This month we launch a conversation on "philanthrocapitalism," and invite you to join in the dialogue. Our guest commentator is Michael Edwards, who in his recent book Just Another Emperor? The Myths and Realities of Philanthrocapitalism, addresses the increasingly popular trend of applying business methods and measures to philanthropy, and asks that we seek clearer evidence of the wisdom of this approach. He expresses his worries that "philanthrocapitalism" will divert attention from the changes needed to transform society, and that it will undermine the purpose of philanthropists. His position has inspired much debate in the philanthropic community, and we hope to enliven and inform this discussion with thoughts and perspectives from you, the members of our very own GPF community.
Mike has written a short summary of his work to launch the discussion among GPF members, and we invite your commentary. It is time for a conversation on how we can better deepen the impact of our philanthropy--and it will likely require dissent before we can move forward in agreement.
-Jane Wales
Just another Emperor? The Myths and Realities of Philanthrocapitalism.
Michael Edwards
Just another Emperor? has certainly caused a stir in the sometimes sleepy world of philanthropy, with hundreds of blogs, webzines, meetings, conferences, newspaper articles and opinion pieces responding to its arguments. Of course there have been criticisms and disagreements (see the discussion on the Open Democracy page and at the Nonprofit Quarterly Forum), but by and large the response has been very positive and welcoming. I am delighted that the Global Philanthropy Forum is joining the conversation and look forward to being challenged and enriched by your contributions.
Why has such a small book created such a large response? In part because it articulates a controversial position--that business influence on philanthropy is overblown--a position that a great many people have been thinking about but were reluctant to declare in public, a testament perhaps to most people’s unwillingness to ‘bite the hand that feeds them.’ “Philanthrocapitalism”--harnessing business and the market to the goals of social change--is a powerful but unconvincing movement, and carries with it considerable risks as well as opportunities. This is not exactly rocket science, but by highlighting these concerns in a straightforward way the book has created space for a different kind of conversation, one less dominated by hype and more open to evidence and dissenting voices. And that’s the spirit we need to move forward together in a more constructive way.
The second reason, I think, is that this debate touches on much deeper questions about the future direction of society, the rising cultural and political influence of business and wealthy individuals, and the potential erosion of older traditions of collective action, democratic accountability, and non-market values of service and solidarity. Although on the surface the disagreements may seem to revolve around different approaches to philanthropy (and therefore different metrics, investment strategies and other similar issues), the real question is whether societies can be transformed through philanthrocapitalism, or whether this new movement will simply treat the symptoms of social problems in more effective ways. Given that most of us want to make the greatest possible difference, this is far from an academic question.
In case you are wondering what the fuss is all about, you can download the book for free at this link, or read a ten-page summary, but my basic conclusions can be easily summarized:
The hype surrounding philanthrocapitalism runs far ahead of its ability to deliver real results. It’s time for more humility.
The increasing concentration of wealth and power among philanthrocapitalists is unhealthy for democracy. It’s time for more accountability.
The use of business thinking can damage civil society, which is the crucible of democratic politics and social transformation. It’s time to differentiate the two and re-assert the independence of global citizen action.
Philanthrocapitalism is a symptom of a profoundly unequal world. It hasn’t yet demonstrated that it provides the cure.
Central to these conclusions is my reading of the evidence (such that it is), which shows that--while business and markets can certainly extend access to socially--and environmentally-useful goods and services like vaccines and micro-credit loans--these things by themselves have little impact on the forces that drive social transformation, namely politics, government and social movements strong enough to achieve broad-based changes in the distribution of power and resources and the systems and structures of society.
That’s partly because they over-estimate the degree to which business thinking can improve non-profit performance where it matters most. A recent study of 12,000 environmental non-profits by Stanford University concluded that they are most effective when they are “purest, most radical and most disorganized,” just like the civil rights movement fifty years before. Grit, determination, courage, passion, sacrifice and love--these are the crucial attributes of civil society. Of course it also helps to have a strategic plan, but that’s the icing on the cake.
I realize that these conclusions are provocative and probably overstate the case, the result of writing a book that was intended to kick-start a full-throated public debate. So let me say a word or two about the criticisms I’ve received and the questions they raise for further discussion.
First, “philanthrocapitalism” may be an eye-catching label, but it is a poor description of what is actually happening in the world. My critique is far too generalized, and while it may apply to some forms of venture philanthropy it does not describe the reality of many other experiments, especially in the field of social enterprise, which itself is very diverse.
Second, is the issue really philanthrocapitalism, or philanthropy in general, or the whole system through which societies finance social change? Many of my criticisms might apply to ‘traditional’ foundations too, so perhaps what’s needed is a debate about the future of institutionalized philanthropy as a whole in comparison to tax-based, member-funded and market-driven alternatives.
Third, my critique underestimates the potential social impact of markets, business and economic growth. After all, it’s difficult to achieve the ‘good society’ in conditions of widespread poverty, and market economies are the only proven way to generate a surplus large enough to eradicate poverty and meet social goals.
Fourth, my book gives civil society a pretty ‘free pass’ in terms of its own failures and weaknesses, and is romantic about the possibilities of achieving large-scale change through social movements. There are many examples of non-profits that have increased their social impact by adopting business thinking and working through the market.
There are counter-arguments to each of these critiques of course, but that, as they say, is a matter for debate! Let me close instead by highlighting a couple of questions that I hope will get the discussion going.
1. Which aspects of philanthrocapitalism are healthy for social change, which are neutral, and which might actually be damaging? What are the costs and benefits of raising non-profit revenue through the market, using markets to advance social goals, integrating business principles into philanthropy and non-profit management, providing goods and services through social enterprises, and investing in new business models like ‘commons-based production’? They are probably quite different.
2. What seems most absent from philanthrocapitalism is a respect for older and historically-proven strategies for social transformation like collective action, and the direct empowerment of poor and marginalized people so that they can control their own agendas. Is this true, and if so why? Are there areas, issues or strategies that should be declared a ‘business or market-free zone,’ and if so what might they be? That would make it easier to identify where different approaches might actually complement each-other.
3. How might we carry this conversation forward, across different perspectives and communities, with the necessary degree of honesty and rigor (something that is always difficult when there are large inequalities of power between the participants). Is there anyone out there who might sponsor and support these conversations? Is there a way we can scale back the hype and look more objectively at the evidence of what is being achieved through different approaches to philanthropy and social transformation? Do we actually have the evidence we need to make informed decisions?
That’s the only way to answer the ‘55 trillion-dollar question’ as I call it--the amount of philanthropy that is projected to be created in the United States alone over the next forty years: will we use these vast resources to pursue social transformation, or just fritter them away in spending on the symptoms? The stakes are extremely high.
Michael Edwards is the director of the Ford Foundation’s Governance and Civil Society Program but writes here entirely in a personal capacity. Just another Emperor? is published by Demos in New York and the Young Foundation in London and is available for purchase from Amazon.com and Amazon.co.uk.
Comment by Matthew Bishop:
The Age of Philanthrocapitalism
Some critics worry that philanthrocapitalism will somehow undermine democracy and civil society, and erode government responsibility.
Fear of the political power of the rich is not new – concern about ‘plutocracy’ has haunted
Of course, there needs to be transparency when the rich get involved in causes with political implications (as many of the biggest problems being addressed by today’s philanthrocapitalists do, or will do). And they need to be accountable for the results of their philanthropy (not just celebrated for the size of their pledges). These are the principles that, we argue in our book, should underpin a new social contract between the rich and everyone else.
This social contract will set out the best division of labour between philanthropy, government, for-profit businesses, civil society organisations and individual citizens. The world could not go back to 20th century big government even if that were desirable – high taxes and economic success in today’s global economy don’t mix. Anyway, the state tends to be inefficient at innovation compared with private institutions and individuals. Government now needs philanthropy to play the role of social risk capital to test new ideas and promote policy change, as philanthropist and politician Michael Bloomberg is already doing in
In short, philanthrocapitalism will succeed in achieving its considerable potential only if philanthrocapitalists take seriously the challenge of being businesslike in addressing today’s big issues in innovative ways. As Warren Buffett has pointed out, philanthropy is a “tougher game” than making money, so philanthrocapitalists will need to be at their best: innovative, thoughtful, analytical, driven, collaborative and, as there is no simple benchmark for success in philanthropy that equates with profit in the business world, brutally honest and self-critical about how they are doing. Here’s hoping they succeed.
45 comments:
Thanks so much for hosting this debate. While I tend to agree with Matthew's view on this issue, I think that much of the debate on philanthrocapitalism has to do with different understandings of the relative roles of capitalism and philanthropy. For instance, while I reject Michael's core thesis, that philanthrocapitalism is damaging to the fabric of philanthropy, I agree with the majority of his recommendations at the end of his book.
As an advisor to family philanthropists, wealthy by any measure but far smaller than Edward's Ford Foundation, I'm struck by how naturally many of them approach philanthropy with a philanthrocapitalist tendency. Without any deep understanding of this current debate, they often automatically begin to apply a systematic, financial system driven thought process to how they give.
I think where Michael misunderstands the importance of philanthrocapitalism is in confusing a set of tools and knowledge frameworks for a moral outlook on the world. The tools of philanthrocapitalism and the framework of understanding the tactical allocation of financial resources for social good are truly powerful, but they can just as easily be used by people with little understand of how change happens as by those (like Michael) who actual understand philanthropy.
I have been in the not-for-profit sector in India since 1984 and founded a NGO in 1989. Over the last 19 years, the shift from social philanthrophy to capitalistic philanthrophy has been dramatic. After the mid-nineties, which witnessed the era of global conferences on gender, environment, health and urbanisation, a certain fatigue set in amongst traditional philanthropists about the effectiveness of thier kind of giving. Where were the results? How was impact measured? Where was the scaling up? I think that they had a point. A large number of civil society organisations had become business-like in thier approach with appropriate strategies. They could mobilise large movements through cooperation and collective action for advocacy. The question was, "What after mobilisation and succesful advocacy for a civil society agenda?" Unfortunately, the follow-up was not business-like, it was ineffecient, it was almost as if the part after the call to action was insignificant. Many of us, for whom the change part was important, were dissapointed. It was almost a distortion of the famous and cliched motto into "think global, do nothing". The approaches of the philanthrocapitalists was like a breeze of fresh air. The business plans replaced the log-frames. The holier-than-thou attitudes were replaced by ones which said "we are in this together, let's find a way out." Market was no longer a dirty word.
This transition was needed. However, when excesses start creeping into philanthrocapitalism, the pendulum will swing again. Perhaps what we need today is to be vigilant that the agenda for social change is not hijacked by the fringe (and very wealthy) individuals and groups, but remains with those who are genuinly commited. A marriage between philantrocapitalism and movements for social change will create a middle path which will be good for both.
Non-profits Are Not Businesses
By Bill Huddleston, CFC Expert
Thanks for the opportunity to discuss these issues, I agree with Sean that they are important. I think that for the non-profit sector is tempting to throw the baby out with the bath water, and to not realize how so much progress has been made.
Non-profits are not businesses. That simple fact is being ignored in the vast majority of economic mumbo jumbo currently written about non-profits. Non-profits can, of course, be businesslike in their operations: they can have efficiently run organizations and a well-trained staff, and they can certainly deliver superior results.
Non-profits are not businesses in that people give money to non-profits with no possibility of getting it back. Donating to a charity is not the same as investing in the stock market or putting money in a savings account or money market fund.
Non-profits are not businesses in that for many non-profits, volunteer labor is a core component of their business model -- people volunteer to work at non-profits. Volunteers at a non-profit are actually making a double contribution. Not only are they working for free, they pay a personal “opportunity cost,” missing out on money they could be earning and time they could spend elsewhere if they were not donating time and talent to the non-profit. Most importantly, for many non-profits, if the volunteers were not there to help deliver the services, the non-profit simply could not exist.
