Access to information, the common good, and freedom of creativity are critical concepts for the progressives among us. Lucky for us, David Bollier and friends are at it again - check out the State of the Commons Report and the new Blog by Bollier, On The Commons. This is good and important stuff for philanthropists to consider.
There are a few philanthropy-focused blogs out there, and some, such as GivingSpace seem to have some far-reaching ideals. For a more proven approach, check out
Green Media Toolshed.
Saturday, June 19, 2004
Book Presentations June 22-25
I'm back on the east coast, doing the I-95 tour this week. I'll be doing a series of book talks in Boston, Hartford, New York, and Baltimore. For more information, please download the schedule here.
Tuesday, June 15, 2004
Intellectual property and philanthropy
The thinking in my last real post, on invention and innovation, was stirred up again by yesterday's (June 14th) New York Times, which ran several stories in the business section on related topics.
First up, a piece on how the Finnish Technology Award Foundation has granted Tim Berners-Lee a million dollar plus Millennium award for his work in conceiving of the World Wide Web and making sure that it was built around license-free technology. What isnotable about this story is the role the philanthropic dollars play in celebrating the freedom afforded to us all by Berners-Lee's approach, not its investment in making his work possible in the first place. The story does a nice job of describing just how significant his "patent-free" approach was in how we all intereact with the Internet today. Given that he was working for the European Particle Physics Lab at the time of hid invention, registering for a patent and requiring licenses would have been the more traditional course.
Second, and the same page in the Times, was a story on the costs to one researcher to his funder (The Robert Wood Johnson Foundation) when he sought proper licenses for the video clips he collected in a medical educatioN DVD. The story, Permissions on Digital Media Drive Scholars to Lawbooks explains that the DVD's use of tv and movie footage cost $17,000 in fees and royalties and took months to navigate the different laws and requirements. All for 3 minutes of footage. The result (besides the DVD) is a conference called "Knowledge Held Hostage: Scholarly versus Corporate Rights in the Digital Age," that will look at the implications for fair use of information now that the questions are far more complicated than xeroxing (or to avoid a trademark dispute, let me change that to copying) course readers.
So how do we want our philanthropic dollars spent on knowledge? As fees to television studios for reprint permissions? To create knowledge for the commons? To protect the rights of artists and creators and their ability to earn just rewards for their creativity? The list of links on this blog under Open Source links present several organizations that are dealing with these issues. Please see, in particular, Creative Commons and Public Knowledge. And let me know what you think.
First up, a piece on how the Finnish Technology Award Foundation has granted Tim Berners-Lee a million dollar plus Millennium award for his work in conceiving of the World Wide Web and making sure that it was built around license-free technology. What isnotable about this story is the role the philanthropic dollars play in celebrating the freedom afforded to us all by Berners-Lee's approach, not its investment in making his work possible in the first place. The story does a nice job of describing just how significant his "patent-free" approach was in how we all intereact with the Internet today. Given that he was working for the European Particle Physics Lab at the time of hid invention, registering for a patent and requiring licenses would have been the more traditional course.
Second, and the same page in the Times, was a story on the costs to one researcher to his funder (The Robert Wood Johnson Foundation) when he sought proper licenses for the video clips he collected in a medical educatioN DVD. The story, Permissions on Digital Media Drive Scholars to Lawbooks explains that the DVD's use of tv and movie footage cost $17,000 in fees and royalties and took months to navigate the different laws and requirements. All for 3 minutes of footage. The result (besides the DVD) is a conference called "Knowledge Held Hostage: Scholarly versus Corporate Rights in the Digital Age," that will look at the implications for fair use of information now that the questions are far more complicated than xeroxing (or to avoid a trademark dispute, let me change that to copying) course readers.
So how do we want our philanthropic dollars spent on knowledge? As fees to television studios for reprint permissions? To create knowledge for the commons? To protect the rights of artists and creators and their ability to earn just rewards for their creativity? The list of links on this blog under Open Source links present several organizations that are dealing with these issues. Please see, in particular, Creative Commons and Public Knowledge. And let me know what you think.
Sunday, June 13, 2004
Networking companies and philanthropy
The ManyOne Network Foundation is yet another example of the continuing re-configuration of private companies and philanthropic assets. We need, as an industry, to keep our eyes on these arrangements as a developing resource.
