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Philanthropy Daily Digest

Impact-Centric Donors

My post on “issue-agnostic” donors struck a chord, with many readers and bloggers disagreeing with the concept. Much of a criticism focused on taking the argument to the logical extreme:

Paul Brest of the Hewlett Foundation wrote:

“[N]o donor is entirely issue agnostic. A donor who thought that his or her philanthropic dollars would have more impact in supporting organizations that provide safe abortions rather than organizations advocate against abortions, or vice versa, would likely make the choice based on the issue rather than impact.”

Paul is right and on reflection I think that the term “issue-agnostic” is overly strong. Instead, I should have focused on another phrase I used in the post: “impact-centric”.

Reader Eric Friedman commented on how he fit the model I was discussing:

“This post really resonated with me, as I’ve tried to be an issue-agnostic donor. I want to help people, but have no ideological preference for which people I help or how I help them. My process is to first determine which area of focus has the greatest opportunity for impact, then select which organization is most effective.

I have sought advice from several experts in philanthropy, and to be frank, they were not helpful. They seemed more confused or frozen by my approach, and generally told me that I should figure out what I was passionate about. They did not seem to understand my response, “I’m passionate about finding the most impactful way to help people.” For all the talk about “strategic philanthropy” and “impact,” many experts had difficulty thinking about how to maximize impact unless the donor first constraints the issue to focus on. There was only one group I found could relate well to my philosophy: GiveWell.

I view it as bothersome that the typical focus is on the donor’s interests as much as the recipient’s needs, and I know that I’m not the only one with this view. Many of the others have told me that they would give more if they actually knew what was most impactful.”

I don’t think that Eric is alone. Most donors care about a variety of issue areas and it may be that as nonprofits become better at demonstrating impact, that impact-centric donors begin to think about issue area focus as an important but secondary decision factor.

I would suggest that the success of Kiva.org has been a remarkable story of tapping into impact-centric donors. While on its surface, Kiva seems like it is focused on the “issue” of poverty alleviation (via microfinance), I would argue that few donors come to Kiva because of their own focus on this issue. I find it highly doubtful that prior to Kiva, there were many US donors who were looking for effective ways to support poor Indian entrepreneurs. Instead, I think Kiva figured out how to communicate impact well (whether Kiva achieves actual impact or simply communicates about impact well is a different argument). It is the tangible experience of achieving impact that brings donors to Kiva, not issue-area alignment.

So maybe issue-agnostic is too strong of a phrase. Maybe impact-centric as opposed to issue-centric is better wording. But I think the concept is real and growing.

Philanthropy Daily Digest

Philanthropy Daily Digest

Social Capital Markets Conference: Tactical Philanthropy Track

SoCap10 First of all, I want to extend a big thank you to everyone who helped me design the Tactical Philanthropy track at the Social Capital Markets conference. From the idea crowdsourcing we did earlier this year to the many conversations I had with members of the Tactical Philanthropy community, the final track design is very much a product of your input.

Below you will find full information about the sessions in the Tactical Philanthropy track, as well as links to more information about the full Social Capital Markets (SoCap) conference (October 4-6, San Francisco).

I’m happy to announce that exclusive to Tactical Philanthropy readers, the SoCap conference organizers are extending a special 30% discount on registration. If you’d like the discount code, please email me. This discount will expire on August 19, so you’ll need to hurry. In addition, all nonprofit employees are eligible for a 40% registration discount. You can apply for this discount here.

Social Capital Markets Conference: Tactical Philanthropy Track

Register Here

The full spectrum of the social capital market includes philanthropic capital. Join the Tactical Philanthropy track and explore the role of philanthropic capital in both for-profit and nonprofit social enterprises and markets. The sessions will help donors and investors bridge the illusionary gap between acts of philanthropy and market rate social impact investments.

Click here to see the full SOCAP10 schedule, including the Tactical Philanthropy Track!

Decriminalizing Fundraising
Fundraising is generally seen as "asking donors for a favor." But what if fundraising is in fact no different from raising investment capital or selling a well-vetted product? This session will feature two 20 minute talks by George Overholser and Dan Pallotta, two of the most visionary and radical philanthropic leaders.

  • George Overholser, Nonprofit Finance Fund Capital Partners
  • Dan Pallotta, Springboard

Scaling Social Impact
In business, scaling requires companies to increase their organizational capacity and output in order to generate greater profits. Nonprofit organizations can scale social impact by not only increasing their own capacity, but also by encouraging other nonprofits to adopt their models. How should social enterprises weigh the tradeoffs between scaling their organization or scaling impact through sharing their process with others? Come hear the stories of three organizations that have successfully scaled using entirely different approaches.

