Philanthropic taking – who should decide what’s good for us?

The social sector is rife with strange power dynamics. On the one hand the social sector is about giving, both the act of giving and the perceived selflessness of being rich enough to have money to spare.

So obsessed are we with giving, that it seems a quarter of social sector organizations have some form of “give” in their name.

The corollary to giving, of course, is taking.

A focus on “philanthropic giving” sounds noble, and sexy. So sexy and admirable is philanthropic giving that the Knight Foundation recently released a playbook for organizing giving days, and countless technology companies are springing up to make every day donors feel like heroes, while taking 3% donation processing fees.

Noble indeed.

But heroes need victims to save. In the social sector, the counterpart to philanthropic giving is philanthropic taking. Folks like me are hired by nonprofits and foundations to help them model their theories of change, a fancy way of defining one group’s (the “philanthropic giver”) vision for another (the “philanthropic taker”).

Nonprofits like the Family Independence Initiative (FII) have called out this traditional take on philanthropy, opting instead for their yet unproven strategy of having low-income families organize themselves out of poverty. The core argument here is that the top down model of philanthropic providers setting objectives for target populations is not only troublingly paternalistic, but also ineffective.

The fundamental premise of one person setting objectives for another is that the latter person doesn’t know what he or she needs. Proponents of this approach in anti-poverty interventions point to what they perceive to be, effectively, the economic irrationality of the poor.

Yet there is evidence to suggest the poor, even the extreme poor, are quite economically rationale, and that the poor maximize their happiness as any other economic actor does, as argued in the excellent book Poor Economics.

While I might make a different decision than you, that doesn’t necessarily make either of us irrational. We simply assign different values to different outcomes. The same is true of the poor.

The trouble is that foundations and nonprofits are in the business of assigning their values to other people’s problems. And why shouldn’t they? It’s their time, and their money, shouldn’t it be spent to maximize their social ambitions?

Sure, why not. But what if the best way to see a given change in the world is to listen for solutions rather than preach them?

That’s the simple premise behind the budding beneficiary feedback movement, which argues we need to listen more to the voices of so-called program recipients (and perhaps less so from folks like myself).

This line of thinking is what lead me to ultimately consider the Cash Transfer Equivalency (CTE) metric, which I introduced in a post last week. While the CTE is admittedly an imperfect evaluative metric, as a planning tool it is a simple way to quantify the value a program participant excepts to receive from a social intervention.

If philanthropic giving is about more than self-aggrandizement, we would be wise to reconceive program participants as more than philanthropic takers.

Technology’s role in the social sector

I’m no fan of Silicon Valley’s offerings for the social sector, but Causes’ relaunch yesterday sparked an interesting conversation in my Twitter feed on the role of technology in our line of work.

Causes is repositioning itself as a platform for civic engagement. Like before it, Causes works with organizations from varying political ideologies, a political-neutral business practice that has drawn the ire of activists in the past.

In the following exchange, Twitter user @mcbyrne argued with Causes CEO Matthew Mahan that by supporting non-liberal initiatives like the NRA, Causes could not justly claim to be a platform for social good:

Matthew responded by suggesting that Causes is simply a platform for social actions, and that technology is politically neutral:

Which lead to the following counter-argument:

Well, that’s just not true at all. Democracy is letting people voice their opinions. Indeed, what is more democratic than empowering idiots to speak their mind?

The fundamental issue in this debate is what the proper role of technology in the social sector ought to be.

I chose a career in the social sector because I have strongly held beliefs on what change I want to see in the world. Working in the social sector allows me to spend my time working on issues that I care about.

But in my work, like anyone else’s work, I use a lot of tools. And those tools don’t have political agendas. People do, I do, but not my tools. If Causes is indeed a tool, an amplification vessel for political action, then why should the platform take a stand on what people promote on the network?

Technology has done wonders for the world, and even the social sector. But the commercial technology that has aided the social sector has not had stated social agendas. Obviously computers and office productivity software make much of the work we do in the social sector possible. But we don’t think of it as “social sector software”.

In so far as Causes is just a platform for social actions, simply a tool, I find nothing offensive about the company working with organizations from varying ideologies.

Technology’s role in the social sector is no different than technology’s role anywhere. Technology should be useful. It should make it easier to accomplish what we want to see happen in the world. I’m not sure the new Causes is going to set the social sector on fire, but I have no desire to burn it down either.

Silicon Valley’s depressing vision for the social sector

Technology is supposed to be taking over the world and eating everyone’s lunch. Every industry, from medicine to law to retail has experienced impressive gains (or joblessness) at the hands of nimble, innovative technology companies upending every sector.

