You don't have to be Warren Buffett

This blog is usually not about fundraising for a specific initiative. But given the situation in Indonesia, where the May 27 earthquake has faded from the headlines, I am going to bend that rule.

The good news is that there are some absolutely outstanding groups working at the village level to help people recover. The bad news is that not enough money has been getting to them.

As you may know:

• Over 360,000 homes were damaged; at least half of these were destroyed completely.
• As many as 1.5 million people are living in tents and shelters made from debris.
• The health system is under enormous strain.

You don't have to be Warren Buffett or Bill Gates to make a big difference in a situation like this. $25 can buy a school kit to help get a kid back in school, $100 can help re-stock the books in the school library, and $250 can provide emergency shelter to 5 families. If you are in a position to do more personally or raise more in a group, then $4,750 will provide tools for 45 families to clean and rebuild their houses.

One of the most valuable members of the GlobalGiving community has come forward to say she will match the first $5,000 that come through in the next few days.

To give or to see what the options are, go here.


[GlobalGiving]

Warren Buffett Gives Money to Bill Gates

Bloomberg Radio called me today to ask what I thought about Warren Buffett's gift of over $30 billion, in annual increments of about $1.5 billion over the next few years, to the Gates Foundation (see article in Fortune).

I told them that it should be good news, but it could also have some downsides if not managed effectively.

This gift is smart because Buffett did not feel the need to establish his own new bureaucracy to give away his money. He partnered with someone. This is a rare and welcome thing in the philanthropy space.

The gift is also admirable because Buffett is requiring each annual increment to be given away in full each year. This means that the money has the potential for having impact more rapidly than otherwise.

The gift will be good news if it spurs even more high net worth families to become philanthropists during their lifetimes, rather than waiting until they die.

It will be good news if it marks the tipping point toward what Peter Drucker called the new economy of "meaning." Drucker noted that we are entering a period when the binding constraint for many people is not wealth or material goods, but meaning.

Buffett maintained for many years that he was going to give his money away when he died, but not before. Apparently, he changed his mind after watching how much meaning - call it enjoyment, fulfillment, or satsifaction - that his friend Bill Gates was getting from his work with the Gates Foundation.

But the gift could be less than good news if it leads the already huge Gates Foundation to become ponderous, bureaucratic, and top-down. Large organizations and companies face major hurdles in retaining their nimbleness and creativity as they grow.

For many years, I worked for the World Bank, which faced many of the same problems. The Bank grew rapidly in the 1970s. When I joined in the mid-1980s, it was filled with exceptionally smart people. But it had an increasingly sclerotic bureaucracy whose momentum kept it from innovating, and whose size and dominance in the sector led to arrogance and isolation from the real world in many cases.

Some of the larger, older foundations in this country have suffered from the same syndrome.

Let's hope that the Gates Foundation can find a way to avoid the same fate by leveraging the power of partner networks and bottom-up initiatives. That would enable it to be an energetic engine of innovation rather than a increasingly conservative force in the years ahead.

[GlobalGiving]

REAL international giving

The US is by far the largest source of philanthropic giving in the world, and most donors to projects listed on GlobalGiving come from the US.

But over the past year we have seen a steady stream of donors from other countries, not only in Europe but also India, Singapore, Japan, Korea, Australia, and Canada. This trend has accelerated recently, with almost twenty percent of all donors last week coming from outside the US.

Some of this increase is due to innovative companies like the Gap, which are now providing matching funds for their employees who live outside the US for specific GlobalGiving-listed initiatives focused on Indonesia Earthquake Recovery.

We have gotten emails from donors outside the US who are thrilled to have the opportunity to join others in supporting specific projects. These emails make me feel like we are making some progress toward our vision of GlobalGiving as a world-wide community of people working together to make our planet a better place.

[GlobalGiving]

Democracies and Dictators

It has been interesting to watch the widely divergent approaches of two web sites launched by the founder of eBay (Pierre Omidyar) and eBay's first president (Jeff Skoll) via their foundations.

Omidyar.net has puzzled many people since its creation. If you go to www.omidyar.net, for example, you can't figure out how to enter into the community. (Someone - presumably an existing community member - has to tell you to go to http://www.Omidyar.net/home). Further, especially at the beginning, no one was sure exactly what the community was FOR.

