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Disrupting Philanthropy

Lucy Bernholz (Blueprint Research & Design), and Edward Skloot and Barry Varela (both with the Sanford School of Public Policy, Duke University) explore the immediate and longer-term implications of networked digital technologies for philanthropy. Their claim: as enormous databases and powerful new visualization tools can be accessed instantly by anyone, at any time, information networks are transforming philanthropy. In this excerpt of "Disrupting Philanthropy: Technology and the Future of the Social Sector," they offer a glimpse of what is to come.

Aug 24, 2010

Entering a new phase

How will donors give and how doers will get things done?

Philanthropy in the United States is entering a new phase. Through many independent actions we are building an information infrastructure that will connect the long tail of donors to the long tail of doers. This infrastructure has the potential to open up and systematize processes and decision-making practices that have heretofore occurred exclusively behind closed doors.

The outline of philanthropy’s future is visible in online, shared portfolios of loans, as well as in informal networks of volunteers working together to aid disaster relief workers. It’s visible in commercial firms seeking social missions and in the capital they attract to the sector. It’s visible in policy debates about nonprofit tax privileges, in shared platforms for measures of social return, and in peer networks of individual donors.

It’s visible in foundation-led explorations of networked governance models and in community-based experiments with local fundraisers networked across time zones. We can see the outline of philanthropy’s future in shared databases of scientific research, in real-time sharing of grants data in exportable, mashable data streams, and in small teams of app developers who find practical and unexpected uses for these data.

How are these phenomena shaping how donors give and how doers get things done? The forms that will animate philanthropy ten years from now don’t yet exist.

In the meantime, we can agree not to fear, scorn, or ignore new technologies but to be open to learning about them, experimenting with them, and sharing the results. We can reconsider assumptions built into our work over decades—assumptions that may no longer make sense, such as whether to fund informal networks, how individual entrepreneurs fit in the ecosystem of the social sector, and what kinds of copyrights (if any) advance the social missions we are pursuing. We can share ideas and data from the online marketplaces of individual givers with the large professionally staffed foundations, and vice versa. There are innumerable strategic and tactical approaches for us—as philanthropic institutions, as social-purpose organizations, and as individual donors—to consider in this moment of transition.

It is a scary time for many, a time of unprecedented opportunity for others. Just a few years ago we could not have imagined using dispersed networks of cell phones to report on earthquake damage and relief operations. Doing so seems obvious now. We cannot foresee what the next application of technology to improving social conditions will be—we can only be sure that it will seem obvious in retrospect. Meanwhile, what we can do is facilitate the behaviors and expectations of sharing structured data that will make that application possible.

We cannot assume that the inequities of access and capacity that still prevent so many individuals and institutions from using these new tools of change will disappear on their own. We must work to set policies and programs that will ensure connectivity for all. We must grasp the authentic beginnings of what information networks have enabled, and be prepared for faster, smarter, farther-reaching, and more innovative opportunities—for a philanthropy that’s truly effective.

Aug 17, 2010

Cost Disease

Some activities may become ever more expensive and suffer from cost disease

In an analysis of the financial models of American theatre, opera, orchestra, and dance companies, William Baumol and William Bowen identified “cost disease” as the fundamental financing problem that bedevils arts organizations. In most sectors of the economy, Baumol and Bowen noted, technology tends to increase productivity. There are, however, certain labor-intensive activities, such as an orchestra’s producing live symphonic music, that undergo little or no growth in productivity through better technology over time. Relative to the rest of the economy, these activities become ever more expensive: they suffer from cost disease.

Likewise, some of the areas that philanthropy concerns itself with are more likely to see significant benefit from a highly networked nonprofit sector than are others. For example, improved networking will almost certainly make vaccination research more efficient. But what of a labor-intensive human service like foster care? Technology may improve foster child placement service around the edges, by streamlining management and financial tasks, but at the most basic level, foster care consists of one family agreeing to take in one child, multiplied many times over.