As the technology revolution has moved from industry to industry, Silicon Valley has even set its eyes on the social sector, with VC’s pumping money into a handful of startups aimed our way.

And oh man, does Silicon Valley ever have a depressing vision for the nonprofit sector.

With few exceptions, venture funded startup technology companies have focused on fundraising or building hallow online followings for non-profit causes.

But wait, don’t nonprofits need more money and more support? Well, two answers:

  1. I’m not sure. If we have the right interventions, then sure. But if we’re using these tools to litter the African continent with more Tom’s Shoes, then no.
  2. It’s well documented that charitable giving is a function of GDP. More accurately, giving is consistently 2% of GDP. Online giving platforms are not growing the pie, they are simply redirecting giving to online channels.

Don’t get me wrong, there are technology initiatives moving the social sector forward. But they aren’t venture backed Silicon Valley startups.

Companies like Social Solutions have tackled the less sexy, but essential problem of helping nonprofits track and report their outcomes. Outside of the case management market, the real social sector technology innovations are coming from the nonprofit sector itself, with Ushahidi pioneering crisis mapping and Volunteer Match long serving as the leader in connecting volunteers to nonprofits, despite ample for-profit competition.

The social sector’s challenges are vast and well documented. It’s a shame that by and large the technology sector has focused on the least of these issues, catering to a caricatured vision of the social sector content to earn five dollar donations for their do-gooder pass times.

The social sector has greater ambitions and faces starker realities. Indeed, even in so far as the income side of the equation is worth tackling for nonprofits (which it is), more than online fundraisers, nonprofits need to move toward serious financial planning.

There is no doubt that the technology revolution has touched much of the world. But Silicon Valley to date has been a modest presence in the nonprofit sector.

Perhaps there isn’t much of a role for Silicon Valley to play. As Phil Buchanan, CEO of the Center for Effective Philanthropy has argued time and again, the social sector exists to correct market inefficiencies. Technology’s genius has been in making already effective market functions work better, faster.

By contrast, the social sector is not as clearly monetizable, nor are we awash in effective solutions waiting for automation. Instead, there is a lot of ambiguity around what works, and we exist in a market that is largely underserved by for-profit ventures for good reason.

Therefore, technology companies are left to focus on the least compelling, yet monetizable, problems the social sector faces – shifting donations online and winning likes and retweets for your cause.

Hardly earth shattering stuff.

Is your program better than cash?

With 1.59 trillion in revenue, and over $300 billion dollars in charitable and government contributions in the US alone, there is no doubt that charity is big business. So vast is the charitable sector, that it has drawn the ire of a famous son who has labeled our noble pursuits the charitable-industrial complex.

Whether a career in the social sector is noble or not, the bigger question is whether one’s efforts result in the intended change.

As one who makes his living as part of the charitable industrial complex, I can’t help but wonder if we wouldn’t be better off skipping writing me checks and instead giving money directly to those who need it most. That’s the thinking of Give Directly, a nonprofit that simply gives money away to people in the developing world.

Cash transfers are not new, the US government has long transferred cash through various types of welfare programs to those living in poverty. The difference between traditional cash transfers and Give Directly’s approach is that Give Directly provides money unconditionally, whereas traditional approaches have provided money on condition a recipient completes certain tasks, like keeping their kids in school.

Cash Transfer Equivalency

I first started thinking critically about how much money it costs to implement social programs while completing a fellowship with a financial intermediary in graduate school. We were giving out large amounts of money, and there was a lot of doubt around what social return on investment we were getting.

One particular grant request was from a nonprofit that planned to hold a musical event for low-income children. The event (I guess) sounded like an okay idea, but some simple math revealed an outrageous price per expected participant. It would have been cheaper to have sent these kids to a Bieber concert.

This realization lead me to a fairly simple evaluation standard. If the purpose of a social intervention is to improve a program recipient’s life, shouldn’t that recipient at least value that intervention equal to its cash equivalent?

More formally, I devised a Cash Transfer Equivalency (CTE) metric, which is a simple social investment standard whereby the cost per person of the social intervention should be less than the value of transferring the same amount of cash to a program target.

Using the CTE, one would simply ask a program’s intended recipient how much they would be willing to pay to receive a social program. You then get a simple ratio, the amount the recipient is willing to pay over the program cost per person. If the ratio exceeds one, the intervention produces a surplus for the beneficiary, as they value the program more than the program costs.

Given the motion around beneficiary feedback, it seems logical that we would get feedback not just on how much a program recipient likes a program, but how much (if anything) they would be willing to pay for a program if they had the means.

My guess is the CTE is beneficiary feedback that would scare the hell out of a lot of organizations.