There’s an old saying, “Walk a mile in someone else’s shoes before you judge them.” So lets switch things around and apply the core principles of the non-profit world to the business sector, and see what it looks like:
Non-profits are not businesses in that people care so passionately about the non-profit’s mission they willingly donate time, money and energy to help the charity succeed. When was the last time you went to your local supermarket and said, “Hi, I’m here to work for you for free, where do I start?” Or, “Since you only charged me $80 for my groceries, let me give you an additional $20 just because I’m glad you’re here.”
When you apply the norms of non-profits to businesses, it becomes immediately apparent that non-profits bear little resemblance to typical businesses.
Non-profits are not businesses in that they are more complex than businesses, needing to satisfy many more stakeholders and constituencies before they are able to say, “Yes, we are successful.” Warren Buffet’s generous gift to the Gates Foundation is actually proof of this -- the most successful investor of all time, an intelligent man by any measure – by his actions said, “The non-profit world is too complicated for me to figure out – I’m going to let my friend Bill Gates do that for me!”
Businesses really only need to satisfy their owners (and their customers), and yes, of course, they need to operate within the law. It’s also true that many businesses are good corporate citizens and donate lots of money to various charities; indeed, some of the best encourage volunteerism in their employees, and I applaud all of them.
The point, however, is that non-profits are more complex entities than businesses, and have many more constituencies than owners or shareholders. Non-profits must also satisfy the community; their board of directors; their service recipients; their donors; their volunteers; and their professional staff. Some that provide services on behalf of government contracts have many additional sets of requirements for service delivery, reporting, and government auditing regulations for contractors. Non-profits must also meet the legal requirements of being a non-profit (as defined by law and IRS regulations).
Some of the current efforts to come up with the dollar value of donated time or count the hours that one donates cheapen the whole concept of the non-profit sector. These efforts are doomed to failure because they miss the fundamental point of “Why?” Why does someone volunteer? Why does someone give money? I believe that the short, truthful, and unifying answer for all donors and volunteers is the response, “I care!”
Donors and volunteers naturally want recognition, and to know that their gifts (monies or personal effort) are being used effectively; they may give more because of the tax codes at certain times of the year. But the first and fundamental response is always, “I care, that is why I give,” or “I care, that is why I donate my time to this great non-profit.”
That is to be absolutely applauded and celebrated, and it is one of the unique and unifying qualities of being an American. We are the most generous people on earth, with Americans giving more than $260 billion in 2005 according to Giving USA. That fact should be recognized, celebrated, and applauded.
One trend in recent years that I abhor about the non-profit sector is the excessive attention paid to the giant donors. Bill and Melinda Gates are two of the most generous people on earth, and I have nothing but admiration for them. However, what much of the non-profit sector seems to have forgotten about is that true progress is based on the collective actions of first groups of ten, then hundreds, then thousands, and finally millions of people. As generous as the Gates are, even if you live in the Seattle area, I’m willing to predict that you will never see them walking down the front walk of your neighbor to deliver a meal for Meals on Wheels, nor should they. But the non-profit sector should do everything it can to encourage people to help that organization and millions of other organizations that solve problems every day, instead of perusing the Forbes 400 list to see who they can approach for a mega donation.
The concept of the “common good” is not an arbitrary concept, and by focusing on areas where everyone can agree, we can make progress in our society and the world. I know that many reading will say, no we’re too competitive, there’s no possible area of common ground, etc. so here’s my recommendation for something that is undeniably a common benefit – literacy. It doesn’t matter where you live, what your economic situation is, your opportunities are magnified if you can read. No one learned to read by themselves, everyone who can read, was taught by someone else.
By the way, for the market zealots – How much was the person who taught you to read paid?
For many of us, it was probably a family member, for others it may very well have been a school teacher, who was paid, but generally not very much by marketplace standards. We have many programs in place to teach children how to read, but where there are gigantic gaps are programs for teaching older youth and adults how to read. If you’re a conservative that pushed for the mandatory drug sentences 20 years ago, those men and women who were incarcerated on a mandatory minimum sentence are not starting to be released back into society – if they can’t read, what program do you have to teach them, lest they become recidivists. If they are in a desperately poor situation anywhere in the world, the first two things that they need are clean water and decent food, but after that, reading is the skill that can help them more than any other.
Thanks for the opportunity to have this discussion, I believe that everyone reading it, when asked why do you do what you do in the non-profit sector, the answer will be “Because I care.”
Bill Huddleston, CFC Expert
www.cfcfundraising.com
BillHuddleston@verizon.net
I too am grateful for the GPF’s hosting of this debate, and Michael Edwards’ comments about his own book. Although I recognize that revolutions need to happen at the local level, and they don’t need to be particularly organized, I’m not worried as some are about the power of “plutocracy” in making change through philanthropic efforts. Indeed, when there’s work to be done and large amounts of money are available, we should recognize the opportunity this presents for making major changes in enabling low income people to have better, healthier lives.
What I’m wary of are assumptions that contributions from corporations will go into corporate thinking, seen as benefiting the rich – this in contrast with business thinking, which is in my view critically important to getting things done on a large scale.
I should explain that in the 1990s I directed the Packard Foundation’s population program, and after that I founded, based largely on what I had learned as a donor, the nonprofit Venture Strategies for Health and Development, which is using business models to improve maternal health on a large scale. I won’t try to describe that more here, it’s explained on our web site. It’s a radically different model for a nonprofit, pledged to remain compact to avoid a large, expensive structure in the US while creating systemic change on a large scale in low income settings.
In many countries government health services are unable to reach most of the poor. In 44 developing countries where surveys have been done, of those people in the three lowest economic quintiles who receive any health care at all, 80% obtain it from the private sector, while the government health services generally serve people in the upper two economic quintiles. Private can mean nonprofit but it commonly involves heavy involvement of pharmacies, shops and traditional healers. It is obvious to us that the power of local market forces is important in reaching people with what they need for health care, and we are taking on responsibility for ensuring that what people want is available to them through these private as well as public channels. It isn’t always easy but it must be done, because expanding public health services faster than the rate of the growth of populations in most of the low income countries is difficult or impossible to do.
I appreciate Mathew Bishop’s comment encouraging philanthropists to leverage their money into larges scale change. Many nonprofits could benefit from learning more from the efficiency in businesses, and a few of the nonprofits that have been active for 20 years or more already understand the value of thinking this way. Sometimes philanthropists can connect with governments, directly or indirectly – and this depends on which government, and whether it is set up to allow the newly available money to be used efficiently, or not. Exciting things can happen in working with colleagues in governments, often ministries of health, when we find officials who are boldly seeking change, changing rules, creating new ways to do things to help people on a large scale. There are ways that corporate philanthropy and these special change-makers in governments could come together to create real leverage of resources for helping in societies whose needs are huge.
Martha Campbell
www.venturestrategies.org
mcampbell@venturestrategies.org
First, my thanks to GPF for hosting this important dialogue. It is especially important in the presence of the scale of the underlying social and humanitarian challenges that we face. Matthew poses three questions to frame a dialogue on the seeming tradeoffs between philanthrocapitalism and the fundamental social change evidenced through through "global citizen action," for example through transformations enabled by the civil rights and women's movements. To loosely paraphrase, he poses the following three questions:
1. When is philanthrocapitalism healthy, neutral, and damaging?
2. To what extent are collective action and philanthrocapitalism complementary?
3. How might this conversation be carried forward for the benefit of our collective intelligence regarding "what works"?
I would like to address each of these questions.
First, our work with more than 70 organizations in the Global Social Benefit Incubator over the past seven years suggests that philanthrocapitalism is healthy when the social mission of organizations is maintained as the foremost value that drives business plans for organizational growth. In this context"earned income" broadens the base of revenue streams and introduces market-based discipline. In about a third of the organizations that we have worked with the number of beneficiaries grows, often substantially, at the same time as the financial sustainability of the organization increases. While elsewhere there is evidence of the potential for mission drift and for the short term focus on financial results to supplant social outcomes, if the mission focus is maintained within a solid framework of social change and metrics, this tension is in fact healthy. It forces social benefit organizations to be wiser stewards of donor funds, more focused in the pursuit of their social missions, and more likely to identify the points of leverage or critical elements of strategy that are key to producing desired outcomes and social impact.
Markets have failed the poor. Globlization has marginalized their voice, as well as their economic and quality of life interests. We need to make markets work for everyone at the same time as we recognize the limits of market-based solutions and the risks posed by false bravado and hype in assuming that the conditions that created vast personal wealth for the few are the same as those that will be critical to providing economic and social benefits for the many. An unbridled belief in market solutions can become negative.
Philanthrocapitalism must recognize that the "agency" that comes with economically sustainable micro-level solutions is not sufficient. Poverty and inequality are deeply embedded in a host of social, economic, and political, and technological conditions as such eminent thinkers as Hernando DeSoto, Mohamed Yunus, and Manuel Castells have carefully demonstrated. But, unless we unleash the power of human agency--as I believe is happening through new approaches to philanthropy--we will not begin to break down the barriers and challenge the assumptions of the status quo in ways that will lead to lasting change. When these barriers require collective action, thanks to the imaginative work of social entrepreneurs it will be a more empowered constituency of citizen change agents that is prepared for this form of action. Philanthrocapitalism and collective action are complementary.
Matthew has posed an important set of challenging questions and this conversation can best be carried forward through evidence-based dialogue and action learning that empowers those who are served by donors. One of the lessons of philanthrocapitalism is that human agency is a vital force. As opposed to a welfare or charity approaches to lasting change it can supplant dependency with personal efficacy, human dignity, and institutional learning from the bottom up.
Jim Koch, Director
Global Social Benefit Incubator
Center for Science, Technology, and Society
Santa Clara University
Here we are, once again, the philanthropy “eggheads” debating oh so dynamically with fellow philanthropy ‘heads.
Philanthrocapitalism? Yes, it rolls off the tongue almost – but not quite – as smoothly as “philantropreneurship.”
Bill Huddleston came closest to saying it – let me finish the job. Our jibber-jabber is so far removed from the “everyday world” of charitable giving (sic) as to make the discussion as irrelevant as debating how many angels can dance on the head of a pin (“it depends on whether you assume they have feet or a pogo-like appendage for a lower extremity”).
Over the past two decades, I’ve advised hundreds of HNW donors and thousands of charities. What I know to be true ...
1. The “agenda for social change” – whether set by philanthrocapitalists or by the fringe – bears no relevance outside of our foundation-and-conference egghead circle. Philanthropcapitalists – and we eggheads – ARE the fringe.
2. Except for the rare few, such as Gates, giving is mostly exercised as a highly personal endeavor moreso than as a social responsibility. And to the extent they feel a social responsibility to give responsibly, donors (including the HNW) have become convinced that CharityNavigator, AIP and Guidestar actually have something meaningful to say. (Maybe we eggheads should take marketing lessons from those entities).
3. The motives of those who serve in the positions of greatest power in our sector – volunteer board directors – vary as widely as the personal and professional backgrounds those directors come from. That’s why pulling volunteer leaders from among the best and the brightest in the capital markets is no guarantee that an organization will be “philanthro” or “capitally” successful – case in point: the American Red Cross (don’t get me started).
What happens in DC, NY, Chicago or other philanthropy conference meccas stays there, for the most part, living on only in discussion forums, weblogs, and print journals ... among our egghead fringe.
“Why?” is the important question. Is it because we believe the majority won’t understand what we’re talking about? Are we weak marketers? Do we need to establish long-term demonstration projects proving the success of our theories first?
Or is it because we already know what the community masses – the charitable check writers – would soon find out ... our clothes are beautiful and expensive but oh so invisible.
I challenge each of us who are so deeply vested in this discussion to organize local non-name philanthropists in our home communities for a “town hall forum” around philanthropcapitalism and the agenda for social change. If anyone shows up, I think we’ll learn that most philanthropy, like politics, is local philanthropy.
And that’s where our discussions and agendas need to start.
Renata J. Rafferty
Philanthropic advisor
www.raffertyconsulting.com
rrafferty@raffertyconsulting.com
Renata,
You know that I think your plain spoken, practical approach to philanthropy is great. But I think you've missed the point of why all this is important.
It is true that this debate will not shape the behavior of individual philanthropists directly. But I believe that individual donors are already expressing an interest in a financial market based approach to philanthropy (a more "tactical" approach, if I may).
