Comments on: Information Sharing in Philanthropy http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy Sat, 30 Aug 2008 14:53:04 +0000 http://wordpress.org/?v=2.5.1 By: Sean Stannard-Stockton http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2671 Sean Stannard-Stockton Tue, 05 Feb 2008 05:10:15 +0000 http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2671 Kevin, this is fun and interesting conversation. I just want to be clear that my comments originated during my explanations of why stock picking is harder than picking good charities to fund. My point was that stock prices exist in a (relatively) efficient market where the market price adjusts so that more or less effective companies become equally attractive investment opportunities. The nonprofit sector has some very important differences, but I do believe that over time, as nonprofits become more fully funded, that a similar dynamic will enter the picture. Now to your point above in comment #17. I agree with you completely. Of course there are many projects that have the power laws you describe. But I assume you don't imagine that the entire sector would represent a hockey stick type growth pattern (except for short periods of time). I would suggest that almost all nonprofits are operating under famine type conditions currently and that we will be shocked by the impact that the sector can have as we move to a market where funders chase good impact opportunities rather than having nonprofits chase funders. Kevin, this is fun and interesting conversation. I just want to be clear that my comments originated during my explanations of why stock picking is harder than picking good charities to fund. My point was that stock prices exist in a (relatively) efficient market where the market price adjusts so that more or less effective companies become equally attractive investment opportunities. The nonprofit sector has some very important differences, but I do believe that over time, as nonprofits become more fully funded, that a similar dynamic will enter the picture.

Now to your point above in comment #17. I agree with you completely. Of course there are many projects that have the power laws you describe. But I assume you don’t imagine that the entire sector would represent a hockey stick type growth pattern (except for short periods of time).

I would suggest that almost all nonprofits are operating under famine type conditions currently and that we will be shocked by the impact that the sector can have as we move to a market where funders chase good impact opportunities rather than having nonprofits chase funders.

]]> By: kevin jones http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2647 kevin jones Fri, 01 Feb 2008 06:15:24 +0000 http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2647 sean, in venture investing, people look for the occasional examples of the increasing returns business; the ones where the cost of getting bigger and having a bigger impact comes at increasingly reduced cost (think windows back when microsoft was a growth company, or google now) why is that not potentially the case with social benefit organizations? why is there not a hockey stick possibility? are you always playing in a game where you can't dunk in this kind of court? there are power laws and there are bell curves; diminishing returns is a bell curve law. the bell curve is not the only that applies. the black swan also exists; the orthogonal case where outsize impact is enabled by pouring more resources into the silver bullet; im not sure what that case is, but i am not sure i like your implicit assumptions, sean.. i dont' think we disagree, but i want to mix it up a bit further, if you're game.. could there be a case where a power law applied in social benefit where piling on equals the google for good? sean, in venture investing, people look for the occasional examples of the increasing returns business; the ones where the cost of getting bigger and having a bigger impact comes at increasingly reduced cost (think windows back when microsoft was a growth company, or google now) why is that not potentially the case with social benefit organizations? why is there not a hockey stick possibility? are you always playing in a game where you can’t dunk in this kind of court? there are power laws and there are bell curves; diminishing returns is a bell curve law. the bell curve is not the only that applies. the black swan also exists; the orthogonal case where outsize impact is enabled by pouring more resources into the silver bullet; im not sure what that case is, but i am not sure i like your implicit assumptions, sean.. i dont’ think we disagree, but i want to mix it up a bit further, if you’re game.. could there be a case where a power law applied in social benefit where piling on equals the google for good?

]]> By: Sean Stannard-Stockton http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2641 Sean Stannard-Stockton Fri, 01 Feb 2008 02:00:09 +0000 http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2641 foundationwriter, For me I think of the debate as kind of a "letter of the law, spirit of the law issue". I don't think that restricting grants is terrible or general support perfect, but I believe in the spirit of the idea that nonprofits tend to know best how to allocate resources given to them and that funders should not (generally) seek to decide which line items to support. I see robust nonprofit organizations as the goal, not simply great projects. Much the same way I see Apple as a great company, it is not the iPod as a separate project, it is the organization itself. There are a ton of qualifications to this. I'm just talking about the spirit of the law. Thanks for joining the discussion. I always like to see new people! (Nothing in this post should be considered investment advice). foundationwriter,
For me I think of the debate as kind of a “letter of the law, spirit of the law issue”. I don’t think that restricting grants is terrible or general support perfect, but I believe in the spirit of the idea that nonprofits tend to know best how to allocate resources given to them and that funders should not (generally) seek to decide which line items to support.

I see robust nonprofit organizations as the goal, not simply great projects. Much the same way I see Apple as a great company, it is not the iPod as a separate project, it is the organization itself.

There are a ton of qualifications to this. I’m just talking about the spirit of the law.

