Decoding the future of philanthropy

I'm going to try to weave together several themes in this post. Since I am famous for "burying the lead" I'm going to get to the point and then begin weaving.

• The point: data are the new platform for change. They will continue to fundamentally alter how philanthropic capital flows.
• The changes are not about the digital technologies that allow access, or about the data themselves. They are about the expectations and behaviors they unleash.*
  
• These changes, coupled with changes in the public and private sectors, are pushing a transition to a "social economy" made up of interdependent public, private and philanthropic capital and creators of social goods.
  
• All of these changes are not an end of a story, they are simply the beginning.
• Philanthropy is an industry of passion and volunteerism in which collusion should be encouraged. It may not change in the same way, at the same speed, or driven by the same forces as the newspaper or music industries or the public sector.
  

Here are several influential information sources for my thinking:

1. An incredible conversation I had on Sunday with 40+/- members of the Iranian- American community, most from Silicon Valley, many of whom are driving the changes at household-name internet technology companies or are the folks that financed those companies and are financing their successors;
2. Mario Morino's brilliant piece "Here comes the Sun;"
3. Several recent conversations with community foundation leaders;
4. The draft of the "technology and philanthropy" paper I am writing for Duke University's Center on Strategic Philanthropy and Civil Society;
5. Twitter-enabled discovery of and subsequent discussions with the volunteer leaders of the Nonprofit Mapping Project.
   

So, how do I substantiate the claim that data are the new platform for change? Largely by looking at what has already happened. Philanthropic foundations and individual donors used to work alone, they had exclusive access to key information on giving opportunities, conducted their due diligence, made grants, and moved on to the next thing. They shared information reluctantly, mostly on paper. Many strove for anonymity. They rarely acted together, paid lip service to sustainability (exit strategies largely consisted of "ending our funding"), and hesitated to endorse their grantee partners to other funders.

Technology has already changed all of the above behaviors. This varies in degrees at different institutions, but in general, the level of public visibility into the sector in 2009 is exponentially greater than it was in 1999. Donors - of any size - can find nonprofits and social entrepreneurs - and sort them by region, issue, and size using Guidestar, NetworkForGood, GlobalGiving, Kiva or any of a 100+ other sites. Media have drawn unprecedented attention to the sector.

(Visibility into the sector is not the same as visibility into how the sector works. Nor is visibility the same as transparency. I'll come back to both of these points.)

Public visibility is driven by, and drives, another major shift - where expertise lies. Just as newspaper editorial pages and television broadcasters once determined "what news matters," expertise used to reside within the walls of foundations, think tanks, and nonprofits. These professionals set strategy, identified partners, and drove dollars from inside institutions. But, just like Elvis, the "expertise has left the building." As Morino articulates so well, crowds and individuals are now determining what gets discussed, mashing together data to show hidden stories, working with professional resources to investigate leads, and demanding access to public data. The work of The Sunlight Foundation to open up government data, new efforts by government agencies to share that information willingly (see datasf, the DC Data Catalog, and the White House), and citizen-driven efforts such as TheyWorkForYou to open the doors of the public sector have tipped from being anomalies to being the new normal.

Now, not all data are equal, nor are all data equally available. Driven by these recognitions, a volunteer group of donors, activists, and techies in San Francisco is launching a citizen-driven effort to unlock nonprofit data and make it visible and useful. This effort, represented in an alpha-state website found at nonprofitmapping.org, is aimed at getting state attorneys general and the IRS to make basic data on the nonprofit sector freely available in a consistent form so that the public can use it.** The effort was spurred by donors' interest in the rate at which nonprofits in the Bay Area were closing down as a result of economic pressures. In loose partnership with the United Way of the Bay Area and with help from the SVT Group the volunteers started trying to map those closures so that anyone could see the impact in their neighborhood, on issues they cared about. Turned out it couldn't be done using freely available public data sources. And thus the ball began to roll. This citizen-driven effort complements Guidestar's "report card" effort to encourage nonprofits to share more info, more readily and in something closer to real-time. It also speaks to the policy issues that matter in this space, access to public data being a policy realm unto itself.

