Omidyar and Patents

I've written here, here, here, and here about patent philanthropy. Now, courtesy of Gifthub, I have learned that the Omidyar Network, which is about to shut down its online community, omidyar.net, has filed for a patent for the point system it used on the site. So here is just a list of the thoughts that come to mind:

• Noting the comments on GiftHub, I never liked the point system on o.net, it was too complicated for its purpose, so who cares;
• I'm sure this will make all those disgruntled souls over on o.net really happy to have invested their time in building community - when actually they were just unwitting beta testers;
• NOW do you believe me that the sectors have blurred beyond meaning - a commercial enterprise launches a free online community for nonprofit do-gooders who turn out to be beta testing a system that will be patented so as to collect royalties on its future use?
  
• Wait a minute, if the sectors have blurred this much, maybe the system is being patented, so it can be protected, royalties collected and then donated to a public trust that will fund the advancement of the Creative Commons and Open Source coding (OK, OK, stop laughing...)
• The value of something is in the eyes of the beholder. Different beholders see different value(s) - to community members at o.net it was in the community. To the owners of the network, it seems the value was in the code.
• NOW do you believe me that philanthropists should be thinking about IP?
• I'm glad some philanthropists agree with me that IP matters.
  

Tags: philanthropy, knowledge, intellectualproperty, patentphilanthropy

More money for your mission

Most discussions about socially responsible investments focus on whether or not the returns can equal those of value-neutral portfolios. But these comparisons miss the boat when it comes to philanthropic foundations.

Endowed foundations exist to support selected social goals. Their missions range across the spectrum. But regardless of their values, most philanthropists agree on this: more money going to their chosen missions beats less. In fact, those who argue for value-neutral investing do so claiming greater returns lead to more money for grants.

Here’s the irony. Putting the most money toward mission actually results from aligning a foundation’s investment policies with its social goals. It’s not magic-- just simple math.

Two philanthropy basics. First, private foundations must spend at least 5% of their endowed value on their missions each year. That’s the law. Second, foundations care about protecting their principal and are not known for aggressive investment policies. Most tend to seek returns of 9-10% per year.

Imagine a foundation that invests just for greatest returns and achieves 15% growth. A $100 million endowment would grow to $115 million, pay $5 million in grants and start the next year with a value of $110 million.

But suppose the foundation invests 10% of its endowment toward its mission instead. This can mean they invest directly in community-based ventures, vote proxy shares, or make low interest loans to mission-related ventures. If it earns back its money on these investments and makes 15% on the remaining portfolio, it will have directed $15 million toward its mission ($10 million investments and $5 million in grants) and have an endowment of $108.5 million. The foundation will have realized a 200% increase in money toward mission at an (unrealized) loss of just 1.5% in total value.

When the goal is putting more money toward mission, aligning investments with a foundation’s values simply adds up.

Tags: philanthropy, alignedinvesting

Hitchhiked

The Hitchhiker's Guide to the Blogosphere found me - this is a nice writeup of the blog (even though they are a year further into the future than I am). Thanks, folks.

Tags: philanthropy, blogs

Bernholz in Business Week on Aligned Investing

My opinions on social investing for endowments are well known to readers of this blog. Business Week picked up on them, and had me redirect my thinking to be relevant to individual donors and investors. You can find the article here.

I'll be debating this some more come September 18 at the Council on Foundations Community Foundations conference, with specific recommendations and opportunities for community foundations. Thanks to Brian Byrnes of the Vermont Community Foundation for the invitiation. You can find the joint Blueprint/Monitor white paper on the subject of aligned investing for community foundations here.

Others, such as Goldman Sachs, have lots to say on aligned investing. Goldman has a new report out that finds that companies that lead on environmental, social and governance (ESG) policies lead their peers in stock performance - by 25%.

Read the abstract here and download full report here: http://www.unglobalcompact.org/docs/summit2007/gs_esg_embargoed_until030707pdf.pdf

Goldman Sachs is also offering a new list of companies that meet its ESG policies, called GS SUSTAIN. I note this because some critics of screens for ESG decry the quality of the researchers and the standards used. I suppose they'll quibble with Goldman's team also - after all the company only hit record profits in 2006 setting a Wall Street record of $37.7 billion in revenue and $9.5 billion in profit. Can't imagine they know what they're doing.

Corporate acronym of the day quiz: What is a CRO?
Answer: Corporate Responsibility Officer


Thanks to Lisa Richter, GPS Capital Partners, for bringing the Goldman Sachs report to my attention.

Tags: philanthropy, socialinvesting, alignedinvesting