How this fundamental shift plays out at the institutional philanthropy level is meaningful. When the Enda McConnell Clark Foundation raises a $120 million growth capital fund (and opens the fund to individual donors), this can either be seen as a fundamentally positive experimentation with a philanthrocapitalist tool set or it can been seen as capitalism polluting the practice of philanthropy. As this story plays out in the press, as a war of ideas is fought, I think it will affect the thinking of the individuals you work with.
While I respect Michael very much, I sense that at the core of his book is the belief that capitalism is a fundamental force in creating inequity. Since he also sees philanthropy as fundamentally about correcting inequity, he believes that the tools of capitalism have no use within our sector. That is my reading of his book and Michael might disagree. But while the war of ideas might be waged in a certain ivory tower environment, I think that no matter what we all believe, donors are approaching philanthropy with a yearning for a new tool set. Philanthrocapitalism offers one set of tools that is attractive to many. I do think that the way in which the "establishment" views philanthrocapitalism will in the end greatly influence the behavior of individual donors.
Thanks to everyone who has posted so far - I will post a response of my own after a few more days of comments and after I've had time to digest all the different opinions. By coincidence NextBillion.net started their own online debate about the book today and here's the link in case anyone wants to join in: http://www.nextbillion.net/blogs/2008/07/07/a-dialogue-on-philanthrocapitalism-just-another-emperor-reviewed
Thanks and keep 'em coming!
Mike Edwards
Seven years ago when I charged into this space as multi-time successful entreprenur who'd just discovered the concept of mixing social impact and business (I'd been heavily involved in non profits while in business) I probably fit the profile of the zealot who thought business approaches to social problem fit every situation. After two years working with a malaria project I started in Swaziland and Mozambique, working with the principal victims, pregnant mothers and low birth weight children, I came to understand a lot about a lot of assumptions.
And all that said, I think the market has something offer to the poorest people in the world that they and the people in the developing world can both agree on. There are market failures, and always will be. no one wants to reach pregnant women and low birth weight children in sub saharan africa as a market for either charity or products or anything else. some things have to remain clearly in the realm of philanthropy, pure and simple and forever or thereabouts.
but any binary approach that keeps needed resources off the table owes more to dogma than it does to a clear head for impact and a clear heart for change, imho.
Matthew Bishop concludes by highlighting a potential pitfall of his case: “As Warren Buffett has pointed out, philanthropy is a “tougher game” than making money, so philanthrocapitalists will need to be at their best: innovative, thoughtful, analytical, driven, collaborative and, as there is no simple benchmark for success in philanthropy that equates with profit in the business world, brutally honest and self-critical about how they are doing.”
One danger of the philanthrocapitalist model is its heavy emphasis on quantifying results to measure success. Bishop (and by extension Buffett) recognize this measure is insufficient to capture the benefits of philanthropy, yet it is a focus of their endorsed business model. Being hard-headed, specific, and comparable to the exclusion of other measures of success risks falling into the trap of “if you can’t count it, it doesn’t count.”
Other challenges can stem from this preference for quantification. Too many times, “it doesn’t count,” if:
• It is difficult to count because it is an integrated program trying to achieve multiple results: Time and time again at the 2008 Global Philanthropy Forum meeting in Redwood City, participants emphasized the need to tackle the linked problems of the conference’s theme: human security, human rights, and the responsibility to protect. Effective programs have tackled the multiple sectors involved in these issues. Yet too few public or private funders are comfortable integrating themselves (the classic “stovepipe” problem) or funding integrated programs, where measuring success is possible—but more difficult.
• It can’t be counted in just a few years: Both public and private donor timelines are often absurdly short for the complexity, enormity, and entrenchment of the problems they seek to address. The philanthrocapitalist model may help if it can extend the strategic planning horizon.. But if it instead it is driven by quarterly reports, election cycles, or today’s 24/7 media pace, then the long-term and unpredictable process of addressing post-conflict reconstruction, corruption, or poverty for example will be ill-served.
• It can’t define success precisely at the beginning: Dialogue and stakeholder processes are key to achieving many of the social goals under discussion here. Yet these efforts are long-term and messy; we cannot precisely define success or identify which successes stem from which dialogues among scholars, dialogues among parties in conflicts, or dialogues between scientists and policymakers. Process counts, but counting the number of meetings held or policy briefs published is unsatisfying to both donor and recipient alike. Monitoring and evaluation cannot anticipate or count the specific impacts of dynamic social networking and new communication technologies (upon which, ironically, some of these new social entrepreneurs have made their fortunes).
None of these points are meant to suggest a tolerance for complacency, foot dragging, or unaccountability. Complexity is not an excuse for poor results, it is an ever-present reality that must be addressed by multiple means. And the measures, expectations, and time frames we use to access our public and private efforts should be just as diversified and integrated as the lives we are trying to improve.
I agree with many of the author’s premises, especially that the role of capitalism and business has become far too large in modern life. We must remember that at its base, a corporation has only one goal – to make a profit and increase value for the shareholders. It has no morals, no values, no “social outputs”. By law and by organization, companies must only do those things – including make donations – that advance the interests of shareholders.
Which is where we must begin, not at the company, but with the shareholders. If the shareholders demand social outputs and are willing to sacrifice some profit for them, then it is the duty of the corporation to meet that demand. This is not a defense of philanthrocapitalism, but merely placing the responsibility where it belongs – there is nothing in law or organizational theory that says the only way to measure a company’s output is profit and share value. So I would argue that social entrepreneurism, social ventures, etc. are really a description of a movement among shareholders, not among companies. True, with social entrepreneurs, it starts with a company; but with older, larger firms, it starts with the shareholders – actually, the only way it starts is with the shareholders. As corporations have become more powerful agents in society and have greater impacts, the people who own them have seen that they must be re-directed to ensure that those impacts are positive. We also do this through regulation, but firms naturally try to avoid or stymie regulations; shareholders is where the power does and should lie (and we need to keep on regulation).
Thank you for inviting me to share my thoughts on Michael Edwards' comments. I think Michael is raising some very important questions about the role of philanthropy in social change and I appreciate his willingness and the Global Philanthropy Forum in putting forward his points of view. It seems to me that underlying his concerns about philthrocapitalism is the question: what is the strategy for alleviating poverty and social development in a global economy? And who is the driver of social transformation?
Over the last decade, we have been working in the grassroots in the US and China to learn about if and how social change happens. In many of the communities of color that we are involved in and continue to learn from, they consider us to be family. It is a very special privilege to be treated in this way. And since 1996, I have been serving on the board of the Kellogg Foundation and was the chairperson for several years. The Kellogg Board meet twelve times a year and we carry out community site visits in Southern Africa, Latin and Central America and in the US each year. So what I have learned from my San Francisco work in vulnerable communities and from my involvement in a grantmaking organization is that there are really and fundamentally different realities and these realities shape the strategy that people use to make change happen. And what I am sharing in this dialogue is my personal point of view and it does not reflect in any way the thinking and direction of the Kellogg Foundation.
To illuminate the reality of two vulnerable communities in the United States, I would like to share some of our findings from a study of a band of indigenous urban Indians (Red Wolf Band) and an Asian refugee community (Lao Iu Mien) of five thousand in the San Francisco Bay Area. We were particularly interested in these two diaspora communities because they were at one time, scattered all over the region. But over the last twenty to thirty years, they have gotten organized and are bringing their people together in ways that are improving social health. So we are learning from these two communities about the strategies that they used to transform themselves from families being scattered to being in a formation. We have interviewed and documented by video the stories and have just completed a 30 minute documentary on the Iu Mien journey.
We have identified three important strategies. First, there are individuals in the community who serve as informal leaders to whom others look to for social and family guidance. These informal leaders work closely and collectively together to establish a leadership formation that is the backbone of a community. They initiate activities that strengthen certain core values such as, intergenerational and extend family, culture and history, healthy living, knowledge acquisition, a spiritual way of life, nature, and sustainability. They are not paid to do community work but are available 24/7. Such individuals are modest, humble, and helpful to others. They do not seek media attention and political positions. Their cooperation transcends organizational and political boundaries. By virtue of their moral actions for decades in community, they have demonstrated their credibility and as such, they hold considerable authority and power.
Second, the organizing of cultural activities and the events themselves serve to bring the community together around shared beliefs and values as well as provide spaces for intergenerational mentoring and personal growth. Shared learning, group organizing, and performing cultural activities lead to social connectedness and the building of social capital in a community. And the formation of trust within families, between families, among groups, and in a community reduces substance abuses, social violence, and gang membership.
Third, there are traditional spiritual leaders who provide moral direction to family and community members. They establish sacred spaces to hold ceremonies for replenishment. Their ceremonies are rooted in history and tradition and yet provide a framework and meaning to contemporary life. Sacred spaces and ceremonies also serve as a centripetal force that strengthens identity and offers balance to a strong market-oriented and material society.
We think these findings have important implications for improving social health of diaspora communities that find themselves atomized and socially isolated. This was the situation for both the Lao Iu Mien community and Red Wolf Band members. Several decades ago, there was no Iu Mien community and Iu Mien youth were joining gangs and dropping out of schools. There was no Red Wolf Band and young men and women were developing dependency on alcohol and drugs. But over time, a group of informal leaders took it upon themselves to develop strategies—rooted in their traditions—that helped individuals and families of somewhat similar backgrounds to adapt to local environments while maintaining and strengthening their cultural identity. These leaders organized into a formation to make things happen. They established sacred spaces and cultural events that brought different groups of people together in meaningful and powerful ways. Both communities drew from their traditions and history and adapted them to contemporary times to guide them in parenting and grandparenting practices, healthy living, social engagements, spirituality, and personal and family successes.
Today, gang membership and violence is significantly reduced in the Iu Mien community. Iu Mien youth are finishing high school and matriculating through colleges and universities. College graduates are returning home to live with and support their parents and grandparents while working in white-collar jobs. The youth involved in Red Wolf have been sober and drug free and they are actively contributing to the social and financial sustainability of the community. Furthermore, our findings suggest that when communities do not have a leadership formation and self-organized activities that form social trust and connectedness, their social health is significantly at risk. Violence, physical abuse, and school dropout rates increase, and community members fail to fulfill personal and family goals.
In our experiences, the strategies underlying philanthrocapitalism helps the entrepreneurs, innovators, athletes, artists and other wealth builders success in the community. They introduce new ideas, expand markets for small businesses, and help nano and small businesses grow. To some degree, philanthrocapitalism supports the nonprofit sector. But its gets complicated when community based organizations shift their mission from providing services to people to thinking exclusively about the bottom line and about expanding markets. This shift is not just a move toward efficiency but a change in the relationship between the organization and members of the community. It seems that a both/and perspective is an important direction for nonprofits to take.
What I have also come to see is the importance of community and culture as a container for the most vulnerable to survive and be sustainable--especially in a global economy. There needs to be a culture to guide everyone in building social trust and safety and in unleashing the passion, determination, and "will" to overcome whatever obstacles that are in front of us and be our best to each other and to ourselves. I am reminded of a story of a friend of mine, a medicine man who lives on very modest income. He drives as far as his car has gasoline and when it runs out of gas, he walks to the nearest town where he looks up one of his friends and crashes for the night. The next morning, he wakes up early, borrows some money to pay for gas, and goes back to his car and drives on.
And finally, to come back to a point made earlier that there truly are different realities, I think Michael question of how to hold authentic conversations across this chasm should be taken very seriously.
hanmin liu
wildflowers institute
While agreeing with Ms. Rafferty on the dissociation of this discussion from the real world, I would posit that the issue is not that only "eggheads" care, but that we should be well past this theoretical stage of the discussion.
We have been using these terms and concepts for more than a decade. It should no longer be sufficient to talk about these concepts as trends or simply note their existence. It should no longer be sufficient to describe the contours of the trend or write about those participating (or opposed to it). We should be having a discussion much more focused on case studies of success and failure. Our debate should be on how to best apply the lessons of the case studies.
And while all commenters here have talked about specific instances, we have to remember that "the plural of anecdote is not data." Particularly when most anecdotes are populated with anecdotal information.