Friday, June 11, 2004
Innovation, Invention and Design
Foundations like to talk about innovation. But how does it happen? Maybe we're looking at the wrong thing. The May 2004 edition of Technology Review, the MIT Journal of Technology (and my father's alumni magazine that I learned to love as a kid) is all about the processes and practices of invention.
Similarly, designers know to how to design new things. Take a quick look at the June 2004 issue of Fast Company, or I.D. Magazine, and you'll learn more about design than one ever could from reading social policy journals or philanthropy magazines. We need to expand our reading lists if we're going to find analogs and methods for social investing.
Similarly, designers know to how to design new things. Take a quick look at the June 2004 issue of Fast Company, or I.D. Magazine, and you'll learn more about design than one ever could from reading social policy journals or philanthropy magazines. We need to expand our reading lists if we're going to find analogs and methods for social investing.
Migration Information Source
As we seek to understand global trends in philanthropy, there are two key resources we need to track - namely people and money. For information on migration patterns, please check out Migration Information Source.
Thursday, June 10, 2004
Making Money Make Change 2004
A conference on social change philanthropy Making Money Make Change2004
Tuesday, June 08, 2004
A bigger pie
Well, we know that the percentage of income that Americans give hasn't moved much in the last 20-30 years, hovering around 1.8% of gross domestic product every year since 1971 according to Giving USA. And we know that the wealthiest of us give the least (as a percentage of income). A new survey by NewTithing Group finds that if the wealthy gave at the same percentage as the less affluent (1% of income instead of less than 1/2 of 1%) the difference would be almost $42 billion a year in additional funds for charity. No chump change, that.
So, with all the new products and services in philanthropy how come the pie isn't getting that much bigger? What can we do to boost the rates at which Americans give? Maybe this is an issue that the nonprofit and commercial vendors in philanthropy can work on together - increasing the philanthropic capital available to the sector.
We'll talk later about why more isn't enough, and just making the pie bigger won't solve the challenges of philanthropic capital systems, but for now, what ideas might we pursue for making the whole bigger?
So, with all the new products and services in philanthropy how come the pie isn't getting that much bigger? What can we do to boost the rates at which Americans give? Maybe this is an issue that the nonprofit and commercial vendors in philanthropy can work on together - increasing the philanthropic capital available to the sector.
We'll talk later about why more isn't enough, and just making the pie bigger won't solve the challenges of philanthropic capital systems, but for now, what ideas might we pursue for making the whole bigger?
Monday, June 07, 2004
Open source philanthropy
Imagine if you could tap into the expertise of every other organization doing the work you care about or funding the work you care about? Imagine you could access an online network of documents, testimony, video, evaluations, project reports, program summaries of all the NGOs working to fight hunger or foster creativity or prevent the spread of AIDS. The information would be out there for you to find when you needed it. In addition, you could add your thoughts, comments, and expertise on a topic or project and put ideas out there to trusted colleagues who would be able to try those ideas in their locations, add to them, edit them, or propose fixes for things that don't work. Let's pretend we can do this:
A local effort at neighborhood improvement has shown great results. More and more residents are involved in street watches and block parties, some small businesses have opened their doors, and a community bank is in the process of opening a small storefront branch. The efforts have been led by a group of local parents and grandparents who made it a priority to attend public hearings, learn how the city's decision making systems work, and advocate on behalf of their neighborhood. A small part of the success was supported by a local family foundation that often made grants to the block association for food and games at the block parties, but the rest of the changes have come through the leadership and endless energy of the neighbors. The changes are small but noticeable, and in a city with too little housing, wealthier denizens of the city have "discovered" the neighborhood and started buying homes in the area as they come on the market. In one case, such a purchase led to the eviction of one of the neighborhood's leading advocates, who had rented a flat in the house for more than 25 years. Recently, two more of the village elders have passed on. The neighborhood association is pre-occupied with infighting about priorities and arguing about the effects of these newcomers. Its last three meetings have led to nothing but bad feelings, and two city commission hearings were missed because the group couldn't get organized.
At the same time, a large national foundation interested in neighborhood revitalization also has "discovered" the area. Seeing the good changes that were made in the last several years, the Foundation wants to support more of the same. It is unaware of the current transitional state of the neighborhood leadership and assumes that the work that has occurred was led by a small number of nonprofit community organizations in the city, not one of which is located in this neighborhood.
