The Wal-Marting of community philanthropy

This Business Week article on Wal-Mart's moves into financial services addresses the likely impact on community banks if the world's biggest retailer continues to expand its credit card, money transferring, payroll check cashing, and branch bank-affiliates model across its entire empire.

Community banks, long-time investors in local economies and staunch philanthropic allies to community foundations and other local nonprofits, have a tough-enough time competing against global banking behemoths. Wal-Mart's "everyday low prices" for money transfers put it smack in the middle of the multi-billion dollar remittance business. Perhaps it has plans to offer community development investments, mortgages, and small-business loans one aisle down from its payroll cashing service and just past the toilet paper and cleaning supplies.

If Wal-Mart continues down the path it has so far forged, community bankers, community philanthropists, and the big mutual fund companies and discount brokers have to ask: is philanthropy next? Might Wal-Mart launch the 21st Century version of Fidelity's Charitable Gift Fund?

Some are real and some are hypothetical...

Real developments in the world of philanthropic financial products:

According to the San Francisco Business Times, the Donor Managed Investment Fund introduced in 2004 by Winklevoss has landed its second client, a San Francisco Bay Area private school.

I received an email alerting me to new offerings from The Calvert Social Investment Foundation and Fannie Mae Foundation, which are predicted to grow the resources available for community investment projects (housing, job development) by making the trading of community investment bonds faster and easier.

Oddball musings about developments in philanthropic financial products:

In the November 2004 issue of Wired, Bruce Sterling raised the possibility of using social networks and network analysis to help scientists draw matching funds. Such an idea, which Sterling admits was influenced by work in the art world and the academy's citation index, would be generalizable to all philanthropic support if the network maps of programmatic, organizational and issue alliances and impacts could be developed. Maybe the next generation of foundation program officers will be customized versions of Friendster or Tribe?

Finally, James Surowiecki noted in his January 10th New Yorker column, The Catastrophe Problem that market interests have already created "catastrophe bonds" that allow buyers and sellers to trade in disaster insurance coverage. If the markets can create bonds for tsunamis and earthquakes, couldn't an enterprising banker come up with some new means of packaging philanthropic assets for development purposes, endowments for health insurance, or donor advised funds for college scholarships?

Will the nonprofit sector crash?

Here is one view of where nonprofits are headed. What do you think?

As the world shifts around us...

Modern American philanthropy has grown up within the social and economic contexts set over the last 100 years. For the most of those years (a period which captures the births of most of the nation's foundations) the social context in the nation has been expansionist. The social policy of the US has been set within the broadest reaches of the New Deal, the Great Society, and the civil rights and environmental movements. Yes, there have been waxing and waning trends in policies for elderly care, retirement, tax revenue, medical support, equal opportunity protection and preservation and conservation efforts, but for the most part the nation has been on a committed path of caring for our neediest, leveling opportunities, and trying to protect our natural resources.

This context has been critical to the shape and direction of modern American philanthropy - it has set the tone, the priorities, the opportunities, and the systems to which change might be made or alternatives offered.

So, what is the role of philanthropy to be in the next generation? Wither philanthropy in an "ownership society?"

As we move further down the path of the current administration to re-craft social security, fundamentally restructure the tax system, eviscerate environmental protections, and disregard global conventions on the treatment, privacy and protection of immigrants, foreign visitors (and citizens).

Changing social security systems reflects new assumptions and values about the role of society vis-a-vis the elderly and the role of the elderly in our society. The Patriot Act reflects significant changes in such age-old values as "innocent until proven guilty" and in the relationships between individual liberty and the purview of the state. Fostering extractive industries and refusing to invest in sustainable energy sources reflects a deep disregard for the health of our own children and grandchildren, not to many every other species on earth.

Where does philanthropy fit in this new framework? Will it offer alternatives? Fund the new mainstream? Reconsider systemic reform in favor of creating new systems? Established philanthropic organizations need to see this broader context as they set their own goals. New philanthropists should closely consider the historical relationships between philanthropy and the state and use those assessments to consider what types of structures, what types of actions, and what types of roles philanthropy can and should play against this changing public backdrop. And all of philanthropy's support organizations, vendors, consultants, leadership groups, networks and affinity groups or associations should be clear on where they fit in this changing set of values so recently reaffirmed by the voting majority.

Are you working with the current directions of the majority or against them? You have to know which way the tide is going in order to answer this question.

Recommendations from IS Panel

Recommendations from the IS panel on nonprofits are now available for comments

Archive problems

Sorry about the archive links - I'm working on it.

Can the twain meet?

Community philanthropy organizations grapple with the tension between working for social change and operating in a market environment. My writing about philanthropy as an industry has (thankfully) been challenged by some of the best thinkers on exactly this point. This is a good thing. My work focuses on one aspect of philanthropy and presents one conceptual analysis. One of the goals of my book was to put forward a vision of a future of philanthropy that would spark others to do the same. We need lots of visions and lots of ideas for the future of this enterprise.