One of the primary reasons we are not at this stage is that even many among the ranks of philanthrocapitalists still do not invest nearly enough time and money on measurement. I don't mean crude, easy measures of course. I don't mean silly metrics like those of Guidestar, AIP and Charity Navigator. I mean real impact evaluation that only comes with time, thought, technology, commitment and money.
The most telling argument that there is nothing new in the "new philanthropy" is the lack of investment in such measurement. Even the paragon of philanthrocapitalism, microfinance, has generated very very little reliable data on impact. Why? Because so few donors are willing to spend the time and resources necessary on things like randomized controlled trials.
So let's resolve to reject more discussion of theory. Let's insist on quality measurement. Then we can focus more on looking at the results of the application of these principles and see what is new and what is worth replicating.
Tim Ogden
Editor-in-Chief
Philanthropy Action
www.philanthropyaction.com
I was at GPF this year and came away with a similar feeling to the one I have now: that differential worldviews are talking past each other because the methods and data allowed by those worldviews tend to be different.
In the world today there are approximately 7 levels of consciousness operating (they develop in sequence). The three that are applicable to this debate represent over half of the adult U.S. population and at Integral Institute we use a color system to describe them.
Orange (worldcentric—about 40% of the U.S. population): In an orange worldview, the individual begins to move away from the dogmatic conformity that reifies the views of one's religion, nation, or tribe. The orange worldview often begins to emerge in late high school, college, or adulthood. Culturally, the orange worldview realizes that "truth is not delivered; it is discovered," spurring the great advances of science and formal rationality. Orange ethics begin to embrace all people, "We hold these truths to be self-evident, that all men are created equal...." Ayn Rand's Objectivism, the US Bill of Rights, and many of the laws written to protect individual freedom all flow from an orange worldview. It also values empirical rationality above all else and efficacy in measurable, objective data and outcomes.
Green (worldcentric- about 22% of the U.S. population): Green worldviews are marked by pluralism, or the ability to see that there are multiple ways of seeing reality. If orange sees universal truths ("All men are created equal"), green sees multiple universal truths—different ones for different cultures. Green ethics continue, and radically broaden, the movement to embrace all people. A green statement might read, "We hold these truths to be self-evident, that all people are created equal, regardless of race, gender, class...." Green ethics have given birth to the civil rights, feminist, and gay rights movements, as well as environmentalism.
The green worldview's multiple perspectives give it room for greater compassion, idealism, and involvement, in its healthy form. Such qualities are prominent in the non-profit world. In its unhealthy form green worldviews can lead to extreme relativism, where all beliefs are seen as relative and equally true, which can in turn lead to nihilism, narcissism, irony, and meaninglessness. People with a sense of self, needs orientation, or cognitive development at Green might reject the overly objective rationality of the former Orange stage and prefer subjective and intersubjective data, feeling that strict empiricism dehumanizes the important subjective/interior aspect of the community in question.
Teal (worldcentric to kosmocentric—about 2% of the U.S. population): Teal Altitude marks the beginning of an integral worldview, where pluralism and relativism are transcended and included into a more systematic whole. The teal worldview honors the insights of the green worldview, but places it into a larger context that allows for healthy hierarchies, healthy value distinctions and a focus on objective efficacy to the extent it serves the functional fit of the system at hand.
Perhaps most important, a teal worldview begins to see the process of development itself, acknowledging that each one of the previous stages (magenta through green) has an important role to play in the human experience and that the data claims and processes by which data are acted upon differ by stage. Teal consciousness sees that each of the previous stages reveals an important truth, and pulls them all together and integrates them without trying to change them to “be more like me,” and without resorting to cultural relativism (“all are equal”).
Teal worldviews do more than just see all points of view (that’s a green worldview)—it can see and honor them, but also critically evaluate them.
So one of the limitations inherent in this debate, and all the points made above are partially true and valid, is that people tend to prefer data differently based on the stage of their own development. So the core question of philanthrocapitalism tends to be a philosophical one around the nature of the system at hand and its stated objectives, the data that will be allowed to act within that system (only measurable outcomes versus "softer" data), and the time-view of the system. These are all developmentally variable. Because this conversation is posing a question that is fundamentally integral in nature - that is, it is trying to integrate the partial and valid truths of philanthropic and capitalistic means, ends and intentions - this conversation may follow a polarized dialectic as long as it is occurring at a cognitive level lower than Teal.
And for what it's worth, the integral responses in the thread stand out in their attempt to take a view that integrates the best of both without marginalizing the important contributions of either. And an integral data methodology accepts that both hard empirical outcomes and softer individual and collective interior measures are critical to adequately account for the complexity inherent in any intervention with many moving parts (e.g., multiple stovepipes of conflict, governance and security; cultural and social factors; economic conditions; health conditions; etc.).
The long and short of it is that at both GPF and at TED this year I was struck by how out-of-date the maps our leaders are using really are. Their maps have to be at least as complex as the problems they're trying to address, and they're just not.
Philanthropy is an economic system. It would be equally accurate to say; 1) the ultimate goal of philanthropy is to make the donor happy, or 2) The ultimate goal of philanthropy is to create a social good.
Capitalism is an economic system that necessitates the maximizing of cash as an outcome of activity.
Neither of these systems are up to the task of solving the world's most intractable problems. Ending poverty, hunger and disease. Providing universal education. Creating healthy physical environments for all of the world's inhabitants...
That said, the only engine that even approaches the sort of horsepower that is needed is The Market. I mean The Market more as a set of principles than I do as a component of a capitalist ideology. I think of the Market like physics; gravity and such. The trick, I believe, is to re-define value. Both capitalism and philanthropy place cash at the center of everything. Our savior, cash money. However, we all have felt love and we all have failed in our efforts to buy it. An open market does not require the abstraction of value. It only needs agreement on relative value. We must agree that love has transactional value. In a very hard-nosed, philanthrocapitalist sort of way, we must agree that love have transactional value. Then we have to start the remarkably hard work work of building the tools for collaboration and measurement because, as it has been mentioned in this discussion, with collaboration and measurement we cannot win.
A better world requires the hyper-talented philanthrocapitalists, strategic philanthropists, kind individuals and responsible governments, effective social entrepreneurs and community actors. It is not rational to argue anything else. I do not think that any one here is arguing this. However, a better world also requires system change, system change so fundamental that the players who are creating the change will need to have a distant horizon and broad definition of value to justify it.
Is 2000 Years Long Enough to Measure “Results”?
Not With Current Tools, Plus Much Of Life’s Treasures Can’t Be Measured
It’s also important that you have the right tool for the job, and that’s one of the huge challenges in the non-profit sector. If all you’re doing is selling boxes or sugar water, it’s easy to count how many you’ve sold. I’m also reminded of Abraham Maslow’s quote: “If the only tool you have is a hammer, everything tends to look like a nail.”
I think it would do the entire non-profit sector good to memorize this quote by Bobby Kennedy, where he identified so well the problem of using economic measures as the only tool:
"Our gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worth while. And it can tell us everything about America except why we are proud that we are Americans."
Bobby Kennedy, March 18 1967, University of Kansas.
If on the other hand, you're working on making the world better, it’s a lot harder as my article about “The Good Samaritan and Performance Measurement” shows:
The Good Samaritan & “Performance Measurement”
by Bill Huddleston
Currently, there’s a lot of hype in the world about being “results oriented” and the culture of “performance management” has seeped its way into almost every realm of American life, including business, government and now, the non-profit world as well.
Well, why shouldn’t it? Doesn’t it sound like it’s the only way to be, after all, who could be “against results” or against “performance measurement.” It sounds great, but like the question, “When did you stop beating your wife (or husband)?” it sets the stage in an extremely negative, and skewed fashion.
Let’s use a historical example, the story of the good Samaritan from the Bible is one that I believe is so widely known that it qualifies as a societal story, not just a religious one.
To recap, in the parable a traveler is robbed, beaten, stripped of his clothes and left for dead. Two different people walk by, leaving the robbery victim alone. Then a man from Samaria (the Good Samaritan) comes upon the man, and even though the two different groups hated each other, he stops to render aid. The Samaritan takes pity on the victim, bandages him, pours oil and wine on his wounds, then puts the victim on his donkey and takes him to an inn and takes care of him. The next day, the Good Samaritan gives the innkeeper two dineri (this was two days wages at the time) and tells the innkeeper, “Look after him, and when I return I will reimburse you for any extra expense you have.” (The story is from Luke 10:29-35).
Now let’s apply modern performance measurement and outcome techniques to this story. With 2000 years of history the story still resonates, how many people have been helped because someone remembered the story of the Good Samaritan and acted in a way that was not perhaps their first impulse? We will never know, and to the performance management crowd, this incident would be recorded today as “too expensive” and “ineffective” – after all, the Samaritan only helped one person. We don’t know if the Samaritan ever came back and paid those extra expenses, and it was two day’s earnings to help just this one person.
It would also received the rating of : “Results Not Demonstrated” - we don’t know if the victim ever recovered, was permanently injured, or had mental impairment due to his injuries. All we know is that he had the crap beat out of him, multiple people walked by, until the “unclean” Samaritan stopped to help.
According to the performance measurement tools, the Good Samaritan “program” was a failure and had no impact.
I think not.
Copyright Bill Huddleston, All rights reserved.
www.cfcfundraising.com
Blog: www.cfctreasures.wordpress.com
BillHuddleston@verizon.net
As someone who is raising a social venture fund, it's a little daunting to enter this discussion; will you get attacked by people with an outmoded, rigid, anti capitalist framework? Or can it provide a venue for a reasonable discussion of the value we are trying to create and the results we expect as we and the investors who believe in us and our approach, try to create a scalable social impact?
As someone who came into this space from business, I understand the arrogance of those who think the market is the answer to everything (I made the post listed as Xb blog above; google supplied the identity). But the market has a role to play. It can create the surplus to support a mission, but it does not solve every problem; somethings require people to give, to get subsidies, etc. It takes all the resources at hand for the problems we face.
I'd hate to see this discussion devolve into yet another feud over measurement, but I will nonetheless weigh in.
On measurement, I have a lot of thoughts; often it's a transaction cost without additive value except to the funder. In the case of Good Capital's first investment, Better World Books, (BWB) their social impact is in literacy, which is by its nature, intrinsically measurable. Teachers do it all the time as part of delivering their service, so they can push the student to new levels. Our second investment, a consumer products fair trade company that works with production coops, which we can announce in a few weeks, has broader metrics that matter, but they can be tracked, too. On the other hand, funders who want to measure the impact, of, say a soup kitchen by anything other than volume of people served can detract from the mission with their demands. Metrics have a cost. They must have a clear value that helps the mission and keeps the project on track or they are not worth it.
We've even worked with BWB to create a capital structure whereby five percent of founders equity gos to their non profit literacy partners, vesting over time based on their performance of their social mission. Glad to tell people more about that innovation, of which we are pretty proud, offline.
This is an incredibly timely conversation to have. In researching the charitable market, I have discovered many corporate "philanthropists" who appear to be taking advantage of serious, young researchers - committing their lives and extra hours to conduct profit-making research at charitable wages. These 'partnerships' are publically available for investigation - through their websites, 990 filings, directories, and other public resources.
Charities are businesses, and have every right to charge corporate research and development for corprate R&D service fees and contracts. Payment arrangements under the guise of 'grantmaking' and 'charity' should be a very serious civil offense, and are fraudulent.
Charities, nonprofits, institutions are at a disadvantage, lacking standardized operational classification models as in business practices. Moreover, technology is required in order to effectively engage operational oversight - though the digital divide is far too wide. Without this type of transparency throughout the charitable market, large donations are seemingly easier to manage in terms of research and development. However, internal lack of transparency prevents charities and insititutions from seeing their financial rights.
Our young, brilliant minds and our strong committed hearts should nere be burnt out for the sake of someone elses dime, most especially in high risk research environments where the livelihood of human subjects are also at stake.
Some corporate philanthropy is obviously part of a business plan, zero-ing out the dollar at year end assets. For firms that are in the top 50 of publicly traded companies as reported by the Wall Street Journal, they can afford to compensate R&D contractors appropriately.
