Tuesday, November 30, 2010

The Future is Here

Philanthropy and Social Investing: Blueprint 2011 is now available. Please click here to purchase your copies. We'll also be hosting seminars on the forecast starting in January. Stay tuned for more information on those.

Want a sneak preview of Blueprint 2011? Here you go:
"In the first section of this Blueprint 2011,“Changes that Matter,” I highlight elements of the Supreme Court decision in Citizens United v. Federal Election
Committee that will have significant implications for nonprofit activities,
organizational structure, and revenue sources. I also look at the set of choices that all donors, big and small, are now navigating. The mainstreaming of mobile giving, while not as grand a change as the preceding two, shows us that technology continues to offer new tools.

In the second section, “Forecasting 2011,” I make three forecasts about this social landscape. For 2011, I expect a very slight increase in giving, the first uptick since 2008. I also predict that social investing will expand and become ever more mainstream. Finally, I look at consolidation of online giving markets particularly and examine the implications of consolidation for doers and donors.

The next section, “2010 Revenue and 2011 Projections,” synthesizes data from several sources about philanthropic giving, social investing, and public sector (U.S. only) funding for the social landscape.

Finally, I present a “Glimpse of the Future” and highlight the kinds of choices all of us will face in the coming year(s)."

- From the Buzzwords list in Blueprint 2011

Sector Agnostic: Funders who make both social investments and grants and who work with both commercial and nonprofit partners describe themselves as “sector agnostic.” They are
interested in solutions, not the tax status of their organizational partners.

Blueprint 2011 includes a section that tells you what I got wrong about the year gone by. You can find that at Renovations to the 2010 Blueprint. You'll have to buy the book to find out more!

Monday, November 29, 2010

The real online revolution in giving

For all the talk of Web 2.0 (and even 3.0), philanthropy online has evolved fairly slowly since the dot com days. First we got big, red Donate Now buttons on every website. Then donation sites such as GlobalGiving came along to provide vetted projects and charitable options for donors. The next iteration came in the form of JustGiving and CrowdRise which let everyone be a fundraiser. As mobile phones became a popular way to access the web and texting surpassed talking we got text giving and location-based organizing.

For the last year or so the focus has been on social networks as the places where we'll conduct most of our future web activities. The theory is that we're becoming more and more comfortable sharing information with our networks of friends. The next step is relying on those networks for all kinds of recommendations and advice, including charitable suggestions.

Is this as interesting as it's going to get? The first few iterations of charities and the Web - the donate now buttons and the giving sites - actually made it easier for donors to find organizations they may not otherwise have know about. Making it really easy to manage an online fundraiser got us engaged in ways most of us wouldn't have taken on otherwise. These changes in the giving space - along with a growing awareness of data as a public resource, calls for more effective charitable giving, and the rise of organizations such as New Philanthropy Capital, actually took us a few steps closer to more rational and informed charitable giving.

By relying on our networks of friends to advise our donations we're hardly taking a step forward in the use of data, comparative metrics, or outcome based analysis of charities. We're actually taking something of a step back. We've always relied on our friends to guide us to charitable activities - well before there was a laptop or a donate now button we gave to the organizations we knew, we gave when asked, and we supported issues that our circles of friends and families knew about.

Most of this first era of technology for giving and organizing has mimicked our offline behaviours. There are two current developments in online giving that are worth watching as signs of future changes in giving behaviours.

The first is Kickstarter. A New York-based startup, Kickstarter is a way for anyone to "find" or "fund" a creative project, whether it be an art installation, a movie, a new magazine, or a concert. In terms of web tools, the site is completely social - it's built for tweeting, emailing, sharing, and interacting. But what makes the site indicative of the future is that the projects are not all charitable. Some are commercial ventures. Some are designed as one-off efforts, others are part of ongoing charitable and cultural endeavors. Old organizational distinctions between charitable and commercial are not assumed on Kickstarter. Creativity may be either a charitable or a commercial act. Funds to support it may be tax deductible or not. The old sector distinction no longer holds.