My failed Gates Foundation proposal

Since deciding to shut down my company Idealistics, I’ve been kicking around various ideas of what to do next. One thing I won’t be doing is implementing my rejected Gates Foundation Grand Challenges data interoperability proposal.

Contests are a popular, yet controversial approach to soliciting new ideas to social problems. Personally I’ve never been much of a fan of contests, preferring to fund my ideas the old fashioned way, by selling.

However, I’ve never had much luck with contests either, which likely suggests more sour grapes than thoughtful dissent of the contest approach. The most compelling argument against contests is that contests waste the time of would be entrepreneurs or nonprofits, making them spend considerable time filling out losing applications.

The common counter argument is that contests are beneficial for the losers in that they get to flesh out their ideas.

In my experience, I neither feel like my time was wasted nor terribly well spent. My time wasn’t wasted in that my opportunity cost was Netflix. On the other hand, while I know what I likely won’t be pursuing, I’m not sure I’m much closer to an answer as to what I ought to do either.

Results of course will vary, but in my experience, the process was neither terribly offensive nor rewarding.

The failed concept

Contests tend to be pretty good about publishing winning ideas. Reviewing a winning entry can be helpful as applicants try to gear their concepts to past winners. While more abundant in the world however, examples of losing projects are almost no where to be seen. In a moment of extreme transparency and boredom, I decided to share my losing idea. You can download it here.

The Gates Foundation Grand Challenges data interoperability challenge was to propose a product or initiative to increase data interoperability between social sector organizations or individuals. My proposal attempted to tackle the problem of non-profits sharing data with foundations.

The gist of my proposal was to build an open-source middleware web-based software solution that would allow non-profits to submit their outcomes data in raw format, in one place, that would then translate and summarize that data for multiple funders.

Essentially, the idea would be to allow non-profits to submit their data once, but have their data transmitted to multiple funders, the way those funders need their data sliced.

By submitting raw data, foundations could bypass the summary statistics shenanigans that earn some development officers six figure salaries, while easing the burden of filling out multiple applications to any number of funding entities.

Admittedly, this idea is totally not sexy and pretty darn boring (obviously the Gates reviewers agreed!). But I do believe it’s a necessary piece of plumbing. Not only are non-profits’ applications to funders arduous to put together, they are full of tons of nonsense. Such a solution would address both issues.

At the time I submitted my proposal, I had not yet attended the excellent retreat on data and philanthropy put on by the Heron Foundation, where I had the opportunity to learn about Coop Metrics.

Coop Metrics is a technology company that aggregates various types of industry data. They got their start focusing on aggregating food coop data nationally, and are now moving into multiple areas, including philanthropy. I’m excited about Coop’s entry into the social sector because they already have a proven, scaled solution, that can adapt nicely into the social sector. I’m hopeful that Coop, or a company like them, will solve this important problem.

I sure won’t be 🙂

The power of utility frameworks

In my last post on next steps I mentioned that I had the opportunity to present at the F.B. Heron Foundation’s inaugural Power of Information conference in July. Last week Heron posted all the presentations from the conference to their YouTube channel. If you are interested in getting more out of data in philanthropy, I strongly recommend giving these talks a look.

For my talk, I focused on how grant makers can make better social investments by developing what I refer to as a “utility framework”. A utility framework is a way for grant makers to explicitly assign subjective values to the outcomes of investments.

I think where people have struggled with the idea of assigning values to social outcomes in the past is that one cannot objectively assign value to one outcome versus another, especially across social sector issue areas. How does one compare preserving rain forest to teaching poor kids to read?

There is no objective way of measuring unlike outcomes. However, we make these subjective value judgments all the time, when we decide to invest in one cause over another. The purpose of a utility framework is to make those values explicit, so foundations can make consistent decisions across investment portfolios.

If you make it to the question and answer portion of my talk you’ll notice that I get a lot of push back from the audience. Indeed, there seems to be a lot of skepticism that you can translate personal values into a mathematical model.

But there is precedent for this modeling approach. Large companies model the risk preferences of their executives, and use these models to apply executives’ values to investment decisions without those executives present.

In my talk, I don’t propose anything new. Rather, I recommend applying this already proven technique for modeling subjective values to social investing. The only difference is that instead of modeling financial risk, we are simply weighing social outcome risks instead.

I have embedded the video of the talk above, as well as a SlideShare embed of the slides I used at the end of this post. If you would like to download the PowerPoint slides directly, you can do so here. Please note that the PowerPoint slides in the video got a bit garbled (particularly the mathematical notation), so it might be worth thumbing through the PowerPoint.