I look forward to the day when corporate 'partnerships' treat institutions, our young minds, and our precious human subjects with greater dignity.
What a fascinating discussion, many thanks to GPF for hosting.
To Michael Edwards: before all else, I have to say I am in 100% agreement with your first assertion - it is always time for more humility. I know that I have learned the most about giving from those who have the least; the most about courage from those who are most oppressed; and the most about forgiveness from those who have been most violated.
But my main thought is that I'd like to add an historical perspective, primarily because I believe that "philanthrocapitalism" is not a new form in conflict with 'older and historically-proven strategies for social transformation like collective action', but a variegated species of response that has operated both in parallel and intertwined with these other forms for getting on 200 years. Indeed, much of what we now think of as philanthropy was invented by capitalists, and not long after the stabilization of modern capitalism.
I am thinking of some very wealthy 19th century businesspeople who brought business techniques to questions of social justice and revolutionized the public response. Take, for example, Charles Booth, shipping magnate who, in 1884, brought statistical analysis to poverty, established the 'poverty line,' radically reorganized the social policy agenda, and from his own research was convinced of the need for old-age pensions (in contradiction to his political beliefs), and then expended a fortune subsidizing the campaigns that led to the enactment of the first universal old-age pension laws. He used the same techniques that had made him successful in business to crack social problems and used his business generated wealth to carry through that thought leadership. His support, and the ammunition of his research, enabled collective popular action of a more traditional form - and demonstrates what I see the very positive role of the philanthrocapitalist - the potential for significant innovation leading to a fundamental shift in both the public perception of an issue and in the public agenda addressing that issue.
That story is repeated over and over - think of the little remembered businesspeople that bankrolled W.E.B DuBois' study of African-American life in Philadelphia (1896), a study that for the very first time demonstrated the impact of prejudice and discrimination across an entire population. Like Booth's work, that of DuBois ended the public debate based on battling anecdotes, and repositioned it in an arena of facts and figures upon which reasonable decisions could be made, and within which no unsupported racist assertion carried value. The same sort of impact was achieved by Joseph Rowntree, and the early funders of the public health work at Johns Hopkins, and the list could go on and on.
I suppose my point is that modern philanthropy began with 'philanthrocapitalists' - and that the institutional character that we now see around us is more the reification of those first innovations (and displays both the good and bad sides of reification). Those first philanthropic innovators saw themselves operating outside of the 'traditional' forms of action - politics, collective public demonstration, or religiously centered alms and amelioration - because they felt those traditional forms were unfair, overly politicized, and inefficient. That 'outside' position is now the 'inside', and I suspect it became so because it proved a more expedient way to achieve positive ends than the reactive alms-giving of the past.
So much for history - what about the philanthrocapitalists of today? Are they as innovative and creative as those of the past? I suspect the answer, in many cases, is yes, since we can see some remarkably inventive and visionary philanthropists today. Of course, there are also those who are more traditional, just as there were philanthropists of the 19th century who wanted the safety of helping only the 'deserving.' And there are, as then, almost every shade of charitable giving in between. To my mind the question, since the philanthrocapitalists will likely always be with us, is how to help them to grow into the most imaginative, effective people that they can be through synthesizing the skills and knowledge they bring from business with the skills and knowledge to be gained from the experiences and perspectives of the humblest and oppressed?
Every week I interview a social entrepreneur/ philanthrocapitalist for my podcast on the Skoll Foundation's community website www.socialedge.org. Each of these people is brave, inspiring, smart and determined. And each of them makes an impact. My latest series, MBAs Without Borders, gets right to the heart of this discussion, and the answers these people bring to this discusion is that the uestion we need to ask is not "does philanthrocapitalism work", but "how do we scale it?". It works - just listen to their stories. You need no further proof of the effectiveness of combining business training with social outputs than to hear their successes in making it work. Check it out and then come back and comment.
I agree the question of scaling is crucial; the typical pattern has been to highlight individual heroes, and not shine a light on the enterprises themselves. The people who are raising similar funds to ours, New Cycle, TBL, and others, believe the aggregation of institutional level pools of capital, coupled with professionally rigorous due diligence that also includes the question of scalable impact is one important way to help these businesses built to do good to reach their full potential in the world. And in this second generation is different from the earlier form of venture philanthropy. In a social venture fund, as we prove it out, the investor gets his money back at a good return, while getting the deep satisfaction of funding scalable and sustainable social impact.
When debating a phrase like “philanthrocapitalism”, one requirement is that we understand the relationship between capitalism and philanthropy. I believe that capitalism is the best system that humans currently have to distribute goods and services. I believe philanthropy, while intertwined with economics, exists to do much more than simply distribute goods and services. Philanthropy is a higher calling that is driven my the human desire for self-actualization (which I discussed in a post for the Stanford Social Innovation Review).
One of the reasons why I think the philanthrocapitalism debate seems to be discombobulated at times, with the participants talking past each other, is because of a specific belief that many people who agree with Michael Edwards’ anti-philanthrocapitalism views hold. That view is articulated perfectly in a comment left yesterday on the Tactical Philanthropy blog:
"Why should nonprofits conform more to the corporate model, when corporations are the main source of the problems non profits were created to solve in the first place?"
If you believe that capitalism is the source of the problems that philanthropy seeks to address, it is no wonder that you would reject the concept of philanthrocapitalism. There is no doubt that markets produce plenty of negative outcomes. Even hardcore free market economists agree that there are “externalities” (costs or benefits that accrue to non-market participants and therefore are not reflected by the market. A classic example is smoking where non-users accrue health related costs and so the market produces too many cigarettes). Capitalism is not perfect.
But I reject outright the idea that philanthropy’s main role is to correct the problems produced by our economic system.
To me, viewing philanthropy as primarily a correcting force on capitalism essentially sets philanthropy up as a kind of handmaid to capitalism. A clean up crew for financial markets. Philanthropy is so much more than that. Even in an economic utopia, humans would still have plenty of problems. Mental illness would still exist. Children would still lose their parents. Pain and fear and anger would still persist.
Philanthropy is about humans coming together out of an interest in each others well being. Capitalism is about people coming together to further their own self interest. It is OK to be self interested. With out self interest the human race would die out. Capitalism manages to harness self interest in a way that allows the pursuit of self interest to benefit the community. This tool set should be useful to philanthropy as a way to further our community interests.
To me, if you believe that philanthropy’s main role is to correct the problems of our economic system, than you are truly worshiping at the alter of capitalism. You are elevating the role of economics to the very center of human happiness.
To truly benefit from a positive form of philanthrocapitalism, we must be able to gather the accumulated wisdom of each discipline and integrate them into a more complete whole. This is the challenge and opportunity for philanthropy in the 21st century.
I believe that almost across the board nonprofits can benefit from both business rigor and operational excellence, as well as sustainable sources of revenue.
I do not believe this is an 'either/or' conversation. I believe that to a certain extent, both views can be held at the same time if we build a big enough box around the topic. Nonprofits globally, whether in sub-sarahan Africa or in Chicago, need renewable funding that they can count on in order to maintain and grow their social programs. As someone who runs a Foundation and is familiar with the funding community we make nonprofits jump through far too many hoops for our funding that at some level we all hope will not become an 'annuity'. Building smart and relevant earned-income streams not only makes nonprofits more sustainable over time and less dependent on annual giving campaigns, but also often builds their capacity to run lean and efficient organizations.
In many ways the idea of philanthropcapitalism is not a new one. Organizations such as the GoodWill have been operating businesss to solve social issues for over 100 years. And it works. It is true that nonprofits are not businesses, but I believes both sectors have much to learn from each other. Nonprofits running lean organizations that are spending the majority of their time on their social mission (vs. fundraising) can learn operational excellence from capitalist models. Capitalists that are not thinking of anyone from shareholders can learn much from nonprofits about how to use their assets for a greater good as well.
Folks,
Here's an example of political clout (or rather the lack of it) in action:
IRS mileage allowance for businesses:
58.5 cents per mile.
IRS Mileage rate for charities:
14 cents per mile.
My personal opinion is that it should be the same for both businesses and non-profits, it's not as if gasoline costs less for charities, and I would urge you to make that argument.
While not pertaining directly to "Philanthrocapitalism" I thought this message from the VANNO, (Virginia Network of Nonprofit Organizations) sums up very well an issue that affects all US charities. Read it, and contact your US Senators and Representatives.
The effort to increase the Charitable Mileage Rate is building momentum in Congress.
The issue came up in a recent House Ways & Means Committee mark-up. On Friday, 6/20/08 Congressman Platts and Petri sent a letter to House Ways & Means Committee Chairman Rangel requesting that they hold a hearing on H.R.2020 (Rep. Platts’ bill) and H.R.1827 (Rep. Petri’s bill). By Monday 6/23/08, the IRS announced that the Standard Business Mileage Rate will increase to 58.5 cents per mile for the second half of 2008. The Charitable Mileage Rate will remain at 14 cents.
Unlike the business rate which is variable and set by the IRS periodically, the Charitable Rate is fixed at 14 cents by § 170(i) of the Internal Revenue Code. While the business rate has steadily increased, but for a limited, Hurricane Katrina rate in 2005, the charitable rate has not increased in 10 years. With gas prices at $4.00 per gallon, it costs between 50 and 70 cents to drive a car one mile. As a result, nonprofits across the country are facing critical volunteer shortages. Raising the charitable rate, to the business rate, would grant relief to organizations who rely on volunteers that drive their personal vehicles for charitable service.
Both H.R.2020 and H.R.1827 would set the charitable mileage deduction at the same variable rate as the business rate. But there are minor differences between the bills. Both are currently in the House Ways & Means Committee. That Rep. Petri is working with Rep. Platts to request a hearing on this issue is a major step. The letter was signed by Representatives Platts [PA-19]; Boswell [IA-3]; Conaway [TX-11]; Miller [NC-13]; Putnam [FL-12]; Shays [CT-4]; Etheridge [NC-2]; Matsui [CA-5]; Shuler [NC-11]; Petri [WI-6]; Campbell [CA-48] and Foxx [NC-5]. Once Chairman Rangel respondse to the letter, we will assess our next steps. If a hearing occurs, VANNO may have an opportunity to testify. If this happens, it would be helpful to share stories from Virginia of organizations that would be directly and positively impacted by H.R. 2020.
Until then:
1. Contact your members of Congress. Action Alert Urge their support for H.R.2020. H.R.2020 would simplify the tax code, provide equity between charities and for-profits, and remove the disincentive from those Good Samaritans in our society who help the less fortunate. Additional information is posted at http://www.pano.org/publicpolicy/publicpolicy-irs.php.
2. Contact your Senators: This issue will reach the Senate. We need a Champion & a strategy. S.403 and S.3032 only raise the charitable rate to a fixed 40 cents whether permanently or temporarily. But the price of gas is not expected to return to prior levels.
Ask your members, your coworkers and your board of directors whether they volunteer or use volunteers, and whether raising the charitable reimbursement rate would help. It might be worth mentioning that volunteer board members of a 501(c)(3) can deduct mileage as volunteers if they are not otherwise reimbursed.
This may be the best chance we have had to increase the charitable rate in over 10 years.
Thank you,
Deborah Williamson
Executive Director, VANNO
First, we cannot go wrong by agreeing with Kevin Bales that humility is an important virtue.
The Peter C. Alderman Foundation deals in global mental health, occupying a very circumscribed niche in the very diverse world addressed both by philanthropy and market forces. Mindful of this, we are hesitant to make sweeping statements about philanthrocapitalism, lest we err like the blind man who upon feeling only the elephant�s tail described the creature as a three foot long being which weighed about fifty pounds. That said, our own experience leads us to agree with Michael Edwards� assertion that civil society and capitalism are not a perfect�or even a particularly good--fit. The metrics employed by philanthrocapitalists simply do not apply to healing massively traumatized populations who are afflicted with incapacitating traumatic depression.