Though networking may spread the acceptance of best practices more quickly, there’s only so much efficiency new technologies can bring to this arrangement. The same is true for homeless shelters, soup kitchens, and mentoring programs for troubled students. Labor-intensive endeavors like these can’t be made very much more efficient; relative to medical research, human services will become more costly over time. Will the program areas that benefit most from new technologies become more attractive to philanthropy? Will the least technologically efficient and most costly subsectors see their government funding reduced?

Finally, how will the legal and institutional structures of philanthropy keep pace with the new modes of organizing, facilitating, informing, and funding change that technology facilitates? What new forms of accountability will emerge? How will institutional funders work with distributed networks? What new policy frames are necessary to maximize the potential impact of these new social forms and minimize their downsides? What new governance structures may emerge?

Aug 10, 2010

Generational Split

Will a generational split emerge?

The decentralizing effects of networked technologies are now familiar. But there is also a counter-tendency: the creation of seemingly “natural” monopolies on the web. Through a certain ineluctable logic—sellers want to go where the most buyers are, and buyers want to go where the most sellers are—the online auction business has produced a single major player, eBay. Similar logic has produced, at times shockingly quickly, natural monopolies among online payment systems (PayPal), classified ad hosting (Craigslist), user-generated video hosting (YouTube), and social networking sites (Facebook, which appears to be in the process of dethroning MySpace).

Among all the many online giving markets, will the logic of monopoly formation—donors want to go where the most doers are, and doers want to go where the most donors are—produce a single dominant site with a single methodology of operation and assessment? If a monopoly does emerge, what are the implications?

How will better data sharing affect the way individuals donate? Will people be more aware of social problems and donate more, growing the philanthropic pie? Will “issue fatigue” set in, causing them to donate less? Will the plethora of competing sites, networks, ratings systems, and the like lead to data, and analytic, overload? This is a time of great entrepreneurial activity, and claims of the “new, new thing” are coming fast and furious. Lately we’ve begun to see some mergers and collaborations among networking ventures, but such cooperation may not become a trend and may not be healthy for the sector if it does.

Will more and better data raise awareness of “root cause” problems, as with the “scientific philanthropy” of a century ago, resulting in a redistribution of individual small donations—away from, say, the local church and toward organizations engaged with widespread social issues? Will donations become less focused on the local and more toward the regional, national, or international? To date we have no metrics to analyze these phenomena.

Will a generational split emerge? That is, will older people, who are less wired, remain attached to the old ways, while younger people give fewer dollars to the Salvation Army and United Way and more dollars to Kiva and DonorsChoose?

Such a generational pattern seems already to be emerging in faith-based philanthropy, particularly among Jews and Catholics. Will there be a similar class-based split, reflective of the so-called digital divide? Are alternative giving approaches “good” for philanthropy, or will they effectively slice and dice donations into smaller, and less effective, pieces?

How will networked technologies affect the major volunteer civil society organizations—Rotary, Kiwanis, Big Brothers Big Sisters, Habitat for Humanity, and others? How will they affect donations to religious groups? These are the vehicles through which most Americans donate their time and money, and they represent, in the aggregate, a much larger segment of the philanthropic sector than do the staffed foundations.

What will it mean for these organizations if younger, better-off individuals begin to gravitate in significant numbers away from them and toward DonorsChoose or Kiva? What will older organizations do with technology to stay current or even ahead of the curve?

Aug 03, 2010

Beyond the horizon

Information networks will continue to proliferate

We can’t predict what philanthropy will look like in five years, let alone ten. But it’s safe to say that information networks will continue to proliferate, become more efficient, and become more accessible to more people and organizations.

So too will new organizational forms, enabled by networks, informed by data, and motivated by the values of sharing and open participation, continue to proliferate. If foundations remain mainly top-down, centralized, reactive institutions while most of the innovation in philanthropy occurs along the long tail of funders and nonprofits, will the traditional power dynamic between donors and doers still obtain?