What will happen....? How could the neighborhood pass on a torch of leadership, reset its priorities, bring together the new residents with the long-timers, and take advantage of the financial (and possibly other assets) of the Foundation? On the flip side, how can the Foundation learn more about working with neighborhoods in a positive way, find out who and how these changes have occurred, and avoid partnering with "the wrong" folks just because they are easier to find?
One way would be to tap into the knowledge and experience of the thousands of neighbors and foundation staff/board members who've been involved in neighborhood change in the last decades. Some of this expertise is in writing, and various affinity groups focused on US neighborhood grantmakers offer a good place to start. But every neighborhood is unique and what the Foundation needs is a way to learn enough about the area (before making decisions) so that it can ask the right questions or look for the right information from its peers. It needs a network of ideas, resources, people, past lessons, into which it can tap by asking good questions, framing a situation, and learning more about how to proceed? Are community conversations appropriate? Should it listen to the community development nonprofits? Can it send someone to attend the neighborhood association meetings? Should it send someone to walk the streets, hang out in front of the corner produce shop where a small clan of neighbors gathers every morning for coffee? Ride the buses and eavesdrop?
This is the everyday challenge of well-intentioned philanthropists, and one that could be addressed if information in the philanthropic realm were treated with the same ethos as information in the world of open source software. Some basic assumptions guide the way Open Source works - collaboration makes stronger tools. More heads are better than one. Many people working on the same problem will find more answers and more options than just a few people. The final ideas are owned by, and available for use by, everyone.
When it comes to investing in neighborhoods (or culture or health care or education or any of the issues philanthropy invests in), there is much to be gained by stepping back and taking stock of some of these open source premises. Ideas gain power the more they are used. Philanthropists interested in outcomes have much to gain from using the public experience and expertise of others to inform their strategy and then feeding their experiences back into that public idea stream so that it continues to adapt and get stronger.
For more on open source see
Steve Weber, The Success of Open Source, Harvard University Press, 2004.
A local effort at neighborhood improvement has shown great results. More and more residents are involved in street watches and block parties, some small businesses have opened their doors, and a community bank is in the process of opening a small storefront branch. The efforts have been led by a group of local parents and grandparents who made it a priority to attend public hearings, learn how the city's decision making systems work, and advocate on behalf of their neighborhood. A small part of the success was supported by a local family foundation that often made grants to the block association for food and games at the block parties, but the rest of the changes have come through the leadership and endless energy of the neighbors. The changes are small but noticeable, and in a city with too little housing, wealthier denizens of the city have "discovered" the neighborhood and started buying homes in the area as they come on the market. In one case, such a purchase led to the eviction of one of the neighborhood's leading advocates, who had rented a flat in the house for more than 25 years. Recently, two more of the village elders have passed on. The neighborhood association is pre-occupied with infighting about priorities and arguing about the effects of these newcomers. Its last three meetings have led to nothing but bad feelings, and two city commission hearings were missed because the group couldn't get organized.
At the same time, a large national foundation interested in neighborhood revitalization also has "discovered" the area. Seeing the good changes that were made in the last several years, the Foundation wants to support more of the same. It is unaware of the current transitional state of the neighborhood leadership and assumes that the work that has occurred was led by a small number of nonprofit community organizations in the city, not one of which is located in this neighborhood.
What will happen....? How could the neighborhood pass on a torch of leadership, reset its priorities, bring together the new residents with the long-timers, and take advantage of the financial (and possibly other assets) of the Foundation? On the flip side, how can the Foundation learn more about working with neighborhoods in a positive way, find out who and how these changes have occurred, and avoid partnering with "the wrong" folks just because they are easier to find?
One way would be to tap into the knowledge and experience of the thousands of neighbors and foundation staff/board members who've been involved in neighborhood change in the last decades. Some of this expertise is in writing, and various affinity groups focused on US neighborhood grantmakers offer a good place to start. But every neighborhood is unique and what the Foundation needs is a way to learn enough about the area (before making decisions) so that it can ask the right questions or look for the right information from its peers. It needs a network of ideas, resources, people, past lessons, into which it can tap by asking good questions, framing a situation, and learning more about how to proceed? Are community conversations appropriate? Should it listen to the community development nonprofits? Can it send someone to attend the neighborhood association meetings? Should it send someone to walk the streets, hang out in front of the corner produce shop where a small clan of neighbors gathers every morning for coffee? Ride the buses and eavesdrop?