In the UK and elsewhere, this blurring of commerce with public mission is the realm of social enterprise, Community Interest Companies, and social investments. To see it mixed in with charitable giving on a website, treated as an afterthought to each project's potential accomplishments as it is on Kickstarter, is indeed indicative of a mind shift.

The second site of note is MissionMarkets. In the ten year childhood of web-based philanthropy and social enterprise, the holy grail has been a fully-realized online investment exchange for social businesses. Such a platform, iterations of which are under development in South Africa, Singapore and London, are seen as the gateway to broad public investment in social enterprises. MissionMarkets is not quite there - currently it's a site for registered investors to place private deals only. But MissionMarkets' beta launch gets us one step closer to a regulated exchange for equity investments in social enterprises.

These two sites - Kickstarter and MissionMarkets - are most meaningful for the futures toward which they point. Both apply the power of the web to raising new money for public benefit projects. Kickstarter recognizes that the defining characteristic of public benefit is no longer captured by classification as a nonprofit. MissionMarkets is a functional expansion of the funding universe for social enterprises, a step toward the broader goal of investment exchanges. In both cases, the technology is being used to expand and expose shifts in our offline assumptions about where good happens. Far more significant than how well the sites use the latest software or gadgetry is how well they reflect societies' assumptions about how to make change.

Sunday, November 28, 2010

Philanthropy Buzzword 2010.7- Chuggers

The Giving Pledge (Buzzword 2010.10) might be considered the "high" of buzzwords. So here's the low - Chugger and Chugging. In honor of the new Voluntary Sector network on The Guardian UK - this is an imported Philanthropy Buzzword 2010.7 - Chuggers / Chugging.

Chugging is a British portmanteau of Charity and Mugging. It refers to the tag-team clipboard-wielding signers-for-hire fundraisers who've staked out almost every city block these days. "Have a minute to save the whales?" "Give a minute to save the children?" "Take a minute for human rights?" "Got a minute for gay marriage?" They call out as you feel guiltier and guiltier about your walk to lunch. If you do stop they'll take far more than a minute - they'll keep talking to you until you surrender your name, address, and a donation. If you give them the first two, you will be bombarded with requests for the third.

A 2009 survey in Britain showed that 2/3 of people crossed the street to avoid these folks and 1/4 lied to them about having "given already."

In California, a state where ballot initiatives have replaced and run over representative democracy, you might avoid a chugger only to be stopped by another clipboard. This one is also wielded by someone getting paid by the signature - asking you to "balance the state budget-throw the bums out-fix Sacramento-sell bonds for the high speed rail/new prisons/ school and hospital facilities while approving pay raises for elected officials." And, of course, when you finally get past the chuggers, and past the petition-signers and get to the deli to buy your lunch, you'll be asked to "round up" your check for charity.

Ho Ho Ho.

Wednesday, November 10, 2010

The market of philanthropy advisers

I recently completed the cognitive juggling act of simultaneously reading Alliance Magazine's very thoughtful issue on philanthropy advisers while listening to the video stream of the Edge discussion on "What will change everything?" at the Genoa Science Festival.

The September 2010 issue of Alliance features articles from Melissa Berman, Felicitas Von Peter and Olga Alexeeva - three of the most accomplished, creative, and globally connected advisers in this space. They've all been instrumental in formalizing, expanding, and setting standards of practice for advising the wealthy about their giving in major regions of the world (the U.S., Europe, the U.K. and Russia). They raise important issues for the professionals in this space and the clients who will use their services.

Philanthropy advising as a service is becoming institutionalized, professional, and better. It will probably soon be held to certain standards, may become focused on impact rather than asset management, and there will be a move to professional accreditations. There will be a scandal or two. There are real ethical challenges - such as those raised by Caroline Hartnell in this article, in which the business interests of some advisers seem to be at odds with both the client's interests and what is "best" for the field. Ethical standards, clarity about the business interests of all involved (as with other financial advisers), and consumer education about what kinds of advisers do what can only help. There will be new tools and alliances that tie together the donor networks, the explicit data on change, and the trusted advisers. Philanthropy advising has been growing the way many industries do and the article in Alliance marks the moment in which it became publicly self-aware.

