But I probably overstated the point. Philanthropists are human and humans like immediate gratification. My point was that markets are actually quite rational in the long term (but frequently irrational in the short term) and thereby counter Tidy Sum’s suggest that the housing and energy crisis shows that markets don’t work.

The wedding metaphor is a good one. (Even if 50% lead to divorce in the US.)

David did a masterful job of playing the role of one of Cinderella’s ugly stepsisters wanting to stuff the fat phenomenon in a logic model to satisfy his own needs.

And I am glad that Bill, rode in on his white horse to challenge the false prophet of economic empiricism with a book that should be read by all the TP groupies who lust for a nonprofit market.

(That wonderfully rational market that helped bring us the banking, housing, and energy crisis this year alone!)

But Christine, nailed the most helpful note for me about the “terribly important work of paying attention to what it means to have generated something good.”

But I agree 100% that people’s motivations and actions are different when they are operating with a social mission in mind and that shouldn’t be ignored.

Thanks for bringing the quote to my attention. Behavioral finance is one of my favorite elements of economics.

Dan Ariely is a behavioral economist. As such, he studies how people will act in a wide range of financial transactions, and—surprise!—it’s not always rationally. His book is Predictably Irrational: The Hidden Forces that Shape Our Decisions,

Interview excerpt:
DA: Yes. First of all, let me give an example of a social norm and a market norm. Imagine that I ask you for a favor, “Would you help me change a tire on my car?” Chances are, you think I’m a reasonable guy and you will help me. What if I promised you two dollars to do it? Would you tell yourself, “Gee, I get to help plus I get two dollars?” Of course not. In fact, the two dollars would not be an added benefit; it would subtract your social motivation. “Oh, this is a job? I don’t do anything for two dollars. Offer me one hundred dollars and we’ll talk.” You would not do something for two dollars that you would otherwise do for free.

We basically live in two worlds. One is the social world, in which we do things for other people for mainly unselfish reasons. And then we live in a financial world in which we do things because we are paid to do them. We think about those two worlds very differently. …

The interview continues, but I think this points to one of the fundamental differences between non-profits and businesses, and how by trying to quantify everything in dollars and sense, we lose too much.

It’s not just that financial incentives can not be applied everywhere — In many situations - when they are applied, something valuable is destroyed.

Regards,
Bill Huddleston
http://www.cfcfundraising.com
+

Best, David

http://thenonprofitlife.wordpress.com/

One of your statements in particular made me smile: “In a perfect world we would measure the impact, compare it to the cost of achieving said impact, and we’d be able to perfectly allocate resources to the highest impact projects.”

I smiled because I’ve spent alot of time thinking about words like perfect, and how they tempt us to arrange our options-for-action along a straight line, from less perfect to more perfect. I’m honestly not sure that straight line exists anywhere, except for just a split second if that, and only in our imagination. In other words, the fantasy isn’t that perfect picture you painted, but the concept of perfection itself.

Physicist David Bohm, among others, spent alot of time thinking about the difference between problems — which set things up in a straight line (problem-solution, cause-effect) — and paradoxes — which are problematic situations created by very nonlinear situations. Those are situations where you couldn’t line things up one after another if you wanted to, because their very definitions looped around among each other.

Engaging with paradoxes — understanding them, working within them to improve a situation — is very different from problem-solving. I like to think we’re gradually recognizing that much of what philanthropists grapple with are paradoxes, not problems. Your post is an example of that, ending with a call to recognize rather than to find a solution.

And the metaphor of a wedding planner is really helpful, too. The most that we can do in wanting to create philanthropic experiences is to create a set of conditions that encourage and support philanthropy. That’s still plenty of work, but it’s very different from creating a set of *causes* that *result* in philanthropy.

We should seek to create the conditions that turn a gesture of giving (money, time, attention, knowledge) into a gesture of compassion (rather than a gesture of pity, or patronizing charity) but we can’t program it. I’m not sure we’d want to even if we could.

If it were any other way – if you really could generate that spark by planning to the nth degree — the spark wouldn’t mean what it does. That moment at the wedding wouldn’t have been magical, I suspect, if it really *could* have been it would have been programmed.

Perhaps we should be actively generating tools that help us recognize this impact we seek, and leave the measuring for those things that do line up in straight rows…

For a ‘low hanging fruit’ example, look at measuring the impact of an organization whose mission it is to combat chronic homelessness. Either a person is chronically homeless, or not. We may quibble over the definition of chronic homelessness. It may be expensive to track the homeless to know whether there has been a relapse. But it is most certainly not a ‘fantasy.’

Looking at a harder case, say an organization whose mission it is to increase democracy, one may argue that measuring the impact here is truly impossible.

If that organization has a clearly articulated mission, supported by a theory of change, and well developed strategies and program logic flow to inform their tactics, then they will necessarily be measuring impact. Whether this be the number of youth registered to vote in a given timeframe, or the number of contributors to a given blog.

The challenge here is NOT that it is a fantasy. The challenge is that it is time intensive and thus expensive.

We, as nonprofit professionals, should not write off impact and attribute it to some kind of wizardry that is as allusive as a magical moment at a wedding.

Rather, we should seek to innovate around how to reduce the cost of outcome/impact measurement and improve our methods. We should also be discussing how we balance the cost of impact measurement with the challenge of allocating capital in our organizations with imperfect information.

These are the real issues. This should be the real discussion.