Revenues, Votes and [X] in Philanthropy?

Beyond Compliance, a new paper from the Center for High Impact Philanthropy and Wharton Social Impact Initiative is the best summary I have seen of tools that non-profits and donors can use to measure impact. It also contains some rare common sense that can help readers chart a reasonable and feasible approach.

I was struck by the paper's conclusion that there is  “an (over) abundance of resources for funders and non profits, sometimes leading to confusion.” To me this gets to the root of the problem, which is that impact measurement is supply driven rather than demand-driven.  

What do I mean by this?

In the commercial sector, no one talks about an overabundance of measurement tools leading to confusion.  Instead, companies are always looking for new and better tools that measure what their customers want and like.  Why?  Because they will go out of business if people don’t buy their products.   

In democracies, the same dynamic has led to increasing sophistication with polling, focus groups, etc, because politicians need to know what their constituents care about.  If politicians fall out of touch, they get booted out of office.  

Revenues serve to focus the mind in market economies, just as votes do in democracies.  Few would argue that markets or democracies are perfect, but these forms of economy and government seem to  perform better than all the other forms that have been tried from time to time (to paraphrase Churchill). Markets and democracies both function better with rich sources of analysis and information. But all of that information is valuable because it drives toward simple, bottom-line metrics - revenues and votes.

What might be the equivalent of "revenues' or "votes" for the aid and philanthropy sectors? That is a great question that I am pleased to be addressing in the time ahead with Katherina Rosqueta, Cecily Wallman-Stokes, and their colleagues at the Center for High Impact Philanthropy and the Wharton Social Impact Initiative.  If you have ideas, sign up at Feedback Labs, and let's see if we can make some progress together.  

Entrepreneurship as Experimentation

"The solution of the economic problem of society is... always a voyage of exploration into the unknown."

That is Friedrich Hayek, as quoted in Entrepreneurship as Experimentation, a new paper that Michael Clemens flagged to me recently.  It emphasizes the important disruptive impact that entrepreneurship has on society.  But it's also a refreshing antidote to so much of the nonsense that is written about entrepreneurship.

Much effort (and hot air) has gone into honing the selection of entrepreneurs by venture capitalists, incubators, academics, and philanthropic funders.  Some people claim to be able to have knock-out tests for "real" entrepreneurs and/or have a rigorous way of assessing the likelihood new ventures will succeed.

But the reality is different:

• Nearly two-thirds of all startups fail.
• Only six to eight percent of startups generate good returns to venture investors.
• Even the best venture capitalists are unable to predict which of their investments will succeed.

Seasoned venture capitalists understand the implications.  The key, in the words of the authors, is to "democratize entry and facilitate efficient failure."  Good venture firms create a large portfolio of experiments, look for ways to reduce the cost of experimentation, gain early information about likely success (through methods like the lean startup approach), and quickly exit investments that are not paying off.

The same "democratization of entry" approach is now underway in the citizen sector through GlobalGiving and other platforms.   A small group of people is now even starting to think about democratization of entry in the government sector.  In both sectors, facilitating efficient failure will be crucial.  Efficient failure requires effective feedback loops, and a number of interesting operational and funding collaboratives are now underway.

Stay tuned.

100 Days of Gratitude, Day 37 - Sally Osberg

Sally Osberg

"This is just something we have to take a chance on."

That was Sally Osberg, president of the Skoll Foundation, in early 2002, months after we launched GlobalGiving. Mari and I had a great idea, but little track record in making markets for good on the new-ish World Wide Web.

Our site was extremely crude, with none of the polish and few of the features it has now. Still, we had launched what would currently be called our minimum viable product - a platform that had already intermediated a few donations to organizations overseas. We had at least taken the first step, gone from zero to one.  The promise of what it could unleash was tremendous, if still uncertain.

The Skoll Foundation thus became one of our earliest backers, and injected critical resources at a crucial period of our early life. Without that money, we might well not be in existence today. And since we were the first global crowdfunding and crowdsourcing site "for good" on the web, I like to think we played at least a small role in encouraging the emergence of so many other great "crowd-x" sites such as Kiva, KickStarter, and Indiegogo. (The pathbreaking, education-focused DonorsChoose started around the same time we did, and we learned a huge amount from them along the way.)

Since that initial investment from Skoll Foundation, GlobalGiving has helped mobilized over $150 million from hundreds of thousands of donors and companies to more than 10,000 projects in 160+ countries. We have made it possible, for the first time in history, for nearly every socially oriented group in the world to have their ideas heard and compete in the global marketplace for funding.  As we now embark on phase two of our vision, which is to create a virtuous cycle between quality and quantity, it is time to take a moment and say:

"Sally (and Jeff!) - your foresight and willingness to take a risk at an early stage helped put a dent on history.  Thank you."