On a micro level, simple outcomes such as a decrease in feelings of helplessness and hopelessness, or a decrease in the number of nightmares and flashbacks are not adequate descriptors of healing. The important parameters are subtle and complex. Do people exhibit life-affirming behavior: attend school, get jobs, adhere to their anti-retroviral or anti- TB drug therapies, put up their bed nets etc.? And, conversely, have they stopped their self-destructive behavior: drug and alcohol abuse, �sexual grazing� with numerous partners, beating their spouses or classmates, and the like? On a macro level, the parameters are even more elusive. How do we measure such qualities as the restoration of social capital in a traumatized society�the faith people have in each other and their institutions� feelings of good will and neighborliness, and conversely the cessation of feelings of tribalism and retribution? Since mass violence has directly affected more than one billion people in over 50 countries around the world, this is no small problem.
On the other hand, Professors Gerson and Colletta in their book Privatizing Peace note that the Marshall Plan was promulgated by a number of large American manufacturers in part to rebuild a market for their goods. In like manner, Thomas Freidman in The World Is Flat observes that global companies can and do in some instances employ their long supply chains to coerce their many vendors either to protect the environment and promote biodiversity or face the possibility of being fired.
We believe that the relationship between philanthropy and capitalism is not explicable by a simple binary system in which they either mesh perfectly or are immiscible like oil and water. We believe that reality is more complex than that. If one pictures philanthropy and capitalism as two separate universes, each represented by a circle, in our opinion, it is highly probable that, as in a Venn diagram, the circles do indeed overlap. The amount of overlap and the areas both shared and separate however must be calculated by heads with a wider world view than ours.
Elizabeth Alderman
Stephen Alderman, M.D.
Peter C. Alderman Foundation
In both Michael Edwards' essay and in many of the comments posted here, there is an assumption, implicit or otherwise, that philanthropy, properly understood, is a force for social change. Philanthrocapitalists believe this as much as more traditional philanthropists do. Yet, it is entirely nonsense.
The most important force for social change -- by a long shot -- in the modern era has been capitalism. It has revolutionized the way people live, it has put pressure on all sorts of social conventions, and it has been a critical engine for political change. Just look at contemporary China for a good example.
Capitalism is not without its faults. It often rewards people who make things people want to buy better than it rewards people who do things that might have social value, for example. But all political and economic systems have their flaws and on balance, capitalism's are more tolerable than others. As for creating inequalities, that has been pretty well exposed as a fraudulent argument in societies that have tried other systems, which have invariably wound up with their own sets of inequalities, or the sharing of mutual poverty.
The real problem with philanthrocapitalism is not that it is too business-like, but that it is presented as the moral superior of business, when it is not. Warren Buffett was right; he's much better as a businessman than as a philanthropist. However, if so, it is irrational to give his wealth to the Gates Foundation. He should have continued to invest it in companies that truly do change the world, not in philanthropic pipedreams.
Here's a thought experiment: 50 years from now, will Bill Gates be best remembered as a philanthropist or the man who built Microsoft? For better or worse, I would bet on the latter. And in short order, I suspect he will realize that too.
Actually, I would bet on the former. Microsoft is in the public eye every time people turn on their PC's. The foundation does wonderful things - but things (plural) are harder to remember than a thing (singular), i.e., making it possible for the computer to be mass and personal. This does not detract from the foundation - just an observation on how the human mind works
I am adding these comments, which appeared in another form in the Nonprofit Quarterly, to the discussion here, in the hope that they will add to what has become a very good discussion of Mike’s important piece. I applaud his strong argument about the downside of philanthropcapitalism--a masterful job of articulating the conceptual weaknesses of this approach and its rather meager results to date; it provides the best summary of the research revealing a glaring gap between rhetoric and empirical reality. And yes to his emphasis on the need to respect the differences in assumptions, aims and methods of the business and civil society spheres.
As is often the case, however, with someone with whom one feels a close conceptual kinship, I also had worries about several points of Mike’s argument:
1)The piece tends to conflate what I consider two, quite different, problems with the application of the business model to philanthropy, namely:
a) the danger of excessive control exercised by great wealth over civil society, and
b)the conceptual distortion of civil society through infusion of the business framework
The first is the perennial problem of power that accompanies wealth and the interests it serves, posing the centuries-old challenge of how to rein this power in through democratic processes without repressing freedom of disposal of private property. The second is the much broader philosophical issue relating to the formation of worldviews and the distortion of values and civic purposes through the imposition of a particular mindset. Mike seems to move back and forth between these two quite different problems as if they were the same.
2)I would differ significantly with Mike’s distinction between the core values of the market and civil society. He describes the difference between the defining values of the market as “individualism” and the “ordinary entrepreneur” and distinguishes that from “what lies at the heart of civil society”—“collective action and mutuality.” His emphasis throughout the piece is almost entirely on the collectivist side of civil society, which, in my view, is much more central to government, versus, pluralism, which I would argue has defined the core of civil society since at least the seventeenth century. This leads him overly to stress civil society’s role as a primary vehicle of “reducing the inequalities of wealth and power” and “social transformation.” It is reflected in many of his concluding recommendations, such as requiring the board of a foundation to be reflective of the community it serves. As defined and enforced by whom?
Conversely, I would suggest that the determination and enforcement of collective goals in a democratic society is the primary responsibility of a well-functioning government, and I would worry about philanthrocapitalists (or any philanthropists) attempting to take on this function. The genius of civil society lies, in my view, in its unique role in balancing individual freedom and collective aims, representing the diversity of conflicting social views while allowing each to pursue its particular vision of the common good without purporting to represent the public as a whole.
3) Mike’s argument seems to contain one important contradictory element: between the multiplicity and diversity of self-defined goals of the players in civil society, on the one hand, and the idea of demonstrating social impact, on the other. He repeatedly argues for diverse definitions of human fulfillment (pp. 44-5 and 58),but then later and champions the importance of social “impact evaluations” (p.87). This is a problem I believe he shares with the work of Jim Collins, whom he cites approvingly, in that, while the business model is rejected as “dead wrong,” its production orientation sneaks back in under the guise of evaluating “social impact” in a way that potentially contradicts the multiple goals and definitions of purpose of civil society organizations. This is illustrated, for example, in the what I hold to be a fallacious argument that “government tax breaks are given in return for a commitment to use the same resources as or more effectively than government.” Government tax breaks have a long and complicated history, having much more to do with the respect for the autonomy and overall value of civil society than they do for any explicit quid pro quo for specific social benefit.
These modest criticisms do not suggest any sense of overall disagreement with Mike’s important piece—they are offered in the overall spirit of, as he advocates, advancing the dialogue.
Bruce Sievers
Visiting Scholar
Stanford University
I appreciated Jane Wales' invitation to participate in this debate. I have been writing a response to Just Another Emperor for a while, because of the strong reaction I had to its arguments. Because it's essay-length and not completed, I'll post a few pieces of it here and see what kind of reaction ensues.
Jim Fruchterman
A Philanthrocapitalist’s Critique of a Critique of Philanthrocapitalism
Introduction
Just Another Emperor infuriated me. I kept running into facts and characterizations that didn’t mesh with the people and organizations I know in the field. It seemed to describe a world that was the opposite of the one that I see. And then I realized that I wasn’t reading a carefully balanced piece of journalism, or an even-handed analysis. This is an advocacy piece. This is a tasty spin cocktail designed to advocate for certain policy changes.
This is an attack on elite philanthropy, and the policy changes recommended are draconian. To support these conclusions, the author has to build a case for dramatic change. To do so, he mightily bends the literature and the facts to fit his purpose. Along the way, the collateral damage is fearsome.
Knowing that this is fundamentally spin advocacy, I could revisit problematic parts and look at them in spin terms. If widely used definitions don’t support the argument, redefine them. If a fact is needed for the argument being made, find one or two examples that support the desired point of view and generalize. If some issue undercuts the argument, throw it out. If there’s a counterexample, downplay it or argue that it’s the exception that proves the rule. Compliment many of the individual actors in the field while criticizing them as a general group. Frame the discourse to lead the reader to conclude something that isn’t quite said.
My goal in this critique is not to prove the opposite set of facts conclusively. It is to point out weaknesses in the case being made so that the conclusions seem less foregone than the author would represent. As a matter of personal opinion, I think the fact set points in the opposite direction. I believe that social entrepreneurship and philanthrocapitalism are a powerful force for empowering disadvantaged communities and improving civil society.
Am I a philanthrocapitalist? Given the fluffiness of the definitions, probably that and more. I’m a tech entrepreneur turned minor philanthropist turned social enterpriser turned social innovator turned social entrepreneur (perhaps not in that order). And, I chair the Social Enterprise Alliance, the leading North American social enterpriser’s association. But, this critique is currently only my opinion and not that of the SEA.
Just Another Emperor calls for more open debate and a set of policy recommendations based on the case it makes. But, let the reader be aware that the framing of the debate is more political spin than a careful policy debate, and that the case for these policy recommendations is based on a weak case.
A Philanthrocapitalist’s Critique of a Critique of Philanthrocapitalism
Part Two
Analyzing the Spin
I had the benefit of Brendan Nyhan working for Benetech for several years. While working for us, Brendan was also an influential political blogger who co-ran a website called Spinsanity. His goal was to deconstruct political arguments being made and analyze the spin behind them. In the words of the site, they want to: “expose the use and intent of the simulated reason and public relations techniques that dominate political discourse…[and] create a greater awareness of how spin operates and corrupts.” One quick example from political discourse is reframing the proponents of campaign finance reform as being against free speech. My intent is to point out the spin techniques being used in Just Another Emperor.
Flipping the Definitions
The most common structure of social entrepreneurship definition ends up dividing social entrepreneurs into two rough camps: the social enterprisers (those who run businesses) and the social innovators (those who don’t). But, the advocacy goal of Just Another Emperor is to discredit business approaches to social sector change. So, in two deft moves, the frame changes. Social enterprisers are now the apex group, and the social innovators are now “a progressive wing” of the social enterprisers. “But social innovation is too broad to act as a useful analytical category in the argument that I want to pursue.” So, let’s take the social entrepreneurs who do work on changing society through methods other than business off the table then. Sure makes it easier to make the case the social entrepreneurs and the philanthrocapitalists who fund them aren’t concerned about social reform and change other than through business.
Not He, Not She, it’s the Philanthrocapitalist Behind the Tree!
Just Another Emperor seems intent on criticizing philanthrocapitalists in general, but is amazingly gentle to specific philanthrocapitalists. So, who is being criticized? Why the straw-man philanthrocapitalist (the “Straw-Man”). Far easier to criticize an artificial construct than a real person, who does not fit the needs of the case. The Straw-Man seems straight out of the Bonfire of the Vanities: a Master of the Universe above the rest of society, with an unswerving belief that success in business has created the power to change the world. Get out of the way, you incompetent social sector people, Straw-Man Philanthrocapitalist will solve the problems of all these defective poor people.
Of course, Straw-Man, like most caricatures, doesn’t exist. It has to be admitted that around the year 2000, there were some people coming out of the tech community with Straw-Man-like attitudes. They didn’t last all that long: those attitudes don’t work. But, today in 2008, active philanthrocapitalists are very sophisticated and knowledgeable. Perhaps they used their business experience to decide to find out what really works and why people do what they do? Just a thought.
A Philanthrocapitalist’s Critique of a Critique of Philanthrocapitalism
Part Three
A is Not A
“Much of the literature on social enterprise seems to assume that the social will take care of itself if the enterprise is successful.”
Since this is a precise inversion of the concept of social enterprise as generally practiced, I found this surprising. But, what it really means is that some literature was found to support this point. But almost all of the successful social enterprisers I know get there by being focused on the social mission above the financial mission.
One of the advocacy goals of Just Another Emperor is to discredit the use of business techniques in the social sector. So, if there are social enterprises, they need to be misrepresented as primarily focused on making money, fundamentally flawed in conception, or too small to matter.
Since most social enterprises are nonprofits or owned by nonprofits, they have a legal obligation to put the social priorities first. And, nonprofits don’t focus on social outcomes solely because it’s a legal obligation: it’s fundamental to the mission.