Can community foundations catalyze or contribute to social movements, as Emmett Carson asks in this speech from last December. Does being part of an industry, or thinking about the industrial and market forces acting on philanthropy, make it impossible for them to be focused on social change? These two models for thinking about community philanthropy -- social movement or industry -- are posited by some as mutually exclusive possibilities. I don't think so.

Here are some guiding questions I'll be working on this year with my colleagues at Blueprint Research & Design:
1) How can philanthropy deploy cutting edge financial tools to advance social change?
2) How can the successes of social movements be used to inform the development of new modes of philanthropy?
3) Can philanthropy be a model for adapting market tools to address market failures (social ills)?
4)How can the industry of philanthropy be a force for driving social improvement?

I hope you'll join us in this discussion, through this virtual workspace and perhaps in some conferences, small group discussions, leadership meetings, board or staff meetings, affinity group listservs and any other appropriate forums. There is a lot at stake - let's start talking.

Open Source Philanthropy: Part Two

Mitch Kapor, creator of Lotus 1-2-3, and chair of the Mitch Kapor Foundation, the Mozilla Foundation, Open Source Applications Foundation, and the Level Playing Field Institute is using philanthropy to create open source software.

Ever more reason to ponder the potential applicability of open source principles, practices, and economics to creating philanthropic resources and products.

Open Source Philanthropic Economy

So, even though I said I was done with ideas to generate new philanthropic capital, I'm not. Yesterday, IBM announced that it was giving free access to 500 of its more than 40,000 global patents.

Today, the Times reports that IBM is still the global leader in annual patent filings, collecting more than 3,200 patents in 2004 on top of the 3,415 filed in 2003. This is the 12th year in a row the company has filed the most U.S. patents of any single entity.

Clearly the company values intellectual property. Clearly it invests in R & D. And, clearly, something is shifting in how and by whom this type of property actualizes its value. IBM wouldn't give away 500 patents if it didn't think that free, unrestricted, open source access to these ideas would generate new possibilities, new products, and new, bigger markets.

IBM is acting on a new understanding of collaboration and economic growth. Open source software, the Internet, and new arguments for an "intellectual commons" are behind the recognition of these new economic principles and IBM's actions.

So, I'm refining yesterday's idea about an industry-wide R & D alliance to call for an Open Source philanthropic product development enterprise. The same principles that spurred IBM to act - market innovation and growth - should apply.

$25 Billion idea #6: The R & D Function

To read the full blog, click Philanthropy 2225

This is the 6th and last (for awhile) in my list of ideas for generating new philanthropic resources. I originally posited the problem as a response to the estimated $25 billion in giving that will be lost if the US Estate Tax repeal is made permanent. Hence the name. The first 5 ideas can be found in the December Archives of this blog.

What we need is a hybrid R & D venture/enterprise/alliance that brings together the power, longevity, and social commitment of the social sector with the best talents and capacities of commercial financial firms. Imagine being able to do product R & D with creative input from university endowments, foundations, individual donors, banking experts, financial investment whiz kids, and product marketing experts. Imagine having the resources of the full nonprofit sector available to inform the way new products can serve diverse populations, maximize community returns, and be used for social good and marrying that to the deep intelligence about tax code changes and market fluctuations that commercial firms use in creating new products. Imagine being able to develop rapid prototypes and quickly test them in all sectors. Or being able to create new products that would rely on revenue streams other than asset management fees, thus opening the doors to all kinds of new partnerships. Perhaps new products that are jointly developed and underwritten by licensing fees, so they quickly become available to donors and communities regardless of who the lead vendors are.

Why would the competing sectors (and competitors within sectors) do this? Because such efforts might actually be able to grow the resource pool for giving rather than just reallocate it. Products that serve the culturally-specific giving ethos of the nation's fastest growing ethnic, racial and religious groups, for example. Or products that provide social returns through commercial investments. Or commercial returns through mission-related investments. Or that pool small funds into securitized big funds.

What if the kind of thinking that went into creating Global GreenGrants, Grameen Bank, PayPal, NewTithing, SourceForge.net, GoogleGrants, Slashdot, Creative Commons, eBay, Social Venture Partners, community reinvestment tax credits, OneWorldHealth, and the folks who turned Citibank into the largest processor of immigrant remittances was harnessed to create new philanthropic products?

Imagine if the nation's fastest growing ethnic, racial and religious communities could work with financial firms to develop products that fit their giving traditions? Similarly, imagine what the portfolio of philanthropic options would look like in 10 years if the innovators, dreamers and competitors that thrive in technology and financial industries were enticed into philanthropy as part of their work, not part of their retirement?

A pipe dream? Perhaps. But we've got nothing to lose by thinking this through, and we know that the current set up of proprietary R & D will 1) be slower, 2) benefit only a small slice of the industry first, and 3) grow market share for the winners without growing the actual market.

Stop - We can't take it anymore!

In what I would argue is a responsible act, Medecins Sans Frontiers (Doctors without Borders) has announced that it has received all the money it can use (41 million euro) to provide its services in the tsunami-ravaged Indian ocean countries. Others are outraged, calling on MsF/DwB to take back this irresponsible remark and desperately afraid that acknowledging that there is enough money at one organization will cause all other giving to stop.