All the landing page says is:

We believe every individual has the power to make a difference.
We exist for one single purpose:
So that more and more people discover their own
power to make good things happen.

Once you log in, you can start a discussion about anything. But there is no real moderator or guiding hand. There is a rating system for members and posts similar to Slashdot, with the front page content determined by users' preferences and ratings. It is all very emergent.

By contrast, the Skoll Foundation's Social Edge is much more structured. Its tag line is "By Social Entrepreneurs. For Social Entrepreneurs." The site has a wide variety of news stories, blogs, indexes, interviews, polls, discussion groups, etc. Although SocialEdge depends heavily on users for content, it also clearly has an editor who sets the agenda and decides what goes on the homepage.

Last week, the editor of SocialEdge, Victor D'Allant, was in town for a series of presentations and discussions. When asked the difference between the two sites, he said it is like the difference between a benevolent dictatorship (with himself as the dictator!) and a pure democracy. Both have pros and cons - in fact they serve different purposes. In my experience, Omidyar.net is more about relationships and personalities, while SocialEdge is more about concepts and viewpoints.

The interesting thing - and a point made by Victor - is that it takes a while for communities to gain critical mass and a "personality." I joined both when they were lauched a couple of years ago, but I used them only occasionally at the beginning. Suddenly in the past few months they have both reached some sort of tipping point of usefulness, and I find myself visiting both much more often.

What is this Underdog thing?

Why is this blog called "Pulling for the Underdog?"

Because I like helping people realize their potential - especially those who have not gotten a fair shot so far.

This does not mean everyone will succeed. It means they should have a fair shot.

There are some open and performance-based systems in the world. But in many cases people don't have access to "show their stuff." And so even if their "stuff" is good, it does not get recognized and rewarded.

This holds true within organizations and companies as well as political systems.

One of the pre-cursors of GlobalGiving was the Innovation Marketplace. This was a physical event in the atrium of the World Bank in 1998. It allowed any Bank staff member, without exception or regard to rank, to pitch an idea for funding. At the end of that day, there was a grown man - a senior economist - crying, because he had never had his idea heard by the bureaucracy. If a senior economist at the World Bank was having trouble getting his idea heard, we realized how much harder it must be for most people in the world.

So we decided to do the Development Marketplace in, except this time we allowed almost anyone in the world to participate. This time we had 339 extraordinary finalists from around the world, ranging from supreme court justices from Latin America to NASA scientists to women from Uganda who had never been outside of their home provinces. None of these people had access to the World Bank system. When the Ugandan women asked me whether it was true that the World Bank president was going to hear their idea, I pretty much broke down.

At the end of the Development Marketplace, a woman from South Africa came up to us and said "I didn't win." "Well it's a competition," I replied, "Not everyone can win." "Well when does the secondary market start," she demanded to know, and continued: "Just because the World Bank didn't fund my idea doesn't mean that there are not others out there who will support it."

She was right, and that is how GlobalGiving was born. My co-founder and I resigned from the World Bank about six months later to start GlobalGiving.

GlobalGiving is about not only enabling your idea to be heard by the World Bank president. It is about enabling your idea to be heard - and potentially supported - by anyone in the world.

That is why I call it Pulling for the Underdog.

PS: The Ugandan women beat out the NASA scientist for funding.
PPS: I welcome your comments. Please provide your name and email.

Is Philanthropy Driven by Results?

Tyler Cowen had an interesting column in the NYT on June 15 reporting on recent work by John List, an economist at the University of Chicago, and his colleagues.

List's research shows that providing a match of 1:1 does increase donations, but anything beyond that level of match has little effect. It shows that entering donors into a lottery can also increase giving, but that such a lottery effect can also be matched simply by having an attractive woman do the asking. Those findings will probably not surprise many seasoned non-profit marketers.

What is even more interesting is Cowen's take on what List's research says about donors.

"Professor List has yet to delve into the specifics of donor motives, but the obvious conclusion is that donors do not behave like customers... [D]onors often give to charities for reasons of pride. Monitoring a charity means worrying about the wisdom of contributing to that charity. Many donors would instead prefer simply to feel good about their generosity and thus they deceive themselves into thinking that all is going well.