The misconception that nonprofit social enterprise has to make lots of money to be successful is repeated in Just Another Emperor. What if a social enterprise runs a 10% annual deficit that is filled by donors, and with that amount of philanthropic funding accomplishes three times what it could by providing that funding directly to the beneficiaries as an income support? The success of social enterprises are measured by their social outcomes, not their financial outcomes.
______________________________________________________
Enterprise is Hard, so Don’t Bother
Enterprises fail. They are hard to do. I don’t think this is big news to most people, but it seems to be the author’s justification for writing off social enterprise. One of the big references quoted is the Seedco report. This is known among successful social enterprisers as the “sour grapes” report. They tried a social enterprise, and it failed. Conclusion: social enterprise is fundamentally flawed. Don’t try it.
It’s called entrepreneurship because it involves innovation and taking risks. Whether it’s in the area of enterprise or in advocacy, lack of success is not a reason to abandon all hope. Failure is a learning opportunity. If every advocacy campaign gave up when they failed to win their first major battle, we’d never have social change.
_____________________________________________________
Great, but what have you done for me lately?
The leading group for identifying and supporting social entrepreneurs is Ashoka. So, let’s be sure to take them down a notch. Remember, Ashoka calls them social entrepreneurs (and not social enterprisers) because so many of them are engaged in social innovation, not enterprise. But, the author conflates them and downplays their success.
“There are certainly examples of social enterprises that successfully bring service delivery and policy advocacy together. … ‘49 and 60 percent of Ashoka Fellows have changed national policy within five years of start-up.’ However, these figures are no more impressive than those for non-social entrepreneurs (i.e., the great mass of civil society activists), for whom the integration of service delivery, capacity building and policy advocacy has been standard practice for a great many years.”
Really? Do half of civil society activists change national policy within five years of start-up? It would seem like a group like Ashoka that has 25 years of experience locating and supporting this rock star advocates might deserve a little more encouragement. The recent book by Crutchfield and Grant cite integration of policy advocacy as a key indicator of successful large-scale impact of social entrepreneurs.
Thanks Jim, I'm glad you got that off your chest! "I feel your pain" as someone more famous than me once said. It sounds as though you feel as I did when I wrote "Just Another Emperor" - fed up at being lectured on something close to my heart with little by way of logic or evidence to support the claims that were being made. Good for you - with an honest debate we might actually get somewhere.
I am happy to plead guilty to some exaggeration and over-generalization (my rationale for doing so is clear from my opening statement at the start of this debate), but by trashing my book as "political spin" you do a disservice to the argument it makes, which is considerably more nuanced than you claim.
The core of my argument is that "philanthrocapitalism"is very good at doing some things but not very good at doing others (and may even cause some unwitting damage), so we have to be clear where the boundaries lie and protect other strategies and traditions to do what business and the market won't do, even when coupled with social objectives - like community organizing and building social movements.
That's why I praise "social entrepreneurs" including your own company Benetech, as "important experiments" on page 38. But that doesn't mean that they hold all the keys to success, or that they can't be out-performed in social terms by others who don't follow "philanthrocapitalist" techniques. Does Benetech address all the necessary aspects of protecting and extending human rights? Of course not - it makes a valued contribution where its skills in business and technology can contribute something useful. We need civil society activism to do the rest. And - to respond to your final point in the third of your contributions - there is plenty of evidence that activism creates changes in systems, structures and values that are every bit as impressive as the "rock star" social entrepreneurs you want to encourage. Learning from them, and valuing their contributions, might be a very good place to start.
A Philanthrocapitalist’s Critique of a Critique of Philanthrocapitalism
Part Four
Entrepreneurship is evenly distributed in business, government and civil society
“Obviously these attitudes are not the property of the business sector since they can be found (or not found) in government, civil society and business too, in roughly equal measure.”
The foregoing quote comes after a lengthy set of examples of entrepreneurship. I find the assertion that entrepreneurial attitudes are equally distributed among the government, civil society and business sector quite ridiculous.
Government is Just
The author’s case is that government is where the action is, and all this entrepreneurial activity nibbles around the edges. So, we have to make government seem great: “over the last century, far more has been achieved by governments committed to equality and justice.”
As a group that works in the human rights field, we might point out that governments are also the primary authors of large-scale human rights abuse. I am highly skeptical about attributing to governments in general a commitment “to equality and justice!” However, this kind of overreach is a logical part of a spin-based argument. The philanthrocapitalists have been around for ten years, so let’s go back over a century. Let’s put governments first, and social movements second. We’re discussing philanthropy, but let’s not mention any connection that philanthropy has with social justice movements.
Would you want a Philanthrocapitalist as a Neighbor?
One time-honored spin technique is the ad hominem attack. Just in case you were tempted to sympathize with Straw-Man Philanthrocapitalist, Just Another Emperor makes sure that you know he’s not a person you’d like to have to a dinner party. Since JAE calls for debate, let’s be sure to set preconditions.
You can’t have an honest conversation with one unless: “they shed the mock civility that turns honest conversation into Jell-O.”
They’re arrogant, and you’ll need a baseball bat to get them to trim their hedges: “humility and self-criticism don’t come naturally to many foundation leaders or social entrepreneurs, so it will take more than a ‘conversation’ to encourage them to live up to their social and political obligations.”
The presumption that whatever they claim to do, it’s worthless: “when the hype and self-promotion are peeled back, what of substance remains?”
Oh, and they cheat on their taxes while buying that second house on the beach: “corporate tax evasion is one of the dirtiest business secrets and an ‘Achilles heel’ of the philanthrocapitalist claim to pursue the social good, so pay your taxes instead of sheltering your profits in havens by the beach.”
At this point, JAE goes completely over the top with its rhetoric. It also explains why we’re tearing down Straw-Man instead of real philanthrocapitalists. Could the case have been made that Microsoft, eBay and Google are tax-evaders? Not in any conceivable responsible way. Could one imagine the author speaking to a crowd of philanthrocapitalists in such a fashion? He’d be lucky to receive “mock civility!”
Thanks for responding, Mike. I'm just warming up, though, and will continue to deliver my critique in serial form. Then I will be able to respond to your comments by reference to my counter-case.
ok tks Jim, hopefully you'll have calmed down sufficiently to engage with my arguments, rather than inventing your own straw men to deal with what you see as mine. I know you can do it! But will you?? Mike
A Philanthrocapitalist’s Critique of a Critique of Philanthrocapitalism
Part Five
Real Philanthrocapitalists Are Not Straw
Since I don’t know Straw-Man, but do know many named or likely real philanthrocapitalists (not that they claim to be such, but going on the implicit or explicit labeling of JAE), it’s easy to pick apart many of the overstatements. I don’t know of philanthrocapitalists that would agree that they would rather treat symptoms than root causes through frittering resources away, or that they would act to disempower those closest to social problems. I would agree that some philanthrocapitalists are not that interested in funding social justice groups, but many are. Philanthrocapitalists are not monolithic, but Straw-Man is far from representative.
The goal of Just Another Emperor is to portray philanthrocapitalism as sufficiently flawed as to make extreme policy remedies justified. But, what if philanthrocapitalism really is as good as the alternative methods of social change? My next goal is to raise this question sufficiently to make readers give serious consideration to the possibility that it is actually better and perhaps policy efforts might be focused on helping traditional government and civil society reform. After all, the social entrepreneurs I know are far more defined by being reformers and activists than protectors of the status quo! Perhaps supporting social entrepreneurs is the radical reform position. I believe that this is a more plausible interpretation of the facts than the one advanced by Just Another Emperor in all its spin.
This raises the question of what standards to use. Some of those proposed in JAE are not bad, the following is actually a pretty low bar:
“Philanthropy is based on the understanding that tax breaks are given in return for a commitment to use the same resources as or more effectively than government, so it is not unreasonable to ask whether tax exempt activities are living up to their side of this agreement.”
Of course, this ignores some facts about philanthropy, which is that it is often used to advance interests the government doesn’t. Someone who chooses to support religious missionary work shouldn’t have to explain why these resources are better used by their religious institution than the government. And, someone who wants to support civil rights or human rights might be actively combating injustice perpetrated by the government. But, let’s be generous and stipulate that effective use of resources is a general good to be pursued and ask the question of whether philanthrocapitalists do a reasonable job of this.
Some of the standards proposed in JAE are unreasonable. Should philanthrocapitalists be required to do more in a decade than other groups in a century? Should they be required to deliver all of the benefits of government with a tiny fraction of the amount of funds? I think that we should focus on effectiveness.
Just Another Emperor also strongly implies that diversity is not well served by the philanthrocapitalists (and proposes strong policy changes to remedy this).
So, what would the situation be if philanthrocapitalists were dollar for dollar more effective and supported more diverse communities than the alternatives: say traditional government or charity? It would then seem the premise of Just Another Emperor is misplaced.
Real Philanthrocapitalists Are More Effective and Support Diverse Communities
Let’s examine the big three supporters of social entrepreneurs: Ashoka, Skoll and Schwab. Each of these groups identify social entrepreneurs, and tend to draw their funding from philanthrocapitalists. Each is cited in Just Another Emperor. The first two are U.S.-based, and Schwab is based in Europe (Klaus Schwab is the founder of the World Economic Forum).
So, what facts do we know about these social entrepreneurs? Some very interesting ones:
- The majority of them are from outside the wealthy countries of North America and Europe
- The majority of them are people of color
- They are engaged in every conceivable part of the social sector. For example, Ashoka divides its social entrepreneurs into six fields of work: civic engagement, economic development, environment, health, human rights, learning and education.
So, the big philanthrocapitalists throw their support behind an organization of social entrepreneurs where economic development is just one of six categories. But, Straw-Man would never do that! And, Skoll and Schwab draw a big slice of their social entrepreneurs from the Ashoka Fellow ranks. Do you think they all filter out everybody except for the social enterprisers who are making money? Nope. As a matter of fact, Skoll and Omidyar are major funders of human rights efforts.
Taking it one step further, perhaps real philanthrocapitalists are savvy and dedicated to societal change. Jeff Skoll’s Participant Productions backed a little documentary called “An Inconvenient Truth,” which has had a tremendous impact on society’s attitudes to the global climate crisis. Not bad for an organization less than five years old…
The Schwab Foundation brings its social entrepreneurs to the seat of global economic power and treats them as equal participants in the annual Forum in Davos. Not only that, but they invite labor union leaders, religious leaders, and the heads of major nonprofit organizations (including both Human Rights Watch and Amnesty International). Just Another Emperor implies that the World Economic Forum (emblem of philanthrocapitalists) doesn’t engage with the social sector. How odd that the opposite is true.
Compare this funding profile to typical American charity: could it be possible that as a group, philanthrocapitalists are far more likely to fund international organizations, organizations led by people of color drawn from the communities they serve? It actually seems to be the case, based on looking at who they fund. Could it be that philanthrocapitalists are in the vanguard of those trying to change “the appalling
statistics” of American philanthropy, rather than “doing little” on this according to JAE?
So, what is the common thread for being identified by Ashoka and the others as social entrepreneurs? Two things: a new approach and effectiveness. Social entrepreneurs are not completely separated from the traditional social sector: they are the reformers that are making a difference. Being identified as a social entrepreneur is a boost to their efforts, but it doesn’t turn the social activist into a raving capitalist.
Another key difference between the social entrepreneurial approach and traditional charity is the relationship with the community being served. Traditional charity frequently has a power relationship that is not about empowering the recipient. Most social activists are not clamoring for charity: they are clamoring for education and economic opportunity for their communities. What is the primary achievement of the civil rights movement? Improved opportunities in education and employment. In the United States, the leading social enterprises are not about selling products and services to disadvantaged communities: they are about jobs for members of those communities. Jobs are the ticket to social advancement and inclusion.
So, when you look at social entrepreneurs, you’re looking at a group of people who are working in tandem with the community they serve. Unlike traditional charity, welfare or foreign aid, there’s more likely to be a true partnership. The social entrepreneur is more likely to come from the community being served, and the innovation is more likely to be sourced from the community being served. They are more about empowerment of disadvantaged communities pound for pound than traditional charity, foreign aid or government funding. And, something tells me they are a better and more effective steward of the resources they have than these traditional approaches. Maybe because that’s such a key part of the selection criteria for social entrepreneur status?