  • Steve Goldberg, Author of Billions of Drops in Millions of Buckets: Why Philanthropy Doesn’t Advance Social Progress
  • Lance Fors, New Teacher Center
  • Shawn Bohen, Year Up
  • Jennifer Davis, National Center on Time & Learning

Individual Donors Practicing Unconstrained Philanthropy
Many of the most well known, active participants in the social capital markets are institutions. But individual donors have fewer institutional constraints and can bear more social risk. These types of donors can make decisions faster, are able to act on less popular/overlooked areas that nevertheless promise big impact, and find it easier to forge collaborations. Join three individual donors who are doing cutting edge work in the social capital markets without the help of a large staff.

  • Katherina Rosqueta, The Center for High Impact Philanthropy
  • Dave Peery, The Peery Foundation
  • Jerry Hirsch, The Lodestar Foundation
  • Additional donor to be announced

The Lessons of Behavioral Finance: Understanding & Overcoming Barriers to Impact Investing
Impact Investing challenges the conventional separation of asset growth from charitable distribution and raises interesting questions about strategic philanthropy, fiduciary responsibility and investment products. While the concept has been well received in theory, most funders and donors have not significantly engaged in this approach. This dynamic panel will explore behavioral, structural, and theoretical obstacles to Impact Investing – and help participants understand how to overcome these obstacles.

  • Rae Richman, Rockefeller Philanthropy Advisors
  • Randy Allison Hustvedt, Federal Street Advisors
  • Hope Neighbor, Hope Consulting

When to Invest & When to Give
For all the talk of producing a blend of social and financial value through giving and investing, little is known about when a social investor can maximize his or her blended returns through a donation and when an investment is a better option. This session will use Evergreen Lodge, a social purpose destination resort in Yosemite, as a case study for when to give and when to invest from both the enterprise and investor/philanthropist perspective. Join Evergreen Lodge owner Lee Zimmerman and his venture capitalist/philanthropist financial backer Stuart Davidson as they discuss the role of philanthropic and social investment capital in the growth of Evergreen Lodge.

  • Melinda Tuan, Melinda Tuan Consulting
  • Stuart Davidson, Woodcock Foundation
  • Lee Zimmerman, Evergreen Lodge

Nonprofit Analysis: Beyond Metrics
Over the last few years, mainstream nonprofit analysts and rating groups have moved beyond simplistic metrics like the "overhead expense ratio." Join three of these groups, Root Cause, GiveWell and Charity Navigator as they present their analysis of a single, high profile nonprofit. You’ll hear three robust approaches to analyzing nonprofits as a way to determine the degree to which a social investment in the organization may lead to impact.

  • Ken Berger, Charity Navigator
  • Andrew Wolk, Root Cause
  • Elie Hassenfeld, GiveWell
  • Nonprofit representative to be announced

Keynote Speakers for the Full SoCap Conference

  • Jacqueline Novogratz, Acumen Fund
  • Matt Flannery, Kiva
  • Jay Coen Gilbert, B Lab
  • Woody Tasch, Slow Money
  • Julie Sunderland, Bill & Melinda Gates Foundation
  • William Foote, Root Capital
  • Ron Cordes, The Cordes Foundation

I hope to see you there!

Register here.

All Donors Care About Impact

Brain In my post on Tuesday, I discussed a study that seemed to suggest that donors are not interested in information about whether nonprofits are any good at what they do. My conclusion was that donors are interested in this sort of information, but only if it is presented in an engaging way. In other words, donors (like everyone else) are bored by statistics and metrics, so when they are asked about “charity rating systems” they say they are not interested, even though they do care whether the nonprofits they support are effective.

The post generate a couple of responses. Sasha Dichter, the director of business development at Acumen Fund, wrote:

“The other way to look at these numbers is to conclude that donors don’t believe that a rating scheme is going to work; that they don’t believe that such an approach is going to effectively inform them about how to make charitable decisions. (I happen to agree that it won’t, though that’s a post for another day.)  If that’s what’s really going on, then the right headline – much less catchy, and much less likely to be retweeted – would be: “Do donors believe that rating agencies are any good at their jobs?  No.”

There’s a lot of good stuff in both Sean’s and Nathanial’s posts, especially Sean’s point that we need to put as much effort into spreading ideas as we put into assessing impact.  But I also think we have to be careful.  I don’t think we advance the field of philanthropy and champion the cause of effective philanthropy by making and tearing down caricatures of philanthropists, and I think the blog post titles do just this.”

