How Investment and Philanthropy Can Fix Each Other
May 26th, 2009 by David Svet
Isn’t it odd how we don’t always pay much attention to the things we really value? Take investing and philanthropy for instance. These are two of the most expensive things that we’ll do in our lives. Yet, most of us are willing to be passive and cede responsibility to strangers. For some reason, we are more than happy to part with vast sums of money and just hope for the best. But, it doesn’t have to be like this. I think the investment and non-profit communities have a lot to learn from each other that will bring and end to our disconnectedness.
Money is scarce, but so are our time and attention. They’re all valuable. But, when it comes to investment and philanthropy which of these scarcities is the driving factor: money, time, or attention?
On the surface, the obvious answer is money — you have to have it to spend it. But once all of our basic needs are met we should invest and be philanthropic. However when most of us have met our basic needs we simply buy more stuff and put philanthropy and investing on the back burner. Why? We think we have unlimited time and our attention is preoccupied with the here and now. I think the real scarcity that limits our investing and philanthropy is our awareness of time and our short attention span.
A lot of not-for-profits have figured this out. When we’re shown the picture of the cute puppy that needs a home NOW we reach for our wallets. Nonprofit organizations are good at getting our attention. They tell a great story. They tug at our hearts. They make the need real and immediate. But our attention span is short and soon we grow numb to the requests. Eventually, they lose our attention.
On the other hand, the financial service sector tells us with clockwork precision and detail exactly what happened at every moment of each investment’s (currently meager) life. We know exactly what has happened and what is projected to happen mapping out our time to retirement as if we were checking off days on a calendar. But we don’t get excited and invest more than we were. Their reports are clinically precise and sterile. They don’t tug at our heart. They don’t tell a great story — much less MY story. So, they lose our attention.
If funds want us to invest more they need to learn to tug at our hearts and inflame our passion for life — not any life, MY life. If not-for-profits want us to be more philanthropic they need to learn to report outcomes with the precision due an investment — MY investment. If both sectors learn from each other they’ll not only be able to keep our attention, but make sure the world is a better place when we get there.
Well I guess there is some semblance of truth to this, but I’m afraid this is very traditional thinking. It’s as if there was only one way to do something and that’s the way business works right now.
Reporting outcomes to the nth degree takes time, valuable “outcome” time. It costs valuable rainforest in paper audit trails. It costs wasted strategic thinking time, due to necessity for devoting time to the tedium of administration.
Also, imagine what it would be like if we were all pin-striped businessmen clones, who were interested only in numbers, numbers, numbers? What about if our social impact cannot be measured effectively by numbers (as yet)? What if we are unaware of the social impact we are creating? What if our reported numbers are just codswallop and the outcomes would have occurred anyway?
I advocate the following - TRUST. The majority of people who are interested in social enterprise are trustworthy. Yes, the majority. There are many sharks and charlatans, but the majority are people of high integrity, doing their utmost to help people in the best way they can. Let’s trust them to do what they do best, whilst we also encourage them to hone their existing measurement systems and help them rebuild them, if they are broken. Let people who care, care. let people who report, report.
Trust can be achieved in a variety of ways. Ashoka stands for trust and integrity. In my own project, young social entrepreneurs will be instilled with a need for integrity and high ethical standards. They will also be taught how to report to a good standard.
If a philanthropist is obsessed with getting an “outcome return” on his (usually his) investment, then let him pay for the work. If a philanthropist is interested in creating social change, let him or her research what is most effective - there’s plenty of choice out there and far more worthy causes than unworthy.
Like I said at the start, there is a shred of truth in what is said above, and most NGOs need to tighten up on their reporting a great deal, but don’t try to paint real people who care about real issues with pin stripes.