I hope that by this point, the possibility that Just Another Emperor has much of the situation backwards might seem plausible. It’s not all wrong, but enough of it is distorted to undercut the view that this is a careful, balanced analysis of the phenomenon of philanthrocapitalism. Instead, it tears down the artificial construct of the Straw-Man philanthrocapitalist while downplaying or misstating what real philanthrocapitalists and social entrepreneurs do.
A Philanthrocapitalist’s Critique of a Critique of Philanthrocapitalism
Part Six
The Recommendations: the Emperor’s Tax
Just because the case being made by Just Another Emperor is fatally flawed does not mean that all of the recommendations are equally bad. Some of the recommendations come across as mom and apple-pie to anyone who has to raise money for a nonprofit. Unrestricted grants, multi-year funding and simplified applications for funding are all great ideas. Of course, many of the philanthrocapitalists already do these things.
Some ideas are also good, but will be harder to execute. Increased diversity in the board room is a major challenge to foundations and nonprofits, not just those of philanthrocapitalists and social entrepreneurs. California recently saw a historic activism campaign that brought many of the large foundations to the table to work on this issue. I happen to be on the board of the Zerodivide Foundation, one of the largest California foundations with a board and leadership that is majority people of color (and people with disabilities). Zerodivide is a rare foundation, but it came about through activism and not through a single person or family’s philanthropy.
However, Just Another Emperor goes further and starts recommending drastic changes to the way philanthropy is conducted. Although it acknowledges that big donors don’t have to give away their money and then implicitly savages them for how they choose to give it away, Just Another Emperor wants to redirect the majority of elite philanthropy’s giving to the Emperor’s Tax:
- 10% to learning in philanthropy
- 50% on social justice philanthropy
- Increased spending on evaluation and research
What if I want to give my millions to religion? Environment? Education? The arts? Disaster relief? No, the author of Just Another Emperor knows better than you do where that money would be best spent. And, we’ll be sure to appoint a board that knows better than you do, too. Fork over your 60+% Emperor’s Tax for the privilege of giving where you want to give, if the board approves your suggestion!
Think about the implications of this on voluntary giving for a second. If I as a rich person want to give a lot of money to a certain cause, under these recommendations I should do it directly without making a charitable deduction, a foundation or staff because of the Emperor’s Tax. The costs of complying with these recommendations far outweigh the tax benefits of charitable giving. It takes control away from the donor. It’s one of the only ways I can imagine to successfully throttle philanthropy by major donors.
Talk to social entrepreneurs in Brazil. There are no individual tax benefits for donations in Brazil. The biggest philanthropic funders are the corporations, who can deduct some of their support for social causes from their business expenses. So, we have yet another example of the topsy-turvy world of Just Another Emperor: a likely outcome of these recommendations would be to shift elite philanthropy from the control of rich individuals (who has frequently moved on from the company they founded) to the corporations. Seems like the reverse of the intended goal, doesn’t it?
Michael you offer a challenging thesis, with Jim has countered with what seem to be valid arguments and you respond with an assumption that Jim Fruchterman will not or hasnot engaged with your arguments, but instead get personal with a comment like this"ok tks Jim, hopefully you'll have calmed down sufficiently to engage with my arguments, rather than inventing your own straw men to deal with what you see as mine. I know you can do it! But will you?? "
Pretty darn snarky response if you ask me, Michael.
Exactly what kind of respectful debate are you willing to engage in, Michael? From the way you are acting, I am beginning to question your desire to play fair in this game you have set up and invited people into.
Why not respond to the issues Fruchterman has raised, rather than questioning whether he's acting or willing to act with a reasonable goodwill?
A Philanthrocapitalist’s Critique of a Critique of Philanthrocapitalism
Part Seven and Conclusion
The Emperor is Better Dressed than You Think
The goal of Just Another Emperor was to make the case for reform of elite philanthropy, the giving of the new generation of philanthrocapitalists. The goal of this critique was to cast significant doubt on these conclusions, by illustrating the spin techniques utilized to reframe and distort the debate. By complimenting individual philanthrocapitalists and social entrepreneurs while denigrating the accomplishments of both communities, the piece sets up straw men to demolish. However, these straw men are not representative and the case falls apart on contact with reality. When Just Another Emperor tells you something is so, there is a very real chance that the opposite is predominant in the real world of philanthropy and social entrepreneurship.
Note what this critique does not say. It does not say that social enterprise is not a vital part of social sector reform: it absolutely is. It does not say that market forces will solve all social issues: they will not and cannot. It doesn’t directly discuss corporate social responsibility, other than to discourage policy outcomes that would make the social sector more dependent on corporations for funding, which today in the U.S. they are not.
This critique does make the strong case that activism and advocacy are not separable from social entrepreneurship, they are foundational to a field whose defining single point of commonality is a commitment to social mission. Social enterprise uses market forces primarily to serve disadvantaged communities through creating jobs and opportunity, not through squeezing profits out of them. It does make the case that the real world philanthrocapitalists invest in far more than social enterprise, and are far more progressive in terms of funding empowerment, funding globally and funding communities of color than traditional charity, foreign aid and government funding.
The policy recommendations in Just Another Emperor seek to ensure that no good deed goes unpunished. While some of them are similar to other recommendations made in the field, the Emperor’s Tax requirement to redistribute 60% of foundation funding to areas specified by the author is a prescription that will kill the patient. Voluntary giving will wither in the face of this compulsion regime. In the United States, we give partial tax breaks to those who give generously: a de facto match in tax dollars for charitable giving. This match does not make up for the Emperor’s Tax, which will discourage giving that will trigger these onerous provisions.
In conclusion, Just Another Emperor fails to make its case. By using the techniques of spin and public relations, it tries to establish a fact set that doesn’t resemble the actual field. It recommends some policy changes that would be more likely to kill its target of elite philanthropy than to reform it, especially given that the new elite philanthropists are more likely to give globally and to social sector causes and leaders drawn from disadvantaged communities. I’m sure that these fields can be improved, but Just Another Emperor is too fundamentally flawed to be the tool for the job.
Back to Mike's comments.
I base my opinions on almost twenty years of actually being a social entrepreneur. I've met hundreds of them. I lead the Social Enterprise Alliance as its chair: a group made up of over five hundred nonprofits pursuing social enterprise as a means to their mission ends. Perhaps some of the press accounts have been a little breathless, but there's so much powerful work going on out there to allow the distortions in your piece to go unanswered. I'm unimpressed by the spin techniques being practiced on our field by your piece.
Take the admittedly nice plug for Benetech's human rights work in your piece. Of course, you put this in exactly the opposite place from where it belongs. It's portrayed as part of the social enterprise movement. This is totally repugnant to the people we are trying to help. The head of our human rights program, Dr. Patrick Ball, doesn't even like the term social entrepreneur, because in the languages of our partners (such as Spanish) it comes out sounding like business. Our human rights program is an example of social innovation, not enterprise, not business. The software we develop for human rights activists is free and open software. Our users are the social justice groups you tout as somehow being in opposition to groups like ours. Our funders are the big philanthrocapitalists and the foundation from the last generation of elite philanthropists like MacArthur and Oak (living donor).
Compliment our program and then tear down our field, our peers and our funders? Not if I have a chance to respond and expose what I see in your rhetoric. I read your material and made my case based on what I found there and what I know and who I've met out there doing real work helping real people. Strawmen don't actually exist in the real world, Mike: they exist in pseudo-academic political spin pieces like yours. If it is taken as a serious account or representation of our field, the damage that could be done is worrisome.
tks Jim, I think will have to "agree to disagree" on this one. I'm happy to let the public decide whether my arguments are just "pseudo-academic political spin."
Good luck with your work.
Mike
Dear GPF Community and Beyond,
We thank you so much for your contributions to this important discussion, whether it was through reading along or sharing your own stories and experiences. We hope that we were able to facilitate a dialogue that was meaningful and informative.
Shortly, we will post a final wrap up comment from our guest commentator, Matthew Bishop, and we will close out the conversation with a final post from Michael Edwards.
We look forward to engaging with you online again soon, and to this end, would welcome your suggestions for future online discussion topics. Please email Esther Kyte at ekyte@wacsf.org with your ideas.
-The Global Philanthropy Forum
First, many thanks to the Global Philanthropy Forum for hosting this excellent debate, which has revealed a great deal of interest in philanthrocapitalism. Clearly, it raises quite a bit of fear and suspicion (although it seems that few people in this discussion are as sceptical as Michael Edwards), which is unsurprising since philanthrocapitalism is a disruptive force in the world of philanthropy. It is striking that philanthrocapitalism provokes a negative response mainly from the old philanthropic order (even if writing in a personal capacity), rather than from grassroots civil society organizations and social entrepreneurs, who understand the leverage that philanthropists like Jeff Skoll, George Soros and even Bill Gates can provide to social movements.
It goes without saying that the philanthrocapitalists have a lot to learn and will make mistakes. No one should, or probably would, disagree with calls for greater accountability and transparency. Indeed, as Michael Green and I argue in our book, "Philanthrocapitalism: How the Rich Can Save the World," philanthrocapitalists themselves should be taking the lead in promoting transparency and accountability in their good works. Capitalism at its best thrives on competition; so too can philanthropy. We should all therefore welcome the arrival of the philanthrocapitalists as new entrants in the market who can drive a step change in the effectiveness of philanthropy old and new, the biggest beneficiaries of which will be millions of the poorest and neediest people on this planet.
First of all, thanks to everyone who has posted. Hopefully it has been useful in clarifying some of the existing issues and adding in some new ones. “Philanthrocapitalism” is clearly a controversial and contested word, but it provides at least a temporary platform for some important conversations.
Identifying points of consensus may sound like a ‘fool’s errand’, but there is one at least, that we need “a marriage between philanthrocapitalism and movements for social change” as Rajendra Joshi puts it (or “collective action” – in Jim Koch’s words), “a middle path which will be good for both.” “Don’t throw the baby out with the bathwater” pleads Bill Huddleston, and let’s steer clear of “binary approaches” (that’s xb blog AKA Kevin Jones, and others).
But if this is the case, we need much better frameworks, metrics and information that can tell us when and where the synergies and tradeoffs lie, without pretending that there is a perfect marriage between impact analysis and the “multiplicity and diversity of the self-defined goals of the players” as Bruce Sievers puts it. I thought Liz and Steve Alderman made a particularly powerful case for work in this area that is “subtle and complex. We need more rigorous and independent analysis of the strengths and weaknesses of different approaches to philanthropy and social change, since as pretty much everyone has said, there is so much diversity in the “philanthrocapitalist” universe, never mind the broader fields of philanthropy and civil society. (Geoff Dabelko, Tim Ogden and others make this point)
The good news is that a global network of donors, scholars, think-tanks and NGOs is already taking shape to undertake at least some of this work (let me know if you would like to join), so I am hopeful that we can take the conversation to another level and think together about ways of building capacity among philanthrocapitalists (or all philanthropists) to see and utilize the best of all worlds – ‘old’ and ‘new’, civil society and business.
Underlying this apparent consensus are some obvious differences of opinion on the roles of government, business and civil society; the meaning and achievements of social enterprise, social entrepreneurs, social innovation and venture philanthropy (or just what it means to be “business-like”); and the future trajectories of capitalism and social change.
These differences are real I think (and as Kevin Bales helpfully reminds us they are anything but new), but they are not insurmountable. Some will welcome the debate and others will resist it. Some may even use smear tactics to silence dissent and close down the conversation. But I suspect it will continue to unfold for the simple reason that so many people want to talk about the issues in a spirit of open engagement.
This recent piece in the Hindu by Rohini Nilekani (http://www.thehindu.com/2008/07/13/stories/2008071355111000.htm) is a great example of the kind of thing I hope we see much more of in the future – confident but self-questioning, and willing to delve more deeply into fundamental questions of strategy and purpose. I hope that the Global Philanthropy Forum will encourage this kind of work as the debate moves forward.
Mike Edwards (edwarmi@hotmail.com)
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