Which is somewhat funny, because the more I read in the magazine the more I kept thinking there was something missing from the story. In 2010 I shouldn't be able to read a snapshot of an emergent industry and come away feeling like the future of that industry is pre-ordained to follow the same trajectory that Michael Porter and others identified thirty years ago. The examples, practices, and issues raised in the Alliance feature section collectively sound as if philanthropy is still offline, only the rich, and only slightly concerned with investing. That's not where I think philanthropy is now or where I see its future, and so it's not where I think the future of advising will be.

I kept thinking that the future of philanthropy advising is peer-to-peer. (By the way, it's also part of the past of philanthropy advising). One of the amazingly underestimated elements of the Gates/Buffet Giving Pledge is the way in which it flat-out demonstrated what we've always known about giving - when a peer, a friend, or a family member asks you to give, you give. Gates and Buffet asked their peers to give (most of whom already were) and they did. In the model that has always been with us, and the model that the Giving Pledge brought to a new level, a person asked a person to give and they gave.

One of the few really big gifts this year - Mark Zuckerberg's $100 million to Startup:Education is classic peer-to-peer philanthropy advising. Zuckerberg turned to his Facebook COO, Sheryl Sandberg, who turned to her networks to find an opportunity that met the donor's interests. More formal versions of these peer network advisory structures include the programs of TPW-W, Legacy Venture, Synergos, Bolder Giving, Social Venture Partners, and Global Philanthropy Forum. There may be service providers, evaluation vendors and professional advisers in the mix, but the learning, ideas, partnerships, and even finding trusted advisers happens through these peer networks.

Peer to peer philanthropy advising is what is being built with social networks, many-to-many communications strategies, and globally connected datasets. It includes the "askers" and the advisers. It includes what I call the "doers" and the "donors." It includes the tweets and blogs on how to give to disasters, how to find the right giving vehicle, the data on nonprofits, the online communities talking about social entrepreneurship and re-creating social finance. At this moment, peer to peer philanthropy advising is a hodgepodge of smart folks and charlatans, of blowhards and thoughtful experts, of those looking to make a buck and those looking to make a difference. It will be these networks of peers that professional advisers - whether they are selling a bank's services or independent evaluation or research - need to service in the future.

The cost of entry to becoming an adviser - formal, institutionalized and working with the world's wealthiest - or informal, online, and iterating as you go - is almost negligible. While those featured in Alliance Magazine are going through the very important industrial life stage of maturation, the rest of the field is still a scatter plot of providers, practices, tools, advisers, and products. From the Alliance feature, we get one side of the story - the traditional narrative of financial innovations over time, in which the services and products developed for the wealthiest are first experimented with, than standardized, and then repackaged to trickle down to mid market when the costs are right.

But in our world today, where data are increasingly commodified and analysis/synthesis/expertise increasingly dispersed - the innovations from the bottom will - and should - affect the thinking of the top. Networks can generate more ideas, vet more ideas, and provide a more robust feedback process than any single adviser. They can mix experts and crowds. They can make sense of data in ways that individuals never will.

In Genoa, Clay Shirky answers the question of "What will change everything?" with "coordinated voluntary participation." He uses an example from the Polymath mathematics community - where the world's smartest mathematicians are upending centuries of professional practice to solve their field's longest standing, unsolvable problems. The story is not about the math but about how the math is done.

For philanthropy advisers, the parallel is to think not just about the philanthropy but how the philanthropy is done. And philanthropy - the long tail that provides the bulk of the private resources for public good - is all about "coordinated voluntary participation." How can the on-the-ground wisdom of long tail influence the wealthiest givers? How can the expertise and research that the big foundations pay for be used by the rest of us?

Monday, November 08, 2010

Citizens United and new rules for Nonprofits

(Cross posted on the Stanford Social Innovation Review)

The most important task for the social sector in the United States in 2011 will be to understand the effects of the Supreme Court’s decision in Citizens United vs. the FEC.

