Crowdsourcing Philanthropy: Creating Markets for Change

Heifer International is already on online pioneer, using its innovative virtual catalog of livestock and plants to encourage gifts relieving global hunger and poverty. But two years ago, its grant-making Heifer Foundation affiliate combined social networking with the idea of virtual charitable portfolios in the Kiva mold to create Hope Equity, an online community that allows donors to invest in a variety of funds by region or by cause. With the look and feel of a traditional stock portfolio, Hope Equity creates an online “portfolio of giving” investing in endowments that support ending huger and poverty while caring for the earth. This online model offers a type of investment that Heifer calls "micro-endowments." In the program, Hope Equity invests the donations and makes a percentage available to the donor’s selected causes each year. This allows for the original contribution to remain untouched, continuing to grow in perpetuity. Donors who commit to a certain level of giving can create their own funds - for causes like HIV/AIDS, environmental issues, hunger in Africa and funds for countries including Kenya, Mozambique, and Afghanistan.

Greg Spradlin, vice president for Hope Equity, says that the investment approach favors an open approach to information - just as everyday investors revolutionized financial reporting, modern charitable donors and investors may well change philanthropy - and the online portfolio, so common in the consumer brokerage world, is beginning to gain favor among donors who crave information.  "One of the things people respond to is the non-competitive approach, the fact that it's not tied to any religion or any political party, the open source nature of it," says Spradlin.  "We have investors with broad spectrum of beliefs, but it doesn't matter because we're not tied to one way of thinking - and they love the idea that it is open source."

Those investors range from young software entrepreneurs in Seattle to an 85-year-old woman who "just wants to know the money's being used the way she wants it being used." Spradlin believes that the formal nature of philanthropy is rapidly changing, and that personal involvement and a desire for information, metrics, and results is at the core of that change - as well as a societal movement towards causes as defining factor in how people view themselves.

"I really believe we are on the tipping point of change in philanthropy, based on what we are seeing and hearing from donors - and we deal very personally with people - giving and causes are part of their family, part of their. We created this to meet a need because we believe people are going to change the way they give, and they favor integrative approach, not just 'it's that time of year again, I'll write a check' Giving is a daily choice and causes are part of people's lives, whether it's the Red campaign or what coffee we drink. I don't think it's going to be a fad thing, I don't think it's going to fade. People are making it part of their lifestyle choices on a daily basis. You have to be socially conscious. In today's work, we don't have the choice to be isolated any more."

And in some ways HopeEquity.com is a capital market for philanthropy, in much the same way Kiva.org and DonorsChoose are - it's part of what Carla Dearing on Philanthromedia  calls "the Schwabification of philanthropy," with greater direct access to the mission of nonprofits, and the greater expectation of transparent reporting as well. As Daniel Rabuzzi, CEO of Peter Drucker's Leader to Leader Institute, wrote in onPhilanthropy.com in 2004: "capital markets for the social sector is an idea whose time has come." Yes as pioneering venture philanthropist Mario Morino has said repeatedly, historically there have been no markets for philanthropic capital. That is just beginning to change, and the open nature of online communications and data-sharing is fueling what may be a fast evolution. "If new wealth creates new philanthropy, then what does new philanthropy create?" asked Morino and Bill Shore of Community Wealth Ventures in a paper entitled High-Engagement Philanthropy: A Bridge to a More Effective Social Sector. "It creates dialogue, in public and private, reflecting vigorous, animated soul-searching on how such precious new resources can be best put to use to improve schools, health care, and the other delivery systems for basic human needs. And, hopefully, it leads to transformational change."

There are two trend lines heading for a collision - on one hand, people are ever more conscious of philanthropy and its role in commerce and society; on the other, these people are talking to each other more so than ever before. Allan Benamer, the IT Director at Coalition for the Homeless in New York and the blogger behind the aptly-named Confession of a Nonprofit IT Director, argues that the notion of consumer philanthropy has a small, point-of-sale, small consumer quotient as well: "Let's take that whole notion of 'consumer philanthropy' and put that back in the Economy 2.0 space. Wouldn't it be possible to move the hardest social services cases in the nonprofit sector over to the Web? And wouldn't it take just a little more thinking to get people to donate to those cases, in effect, becoming a consumer philanthropist? We're basically applying the network effect to donations and ending up with another shading on the notion of consumer philanthropy. It's not so much big-money philanthropy but online retail philanthropy."

He's got a point, of course. As the web experience grows ever more personal and less and less about big portals and media brands, so too does the giving experience - especially for the net native demographic. Even as consumers are inspired by the big names and big cause marketing campaigns, their day-to-day world online may well expand to include philanthropy. But is this a tipping point? Inflection point? You pick the economic cliche.

My partner in onPhilanthropy.com, editor in chief Susan Carey Dempsey, has reported from the front lines of philanthropic change these last eight years. "Everyone," she says, "is intrigued by the phenomenon of online social networking, which is making an impact on the micro-level in nonprofit fundraising as well as grass-roots political activism. Yet the implications of these millions of tiny interactions have the nonprofit community intrigued, encouraged and, with good reason, shaking in their boots. Clearly, the rules that have governed the donor-grantee relationship over the last few centuries of American philanthropy increasingly will not apply; those rules of engagement are still being re-written."

As that relationship changes, fewer decisions will be made entirely by the nonprofit professionals, and some degree of influence will devolve to the vast pool of donors - much as investors ultimately control the destiny of a public company. "The basic premises of seeking diverse input, trying some design methodologies such as rapid prototyping, and drawing from multiple disciplines are strategic approaches to solving social problems that are starting to gain some traction," wrote the philanthropy analyst Lucy Bernholz in her 2008 essay "Is Philanthropy Going Open Source?" The concepts, she said, are exciting, but "they also raise some questions for philanthropy. Where are the lines between public and private when it comes to ideas for the public good? Can or should someone be able to own a policy innovation? Protect a service delivery process? Are all socially positive ideas public?"

Susan Davis, the founding chairman of the Grameen Foundation and CEO of BRAC-USA, the American fundraising arm of the Bangladeshi microfinance agency, spoke about the shift in the winds of philanthropy at the Hilton Humanitarian Symposium in New York in 2007.  “I believe a change is coming between palliative philanthropy and what I call jujitsu philanthropy,” she said. Palliative philanthropy is “about saving lives and it’s based on compassion and a sense of social justice.” But “jujitsu philanthropy is all about finding the point of highest leverage to effect systems change.”

The CauseWired phenomenon may well have its greatest impact in the sector that is traditionally the slowest to change. In the last 50 years, only two new nonprofits have entered the ranks of the nation’s largest organizations – otherwise the top charities remain the same, year after year. And even in the most charitable country on earth, giving remains stagnant as a factor of our national wealth. But “Facebook Philanthropy” - along with Carla Dearing's "Schwabification" and the growth of philanthropic markets for change - is redefining what it means to give, how people view charity and social involvement, and what causes will ultimately succeed in the new philanthropic landscape.