Friday, April 11, 2008

Introducing "Bernholz's Law" of philanthropic adaptation

I've written about prediction markets before - these are idea exchanges (my term) that let interested parties buy/sell/trade positions on ideas or social issues. Prediction markets is the nice, vogue term for betting on the outcome of an issue - it melds voting, betting, and trading and can be used (are being used) for anything from tracking influenza outbreaks to picking winners of the Nobel prize to the direction of relations between China and Taiwan. As the Iowa Electronic Market (IEM) describes itself, it is

" on-line futures market where contract payoffs are based on real-world events such as political outcomes, companies' earnings per share (EPS), and stock price returns."

For example, there are prediction markets that allow people to place a trade on who they think will win the 2008 US presidential election. In fact, this is such a popular market segment that that Slate has aggregated them here. Essentially you "buy stock" in an outcome and if that outcome comes true, you win (make money). These kinds of markets are also used by companies to test ideas and to track product launches and by epidemiologists and public health officials to track diseases.

For the companies that host these markets the trick is to now drive traffic to their markets instead of the next guys. If everyone hosts markets where you can trade shares (or place a bet) on the presidential elections, than you need to differentiate your site either by hosting different types of markets (the direction of the economy or NHL draft picks) or by using new tricks to attract users.

So, not surprisingly, we have now found the metaphorical offspring of embedded giving and prediction markets - Here you can bet on the same old issues you find elsewhere, but the "winnings" go to charity. If you win, you pick the charity. If you lose, someone else picks it.

All of this leads me to begin working on "Bernholz's Law" of philanthropic adaptation (doesn't have quite the same ring as "Moore's law," but I'll work on it). This will be my attempt to lay out the general processes by which philanthropy adopts technology and eventually adapts to the changes created by technology.

Herewith, Bernholz's Law 1.0:
  • First phase - ignore new technology.
  • The second phase of philanthropic adoption of a new tool is for fundraising. (See this application of iPhones)
  • The third phase (in the case of bet2give phase one and two are simultaneous) is using charitable giving as a means of attracting customers to some other business model (See good2gether or goodsearch)
  • The fourth phase is using the tool to publicize the philanthropic status quo (see almost every foundation website)
  • The firth phase is to consider how technology might change the edges of philanthropic practice (see Packard Foundations Nitrogen Wiki)
  • The sixth phase is to up-end our understanding of where and how change happens and nurture new philanthropic supports for those new ways of being (see... help me out here, anyone have examples in this phase?)
  • What would the seventh phase be...and eighth...and beyond?
I'll need a cool graph to show this cycle over time....

PS: I was going to save this post till Monday, but then I remembered that the Goldman Environmental Prizes are coming up. I think these are the most inspirational prize winners and one of the coolest - and most hope-filled - events of the year. We take our seven year old to the event and he agrees. So I'll post this now and then blog about the Goldman prize next week. Winners will be announced on Sunday and the celebration is Monday, April 14.

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