This response surprised me, because Sasha seems to think that I was being critical of donors in my post. But if Sasha thought that, then other people did too and I clearly didn’t make my point well. So to try to be crystal clear, any criticism in my post is directed towards the effective philanthropy movement (of which I’m a part) for not being savvy enough about spreading the idea of great philanthropy in ways that are sticky. It shouldn’t be surprising to us that donors say they are not interested in, and are unmoved by, metrics and statistics. We too frequently talk about effective philanthropy as if we’re encouraging people to eat their spinach. Great philanthropy isn’t a moral obligation that donors should feel like they need to struggle to get right. Effective philanthropy should be a hugely engaging, exciting activity.

The headline I chose, “Do Donors Care Whether Nonprofits Are Any Good?” wasn’t meant to provocatively suggest that I think they don’t. It was in response to the New Philanthropy Capital blog post titled “Do Enough Donors Care?” which I was commenting on. Oddly, Sasha seems to criticize the blog title for being designed to get people to actual read the post and share it with others. But of course that’s exactly what I’m arguing our field needs to do better and which Sasha says he agrees with.

Taking a different angle, Nathaniel Whittemore responded to with a post of post of his own titled “Do Donors Care About Impact? Not Really.”

“I believe that the further the apparatus of giving is from the person whose money is being used, the more likely to be interested in impact metrics a certain class of money will be. What I mean is that a group like the Ford Foundation has a mandate to address a particular set of issues. For them, their raison d’etre is their impact.

For your average personal donor, it’s something much different. Most people give because they feel a longing to be a part of something bigger than themselves…

The important thing to recognize here is not that people are un-interested in impact; it is to recognize that when people give with a desire to be part of a community, or reinforce their investment in friends, the emotional satisfaction they get from their gift — their personal impact, you could say  — is immediately gratified at the moment of giving…

The point is, it’s not that people are dumb, or ultimately only care about their warm fuzzy feelings. Most people that I’ve met genuinely believe in the causes they support, and believe they’re helping achieve change. It’s just that their "due diligence" is all about who brings them through the door and the community that surrounds them there, and they will trust that over more abstractions.”

I agree with Nathaniel that donors will never make donations based on “abstract,” statistical reviews. This was one of the points of my post. But I think there is an important nuance he is missing when he says that donors care more about being “a part of something bigger than themselves” than they do about having an impact.

The “warm fuzzy feelings” that humans feel when they make a donation or do anything to help other people is hardwired into how our brains operate. The warm, fuzzy feeling is triggered when we believe that we are helping someone else. This means that we are hardwired to seek impact in our giving. All “seeking impact” means is that we want our efforts to help to actually be helpful. If donors are consciously aware that their gift in fact will do nothing. For instance, if they are consciously aware that the gift they are making is to a fraudulent nonprofit, they certainly aren’t going to feel a “warm, fuzzy feeling”. Rather they are likely to feel sick to their stomach.

The problem faced by the movement to make philanthropy move effective, is that donors understandably judge nonprofits based on their personal experiences with the nonprofit and the recommendations of friends and family who are drawing on their personal experiences. But unlike normal consumer products, in which the “customer” both buys and uses the product, donors pay for the products and services produced by nonprofits, but they are then delivered to the nonprofit’s beneficiaries, not the donor. That means that donors are unable to judge whether a nonprofits products and services are any good and instead judge the nonprofit based on the effectiveness of its sales and marketing.

The dumb way to try to change this situation is to yell at donors that the way they are making donations is bad, urge them to override the way their brain is hardwired, to dismiss the warm, fuzzy feeling of giving and instead consult statistics and metrics when making gifts.

The smart way to try to change this situation is to make more effective ways of giving enticing, exciting and engaging. To recognize how humans are hardwired and to work with it instead of against it. To find new ways to trigger the warm, fuzzy feeling by bringing to market new approaches to giving which allow donors to help other people by taking actions that actually help.

Donors aren’t dumb. Donor’s aren’t doing philanthropy “wrong”. Donors are humans who take action in exactly the way that evolution has wired our brains to act. This isn’t a bad thing. This is reality.

Kiva.org is showing us that donors are willing to take radical new actions when they give. They are willing to not only reorient the beneficiaries they support, but to completely change the very essence of the transaction. But Kiva has been able to pull this off by working with the way the human brain works rather then against it.