This decision removed prior restrictions on independent spending by corporations and unions on election campaigns. The immediate result of the January decision was to unleash a flood of money to advertising in support of or opposition to ballot measures or candidates. Most of this money was channeled through certain types of nonprofits.

Much has been written about the political and financial impact of Citizens United on election campaigns. Immediately following the elections on November 2, 2010 estimates the independent expenditures totaled at least $450 million, more than twice as much as was spent in 2006, the last midterm election.(Data from Sunlight Foundation) This includes at least $126 million from nonprofit organizations that do not have to disclose their donors.

There is some very important work being done, by groups such as the Center for Political Accountability, Voter Action, and Democracy 21 to address the questions raised by these undisclosed donors. Strategies for dealing with the flood of corporate money to politics that is being "laundered" through these nonprofits include:

  • Encourage corporations to disclose their contributions as a sign of good governance - there is great work being done on this front by Center for Political Accountability through lists and standards of best practice
  • Use shareholder resolutions to encourage corporations to disclose their contributions - these give individual and institutional shareholders the opportunity to guide the corporations toward good governance
  • Support efforts to pass the DISCLOSE ACT, which failed in the Senate in March 2010
Citizens United has shifted the legal landscape for nonprofit political advocacy. The years to come will be shaped by legal battles to define new practice within these bounds, continued legal battles which might further extend the Citizens United precedent, and many new actions within the world of voter rights and campaign finance reform.

The aftershocks of Citizens United include the start of a period of testing, trial by error, and new case law to determine what rules now apply to 501(c)(3) nonprofit organizations. This may please some and anger others, but there will be period of confusion for everyone.

I'm interested in the impact of the decision on nonprofits as a class of organization and on the public perception of them, their reputational risk, if you will. This topic has received far less attention than the "money into politics" part of the equation.

First, as I mentioned in this earlier post, the subsection tax code
legal distinction that separate 501 c 3, c 4 and c6 nonprofits means little to the general public. According to The Washington Post, eighty percent of all Americans (regardless of political party affiliation) opposed the Citizens United decision by the Court. The confusion about the role of these organizations in the political process is important for charitable nonprofits to the extent that the public conflates political activity (which they may or may not approve of) with charitable activities.

Second, while Citizens United clearly removed limits on political expenditures it also raised the need for a new look at disclosure requirements for donors. Donors to political parties and political action committees must be disclosed by name within a reasonable amount of time. Donors to the 501 (c) (4) and (c) (6) groups do not need to be disclosed. Changing these disclosure requirements is of great interest to many activists.

The unintended consequences of changing disclosure laws need to be carefully considered. Some legal scholars believe that increasing the disclosure requirements on all donations will result in the Court eventually removing all restrictions on political spending. Others raise the problem of relying on “analog” disclosure requirements in a “digital” age and suggest that donor disclosure needs to be more frequent and timely where political contributions are concerned.

Finally, if new donor disclosure rules triggered by political giving are applied to all charitable giving, the shift would likely have a dampening effect on long-held traditions of anonymous philanthropy.

Donors may find themselves being asked to support an organization that does not do direct political work but that has an affiliate organization that does. As of 2010, tax deductibility and anonymity are still options for non-political contributions
- clarity of purpose and intention for the funds given will be key.

How is your nonprofit addressing these changes? How are your donor outreach activities affected by the news reports of "hundreds of millions of dollars flowing to election campaigns through nonprofits?" It may be soon to have full answers to these questions, but the nonprofit sector needs to be seriously considering the implications of these rule changes. As Abby Levine, legal director of Alliance for Justice put it:
"There are some organizations that recognize the ground has changed. We may never be able to compete with big business, but we need to be at the table. If we're not in the game, we're definitely going to lose."

Sunday, November 07, 2010

The history of the future

(Photo from http://www.kk.org/ct2/2009/06/the-internet-mapping-project.php)

I'm an historian by training. At Stanford, I had the great honor of working with David Kennedy, who was both my teacher and a member of my dissertation committee. Kennedy is the author of several best selling histories of America in the 20th Century, such as the Pulitzer Prize-winning Freedom From Fear: The American People in Depression and War, 1929-1945 and Over Here: The First World War and American Society. Needless to say, I am a big fan of Professor Kennedy's work.