Furthermore, many donors seek a sense of affiliation and wish to be a part of large and successful organizations — the "winning team," so to speak. Again, these donors do not focus on how, or if, they actually end up improving the world."It remains to be seen which particular innovations will stick or spread, but well-informed and self-critical donors are probably a key to improvement for nonprofit organizations.

If donors do not abandon failing causes, those efforts will continue. Perhaps the content of donor pride needs to change. Rather than taking pride only in their generosity, donors should also take pride in their willingness to confront unpleasant news. Many individual donors are reluctant to take such steps, but the result would be better charities and greater real generosity all around."

What is interesting here is that Cowen is comparing donations to consumption, not investment. I agree with this - I believe that donors' behavior and motivation is more akin to consumption than to investment.

I don't fully agree with the implications of Cowen's assertion that " Customers take great care to learn about the merits of different expenditures, on cars or on homes, for example." People DO choose their houses and cars based on quality - but only partly. Much of their behavior is influenced by what their neighbors and the people they want to associate with are buying. Emulating and associating with others are major factors in donors' giving behavior as well.

So the goal for philanthropy should be to introduce a heavier weighting of quality into the donation decision, while recognizing the reality of the other factors that drive donors' behavior. This is what we are trying hard to do at GlobalGiving - and our friends at Geneva Global are hard at work on this as well. And groups like College Summit (assisted by people like George Overholser) are leading the way in developing more transparent indicators for quality and accountability.

Pushing on the Flywheel

People often ask me how GlobalGiving grew by 5x last year. "What were the main factors driving that growth?" they ask.

Depending on who is asking, I have a variety of answers at hand - the tsunami, the general growth of online giving, our growing partner network, etc.

But the real answer is much harder to describe.

Fortunately, I was reading something by Jim Collins today, and he described perfectly my own experience of the last four years since we launched GlobalGiving in beta. In his terms, I would say that we are at about turn 4 of the flywheel:

"Right now, the flywheel is at a standstill. To get it moving, you make a tremendous effort. You push with all your might, you make a tremendous effort...and finally you get the flywheel to inch forward. After two or three days of sustained effort, you get the flywheel to complete one entire turn. You keep pushing, and the flywheel begins to move a bit faster. It takes a lot of work, but at last the flywheel makes a second rotation. You keep pushing steadily. It makes three turns, four, five, six turns. With each turn it moves faster, and then - at some point, you can't say exactly when - you break through. The momentum of the heavy wheel kicks in your favor. It spins faster and faster, with its own weight propelling it. You aren't pushing any harder, but the flywheel is accelerating, its momentum building, its speed increasing."

(Jim Collins, "Good to Great," Fast Company, October 2001)

Earthquake

GlobalGiving just posted a number of specific additional projects that you can support that will help Indonesians recover from the devastating earthquake. Nearby Mount Merapi continues to rumble as well, and the affected families really need help.

Here is one example, but there are more on the site:

Recovery and Education for Indonesian Children Provide trauma recovery and education for children in the earthquake affected city of Yogyakarta. School kits including books, bags, and uniforms will be provided. Theme: Education | Location: Indonesia | Need: $10,000

Blogs and CB Radios

We probably all have friends who tell us more about their personal lives than we really care to know. And at some point most of us have revealed something personal that we later wish we hadn't.

When I was a kid in the late '60s and early '70s, CB radio became a huge fad in rural Kentucky where I lived. Everyone had a CB radio in their car, and some had one in their homes. It was a great novelty to be able to talk - actually broadcast - on the CB radio. While some important information about traffic conditions, speed traps, and accidents was broadcast, much of the content was trivial or even embarrassing.

This was exacerbated by the fact that people often considered their transmissions anonymous, even though they had so-called "handles" and were often identifiable. Others did not think about what they were saying at all in the rush to simply have their voices heard on the air.

So when blogging began to catch on, I wondered whether it was just CB radio all over again - except this time in print and available to everyone in the world with a computer connection - not just everyone with a CB radio in a 5-mile radius. CB radios also provided some deniability - if you said something stupid or embarrassing, you could always deny it later, since no one recorded these transmissions.

By contrast, blogs are forever.

The blogging trend coincided with - is there any causation in either direction? - a new wave of confessionals in other media. One of the most notable is the Modern Love column in the NY Times. This column provides a forum for people to write candidly about the ups and downs of their lives, especially their relationships. What is striking about the column is the quality of the writing and the relatively prominent authors who are willing to put themselves out there.

