I wonder however if the same logic doesn’t extend to the social sector. I work with non-profits big and small, all who claim they offer critical services. They make these claims to solicit donations, but in the aftermath of Too Big to Fail, the idea that certain social sector institutions are absolutely essential might be more unsettling than moving.

In the social sector we defend agencies’ rights to create monopolies, veiled in an avoidance of duplication of services. Social sector agencies argue that there are limited funds to produce social value with. Therefore, in order to maximize social output we should avoid situations where one agency’s service offering overlaps with another. The result is regional monopolies whereby a few organizations are granted full control over a range of social services, thus manufacturing an environment where agencies can claim to be critical backbones of the social sector.

Their claims of being too big, too critical to society, to fail, are legitimated by the dogmatic adherence to avoiding duplication of services. All the praise heaped on these organizations amazingly echoes the same complaints we now have about unwieldy financial institutions. Anti-competitive social sector collusion is the backdrop for the social sector version of Too Big to Fail.

The idea of social sector organizations being too big to fail is even more disturbing considering we don’t have much reason to believe they are effective, even though their entire hegemonic reign is predicated on the assumption of maximum social impact.

Organizations that successfully convince the public they provide essential services might very well be producing more marketing miracles than Hallmark moments. In fact, I have serious doubts about most organizations’ capacities to measure changes in client indicators period, let alone asses the extent to which those changes are the result of program activities.

I recently read a report about program measurement released by the Gates Foundation titled A Guide to Actionable Measurement (non-profit consultant Gayle Gifford has a nice write up about the report on her blog). While the report provides a comprehensive evaluation strategy, I was struck by the simple advice the report offers to not always focus on measuring social impact by relating program outputs to client outcomes.

I often drink the social outcomes measurement Koolaid, but this Gates report got me thinking that  simply understanding whether clients who receive a particular service are better off or not is a logical evaluative starting point. However, the extent of our evaluation woes is so deep that even such a simple, summary data type assessment of client indicators is more elusive than it ought to be, a problem that is compounded by a social sector culture that favors non-profit monopolies.

Through monopolization a handful of organizations, rightly or wrongly, are allowed to claim credit for a community’s status quo. The anti-competitive nature of the social sector creates an atmosphere whereby every organization can claim that reduced funding or closure of their programs will lead to social disarray.

I view the problems of anti-competitiveness and poor evaluation in the social sector to be linked. Anti-competitiveness, and adherence to avoiding duplication of services, supersedes the need for serious evaluation. Evaluation is not only a tool for evaluating client progress, it is a lens through which comparison between interventions, and agencies, can be drawn.

So long as the social sector continues to espouse anti-competitiveness cloaked in the flag of collaboration, we will continue to have a sector that is not necessarily too big to fail, but is certainly too small-minded to succeed.

(Photo by jeffisageek)

At their core, Pallotta’s arguments in Uncharitable come down to the idea that the activities of nonprofit organizations have been governed by social norms tracing back to the Puritans that hinder the ability of charitable groups to effectively address the problems they are tasked to solve. The antidote to these damaging social constructs is rational application of market norms to our expectations of charitable organizations, allowing groups and individuals free reign within these broader confines to take the most expedient approaches to achieving their missions. Not allowing such groups access to these tools is irrational.

While I agree with the logic behind almost all of Pallotta’s individual recommendations, I’ve come to recognize that most people who aren’t social sector professionals aren’t willing to make the effort to intellectually understand how philanthropy “should” work. Even among professionals within the sector, there is little consensus over what constitutes good philanthropy and whether Pallotta’s ideas are a step in the right direction. How can we expect those who are not living and breathing this work to reach conclusions that go against their gut instincts about acceptable ways for charities to operate? It’s not that they don’t care about poverty and climate change and human trafficking; it’s that their lives don’t rotate around these issues. Although they want to help, they don’t have time or energy to dedicate to understanding why it’s a good thing that the charity they just gave $20 of their hard-earned money to is going to spend part of it to pay more competitive salaries for its staff, rent a billboard to raise awareness about its cause, or experiment with an unproven but potentially lucrative fundraising event. Their involvement in philanthropy is based around social norms, which are governed by our desire for community, altruism, and interactions without explicit expectations of reciprocity. It is difficult to reconcile that goals arising from a set of social norms may be best advanced by adopting practices that are based around costs and benefits, individual merit, and financial transactions.