NonprofitMapping is an example of the shift from making the sector visible to making its inner workings and deal flow visible. I'm a child of the 1970s and Watergate so I believe strongly that actually understanding how things work is a matter of following the money. Once we can really see philanthropic dollars - in flow with public dollars, individual contributions, political contributions, and corporate support - then we'll have really useful visibility into philanthropy and nonprofits. And then the data and the expertise and the networks of users will innovate off of that data platform...and change will continue.

Now the partnership described above - volunteers, donors, techies, and the United Way - are another example of the power of external expertise plus access to digital tools, that Morino cites as a driver of "the new sunshine." They have some great analogs to mimic, including the HealthyCity project which has made data on hard-to-find populations available online and will be spreading across California by January 2010. The model for spreading the tools is also notable - this is free, open source franchising at its best. If nonprofitmapping can solve the problem in San Francisco, then other communities can easily follow suit. Simultaneously, the lessons and tools developed by others can be incorporated into the San Francisco effort.

The combination of visibility, expertise, and data inform the next key force - networks. All of what I've discussed so far is only made possible because of the proliferation of networked information processing tools. Now these tech-based networks are unleashing the power of human networks and these networks are, in turn, changing organizations. Clay Shirky has literally written the book on this, workingwikily provides you with a living forum to learn about this and the experts in network analysis just seem to keep getting smarter and smarter.

But these networks matter for philanthropy in ways we are only just beginning to see. They are fundamentally shifting how communities organize and what value they bring when they come together. The value of community foundations, for example, has been found in the knowledge that their boards and staff bring to community philanthropy. National donor advised funds eroded community foundations' advantage as a transaction processor. New online data sources threaten the foundations' efforts to build business models around knowledge.

Even more important, the expertise that matters can now be found in networks of donors and partners. Those networks' connections to the foundation may be transitory. They are definitely not monogamous - donors have lots of interests, lots of giving vehicles, and lots of advisory sources. Donor networks are fluid, multi-networked, and informed by cheap or free data. The value that foundations or advisers offer will come from strengthening or informing those networks, not forcing donors into their established structures or business models.

The mix of visibility, expertise, data, and networks is driving rapid innovation in social capital products, exchanges, enterprises, and discussions. It is now easier than ever for donors to consider their entire financial portfolio when thinking about their values. The social capital and social enterprise movements have brought forward remarkable innovation in measuring success, moving money, and hybridizing organizational structures. They are enticing traditional philanthropists, drawing attention to the intersections of public, private, and philanthropic capital and continuing to diversify the social economy.

Many of the drivers of change, the external forces, on philanthropy are the same as those on other industries. Given all of this, shouldn't we be able to assume that "cracking the code" of philanthropy's future will be simply a matter of finding the right mix of industry analogs? I don't think so.

There are some countervailing forces that we need to consider. First, remember, participation in the social economy is voluntary for donors. They can opt out at any point. They are not subject to the same systemic market or political forces that drive change across other sectors. If demands for visibility become too strident, or if visibility morphs into norms or requirements for greater transparency, we will likely see a rise in the use of options that protect anonymity (donor advised funds, for example). Second, while data may be the platform for change, not all funders need to climb aboard. Most of the innovation in data and donors has happened down the long tail of giving - kiva, globalgiving and other online giving platforms are data-powered communities. But data do not always inform or drive passion. We cannot presume that the current attention on evidence, outcomes, metrics and impact are universal, will persist, or will ever migrate into those areas of social good where intuition, direct experience, fun, or passion are shaping forces.

The drivers of change on philanthropy are easy to see. We can extrapolate from other industries and other experiences. But philanthropy is not like every other industry. And the secret code to its future may unfold more like the clues in a Dan Brown thriller than in the cryptography of market-based industries or electoral politics.***


* Networked information economy is Yochai Benkler's term, used in The Wealth of Networks, it is a must-read for understanding the social, political and economic breadth of change currently underway. Charlene Li and Josh Bernoff's book, Groundswell, is a wonderful review of these changes in companies. Social Economy is my term for enterprises and financing sources dedicated to production and distribution of social goods.
** I'm delighted to be joining this effort in a volunteer capacity.
*** Yes, this is blatant pandering to the release date of The Lost Symbol and, yes, I do read trashy novels in between books on network theory.

Tags: benkler, groundswell, philanthropy, innovation, globalgiving, @vppartners, mariomorino, #socap09, knowledge, technology, duke