I knew that this genre had hit the mainstream when Debora Spar, a professor at the Harvard Business School, wrote a column about childbearing and adoption. Very well written - and very personal and revealing. Although I don't know her personally, I have taken some classes from her, and she did not strike me as one of those people who are constantly providing "TMI" (too much information). But the column was quite moving, and she was doing a service by writing it.

Hmmm... It will still take me a while to loosen up.

Many2Many2Many2.....

Clay Shirky, Danah Boyd, Liz Lawley, Ross Mayfield, Sebastien Pacquet, and David Weinberger are doing a joint blog on social software here.

Earlier I blogged on a recent talk by Danah, and Clay has long set the standard for intelligence observation and analysis of trends in social interaction and related software on the web. Highly recommended reading.

Clay Shirky:

Prospering (and Kiva'ing?)

Check out the relatively new website called Prosper.com. It is a peer-to-peer lending

platform that focuses mostly in the US. It follows on the heels of Zopa, which started in the UK.Prosper has sophisticated credit rating tools and interest rates vary depending on supply, demand, and credit risk.

The nice thing about Prosper is the community element. As the site notes:

"Groups are the heart of the Prosper marketplace. A group is organized by a single leader and consists of borrowers who all share something in common. Borrowers request membership or are invited to join a group, and since membership is limited, usually have some connection with one or more group members."

A site called Kiva lets you lend money to small entrepreneurs in developing countries, at no interest. Premal Shah, formerly of Paypal and eBay, recently joined the team as president, and while Kiva still has a ways to go, they have potential.

Clara Miller and George Overholser

Over the past few months I have started talking with Clara Miller, Founder and CEO of the Non-Profit Finance Fund (NFF) in New York City, and George Overholser, a VC and former banker and management consultant who recently joined NFF to found and lead NFF Capital Partners.

Clara has been one of the leading lights in the field of non-profit finance over the past two decades. Now she and George are doing some powerful new work on the capital structure of non-profits, and how non-profits can leverage private sector financial flows, accounting practices, and management approaches to grow their organizations sustainably while sharpening impact.

As their site notes here "We are now in the midst of another
development phase... Our holistic approach to
facilities has led us to expand to address the broader capitalization
needs of nonprofits. Our loans are increasingly being made for purposes
beyond facilities, such as working capital and “ventures,” and we have
added non-debt financial products, including asset-building services
and credit enhancements."

Read some of Clara's articles here and George's here to get a better sense of their thinking.

Update 8/31/06: Clara has been selected by the Non-Profit Times as among the Top 50 Most Influential Leaders in the sector. NPT says (pdf):

"She is arguably the most influential voice in the ongoing effort to reshape thinking and practice about nonprofit capitalization and relationship to debt. She has built NFF into a clear leadership position in the CDFI Loan field and does stellar capacity-building with great intelligence and savvy."

How to get results at 1/5 the cost

The scale of assistance to developing countries called for by many experts can seem overwhelming. For example, UN experts have recently called for $1.5 trillion in funding over the next ten years. But these funds would be allocated mostly in a top-down way via large, often government-driven projects. Community-based projects can deliver better results at much lower costs.

Irrigation provides a good example. A review of the experience in Bangladesh in Scientific American shows that the cost of constructing a conventional dam and canal system is about $2,000 per acre. The World Bank has made several loans for deep-well diesel pumps, bringing the cost down to approximately $375 per acre. But that is still prohibitive for poor households. So a local group called IDE (a project sponsor on GlobalGiving) has launched a campaign that has sold more than a million treadle pumps, which can irrigate one acre for only $66 – about 1/30 the cost of the dam system and 1/5 the cost of the World Bank diesel project.

The reality is that governments are unlikely to come forth with $1.5 trillion in official aid over the next ten years. But that is not a bad thing – because even better solutions can be delivered at much lower cost using GlobalGiving and related market-based mechanisms.

The Dumbness of Crowds?

Here is an excellent piece from Edge.org by Jaron Lanier.

Jaron argues that we should not get carried away by too facile an interpretation of the wisdom of crowds idea. He correctly points out that well functioning systems require a balance of bottoms-up and top-down approaches, along with both individual and collective action. Markets (collective action) require some degree of (top-down) government regulation and (individual) entrepreneurs.