Thanks for joining the discussion. I always like to see new people!

(Nothing in this post should be considered investment advice).

]]> By: Sean Stannard-Stockton http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2640 Sean Stannard-Stockton Fri, 01 Feb 2008 01:49:22 +0000 http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2640 Bruce & Kevin, Sorry I'm having a hard time getting my point across. I doubt we disagree. My point is just that the law of diminishing returns exists for grants the same way it does for anything you put time/energy/money into. Clearly, in an efficient market, there is not one organization that should get every dollar of total global donor resources. In an efficient market, capital would be allocated to many, many nonprofits, some of which would be less effective than others. My point when I first mentioned the concept that once the market is more efficient, the question will be less about identifying the most efficient nonprofit, but the one that can do the most with more money. Bruce & Kevin,
Sorry I’m having a hard time getting my point across. I doubt we disagree. My point is just that the law of diminishing returns exists for grants the same way it does for anything you put time/energy/money into.

Clearly, in an efficient market, there is not one organization that should get every dollar of total global donor resources. In an efficient market, capital would be allocated to many, many nonprofits, some of which would be less effective than others.

My point when I first mentioned the concept that once the market is more efficient, the question will be less about identifying the most efficient nonprofit, but the one that can do the most with more money.

]]> By: Bruce Trachtenberg http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2635 Bruce Trachtenberg Thu, 31 Jan 2008 21:58:45 +0000 http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2635 Foundationwriter makes some valuable points. It should be less a question of "general" vs. "project," but more about whether the grant will help help the organization fulfill its mission. In my fundraising efforts, I sometimes seek project support for work we initiate and that is more likely to get funded as such, rather than making a general request (which we also do a lot of). But in those cases, it's money to keep us operating day-to-day. Foundationwriter makes some valuable points. It should be less a question of “general” vs. “project,” but more about whether the grant will help help the organization fulfill its mission. In my fundraising efforts, I sometimes seek project support for work we initiate and that is more likely to get funded as such, rather than making a general request (which we also do a lot of). But in those cases, it’s money to keep us operating day-to-day.

]]> By: foundationwriter http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2634 foundationwriter Thu, 31 Jan 2008 21:53:44 +0000 http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2634 The discussion of general vs. project support sounds depressingly like the unenlightening debate about "old" vs. "new" philanthropy. First, it sets up a false dichotomy, partly a result of imprecise definitions: a fair share of foundation project support is, in fact, general support. It may be called capacity-building (or better, improving operations), or the "project" may be all the agency does. Second, many foundations that have made general support the next new thing put huge demands, and sometimes, restrictions, on their grantees, e.g., hiring business consultants, putting corporate staff into the nonprofit. This may or may not be a good thing, but it's hardly what most nonprofits think of as general support. Finally, if we're only going to make grant to nonprofits that a foundaton believes can "handle" general support, what happens to small agencies in poor neighborhoods who may not be the most efficient at what they do--but are the only ones helping people in those communities. The discussion of general vs. project support sounds depressingly like the unenlightening debate about “old” vs. “new” philanthropy. First, it sets up a false dichotomy, partly a result of imprecise definitions: a fair share of foundation project support is, in fact, general support. It may be called capacity-building (or better, improving operations), or the “project” may be all the agency does. Second, many foundations that have made general support the next new thing put huge demands, and sometimes, restrictions, on their grantees, e.g., hiring business consultants, putting corporate staff into the nonprofit. This may or may not be a good thing, but it’s hardly what most nonprofits think of as general support. Finally, if we’re only going to make grant to nonprofits that a foundaton believes can “handle” general support, what happens to small agencies in poor neighborhoods who may not be the most efficient at what they do–but are the only ones helping people in those communities.

]]> By: Bruce Trachtenberg http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2630 Bruce Trachtenberg Thu, 31 Jan 2008 12:39:23 +0000 http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2630 Sean, I have to agree with Kevin. Not so much that your assumptions are incorrect. There just isn't enough evidence to prove your point. There hasn't been enough unrestricted capital flow to see what a fully scaled organization can accomplish. Let's get to that point and then revisit this debate. Sean,
I have to agree with Kevin. Not so much that your assumptions are incorrect. There just isn’t enough evidence to prove your point. There hasn’t been enough unrestricted capital flow to see what a fully scaled organization can accomplish. Let’s get to that point and then revisit this debate.

]]> By: kevin jones http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2624 kevin jones Thu, 31 Jan 2008 05:00:41 +0000 http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2624 Im not sure your base line assumptions are correct. what makes non profits or their impact inherently unscalable? the rule you are applying would not be applied, in fact would be avoided as an inherent inefficiency in business. you want businesses to scale, to be increasing returns businesses. why can't you have (and i have not considered the question deeply and can feel phil cubeta breathing down my neck as i say this) an increasing returns social impact non profit? Im not sure your base line assumptions are correct. what makes non profits or their impact inherently unscalable? the rule you are applying would not be applied, in fact would be avoided as an inherent inefficiency in business. you want businesses to scale, to be increasing returns businesses. why can’t you have (and i have not considered the question deeply and can feel phil cubeta breathing down my neck as i say this) an increasing returns social impact non profit?