The resurgence of interest in the commons, as exemplified by the over 140,000 photos currently under Creative Commons license on Flickr, is perhaps a harbinger of things to come. Just as agrarian communities managed pasture land for the good of the whole and didn’t inevitably suffer from the “tragedy of the commons,” efforts such as the Public Library of Science, not to mention Wikipedia, show how information resources can be managed for the good of the whole.

How will quasi-market entities such as B Corps and L3Cs evolve, and what new hybrids are yet to emerge? What changes might regulatory structures such as intellectual property law or patent regulation bring to bear on these emergent forms? What challenges might hybrids raise to the legal systems that define and shape charitable activity, such as nonprofit tax exemption or nonprofit status itself?

Each of these questions has taken on much greater salience in the last couple of years and all will put pressure on federal and state governments to look at the sector differently.

While industry and the public sector, especially the Department of Defense, have for years used simulation technology and game-playing pedagogy to test new ideas and teach new skills, philanthropic support for games is newer and less well established. One significant example of where games have worked is in HopeLab’s development of Re-Mission, a video game for youth living with cancer that helps them stick to their medicine regimens. Independent evaluations found a significant increase of regimen adherence by young people who played the game.

Organizations such as Games for Change and the Serious Games Initiative are helping build awareness of these “pro-social” games. Games and mobile phones—in fact all digital technologies—readily lend themselves to quantitative measurement.

Jul 27, 2010

Data, data, more data

More and better data, more readily available and at lower cost

Here the public sector is leading the way. Governments at the municipal (San Francisco, Washington, D.C.), state, and federal (data. gov, the Open Government Initiative) levels are making data available on the web. In the arena of campaign finance, the Sunlight Foundation enables users to tease out who gives how much money to whom, when they give it, and (by implication) why. On the Pew Charitable Trusts’ Subsidyscope website, users can track federal subsidies.

As more such data become available, new correlations and connections will be revealed in every area in which philanthropy has an interest, from test scores of middle-schoolers to disparities in public health to racial discrimination in housing. The ability to mix and remix public data will influence both governmental and philanthropic approaches to producing social good.

Of course, most government data are not accessible via the web. And philanthropy (with some important exceptions) has been even less pro-active in making data available. It’s not yet known what force—third-party intermediaries, regulation, the market, leadership within the field—will drive an opening-up of philanthropy, but open access to philanthropically funded data and research is within our reach. To the degree that new data will lead to new measurements of change, we should also expect to see major changes in the sector.

A relatively recent innovation is the storage of information in “the cloud.” The cloud refers to data and applications that are hosted remotely (i.e., stored on third-party servers) and that can be accessed via the web. The best-known examples are probably Facebook, Google Mail and Google Docs, Flickr, and SalesForce.com. Shifting from data storage on desktops or mainframes to cloud computing can save organizations money on hardware and software and allow them to allocate human resources differently.

Jul 20, 2010

New Alliances

Networked, boundaryless, and often temporary alliances that call for the creation of new ways of activating, coordinating, and governing cooperative efforts.

The transition from a relatively simple social economy to a complex social economy made up of a spectrum of financing sources and enterprise types has already begun.

On the funder side, we’ve seen a decade of experimentation with different kinds of peer networks. Just as an environmental program officer in a large foundation has a peer group of program officers at other foundations, environmentally focused individual donors are now connecting directly with their peers. The same thing is happening with regionally focused donors, activists interested in public data access, individuals who share the immigrant’s diaspora experience, and those committed to global giving.

Acumen Fund and the Edna McConnell Clark Foundation show how a data-driven portfolio approach can be used to attract donors to new forms of investing. Giving circles and Social Venture Partner communities bring together individuals who want to increase their philanthropic impact by working together. The Global Impact Investing Network’s Investors’ Council, SeaChange Capital Partners, the Nonprofit Finance Fund, and the Growth Philanthropy Network are all examples of new networks for donors and social investors.