This is the everyday challenge of well-intentioned philanthropists, and one that could be addressed if information in the philanthropic realm were treated with the same ethos as information in the world of open source software. Some basic assumptions guide the way Open Source works - collaboration makes stronger tools. More heads are better than one. Many people working on the same problem will find more answers and more options than just a few people. The final ideas are owned by, and available for use by, everyone.
When it comes to investing in neighborhoods (or culture or health care or education or any of the issues philanthropy invests in), there is much to be gained by stepping back and taking stock of some of these open source premises. Ideas gain power the more they are used. Philanthropists interested in outcomes have much to gain from using the public experience and expertise of others to inform their strategy and then feeding their experiences back into that public idea stream so that it continues to adapt and get stronger.
For more on open source see
Steve Weber, The Success of Open Source, Harvard University Press, 2004.
Saturday, June 05, 2004
Aggregating resources (part two)
In Part One of this post (Aggregating resources, part one - scroll down to next posting) I introduced the approach to problem solving posited by Bjorn Lomberg, a controversial Danish economist. Lomberg brought nine really smart people together (all economists, four of whom have won the Nobel prize in their field) and had them run cost-benefit analyses on proposals to address major global problems from AIDS to global warming. The experts came up with ranked proposals and price tags for achieving major change. See
I asked about the validity of the approach - why don't we bring smart people together to vet proposals for major change. Everyone would win, theoretically: those who have a vested interest in promoting the change, those affected by the issue, and those who either directly or indirectly provide the financial resources to funders of such efforts (taxpayers - directly through government revenue or indirectly through tax subsidies for private philanthropy).
Now I want to add a twist. If nine people are so smart, what about 9 billion? After all free markets, the lottery, race track bets, football odds - all depend on the widsom of many. They rely on the understanding that groups as a whole are smarter than the smartest person in them. James Suroweicki, financial columnist for The New Yorker, shows us how this works in his book, The Wisdom of Crowds. We all actually now that it works (and rely on it to do so) whenever we agree to pay market price for retail goods, buy stocks on the exchange, or place a bet on the odds-on favorite.
So what if we really brough democracy and philanthropy together and used "decision markets" to rank proposals for funding social programs? Perhaps we let the experts pull together the proposals and then use the rest of us to vote on the proposals.
Perhaps we would find out, once and for all, that all those experts really do now how to make smart decisions for allocating resources. Or erhaps it would work out like the old saw about monkeys and dart boards making better decisions than stock brokers and fund managers. Either way, I say its worth a try.
I asked about the validity of the approach - why don't we bring smart people together to vet proposals for major change. Everyone would win, theoretically: those who have a vested interest in promoting the change, those affected by the issue, and those who either directly or indirectly provide the financial resources to funders of such efforts (taxpayers - directly through government revenue or indirectly through tax subsidies for private philanthropy).
Now I want to add a twist. If nine people are so smart, what about 9 billion? After all free markets, the lottery, race track bets, football odds - all depend on the widsom of many. They rely on the understanding that groups as a whole are smarter than the smartest person in them. James Suroweicki, financial columnist for The New Yorker, shows us how this works in his book, The Wisdom of Crowds. We all actually now that it works (and rely on it to do so) whenever we agree to pay market price for retail goods, buy stocks on the exchange, or place a bet on the odds-on favorite.
So what if we really brough democracy and philanthropy together and used "decision markets" to rank proposals for funding social programs? Perhaps we let the experts pull together the proposals and then use the rest of us to vote on the proposals.
Perhaps we would find out, once and for all, that all those experts really do now how to make smart decisions for allocating resources. Or erhaps it would work out like the old saw about monkeys and dart boards making better decisions than stock brokers and fund managers. Either way, I say its worth a try.
