We’ve said it before many times: the best feature of this blog is its readers. Case in point is a recent e-mail from one Chris Markl. It concerns philanthropy, a topic we’ve covered in various ways before on this blog: the economics of street charity; conservative vs. liberal giving; the efficiency of Smile Train; and most recently, Penn State’s THON fund-raiser.
Chris’s note is essentially a plea for everyone to read a book on the topic that illustrates what he sees as a huge barrier to efficient philanthropy.
We don’t usually publish unsolicited mini-book reviews, but this one seems worthwhile.
Hello,
I am writing to suggest a blog topic about a book I recently finished reading called Uncharitable [by Dan Pallotta]. Uncharitable concludes that the constraints society places on non-profits leave them unable to solve the great social problems of the world. The book argues for the capitalization of philanthropy, including: competitive wages to attract the best applicants, increasing spending on advertising to build demand for philanthropy, and allowing investors to purchase stocks in non-profit organizations so philanthropy is not capital barren.
One of the key points of the book is that the method we currently use to evaluate charities, through efficiency ratios, provides no information about the effectiveness of an individual charity and leads an organization to focus exclusively on the short term (at the cost of long-term planning) and develop extreme risk-averse preferences (which leaves them unwilling to take risks which could lead to innovations).
The book has been reviewed by Nicholas Kristof and in The Economist. There is also a companion site for the book.
I’m not a publicist and I’m just a 28-year-old who has seen the adverse effects of constraining charities through creating my own large-scale fundraisers (yesride.org), and through being priced out of the non-profit market because of the extraordinarily low wages.
If desired, I will use my limited community college teaching income to purchase and send you a copy of Uncharitable from Amazon; this is how much I believe in this book.
I appreciated Chris’s generous offer, but he easily persuaded me to buy it for myself.
and 
. You can also watch it on 
I have been advocating that we use this crisis to explore the cooperative idea further, e.g., credit unions, community owned utilities and resources (like my electric co-op), community supported agriculture (CSAs, time to buy shares), and the like. As we learn to scale and localize alternative power supplies, sustainable agriculture (food stamps for farmers markets, grants for local governments to purchase shares in CSAs for use in food banks, etc), and other essential goods and services, we should look into the non-profit models we already have, and find ways to further capitalize them, and encourage the use of them.
All of these examples offer direct ownership of the necessary goods and services by the community, which could be considered the ultimate in ownership society, a conservative goal under President Bush. Resilient communities that work together to solve their immediate problems at the local level will be better for all of us in the long run.
Self reliance, a long-held, core conservative principle, is no better demonstrated than by freedom from corporate profit motives provided by non-profits. As long as we can keep them free from the deregulated, robber-baron pillaged ghost town known as Wall Street.
Hmmmm. Or maybe the plight of not-for-profits is really just another argument against relying so heavily on the private sector to provide social goods.
I would also be concerned that allowing NFPs to accumulate too much capital – which is a prerequisite of long term goals – would attract the same unscrupulous scavengers that beset many for-profit organizations. (Not that they aren’t circling already …)
I read Uncharitable last month. What detracted for me from the argument that charities are hamstrung by their inability to use the tools of capitalism was the lack of any recognition on his part that Mr Pallotta had some responsibility for the failure of his company. He said he was just a couple percentage points away from being on the “recommended” list — he couldn’t have tweaked his cost structure enough to make the cut? People complained about his cross-promoting other fund-raisers at his events — how about just promoting other fund-raisers for the same cause, e.g. breast cancer research, but for other groups in other locations? It would have been much harder for folks to complain about that.
It’s true that Mr Pallotta raised tremendous amounts of money and he should be commended for that. But he would still be in business if he had modified his approach to blunt the criticism of his methods. Then he would be leading the charge to change charity by the example of his continued success rather than from the postmortem of his failure.
Oh Scott #1
A severe economic downturn and a few well publicized corporate scandals… and now you propose the feudal Chinese model.
Isn’t the problem the reverse? Government trying to out-spend private charities and “crowding out” the value of their dollars spent.
It’s actually interesting how much non-profits behave like for profit institutions. A friend of mine worked for the American Lung Association and they were actively trying to drive other Lung related charities either out of businesses or into mergers. Moreover they were always sure to guard their “territory” from perceived “competitors” like the American Cancer Society. The stories this fried told were just completely wild and nothing I would have expected in a supposedly benevolent “not for profit” foundation.
Like the old Twilight Zone episode said people are alike everywhere.
As a serial non-profit board member (at least a brown belt by now, by my estimation), the biggest problem I see in simple economic terms is the isolation- or insulation- of the non-profits from their constituencies and their consequences. Most non-profits feel roughly like an episode of The Office on the inside- vacuous, self-serving, self-referencial, and generally feckless. The main issue is the lack of pointedness in their pay and incentive structures, IMO- the enthusiasm of the charity’s founders quickly wears away, and pretty soon you have just another organism that eats, breathes, and functions just like any other. It ceases to look for solutions to the putative problem and (invariably) becomes concerned chiefly with its own survival and those of its staff members. It is just the way of the world. I wish I knew the answer; I will certainly read Uncharitable and see if I can learn something…
M.B
cooperatives are nothing like the Chinese feudal model. Many operate effectively and competitively in global markets and indeed many are surviving the downturn much better than their rivals.
Here in the UK the John Lewis partnership, including food retailer Waitrose, the co-op group of food retailers, travel agents, funeral directors and more, as well as lots of smaller local coops are very effective and make a lot of surplus for their members.
I work for a nonprofit as a low wage employee. From my perspective, the problem is that this nonprofit is extremely top-heavy and political. The “leaders” never lead. They simply tell everyone else what to do while those same “leaders” sit on their butts all day and make the most income of all of us. That’s not so bad, but the intolerable part is that this is supposedly a “Christian” organization. So far, I’ve seen this organization define “Christianity” as being power hungry, insecure, and bullying. In this horrible economy, I hope I can find some other type of work so I can close this dark chapter of my life.