What if we do succeed in creating a broad shift in public sentiment towards the acceptability of applying market norms and market thinking to aspects of philanthropy? At what point does our encouragement of donors and professionals within the sector to apply market norms begin to seep into other areas and overwhelm our social motivations? Market norms and social norms do not mix well together. In Predictably Irrational, behavioral economist Dan Ariely relates the story of how a few years ago, the AARP was rebuffed in their request for lawyers who would be willing to offer their services at reduced rates of around $30 an hour to retirees. But when the AARP went back and asked the lawyers to volunteer their time, they received an overwhelmingly positive response. In both cases, the AARP was attempting to appeal to the lawyers’ sense of social obligation, but the involvement of even a hint of a market transaction overwhelmed the social instincts to assist the elderly. This is a trend that shows up again and again in behavioral economics: when money or market norms are introduced, social norms tend to go out the window.

I don’t mean to suggest either that the approaches Pallotta advocates in Uncharitable exclude the role of social norms or that it is impossible to introduce aspects of market functioning into the social sector. Yet, the combination will not be easy, and those who attempt to navigate the grey area where social and market norms may overlap will have to be cognizant of the trade-offs involved. When investors (social or not) begin to question whether an organization may be shifting away from the “rules” that were implicitly or explicitly understood when their investment was first made, their willingness to make future investments is likely to diminish.

Pallotta has established himself as a leading voice of reason within the social sector and I consider him to be one of the most consistently insightful writers in this space. That said, his views on how charitable goals can be met most effectively are still far from commonly accepted even within the social sector. I see a future where more widespread acceptance of the application of market norms to various aspects of social sector behaviors will result in more resources for the sector and better outcomes for the populations it seeks to serve.

At the same time, it is important that we do not discount how deeply embedded, powerful, and valid the presence of social norms is in the decisions of the people we hope to enlist to our causes. We need to find ways to tap into those “irrational” forces and direct them to more effectively create social impact. After all, these forces are responsible for countless hours of volunteering, in-kind contributions, and $300 billion in donations that flow into US charities each year.

The concepts of market and social norms and more broadly the study of how emotions and perception can trump logic in decision-making are the subject of an emerging field known as behavioral economics. A fantastic primer for those interested in behavioral economics and how to apply some of its core findings to social sector work can be found in the creatively titled, Homer Simpson for Nonprofits: The Truth About How People Really Think and What It Means for Promoting Your Cause, available as a free download from Network for Good.

Failing the success of sweeping interventions, the sector has recently become obsessed with micro solutions to social problems. The wave of micro activity started with the popularity of microcredit, but has recently devolved into a flurry of any philanthropic word pre-fixed with “micro” such as micro-volunteering, micro-donations, micro-philanthropy, and micro-actions.

My macro point here is that the momentary micro dogma of the social sector distracts us from pursuing real solutions that help people.  What matters, of course, is what works, small, medium, large, or super-sized.  The micro-trend was started by microcredit, the first, and only member of the “micro” solution set that resembles a real intervention rather than a gimmick focused more on size than effectiveness.

Microcredit is micro in so far as it is a small loan to an impoverished person, ostensibly used for wealth creating activities. While microcredit has been heralded in some circles as a powerful poverty-reduction tool, recent evaluative research has raised some important questions. Specifically, David Roodman speculates there might be a microcredit bubble in Bangladesh. Roodman writes

Indeed, multiple borrowing is widespread in Bangladesh now, and it has raised concerns that some Bangladeshis are juggling microcredit loans the way some Americans juggle credit card debt, in a merry-go-round that must one day stop.

As borrowers acquire multiple loans their debts becoming increasing less micro, raising doubts about microcredit’s core promise that the poor need only small loans to lift themselves out of poverty, a falsehood promoted more by Kiva’s marketing than the fundamental tenants of the microcredit movement.

While the idea that a modest investment by Western standards can create sustainable businesses is appealing, evidence of multiple borrowing undermines this hope. Even though most people involved in the day-to-day development of microcredit as a poverty intervention strategy take a sophisticated, nuanced approach to microcredit, its widespread popularity has less to do with actual outcomes and more to do with the suggestion that solving big problems only requires small actions.

And here, I believe, is where the micro thinking begins to unravel.

The current adherence to the micro dogma does not come from a measured understanding of effectiveness of micro approaches. Instead, our fascination with all things micro stems from a hope that simple, small, and intuitive sounding actions can solve tremendously complicated problems. By attempting to reduce the daunting magnitude of poverty to something we can solve through trivial investments, shopping, and meaningless minute-at-a-time volunteer activities, we simply aggregate our micro inabilities to solve social problems into a macro inability to solve social problems.