Aggregating resources (part one)
Some ideas just make people mad. Bjorn Lomborg did this in 2001 when he published The Skeptical Environmentalist, which disputed the claims of the environmental movement and accused it of being sensationalist. He's at again, this time enlisting nine reknown economists (4 of whom are nobel prize winners) to prioritize the world's problems and allocate resources to them: Copenhagen Consensus
From conquering AIDS to ending hunger to enforcing environmental treaties, the experts ranked ten issues using cost-benefit analysis. They issues/proposals they assessed and the ranking they assigned them are below:
Very Good
1 Diseases Control of HIV/AIDS
2 Malnutrition Providing micro nutrients
3 Subsidies and Trade Trade liberalisation
4 Diseases Control of malaria
Good
5 Malnutrition Development of new agricultural technologies
6 Sanitation & Water Small-scale water technology for livelihoods
7 Sanitation & Water Community-managed water supply and sanitation
8 Sanitation & Water Research on water productivity in food production
9 Government Lowering the cost of starting a new business
Fair
10 Migration Lowering barriers to migration for skilled workers
11 Malnutrition Improving infant and child nutrition
12 Malnutrition Reducing the prevalence of low birth weight
13 Diseases Scaled-up basic health services
Bad
14 Migration Guest worker programmes for the unskilled
15 Climate Optimal carbon tax
16 Climate The Kyoto Protocol
17 Climate Value-at-risk carbon tax
(Some of the proposals were not ranked and so are not listed above)
I'm not really that interested in the outcomes of the group's work. Cost benefit analysis doesn't make me think the life of a child orphaned by AIDS is any more (or less) valuable than the life of a child orphaned by hunger. But I am interested in the approach - the idea of bringing disparate experts together to vet proposals for addressing identified issues.
So here's a question: if this approach holds any merit (and the private foundations*, Ministry of Environment of the Danish government, and The Economist Magazine - all sponsors of the work - must have assumed it did) why don't we try it more often?
We could use the financial resources (money and access) of private and public funders to pool intellectual resources (experts) who would put forth and/or vet proposals for addressing identified issues. After all, so what if ten groups modeled after the Copenhangen group came up with one viable proposal for each of ten issues - who's to say we can't marshall the necessary resources to implement those proposals? What we need is aggregation of approach and funding - not consensus on a single issue.
After all, when Lomborg and colleagues were done, their list of priorities "only" costs US $50 billion, less than 1/5 of the amount Americans give in charity each year. Count in public resources and the rest of the world's philanthropy, and it becomes clear that we can afford the money for real change, if only we could put our minds to it.
*Private funders include The Tuborg Foundation; The Carlsberg Bequest; and The Sasakawa Peace Foundation and SPF-USA
From conquering AIDS to ending hunger to enforcing environmental treaties, the experts ranked ten issues using cost-benefit analysis. They issues/proposals they assessed and the ranking they assigned them are below:
Very Good
1 Diseases Control of HIV/AIDS
2 Malnutrition Providing micro nutrients
3 Subsidies and Trade Trade liberalisation
4 Diseases Control of malaria
Good
5 Malnutrition Development of new agricultural technologies
6 Sanitation & Water Small-scale water technology for livelihoods
7 Sanitation & Water Community-managed water supply and sanitation
8 Sanitation & Water Research on water productivity in food production
9 Government Lowering the cost of starting a new business
Fair
10 Migration Lowering barriers to migration for skilled workers
11 Malnutrition Improving infant and child nutrition
12 Malnutrition Reducing the prevalence of low birth weight
13 Diseases Scaled-up basic health services
Bad
14 Migration Guest worker programmes for the unskilled
15 Climate Optimal carbon tax
16 Climate The Kyoto Protocol
17 Climate Value-at-risk carbon tax
(Some of the proposals were not ranked and so are not listed above)
I'm not really that interested in the outcomes of the group's work. Cost benefit analysis doesn't make me think the life of a child orphaned by AIDS is any more (or less) valuable than the life of a child orphaned by hunger. But I am interested in the approach - the idea of bringing disparate experts together to vet proposals for addressing identified issues.
So here's a question: if this approach holds any merit (and the private foundations*, Ministry of Environment of the Danish government, and The Economist Magazine - all sponsors of the work - must have assumed it did) why don't we try it more often?
We could use the financial resources (money and access) of private and public funders to pool intellectual resources (experts) who would put forth and/or vet proposals for addressing identified issues. After all, so what if ten groups modeled after the Copenhangen group came up with one viable proposal for each of ten issues - who's to say we can't marshall the necessary resources to implement those proposals? What we need is aggregation of approach and funding - not consensus on a single issue.
After all, when Lomborg and colleagues were done, their list of priorities "only" costs US $50 billion, less than 1/5 of the amount Americans give in charity each year. Count in public resources and the rest of the world's philanthropy, and it becomes clear that we can afford the money for real change, if only we could put our minds to it.
