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