Over on the Tactical Philanthropy Blog comments section reader Chip McComb sums up the problem with micro giving nicely, in so doing revealing much of what is wrong with micro thinking in general. Chip writes

I fear that as micro giving, and mobile giving becomes more and more prevalent the attitude of those that give, could shift dangerously to think that all giving should be as easy and as pleasing as buying a coke or a big mac, and when it’s not easy or pleasing, it is therefore not worth their time or expense. What a dangerous trap!

I am not arguing that all micro efforts are problematic. There are some great virtues of thinking small, so long as micro means local approaches to social problems, small strategic investments (like microcredit), or other such reasoned uses that resemble actual strategies. My problem with the current wave of micro thinking is that micro has become a euphemism for easy.

Ultimately, what matters is providing solutions that work. In some cases, small interventions might work best, like microcredit, in other cases, perhaps our investments need to be large and patient, rather than micro, like Acumen Fund’s approach to social investing. Whatever the size of the intervention, all our approaches should be well reasoned and rigorously evaluated.

Of course, unlike our modern micro interventions, evaluation is hard, even if it is indispensable in expanding what works and purging what does not.  Recognizing both the importance and complexity of evaluation, perhaps I should pursue the idea of micro-evaluation, a simple evaluative framework that is as easy to use as it is meaningless.

(Photo by Articulate Matter)

And poverty is just one of many challenges humanity faces.

Philanthropy will never solve these challenges.

Let me clarify: Traditional philanthropy will never solve these challenges. Traditional philanthropy, composed solely of donating time and money to charitable causes, will never solve challenges of this magnitude in anything close to an acceptable time frame given the extent of human suffering they represent. As William Easterly argues in great detail in his book, White Man’s Burden, it’s unclear whether the billions of dollars poured into aid by governments and NGOs over the years have had any kind of sustainable positive impact on the lives of the people they were intended to benefit.

So, if traditional philanthropy isn’t the answer, what is?  Well, it probably isn’t too surprising that I’m going to suggest that we need to find ways to be more inclusive of business and government and find ways to leverage the strengths of those sectors, along with the nonprofit sector, to create social change.

Some might question whether the activities of business and government can really count as “philanthropy.”  But let’s look at the etymology of the word: it comes from the Greek philanthropos, a combination of philos, or “loving” in the sense of benefiting, caring for, nourishing; and anthropos — “humankind”, “humanity”, or “human-ness”.  So: “love for humanity.” Business and government may not always express a love for humanity, but they certainly can in some cases, so let’s take full advantage of that where we see an opportunity.

But it’s not enough to simply open our hearts and our minds to accepting a broader definition of philanthropy.  We need full-bore, pedal-to-the-metal commitment to finding what works and doing whatever it takes to make our vision of the world a reality.  We need people like Dan Pallotta, who started Pallotta Teamworks, a for-profit event management that produced multi-day fund raising events such as AIDSRides and Breast Cancer 3-Days, raising over half a billion dollars and netting over $300 million for those causes in nine years.  We need people like Kjerstin Erickson, Saul Garlick, and Jon Gosier, three young social entrepreneurs who have formed the Thrust Fund to offer up a percentage of their future earnings in exchange for the unrestricted capital investments they need to scale their ventures right now.  Basically, what we need are people who take a no-holds-barred, everything-is-on-the-table approach to philanthropy, where the two questions that matter are “Does it work?” and “Does it work better than whatever alternatives are available?”.  We need, as I like to think of it, Full Contact Philanthropy.

To quote Deng Xiaoping: “I don’t care if it’s a white cat or a black cat. It’s a good cat so long as it catches mice.”

Let’s all stop caring about the color of the cat and focus on how we can best identify and nurture the cats that demonstrate that they can (or someday will be able to) catch the most mice.  And if you’ve got a dog or a wombat that somehow manages to catch even more mice, heck, let’s find a way to nurture those too!

(Photo by sselbein2007)

Christmas is a lot of things to a lot of people. To some it’s a reminder of how great they have it and that they should be more giving to those who have less.  Those who have more might have volunteered today, given away a turkey to a needy family, and felt great about it. Don’t get me wrong, I’m grateful to those who step up during the holidays to improve the lives of others, some people don’t care for anyone but themselves (I even dated one of them for a long time). Just because I am grateful to those who give does not mean that I like charity.

In order for there to be a giver, there must be a receiver. For there to be a hero, there must be a victim. Indeed the social service sector is one that exists to help those who are victims of the economy, physical violence, drugs and alcohol, mental illness, etc. I cannot relate to those in my sector who say they love charity.  How can anyone love this? I do what I do because I love people, but I don’t love charity.

So there you have it, I am a dedicated social servant who hates charity. Merry Christmas, here’s looking forward to a  future where your donations won’t be necessary.

(Photo by Funky64)