*Private funders include The Tuborg Foundation; The Carlsberg Bequest; and The Sasakawa Peace Foundation and SPF-USA
Friday, June 04, 2004
Casey's kidscount project
The Annie E Casey Foundation's Kids Count is one of those philanthropic endeavors that deserves highlighting IMHO*. Just released for 2004 and available at Kidscount Databook, the websiteprovides longitudinal data on the "state of childrn" in all 50 states. The data can be easily accessed, graphed, and formatted for use in policy analysis, reports, testimony, research, and by the media.
This has become such a powerful tool it is practically taken for granted by children's organizations, policy makers, foundations, researchers, and advocacy groups. My only question is this - does the Foundation know just how valuable this tool is?
*In my humble opinion.
This has become such a powerful tool it is practically taken for granted by children's organizations, policy makers, foundations, researchers, and advocacy groups. My only question is this - does the Foundation know just how valuable this tool is?
*In my humble opinion.
Wednesday, June 02, 2004
Where the innovation is
Well, the development of new products in philanthropy continues apace. The innovation has moved to the back office, where new companies such as Foundation Source and trusted names such as Fidelity Investments, which provides the services through a subsidiary, National Charitable Services, offer complete administrative services to support foundations and donor advised funds. The biggest purveyor of private label back office services to support donor advised funds is The National Philanthropic Trust which manages these funds for 8 major financial firms including American Express, Bank of America, JPMorgan Private Bank, and Morgan Stanley. (Disclosure: I am on the advisory board of NPT).
What are these companies selling? Pure back office functionality - check processing, grant distributions, account reconciliation. They also can manage all the administrative and regulatory filings for accounts, and in the case of Fidelity's subsidiary, National Charitable Services, they'll provide customer support to your donors as well.
Clearly, there is an opportunity to outsourcing the technical processing of account management and grants distribution. Is this a good thing? I think so. First, these companies have automated the drudgery that keeps most foundation board members (i.e., family volunteers) from enjoying the privilege of giving away money. No one likes to balance the checkbook or fill out the 990 forms for the IRS - so why not let these companies do it for you?
As these companies compete for business, they have all the more incentive to make these tasks cheaper and more automatic - Foundation Source offers its clients a quick eligibility checker that can let grant applicants screen themselves in or out of a donor's interest areas online and immediately. This saves time for both the nonprofit and the funder. As these companies compete (NPT is a registered 501 c 3 charity; Foundation Source and National Charitable Services are commercial entities), they will bring down the costs of the transactional parts of grantmaking while also building robust, remote, easily customized systems that could support a small family foundation, thousands of donor advised funds, and even large staffed foundation operations.
They might also develop some interesting and useful auxiliary products. For example, it won't take too long for these companies to be hosting databases of grant information that will rival The Foundation Center's giving database in size, though certainly not in public accessibility. Each company will hold detailed information on donor advised funds, donors, and giving patterns - information that hasn't existed on this scale before. They'll also be rich in market research on the services, products and information that individual donors and small foundations will pay for.
While these new datasources may rival what the information we now collect on giving, they also will be proprietary, Limited as it is, The Foundation Center's data on 10,000 US Foundations is available for public use and purchase and is the basis for most industry research. These new data sources will have a treasure trove of information - that could provide the best news lenses on industry trends - but the databases will be owned by the companies that build them, and how and if they are available to or used for industry research remains to be seen.
How will existing philanthropic institutions respond to these new products? Will we see large staffed foundations - almost all of whom "hate" their grants software, can't make it "talk to" their financial packages, and operate completely separate systems to manage their investments - migrate to these systems that have been built as aggregate, integrated, online tools from the start? Will the data these firms gather on individuals and institutions be used for industry analysis, proprietary gain, or both? Will new metrics on giving trends flow from these new tools and service providers as complements too or replacements for the industry databases now maintained?
Any and all of the above are possible. I'd bet on these newcomers - who have launched themselves with competitive zeal - to be the rapid innovators and automators of all parts of the financial management process. I'm also counting on them to capitalize on the data they collect on donors, giving, and nonprofits.
Just like donor advised funds in the early 1990s, these back office systems are important harbingers of a new era in philanthropy. They're low cost. They're automated. They're designed to be customized on a mass scale. And they're the product of competitive, commercial interest in the philanthropic marketplace.