"Every authentic example of collective intelligence that I am aware of also shows that collective was guided or inspired by well-meaning individuals."

Note 1: This piece is fairly long, and the first part is focused mostly on Wikipedia, but the most interesting thoughts are in the second part, so hang in there.

Note 2: See related thoughts from me here.

Note 3: Edge.org is a superb site that catalyzes conversations among leading physicists, artists, sociolgists, anthropologies, and others.

Naked Conversations - and Stumbling on Happiness

I just read a book about blogging called Naked Conversations, by Robert Scoble and Shel Israel. It focuses primarily on business-related blogging and how it is changing the way businesses communicate with their customers and other stakeholders. They predict big shifts away from "spinning" messages at audiences toward more genuine conversations where real human beings talk to each other. Let's hope they are right....

Now I turn to a book called Stumbling on Happiness, by Daniel Gilbert, who is a professor of Psychology at Harvard. His thesis is that humans are very poor at predicting things that will make them happy. They buy things that they are obsessed with, only to find that the pleasure fades fast. I heard the author interviewed by Madeleine Brand on NPR recently, and he had a great sense of humor, which I appreciated. Seth Godin says that Gilbert writes like a cross between Malcom Gladwell (author of Tipping Point and Blink) and David Sedaris (author of Me Talk Pretty One Day and other books).

Daniel Gilbert

How much money gets to the ground?

There has been much discussion of the effectiveness of aid and philanthropy recently.

You can think about this issue in two ways - efficiency and effectiveness.

Efficiency is how much of the money gets to the actual project. Here are some thoughts on efficiency:

• Before I left the World Bank, I did an informal survey of my colleagues, and the consensus was that about 25% of the money gets to the actual grassroots on average. The rest is taken up through the costs incurred by various layers that the money goes through, including the central government, provincial government, local government, etc. Note that these costs do not imply corruption, just the costs of reviews, planning, salaries, etc.
• This may sound bad, but it is actually par for the course. Many people do not realize that, according to the Chronicle of Philanthropy, the cost of fundraising via direct mail or telephone solicitations averages about 50-66% of the total raised, leaving. Some organizations do much better than this, but many also do worse! Small organizations have particularly high fundraising costs because of the high fixed costs of direct mailing and telephone campaigns.
• We have taken on a huge challenge at GlobalGiving. We are committed to charging only a 10% facilitation fee. When you add in certain bank charges, this means that we can usually get 85% to 90% of the money to the ground.

Effectiveness is how well the project helps people once it is implemented. Even if you get 100% of the money to the ground, the project is not effective if it is poorly designed. Here is a posting that discusses effectiveness of design.

The Death of Bullet Points....

A friend complained to me the other day about a terrible presentation that she had seen recently. What was extraordinary about the presentation was its ordinariness - a long series of bullet-pointed powerpoint slides that went on endlessly. In addition, the main points were at the end, long after my friend had given up and left the meeting.

Some months ago, Mari pointed me to a great site called Presentation Zen. This is now one of my favorites sites on the web. This site (really a blog) is compiled by Garr Reynolds, who used to be at Apple and currently is at Kansai Gaidai University where he teaches Marketing and Multimedia Presentation Design. The site is basically a compilation and analysis of superb presentations that Garr has seen (along with a few terrible ones). Some presentations use only images, such as this one by Al Gore. I have seen this one in person and can vouch for how powerful it is.

I also like the "Takahashi Method", which basically consists of putting one word, letter or symbol - in giant type - on each slide. I tried this about six months ago, and it had a big effect on the audience.

If you make presentations and are interested in getting your message out and across more effectively, check this site out.

Can it be ALL bottom-up?

People often ask me if bottom-up systems like GlobalGiving can totally replace top-down systems like the World Bank and USAID. Here is a response that I posted in a related discussion on Omidyar.net:

The short answer is that it takes both types of system. The analogy I often use is that of a well functioning economy. The healthiest economies around the world are market-oriented, but they also have significant public sectors.