We can expect that more and better networked information will lead to more and better collaborations and partnerships. Donors and doers will no longer be able to say that data are unavailable, or that they are too expensive to collect, in order to avoid working together. Donors and doers who do insist on going it alone may find themselves at a disadvantage when faced with networks of mutually supportive organizations and individuals.

Staffing foundations individually, especially small foundations, may cease to make sense. Consortia of active donors may begin to thrive, especially for place-based or thematic endeavors, boosting the case for donor engagement in philanthropy.

On the enterprise side, we see market-based enterprises such as B Corporations and L3Cs. As this monograph goes to press, there are 285 registered B Corps, including companies such as CleanFish, which works to preserve ocean biodiversity by changing the fishing industry, and Better World Books, an online book reseller that donates proceeds to literacy programs. B Corps also include retail outlets that function as employment development programs, such as Juma Ventures and Greyston Bakery. L3Cs include small, socially oriented enterprises such as Maine’s Own Organic Milk (MOOMilk) and the Champlain Housing Loan Fund.

Network-enabled volunteer groups like Ushahidi are radically different from incorporated enterprises with bylaws, mission statements, formal boards of directors, and geographical limits. They operate outside the existing regulations for grant funding that require nonprofit organizational status. They are managed by individuals who seek social solutions, not monetary gain or market success, and they rely on new models of accountability. Led by volunteers and managed remotely with free software, Nonprofitmapping.org rates the states on the quality of data on nonprofits they make available, with the aim of improving state reporting standards. It’s an example of how a virtual team, without an organizational home, permanent institutional affiliation, or shared locale, can work together to solve a big problem.

Similarly, volunteer-driven efforts that are, by design, here today and gone tomorrow—“flash” causes—can create tremendous impact by drawing attention to an issue. Some can even move a fair amount of money. In February 2009, charity: water raised hundreds of thousands of dollars through parties in more than 100 cities, all organized by volunteers via Twitter. These dispersed, crowd-organized events are common tools of community organizing and political fundraising and are increasingly present in campaigns for charitable support.

New organizational models will require new modes of governance. Most of the successful examples we can find of distributed governance, such as the ongoing development of the open-source software platform Linux, are made possible by norms and licenses that are unique to the software arena. For other kinds of ventures—such as in higher education, medical research, or service provision—where open source content sharing is not a norm, rules of the road for governing networks and networked organizations may need to be invented.

The reconfiguration of business forms and the development of hybrid governance models will undoubtedly stress the laws, regulations, and cultures that have developed in isolated silos. We will not only see the blending of market and nonmarket organizations, we will see the corresponding development of new approaches to funding, finance, and reporting requirements.

Creating new modes of governance will be an important endeavor in the future, but in the near term it poses quite a challenge to the relationships between capital providers and social sector institutions.

Will foundations find ways to fund dispersed, fluid, unincorporated organizations like Ushahidi and Nonprofitmapping.org? And if not, will they fail to be a consequential source of capital for these organizations? Will new organizational forms necessitate the overhaul of nonprofit tax and regulatory law? Will governments need to review and revise the very definition of nonprofit status?

Jul 13, 2010

New Blendings

New Blendings of Market-Based and Non-Market Solutions

Today, socially minded entrepreneurs don’t have to choose either the market or the nonprofit sector. The ethic of the networked information economy—reinforced every time you use your Firefox browser to look up something on Wikipedia or watch a user-generated video on YouTube—states that people aren’t motivated by profit alone, and that enterprise can generate both profit and social good.

We observe two seemingly contradictory impulses that, on reflection, may not be so contradictory. On the one hand, we see a proliferation of phenomena that harness market mechanisms to solve social problems: socially responsible investing, information marketplaces such as the FasterCures Philanthropy Advisory Service, B Corporations, low-profit limited liability companies (L3Cs).12 On the other hand, we see an enormous commitment of time, energy, ingenuity, and know-how to nonmarket, nonproprietary phenomena that are themselves social goods: open-source software, wikis, Project Gutenberg.