Professor Kennedy has an opinion piece in today's New York Times about Tuesday's election. In it, he notes the similarity between these results and those from the Gilded Age, the period that defined the turn of the last century (1880s-1910s). In the decades after the end of the American Civil War into the start of the 20th Century Kennedy notes that we had presidents from one party and congressional control by the other party far more often than we had single party control of both the executive and legislative branches. He refers to the kind of election we just had, where there is a massive shift in party control, as a "wave" election and notes that they reflect periods of uncertainty and resetting. He notes:
"So perhaps the stasis of the Gilded Age and the stalemate of our recent years reflect not so much the defects of our political structures as the monumental scale of the issues at hand. From that perspective, “wave” elections mark a necessary stage of indecision, shuffling, avoidance and confusion before a fractious democratic people can at last summon the courage to make tough choices, the creativity to find innovative solutions, the will to take consequential action and the old-fashioned moxie to put the ship of state again on an even keel."
Kennedy further notes that the Gilded Age eventually gave way to the Progressive era and great Presidents from both parties. In particular, Professor Kennedy writes:

"Eventually, leaders emerged in both major parties — most conspicuously the Republican Theodore Roosevelt and the Democrat Woodrow Wilson — who breathed vitality into the wheezing political system and effectively initiated the tortuous process of building institutions and writing laws commensurate with the scope and complexity of the society over which they presided. (My emphasis added)

This is the challenge we now face. In so many areas of life, we are trying to thrive within rules written for a different time. I won't go into the areas beyond philanthropy where this applies, but they are many. Where philanthropy and the social sector are concerned, we are very much trying to make do with rules that no longer hold.

The Citizens United case, about which I have a post on the Stanford Social Innovation Review, is one harbinger of new rules for the social sector vis-a-vis its relationship to advocacy and election politics. The for-benefit corporation laws (B Corporations and others) and the L3C movement, are "shots across the bow" for a new era of corporate law regarding the production of social goods. The creation of social finance and social investment exchanges and the ways these forces draw securities regulation into the equation for funding social goods is probably the the next place we will see massive shifts in law and regulation. Intellectual property, the Creative Commons, and governance of and in the commons, are also areas of law, regulation, and practice that hold promise for how we collectively produce social goods and threats to the established norms of nonprofit practice.

It is unsettling. We can't predict the future. We can't just hope that history repeats itself with great leaders of either the Rooseveltian or Wilsonian persuasion. But I believe we - all of us with a vested interest in a healthy, humane, culturally vibrant, and sustainable society - can do more.

We can use our current tools - as Kevin Kelly has done so creatively with his crowdsourced maps of the Internet - to spark conversations about what is and what we want. We can engage in civil debate and disagreement - as so many communities - from pop stars to college students, have with the "It gets Better" and "Make it Better" campaigns against bullying, violence and intolerance. We can actively seek to know "the other," as thousands of Jews and Muslims did this past weekend in a dedicated series of "religious twinning" services.

But what we also must do is actively consider the policies that shape the way we produce, distribute, and finance social goods. These are the rules that shape the game.

If Kennedy's read of history is accurate, and if this is a moment of such profound transition that we will only see it clearly in the rearview mirror, than what we need to be doing now is imagining what better could look like. How do we want services and social goods created and paid for? What can social business do and what needs an independent, civic infrastructure protected from the vagaries of politics and the motivations of a bottom line? What do the digital tools, the massive datasets, the communications instancy, the ability to combine crowds with expertise give us that our 20th Century forebears could not have imagined when they endowed great foundations, built public services, and codified certain practices almost 100 years ago?

We can only put new rules into place if we imagine them first. We're running up against old rules. There are examples aplenty of individual activism - from the Tea Party to Wikileaks - that are "first wave" reactions against the existing structures. Now is the time to start using that same combination of collective and individual to write the new rules.