]]> By: Sean Stannard-Stockton http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2614 Sean Stannard-Stockton Wed, 30 Jan 2008 18:19:50 +0000 http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2614 I didn't mean that. I generally advocate for nothing but unrestricted grants (although I admit there are times when restricted grants make sense). I meant that the more you give to a nonprofit the less social return on investment it can get on every incremental dollar. The nonprofit sector doesn't face this very often. But my point what that if capital flowed freely to its highest use, that after awhile some effective nonprofits would begin to produce diminishing returns. It would be good if Harlem Children's Zone (for instance) got $1 million or $5 million instead of $100,000. But they couldn't use $1 billion dollar. So at some point, dollars should start going to lower impact nonprofits who can still get the full use out of new funds. Sorry I haven't explained this clearly. I didn’t mean that. I generally advocate for nothing but unrestricted grants (although I admit there are times when restricted grants make sense). I meant that the more you give to a nonprofit the less social return on investment it can get on every incremental dollar. The nonprofit sector doesn’t face this very often. But my point what that if capital flowed freely to its highest use, that after awhile some effective nonprofits would begin to produce diminishing returns. It would be good if Harlem Children’s Zone (for instance) got $1 million or $5 million instead of $100,000. But they couldn’t use $1 billion dollar. So at some point, dollars should start going to lower impact nonprofits who can still get the full use out of new funds.

Sorry I haven’t explained this clearly.

]]> By: kevin jones http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2612 kevin jones Wed, 30 Jan 2008 17:54:41 +0000 http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2612 ok. so it's like portfolio theory; put the money where it makes the most sense. to the program that works.. that's ok.. but it still makes it program, not capacity funding, which is a fundamental problem ok. so it’s like portfolio theory; put the money where it makes the most sense. to the program that works.. that’s ok.. but it still makes it program, not capacity funding, which is a fundamental problem

]]> By: Sean Stannard-Stockton http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2610 Sean Stannard-Stockton Wed, 30 Jan 2008 16:26:12 +0000 http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2610 Sorry to not be more clear. I was responding to Tidy Sum's comparison to stock market investing. In a world where effective organizations were fully funded (ie. they had all the money they needed for their highest return projects, and could only use more money to pursue projects with secondary priority), less effective organizations could become better relative funding opportunities if their best projects had higher return potential than the top nonprofits secondary projects. Think about it this way: Imagine that X Charity is the most effective organization in the world. It would not be most efficient for every donated dollar in the world to be given to them. They simply would not be able to put all of that money to work. Markets generally do not create a winner take all scenario, usually (when they work well), they create an ecosystem of organizations that compete against each other. Sorry to not be more clear. I was responding to Tidy Sum’s comparison to stock market investing. In a world where effective organizations were fully funded (ie. they had all the money they needed for their highest return projects, and could only use more money to pursue projects with secondary priority), less effective organizations could become better relative funding opportunities if their best projects had higher return potential than the top nonprofits secondary projects.

Think about it this way: Imagine that X Charity is the most effective organization in the world. It would not be most efficient for every donated dollar in the world to be given to them. They simply would not be able to put all of that money to work. Markets generally do not create a winner take all scenario, usually (when they work well), they create an ecosystem of organizations that compete against each other.

]]> By: kevin jones http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2609 kevin jones Wed, 30 Jan 2008 14:40:13 +0000 http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2609 Bruce, giving to less effective organizations seems like it's way to reward failure, which is kind of consistent with the bassackwards way non profit funding sometimes runs.... or not.. im sure sean will explain what he means, but i'd thought i'd throw in a cheap shot in the interim, just for fun. Bruce, giving to less effective organizations seems like it’s way to reward failure, which is kind of consistent with the bassackwards way non profit funding sometimes runs…. or not.. im sure sean will explain what he means, but i’d thought i’d throw in a cheap shot in the interim, just for fun.

]]> By: Bruce Trachtenberg http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2608 Bruce Trachtenberg Wed, 30 Jan 2008 13:02:38 +0000 http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2608 Sean, I'm puzzled by your comment that if effective organizations get so much money, donors will give to less effective organizations to make their money go "further." Seems to me that giving to organizations already effective at their work is more likely to result in a positive return on investment. Giving to less effective organizations doesn't seem like a wise alternative, unless donors are working with those organizations on a plan to improve their operations and better their outcomes. At the same time, it seems like organizations doing a good job shouldn't be penalized for because they are succeeding at what they do. Sean,
I’m puzzled by your comment that if effective organizations get so much money, donors will give to less effective organizations to make their money go “further.” Seems to me that giving to organizations already effective at their work is more likely to result in a positive return on investment. Giving to less effective organizations doesn’t seem like a wise alternative, unless donors are working with those organizations on a plan to improve their operations and better their outcomes. At the same time, it seems like organizations doing a good job shouldn’t be penalized for because they are succeeding at what they do.