The blended value proposition developed by author and consultant Jed Emerson states “that all organizations, whether for-profit or not, create value that consists of economic, social and environmental value components—and that investors (whether market-rate, charitable or some mix of the two) simultaneously generate all three forms of value through providing capital to organizations.” We may be approaching a moment when the idea of blended value, which resolves the contradiction between market and nonmarket impulses, may become as commonplace as belief in the “invisible hand” of the market is today.

Over the past few decades, corporations have pushed for ever- longer periods of copyright protection and ever-broader interpretations of what can be copyrighted. In response, the foundation-supported nonprofit Creative Commons has established a “copyleft” licensing regime that accomplishes the inverse of what copyrights usually do: rather than restricting rights, Creative Commons licenses bestow them, ensuring that a work placed in the public domain by its creator, as well as all works derivative of that work, remains there. In addition to texts and images, Creative Commons licenses cover scientific data, music, and video, and they are valid in countries all over the world.

A 2009 study performed by the Berkman Center at Harvard Law School found that while “Open licenses promise significant value for foundations and for the public good and often for grantees as well,” they are rarely used in the philanthropic sector, as “many grantees and foundations are relatively uninformed and inexperienced with open licenses.”

For many tasks, nonmarket entities and the self-organizing commons can compete with, and even outperform, the market because market players tend to have higher overhead costs in the form of advertising, talent recruitment, capital equipment, attorney fees, and so on. Funders can apply tremendous leverage by making relatively small investments in maintaining the infrastructure and information resources that enable nonmarket players to exist and flourish.

Jul 05, 2010

Glimpses of the Future

The technology expert Clay Shirky has observed, “Communications tools don’t get socially interesting until they get technologically boring.”

This is certainly the case in philanthropy. Philanthropy is, by its very nature, idiosyncratic and fragmented. A technology or practice must be widely adopted, and broadly transformative of individuals’ expectations, before we can expect to see it make a real impact across philanthropic enterprises. Email; online shopping, banking, and bill paying; search engines; social networks; wikis; blogs; streaming music and video; newspaper and magazine online publication; GPS and online maps; cell phones; digital cameras—these are among the technological innovations that, to date, have changed people’s behaviors, and most people now view them as “technologically boring.” (Remember how amazing GPS was the first time you saw it? That was probably less than ten years ago. Now—yawn.)

Networked information has already affected, in some domains, the way philanthropy is conducted and the way social good is produced. But philanthropy is not like the music or newspaper industries, which have been utterly transformed—mostly against the will of those who run record labels and newspapers—by information networks. While no record label can operate the same way it did ten years ago, and no newspaper can ignore the Internet, there are thousands of private foundations, and millions of individual donors, who disburse their charitable assets, whether money, time, expertise, or physical labor, using no technology that didn’t exist in 1989 (or 1889, for that matter).

Nevertheless, change is inevitable, and the further penetration of networked technologies into everyday life, among all social strata in all parts of the globe, would seem likewise to be inevitable.

Some of the changes that networked technologies will bring may not just fail to live up to expectations, but may also bring negative consequences. For example, the establishment of network-driven standardized metrics may direct resources toward easily measurable, low- cost, low-effect interventions at the expense of less easily quantifiable, but perhaps ultimately more important, activities. Similarly, while increased transparency is an important goal in philanthropy, there may be a point at which transparency limits creativity and risk taking. And there is no agreement in the funding world on what transparency means anyway.

Some technologies—virtual worlds, gaming—play only marginal roles in philanthropy at present. They have not yet induced widespread interest, let alone change. But as today’s new technologies become commonplace, the next order of change—in behaviors and in expectations—will set in, and that is where we will see the early indications of what the future will hold.

Here are three phenomena we expect to see more of in the future:

• New blendings of market-based and nonmarket solutions.

• Networked, boundaryless, and often temporary alliances that call for the creation of new ways of activating, coordinating, and governing cooperative efforts.

• More and better data, more readily available and at lower cost.

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