Tuesday, March 11, 2014

The cosmology of private resources for public benefit

Neil deGrasse Tyson has brought back Carl Sagan's Cosmos. When this television show first aired 30 years ago, most people knew nothing about space and the images shown had never been seen before. It's a different task to bring this program back today. Everyone on earth under the age of 45 has only lived during a time of space exploration. Yet the program still delights, because our knowledge has advanced and we can see both the magnificence of the whole and wonder at all we don't know.

When I dove into the numbers from The Urban Institute's Nonprofit Almanac 2012 yesterday I made a classic mistake - one I'm usually telling others to avoid. I got lost in the numbers that were presented, and failed to step back and ask "Is what is being counted here what really matters?" "What are we not asking, what do we not know?"

The data that the Almanac presents are important and they raise a number of important questions, including and going beyond those I posted. But they do not represent all the ways we use private resources for public benefit and their meaning and implications will always be limited taken out of this broader context. As commenters on the post reminded me - what about DAFs? There are tens of billions of dollars in donor advised funds - yet they are nowhere in the Almanac.

This is important because DAFs have been with us for decades, and we still don't count them. The questions I raised about political funding - which are attributable to a much more recent phenomenon of explosive "dark money" flowing through organizations chartered as nonprofits - is nowhere to be seen. These flows matter, but you'd never know to think about them from the data presented. This is similarly true with funding from impact investments, and with the many types of social businesses, hybrid enterprises, and "for benefit" corporations putting those funds to work.

In the very first Blueprint (2010) I shared my attempt at showing the different, but related and mutually influential, sources of funding and enterprises that make up a more complete universe of how we use private resources for public benefit. I argued then, and am still arguing today, that we need to consider the funding and the enterprises as part of interconnected space (we've dubbed it the social economy) in order to really understand who's doing what, if revenue is growing or declining, and where the boundaries of different sectors should be drawn. Here's a version of that picture (taken from the Blueprint 2012 and used in just about every speech I've given since 2010)

The galaxies represent the enterprises of nonprofits, political giving and impact investing. The spaceman represents you and me (Americans). The money we deploy to pursue our visions of "public benefit" can go to any or all of those galaxies - we choose whether it's nonprofit charitable giving or political funding or investing. The only way to really understanding the pieces is to understand the whole. Unfortunately, we still focus independently on the different galaxies. The Urban Institute studies nonprofits. The Global Impact Investing Exchange studies impact investing. The FEC, political campaigns and television networks track political spending. Others are beginning to track the sharing economy. It's time to pull them all into one map.

I've used this graphic so often I hate it. I've spent five years trying to map the changes in this universe - it's high time we all started working to map the fullness of these phenomenon. If Neil deGrasse Tyson can bring back Carl Sagan's Cosmos, surely we can update our understanding of how we use private money for public benefit - and track the data accordingly.

We need data on nonprofits, benefit businesses, and politically active social nonprofits in one place, tracked over time, so we can answer questions such as - "Is there more or less money involved?" "More or fewer enterprises?" "Who does what?" and, most important, "How should we monitor, oversee, provide incentives for, and regulate all of this?"


Bradford Smsith said...

Actually I like your cosmos diagram. It has a wonderful retro quality to it, kind of like the vision of the future in an old science fiction film. The point you are making is a really important one and similar to the one I made in "The Brave New World of Good" blog a few months ago on Philantopic. There are major funding and finance streams sloshing around the social economy cosmos for which there is little transparency, therefore, little data. That hardly means that it is "dark" money, indeed most all of it is probably doing good, or least not doing bad. But we can't really describe it, track it, analyze it, and perhaps most importantly, search it in a way that allows the greatest volume of resources to connect with the the best ideas, services, and energy in the social sector.

Lucy Bernholz said...

The "dark money" term refers specifically to money for political activity, flowing through C4s, that can't be traced to specific donors. The darkness is not about the ends so much as the sources.

It's one of the many ways the "brave new world" has bust out of the regulatory mechanisms and norms we established for an earlier time. Two different norms (anonymity in charity, transparency in politics); two different systems (campaign finance and nonprofit social welfare), and two different regulator structures (FEC and IRS) - all drawn into same sandbox.


Unknown said...

Intriguing perspective - thank you for sharing.