I think this a great thing for philanthropy. Creating resources that people need and will pay for - this is how we should be promoting philanthropy. I hope the established "data purveyors" are worried about these newcomers. I support all parts of the philanthropic industry to take the approach that "data matter," "the customer matters," and that the tools and products we create should bring people, passion, and information together.
These development also show that what was once joined (financial management and knowledge about philanthropy or social issues) continues to be rendered. We are continuing down the path of having two distinct product lines in philanthropy - financial management products (such as those discussed above) and knowledge products. These two products came bundled as one for so long - in the form of staffed foundations or community foundations - that many thought they couldn't be unbundled. But they have been effectively decoupled in recent years, and the key question is what new forms will emerge as services and products are re-bundled and re-packaged for the 21st Century philanthropic marketplace.
What are these companies selling? Pure back office functionality - check processing, grant distributions, account reconciliation. They also can manage all the administrative and regulatory filings for accounts, and in the case of Fidelity's subsidiary, National Charitable Services, they'll provide customer support to your donors as well.
Clearly, there is an opportunity to outsourcing the technical processing of account management and grants distribution. Is this a good thing? I think so. First, these companies have automated the drudgery that keeps most foundation board members (i.e., family volunteers) from enjoying the privilege of giving away money. No one likes to balance the checkbook or fill out the 990 forms for the IRS - so why not let these companies do it for you?
As these companies compete for business, they have all the more incentive to make these tasks cheaper and more automatic - Foundation Source offers its clients a quick eligibility checker that can let grant applicants screen themselves in or out of a donor's interest areas online and immediately. This saves time for both the nonprofit and the funder. As these companies compete (NPT is a registered 501 c 3 charity; Foundation Source and National Charitable Services are commercial entities), they will bring down the costs of the transactional parts of grantmaking while also building robust, remote, easily customized systems that could support a small family foundation, thousands of donor advised funds, and even large staffed foundation operations.
They might also develop some interesting and useful auxiliary products. For example, it won't take too long for these companies to be hosting databases of grant information that will rival The Foundation Center's giving database in size, though certainly not in public accessibility. Each company will hold detailed information on donor advised funds, donors, and giving patterns - information that hasn't existed on this scale before. They'll also be rich in market research on the services, products and information that individual donors and small foundations will pay for.
While these new datasources may rival what the information we now collect on giving, they also will be proprietary, Limited as it is, The Foundation Center's data on 10,000 US Foundations is available for public use and purchase and is the basis for most industry research. These new data sources will have a treasure trove of information - that could provide the best news lenses on industry trends - but the databases will be owned by the companies that build them, and how and if they are available to or used for industry research remains to be seen.
How will existing philanthropic institutions respond to these new products? Will we see large staffed foundations - almost all of whom "hate" their grants software, can't make it "talk to" their financial packages, and operate completely separate systems to manage their investments - migrate to these systems that have been built as aggregate, integrated, online tools from the start? Will the data these firms gather on individuals and institutions be used for industry analysis, proprietary gain, or both? Will new metrics on giving trends flow from these new tools and service providers as complements too or replacements for the industry databases now maintained?
Any and all of the above are possible. I'd bet on these newcomers - who have launched themselves with competitive zeal - to be the rapid innovators and automators of all parts of the financial management process. I'm also counting on them to capitalize on the data they collect on donors, giving, and nonprofits.
Just like donor advised funds in the early 1990s, these back office systems are important harbingers of a new era in philanthropy. They're low cost. They're automated. They're designed to be customized on a mass scale. And they're the product of competitive, commercial interest in the philanthropic marketplace.
I think this a great thing for philanthropy. Creating resources that people need and will pay for - this is how we should be promoting philanthropy. I hope the established "data purveyors" are worried about these newcomers. I support all parts of the philanthropic industry to take the approach that "data matter," "the customer matters," and that the tools and products we create should bring people, passion, and information together.
These development also show that what was once joined (financial management and knowledge about philanthropy or social issues) continues to be rendered. We are continuing down the path of having two distinct product lines in philanthropy - financial management products (such as those discussed above) and knowledge products. These two products came bundled as one for so long - in the form of staffed foundations or community foundations - that many thought they couldn't be unbundled. But they have been effectively decoupled in recent years, and the key question is what new forms will emerge as services and products are re-bundled and re-packaged for the 21st Century philanthropic marketplace.
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