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Home » Foundations, NonProfits, Social Entrepreneurship

One Giving Sector Prognosticator Looks Forward – and Back

By Tom Watson on January 16, 2011No Comment

This is the tail end of the busy season for experienced prognosticators, and few in the social sector are as voluble (or respected) as Lucy Bernholz, who blogs at Philanthropy2173 and runs Blueprint Research & Design – while serving up a heaping helping of buzzwords and informed crystal ball reading, especially as the year turns.

This year, the decade turned and brought out the super-charged native historian in Lucy’s always readable philanthropic zeitgeist hopping. Great ideas abound in the output, and I thought I’d grok a few from personal experience and observation.

Social Entrepreneurs (from Lucy’s decade review) – Last spring, I flew down to Miami to give a talk to students at the Clinton Global Initiative’s annual university gathering. Even before getting out of the terminal, I had living proof that the idea of social entrepreneurship – a mere futuristic buzzword a decade ago – had reached intellectual scale. While waiting for the CGI shuttle bus to the campus, I was literally grabbed by a bunch of young people who enthusiastically described their projects and picked my brain for ideas on how social media (the topic of my talk) could help them. That tidal wave of enthusiasm didn’t abate till I headed back to the airport the following evening – and during my time at the conference, no less than half a dozen students described themselves as budding “social entrepreneurs” and described either courses of current university study that was prepping them for careers, or plans for graduate school. There were 1,800 students at CGIU – each with a “commitment” to some kind of social project. Most were not pure philanthropy (raising money for a cause); rather, they were either start-up businesses or short-term projects aimed at a specific social change.

There are thousands of young people planning on careers as social entrepreneurs – and many more who have already started them. The main challenge? Funding, of course. Unless you’re self-funded (family dough) or lucky enough to land “enlightened” venture capital, the road to sustainability is a long one. Other challenges: deciding what constitutes success and the lack of a vibrant mergers and acquisition market. Yet, you can’t doubt talent and drive – we’re still at the beginning of social entrepreneurship as a functioning sector, I think.

Giving Pledge (from Lucy’s 2010 buzz words) – If I had a nickel for every nonprofit client who asked me about the Giving Pledge and how to go about applying for a grant from the generous billionaires on Warren Buffett’s list, I’d have … well, a buncha nickels. Lucy writes that she had to ” move this to the top of the list, just based on the number of Google hits – (9,570,000 ), intensity of sycophantic posts about it, and its role as discussion starter.” You can say that again. The pledge may well be effective over the long haul in proving a welcome example of spending down large fortunes on good causes, but as I noted last summer in the Daily Beast, the commitment is pretty vague:

This is no pledge to end hunger in our time, attain world peace, or cure cancer. The uniting factor in Giving Pledge is a commitment to abstain from dynastic wealth in the cause of philanthropy. Quite deliberately, there is no shared vision or common ideology here, and the definition of charity among the Giving Pledge club varies widely among the 40 members.

Hence, I have no good answer for my clients – yet the headlines are everywhere when someone else joins the club. An idea: could Buffett, Gates and other pledge club members free a relatively tiny amount of funding to assist family foundations in making decisions on hereditary wealth?

Spend Down Foundations (the Bernholz predictions for the next decade) – This is a big picture set of predictions in general, but I latched onto this very practical and impactful prognostication, which dovetails – in theory – with the Giving Pledge trend. Since moving to the philanthropy sector in 1999, I’ve been serially surprised to encounter the great stasis that binds so much of institutional philanthropy. The five-percent rule, the preservation of jobs and systems, the aversion to risk, the demand for ever-greater reporting from grantees under the guise of encouraging “impact,” and the general haughty come-to-us behavior clogs up true philanthropic change. I’m not saying it’s all foundations or even most foundations; I am saying it’s all-too-prevalent.

Spend-down foundations, like the Atlantic Philanthropies, shake up the staid foundation sector and – you would hope – force other philanthropists to consider “change in their lifetime.” On Long Island, where I have several terrific nonprofit clients, the Hagedorn Foundation is a well-respected spend-down philanthropy that advocates social change and aggressively pursues important goals. And, of course, the Gates Foundation doesn’t intend to operate in perpetuity. But as Bernholz noted, the growth in wealth among younger donors like Facebook’s Mark Zuckerberg may spur more spend-down action. “After all, if you start giving away your billions in your twenties you’ve got as many years left ahead of you as most of the nation’s perpetual foundations have behind them.”

There’s another prediction in Lucy’s next decade cavalcade that I’m unsure of:

Impact investing will surpass philanthropy—Total giving in the USA increased by about 50% or $100 billion in the last decade. The 2000 number (as reported by Giving USA) was $203 billion and the 2009 working number is $303 billion. If that rate of growth continues over the next decade we’ll hit $450 billion in total giving by 2020. Meanwhile (admittedly self-interested) predictions of impact investing peg the a potential investment opportunity between $400 billion and $1 trillion. (related – “Impact economy” will replace “social sector” as the term of art.)

The thing is, I’m not sure what impact investing encompasses – does it include all equity investment in for-profit companies that, in addition to aiming for profits, embrace a broad social goal? Would that include, for example, Google or Facebook (who maintain broad social raisons d’etre) or is it limited to blended value startups and companies owned or controlled by foundations or charities? Secondarily to that question, how about impact and efficiency – will that money, if it exceeds the annual average of just less than 2 percent of GDP, actually go into social programming? And who will measure the effects? I agree entirely that there’s a trend there, but I’m not sure that those broad numbers tell us anything.

Which in a way, reminds me of a post Bernholz wrote last year, when she took a hard look at predictions she’d made way back in 1999.

Looking back at just foundations over the last ten years I’ll say I was wrong about the timeline on which they would change – unless you focus on the exceptions that show what is possible (and not the thousands who look just like their brethren of 100 years ago). I was right about what was possible and many of the ways it would matter. This reminds me that I can look for patterns in the present and the past but then must factor in the innate irrationality of philanthropy when I project their impact.

Yes, that irrationality in philanthropy can be frustrating! I’d only add that in looking at the next decade’s trends, we’re clearly talking about a different generation in the driver’s seat of change. By the way, Lucy’s blueprint for 2011 is available online for $19.95 – I read 2010′s version (it informed my thinking all year) and can strongly recommend the series to anyone interested in the structure and direction of philanthropy.

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