]]> By: Sean Stannard-Stockton http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2607 Sean Stannard-Stockton Wed, 30 Jan 2008 06:36:13 +0000 http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2607 Tidy Sum, There is plenty of information to make it quite easy (mostly) to figure out which publicly traded company is producing the highest return on capital (not the best stock returns, but making the most profit). The stock market has an extra layer of complexity in that the price of shares adjusts to take into account effectiveness. That doesn't happen in the nonprofit world. What could happen in the future is that effective orgs get so much money that it becomes a better "investment" for donors to give to less effective orgs because their money goes further than just sending more money to nonprofits I would suggest that is happening right now at the elite universities where donors are questioning why they need any more money and wondering if gifts to other schools (that are objectively not as good schools) are a smarter use of their funds. Sabermetrics: <a href="http://www.ft.com/cms/s/0/e0bf6a08-cbb1-11dc-97ff-000077b07658.html" rel="nofollow">Moneyball</a> was a GREAT book and interesting look at a real life attempt to use nothing but quant to run a baseball team (note that the sub-title was "the ART of winning...". I think that sabermetrics teaches us that many of the assumptions we have are wrong when you look at the data. But that doesn't mean data trumps everything else. A good investor knows that you can create a list of 100 data points that show we are definitely in a recession or going into one as well as 100 data points showing that we'll avoid one for sure. Tidy Sum,
There is plenty of information to make it quite easy (mostly) to figure out which publicly traded company is producing the highest return on capital (not the best stock returns, but making the most profit). The stock market has an extra layer of complexity in that the price of shares adjusts to take into account effectiveness. That doesn’t happen in the nonprofit world. What could happen in the future is that effective orgs get so much money that it becomes a better “investment” for donors to give to less effective orgs because their money goes further than just sending more money to nonprofits

I would suggest that is happening right now at the elite universities where donors are questioning why they need any more money and wondering if gifts to other schools (that are objectively not as good schools) are a smarter use of their funds.

Sabermetrics: Moneyball was a GREAT book and interesting look at a real life attempt to use nothing but quant to run a baseball team (note that the sub-title was “the ART of winning…”. I think that sabermetrics teaches us that many of the assumptions we have are wrong when you look at the data. But that doesn’t mean data trumps everything else.

A good investor knows that you can create a list of 100 data points that show we are definitely in a recession or going into one as well as 100 data points showing that we’ll avoid one for sure.

]]> By: Tidy Sum http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2583 Tidy Sum Fri, 25 Jan 2008 21:06:34 +0000 http://tacticalphilanthropy.com/2008/01/information-sharing-in-philanthropy#comment-2583 Spot on comment. Thanks for getting your Texas crank on here. If the stock market has more data than God available with a mouse click so how come 3/4 of our smarty pants investment advisors can't beat the indices? You reminded me about the wonderful field of sabermetrics -- the analysis of baseball through objective evidence, especially baseball statistics. The steroidal sport of baseball is pumped up with more data and statistical measures than any other human enterprise. Yet for all of its satisfying and sexy quantifiability those nerdy sabermetricians point out that many of the traditional measures we use are horse-hockey. The brainiacs with the spreadsheet burns on their noses are also quick to point out how darn hard it is to predict and compare without having some other geek point out problems with their assumptions. Any baseball freaks out there who can offer examples of what I am getting at? Now, I love hard data as much as a steaming bowl of Texas chili, but like my chili I always take it with a grain of salt and a nice cold Bud. Spot on comment. Thanks for getting your Texas crank on here.

If the stock market has more data than God available with a mouse click so how come 3/4 of our smarty pants investment advisors can’t beat the indices?

You reminded me about the wonderful field of sabermetrics — the analysis of baseball through objective evidence, especially baseball statistics.

The steroidal sport of baseball is pumped up with more data and statistical measures than any other human enterprise.

Yet for all of its satisfying and sexy quantifiability those nerdy sabermetricians point out that many of the traditional measures we use are horse-hockey.

The brainiacs with the spreadsheet burns on their noses are also quick to point out how darn hard it is to predict and compare without having some other geek point out problems with their assumptions.

Any baseball freaks out there who can offer examples of what I am getting at?

Now, I love hard data as much as a steaming bowl of Texas chili, but like my chili I always take it with a grain of salt and a nice cold Bud.

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