit level. We at LAYC use our passion for helping youth in combination with metrics to determine how to better serve DC and Maryland youth at the end of the day. Our passion is to serve our youth better tomorrow than we did today. And we do this by using metrics to determine what we do well, and where we need to improve.

    This combination of passion and metrics is something that I think should be shared by social investors and nonprofits – because if it is – then it makes it far more likely that people receive services that can truly change their lives.

  2. I fully agree that social investing is rooted in passion, as is commitment to performance in nonprofits.

    I would like to build on Isaac’s comments and say that I believe social investing can bring nonprofits and investors together – as opposed to having funders dictate unreasonable requirements to nonprofits – since social investors and performance driven nonprofits have in common the deep desire to serve people effectively.

    That necessarily involves continuous learning, as opposed to simply assuming that services work, which has been the norm for too long. While traditional donors’ and funders’ thinking does not generally support building performance management capacity over time, the improvement philosophy of social investors does.

    That should give nonprofits hope. But most importantly, is means that more people will be helped more effectively.

  3. Jeff Mason says:

    Sean, when referring to SVP you say “they are so passionate that they want to be sure that the work they do actually produces results.” This says it all. If we are really passionate about helping those in need then social investors should reward nonprofits that have a clear understanding of the results of their efforts and use this information to continuously improve. To do this you need to collect and analyze quality data. Doing this is hard work. I would argue that if you don’t do this type of analysis that you lack the passion to improve the lives of those in need.

    Another great post Sean!

  4. Jonathan Hartman says:


    I came to your blog this evening facing an existential crisis. Riding alone in my car I asked myself that one, single most important question, “What am I passionate about?” For me, specifically, this question was extended to, “Why am I pursuing social entrepreneurship? What is the meaning of this venture to me?” My answer was honesty, yet equally unsettling.

    I am passionate about organizing groups of people behind social change, I am passionate about “tactical philanthropy” (a phrase which came to my mind after being introduced to your blog), I am passionate about the metrics, the organization, the mobilization, the social and economic science behind social change. My honestly startled me. This was the first time I had come to terms with my motivations. A second, more inconsolable, question soon followed: “Am I a detached, unfeeling, callous player in the field of social change? Have I no heart for the real issues at hand?”

    I came to your site and to my utter disbelief was presented with this post entitled “Social Venture Partners & Passionate Social Investing”. What timing! Though I do not know why I visited your blog tonight, having only been introduced to it once many months ago, you should think of me as a more regular reader from now on.

    -Jonathan Hartman

  5. Aaron Stiner says:

    Great post Sean, thank you for sharing your passion! Conversations about shared passion and values can go a long way in creating a base for lasting relationships. Once we have agreement on the basics of why we are all in this “business” we then have opportunities to strategize together on the best ways to get this business done. I appreciate blogs like yours that serve as a platform for these open conversation. Thanks again!