C'mon folks, we can't have it both ways. We want NGOs to be responsible stewards of financial resources and to honor donor intent. We don't want a repeat of the "blood banking" post September 11, when everyone gave blood and there was (sadly) no increased need for it. Blood, unlike money, actually has a shelf life. But - given the challenges of coordinating the tsunami-relief efforts, doesn't it make sense for a fully-funded effort to say, "Thanks, but how about supporting OxFam to provide clean water or to the UN for refugee services or to X for Y" and let donors send their funds elsewhere? WOuldn't it be great if we had a way to do this - refer, coordinate, and move resources to where they are needed and to those who can put them to immediate good use?

Or, wouldn't it be helpful if some of the potential donors to MsF/DwB for tsunami relief would still give to MsF/DwB but for their work in Darfur or Uganda (both appeals appear on the home page - www.msf.org) or to the organization's general operations?

When the final toll is counted, the outpouring of private financial support for the victims of the tsunami will be enormous - probably unprecedented. This is great, and something we as humans can take pride in and express gratitude for. But to really help those in need we need those enormous resources to be well spent. Part of ensuring this happens is for individual donors, nations and NGOs to act responsibly. MsF/DwB is doing so in this case. If the whole doesn't work, its for want of coordination and systemic connections, not due the actions of one organization. What we need are ways to coordinate the moving of those "excess" resources to the other underfunded needs in the region and around the world.

For more on this theme, see yesterday's post on coordination.

Directing one's gift

Here's a blog: Charity Governance with a lot of useful information - and an opinion - on targeting one's gifts to specific programs (e.g. tsunami relief) when giving to NGOs.

Tsunami relief giving in January counts toward '04 tax deduction

From Today's NYT, Contributions: Giving for a Cause, and That Cause Only
January 5, 2005
By STEPHANIE STROM

"On Tuesday, the Senate Finance Committee proposed that
Congress approve a plan to allow taxpayers to claim a
deduction in 2004 for cash gifts to tsunami relief efforts
made through Jan. 31, 2005, in part to help support the
efforts of former Presidents George H. W. Bush and Bill
Clinton to stimulate private giving."

1000 more points of light?

In covering his tracks from the lame initial and secondary pledges of American government aid to tsunami-struck communities, President Bush has claimed that "The greatest source of America's generosity is not our government; it's the good heart of the American people."

Sounds to me like yet another impossible claim that we should count on private giving to do what many (but not this President) think government should.

Leaving aside for a moment the ideological differences we hold about whether private generosity should be held up as an excuse for a weak public sector response, how do you think the chips will fall?

Will total 2004 giving spike up, drop down, or stay flat compared to 2003** as a result of:
1) the outpouring of end-of-year gifts to tsunami victims and
2) the unprecedented amounts of money that went into the 2004 presidential election, which may have drawn away from resources otherwise given to charity?

UP ___ DOWN ___ FLAT ___


[**Since 1971, in years without recession, the average rate of change is an increase of 3.8 percent adjusted for inflation. Source: AAFRC, Giving USA 2002]

Its all about coordination

Has anyone else noticed that the "philanthropic story" associated with the December tsunamis disasters is that of coordination? Well, that and the story of the US government's pitiful first and second response to the tragedy. Immediately following the first reports and the first calls for aid, the questions and focus have been on how to coordinate emergency respondents - now and in the coming months and years - across so many countries and such devastation.

This interests me for several reasons. First, I think it shows that the (American) media and donor communities learned a partial lesson from recent disasters -both natural and man-made. That lesson: coordination matters and it shouldn't be assumed. I'm fairly sure the people and organizations who make up the emergency respondent groups - NGOs, multilaterals such as the UN, and national governments - knew this lesson already and have for a long time.

Second, while the stories get right to the issue of coordination and the need for it, there is also something of a tone of surprise that it doesn't exist at some miraculous, internationally-fair, and politically-immune level.

Third, with the exception of the NGOs themselves, the wonderment about coordination and the lack thereof will no doubt come as a 'predictable surprise' next time.

In short, maybe we've gotten a little smarter about the need for planning ahead across organizations, across political boundaries and cultural lines, and across disaster-types (natural, man-made, war-caused), but we're not as smart as we need to be. If we were, we would use our extraordinary capacity for logistical planning, the unparalleled reach of existing networks, the sophistication of local NGOs, and the theoretical imperative behind every government to protect and serve its people to invest in the coordination systems and options when the sun is shining so they work when the rains (or waves or quakes or fires or plagues or wars or droughts or ....whatever) inevitably come.

Emergency response organizations respond to crises. Those of us who support and depend on them (read: all of us) ought to respond in the non-crisis intervals by investing in and/or voting for the coordination systems.

2005 Predictions in SF Business Times

The San Francisco Business Times picked my brain for some of what I think might be happening in philanthropy in 2005.

Information on remittances

The best source of information on migrant remittances is here.