The numbers vary, but a rule of thumb is that about 2/3 of the resources of an economy are allocated through the private sector, and about 1/3 through the public sector. The private sector is comprised of millions of small and large companies that listen to consumers and try to produce goods and services that consumers want. To flourish, private companies and consumers all need a well run public sector to provide public goods such as policies, laws, large infrastructure, basic social goods (including some education), etc.

Currently the aid sector is dominated by public sector institutions. Broadly, public aid to developing countries is about $80 billion, and private aid (ie regular people, companies, and organizations) is about $20 billion. The ratios are reversed compared to a well functioning market economy. (I worked in Russia for five years, so I saw first hand how badly the public sector functions in a situation like this!)

So I think the goal should be to change this balance and make it 2/3 private and 1/3 public over time. The goal should not be to get rid of the public sector institutions, but rather to have them focus on the policy framework, infrastructure, and other public goods. The private aid sector would focus on the millions of small-scale projects out there, driven by the demands and needs of the people on the ground.

Some ask whether the private aid sector has the resources to redress the current imbalance. The answer is yes, over time - and even faster if public institutions were willing to deeply innovate. Last year, individuals in the US gave away about $200 billion. So there is a lot of leeway to increase the amount of private aid going overseas from its current level of $20 billion.

Our own experience at GlobalGiving is that once people find out that they can find, fund, and follow up on overseas projects, they are very happy to be able to do so. And although it is early days, the fact that a few million dollars have flowed to several hundred projects through our site makes us optimistic that private aid overseas can increase steadily.

In terms of innovating in the public sector, in the year 2000, we did a little experiment at the World Bank called the Development Marketplace. It allowed community groups to submit projects directly, and then allowed non-profit and other private sector people to help make allocation decisions. This program has allocated tens of millions of dollars over the past few years - and has surfaced many superb ideas and backed outstanding community leaders. What if we upped that program to tens of billions of dollars?

Bill Easterly has taken these ideas a step further and suggested that public agencies should be required to give out aid vouchers to community groups around the world. The community groups could then use the voucher to "shop" at different aid agencies for the programs they wanted. Now THAT would shake things up! (And what would happen if private agencies could compete with public agencies for those vouchers?)

"Anyone who says that are not using it is lying."

Earlier I posted about a session at PCForum this year where the founder of Facebook spoke.

More recently I read an excellent article about the rise of Facebook.com by John Cassidy in the New Yorker. In the article, Facebook founder Zuckerberg argues that the secret of Facebook's success is how it gives each user total control over what personal detailsthat they display to every other person. This allows people to form a web of very nuanced networks, revealing different amounts of information to different people - just like they would in real life.

Last night I met with a group of 15 high school students who are interning on Capitol Hill here in Washington for the spring term.

I was stunned that **every single one of them** uses Facebook, and they said that anyone at their school who claims not to is lying. One girl, a senior, said that she had decided that very day to try to go cold turkey and quit, but that she was not sure she would succeed.

Wow.

$6 can change a life

I did a lot of graduate work on cost-benefit analysis, and spent a large part of my early career doing cost-benefit analysis for projects and programs. I got disillusioned because of two big problems.

• Conceptual: There are big problems comapring apples and oranges. These problems are compounded because different people value apples and oranges differently, and different people place a different value on an apple today versus two apples tomorrow.


• Usefulness: I found that despite the tens (or hundreds) of millions of dollars we spent on evaluation at the World Bank, the lessons learned were adopted very slowly.

But it is important not to throw the baby out with the bathwater. Sometimes it is useful to compare costs and benefits at a very general level just as a reality check on where funds are flowing. To this end, we have started doing some analysis on projects funded through GlobalGiving, because we believe it will be useful to donors.

We decided to start with the imperfect metric of "the cost of positively improving one person's life." This metric is very crude, and the data are still limited, but it is a start. Here are the initial results. In the last couple of years, it has cost about $6 to improve a person's life through projects funded on GlobalGiving.

When Eli and I were visiting Geneva Global recently, we found that they were coming up with siimilar cost numbers.

Within this, there are wide variations. For example, economic development projects cost more, and health, education, and human rights projects cost less. As mentioned, these are not directly comparable, because projects in one sector may have a greater impact on a person's life, or that impact may last longer.

Based on what we have to date, we estimate that more than 500,000 people's lives have been improved in some way through the 700+ projects funded on GlobalGiving.

We will continue to work on the numbers and over time will provide more details as we get more data.