It is time for the effective philanthropy movement to make products and services that donors want to use rather than moralistically making products and services that we think donors should use.

Jacob Harold on Whether Donors Care

Jacob Harold is the program officer at the Hewlett Foundation who manages the foundation’s philanthropy program along with president Paul Brest. The program is one of the very few foundation funded efforts to support the field of philanthropy. The goals of the program are to:

Below is Jacob’s comment on my post yesterday examining whether donors really care whether the nonprofits they support are any good.

Sean,
You are right that we need to get much better (and clearer) about how we’re going to actually shift donor behavior. But I think that we can resolve some of these challenges if we focus on a targeted part of the donor market. The inconsistency of the majority need not be a barrier if we can activate the minority who authentically want to maximize the impact of their giving.

First, let me offer two different models of the diffusion of behavioral change: prioritization and possibility.

(1) One way to change behavior is to get people to think that something is more important than they used to think it was–that is, to push it up their hierarchy of prioritization. This often requires breaking through the countless distractions of everyday life.

(2) Another way to change behavior is to offer new people an appealing possibility they didn’t know existed. No one knew they wanted an iPad until there were iPads to want. But interest in iPads multiplies as excitement grows, people talk about them, and they begin to see them in their daily lives.

Both strategies offer some hope for us as we try to enable smarter, more effective philanthropy. But they both have their weaknesses: changing prioritization can require expensive, brute-force interventions like paid advertising; introducing a new possibility requires a really good idea and a whole lot of luck. Ultimately, I think we can’t afford the first approach and have to figure out how to use the second.

If we’re humble in our ambition and simply try to get to the fraction (~15%, see reference here) of donors who are particularly concerned with impact we can still have an immense influence on the sector. Reaching half of them for 20% of their giving is still >$3.5 billion a year in the US alone.

Every year there are millions of visits to websites with information about nonprofit performance–even though not much good information is available. There is in fact latent demand; and it’s barely activated. There is not yet that sense of possibility that can feed on itself. If we build it, most will never come–but if we build it well, enough will come to influence billions of dollars.

What philanthropy innovations fall into Jacob’s second category? The one that immediately springs to mind for me is Kiva.org. Before Kiva, Americans were not sitting around demanding that someone help them make $25 loans to poverty stricken Indian women. But Kiva was “made to stick” as I wrote about here and have more effectively spread an idea about effective philanthropy* than almost any other group in America.

* Kiva isn’t really philanthropy since it is lending, not giving, and the effectiveness of microfinance is under intense debate. But Kiva still wins the prize if you recognize that philanthropy is broadening to include much more than just traditional charitable giving and the effectiveness of just about every philanthropic act is debatable.

Philanthropy Daily Digest

Philanthropy Daily Digest

A Killer App for Philanthropy

A killer app (application) is a piece of software that is so fantastic that it drives uptake of the hardware needed to run the software. For many people email was the killer app that drove regular computer use in the 90’s.

So what’s the killer app for engaged philanthropy?

What is the activity that will drive uptake of the “operating system” of engaged philanthropy? Email was a killer app because it was hugely useful and it got people to log onto their computer multiple times a day. It spurred the need for a home computer (or more than one once a family of four all had their own email accounts) for purely personal use. Email was a killer app because by itself it made people want and need a computer. But the real impact of email wasn’t just that it let people communicate easily. It also got them on the computer where they quickly picked up all sorts of other activities that they never would have bought a computer for on their own.

In my recent post about Kiva.org, I called the organization a “gateway drug to social investing”. My point is that Kiva.org is hooking people who do not participate in engaged philanthropy. But once exposed to microfinance, Kiva users suddenly become much easier to convert to other social investing activities. Kiva or more generally, well designed microfinance, may be emerging as a killer app.

So my question today is what program, activity or entity has the potential to be a killer app that drives a larger uptake of engaged philanthropy?

Here’s one idea.

Donor advised funds: With the minimum to open a donor advised fund falling to just $5,000, many, many Americans now have the ability to financially structure their philanthropy. Just like the emergence of IRAs and 401ks in the early 1980’s drove the explosion of individual investors in the stock market, DAFs have the potential to do something similar for philanthropy. But it seems to me that for DAFs to become a killer app, someone needs to launched a better designed DAF that provides a more tangible “story” that connects donors to grantees much the way Kiva’s “journals” connect lenders and borrowers.

How else might DAFs be redesigned so that they become a killer app for philanthropy? What other ideas do you have for potential killer apps?