Category Archives: New Philanthropy

Donation Dashboard

September 4, 2008 – 8:13 am

Donation Dashboard is an interesting philanthropy experiment from a team at UC Berkeley. The idea will be familiar to anyone who has ever used Pandora to find music to fit their tastes, Netflix rating system to find movies or iTunes recommendations to get turned on to new music.

Donation Dashboard describes themselves:

Donation Dashboard uses machine learning techniques to recommend a customized portfolio of good causes based on your personal ratings of sample non-profit organizations.

Here’s how it works: you are presented with brief descriptions of non- profit institutions and asked to rate each in terms of how interested you are in donating to it. The system analyzes your ratings in light of others’ ratings and does its best to allocate your available funds in proportion to your interests. Your customized “donation portfolio” is presented in an easy-to-understand pie chart that you can save at the site for future reference.

Donation Dashboard, which is being developed by the Berkeley Center for New Media, extends machine learning techniques used by commercial websites to recommend movies, music, and books. Donation Dashboard goes beyond existing charity ranking sites by statistically combining your ratings with the ratings entered by your fellow good samaritans to compute a portfolio customized to your interests.

I tested the system and found it easy to use and liked how it gave me recommendations as well as created an “asset allocation” pie chart that suggested how much I should give to each of the recommendations (scaled to my interest level).

Their are two reasons why I think this kind of system is useful in philanthropy:

  1. Nonprofit impact is at least partially qualitative. While no one would want to use a peer recommendation engine to decide a purely quantitative question (like, what airline is the safest to fly), these systems work great for highly qualitative decisions such as which book you’ll like. Nonprofit impact is a mix of qualitative and quantitative outcomes. So while a peer recommendation engine is not the end all solution, it is a good starting point for donors.

  2. This kind of system is useful when your universe of choices is very large and the number of choices that fit your interests is also large. This is why professional (and non-professional) investors use peer recommendations to identify investment ideas that warrant further research. There are a number of different takes on peer recommendation services for stock picking, but Stockpickr is a good example.

I think there are good quantitative ways to examine how effective a nonprofit is. But with over a million nonprofits, sorting through the haystack to even figure out which nonprofits deserve a deeper look is tough. I think programs like Donation Dashboard can be a useful tools for philanthropists.

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Effective Giving, Information Sharing, Philanthropy | Comments (0)

Philanthropy as a Business

September 3, 2008 – 9:54 am

In response to my recent posts on “philanthropy spending vs investing”, “paying for philanthropic advice” and “how much philanthropic advice is worth”, Phil Cubeta offers a post titled, “Why Philanthropy as Business is Foolish and Will Fail” in which he calls my posts “false poetry”.

Cubeta:

We can jabber on about how this is really social investing, a philanthropic industry, a social capital market, but donors (or social investors) will likely see through the high quality, MBA-inspired, BS and realize that we are battening on their gifts, extracting tolls and levies and loads designed to make our cushy lives better. We are cynically exploiting the charitable motive, as capitalism exploits all motives…

…What then is the answer, if loads [fees] there must be? Align the load with social benefit. Have the entity extracting loads be mission-aligned with the donor. Have the load-extractor positioned within the donor’s circle of trust, love, and concern. Have the load-extractor be a beloved nonprofit, and mainstay of a community in which the donor and the donor’s family dwells in solidarity, kneels in prayer, or works as a volunteer in a spirit of shared service.

For those that don’t know the history, Phil Cubeta was my foil when I first started blogging. He welcomed me with open arms to the then budding philanthropy blogging community and then quickly skewered my writing (to my delight). When reading Phil’s rants, it is important to understand that he uses satire often and with relish. Phil has done much for philanthropy blogging and I credit him with reigning in my social capital market beliefs when I get out of line.

But Phil is dead wrong on this one.

To buy into Phil’s world view on this topic, you have to agree with him that 1) capitalism exploits the motives of all those who dare engage it, 2) that donors are best served when they receive philanthropy advice from nonprofits rather than for-profits.

I believe that philanthropy already exists within American capitalism and that it will benefit from embracing the financial systems that are used to fund for-profit enterprises. I do not believe that for-profit businesses and free markets produce the most social good (and neither do most economists who recognize that “externalities” exist in free markets). But I do think that financial markets are pretty effective at allocating funding to top performing companies and depriving poor performers of capital. Employing a more robust social capital market and encouraging donors to utilize all the tools at their disposal is not cynical nor exploitive but in the best interest of philanthropy.

I believe that philanthropic advice should be provide by both nonprofit and for-profit organizations. Donors should understand the incentives of the advisors they hire. Calling advisors (both nonprofit and for-profit) “fee-extractors” is just silly. Phil might wish that we could all exist in a gift economy where people simply helped each other out of pure good will, but frankly both nonprofit and for-profit employees need to earn a living. If they can do so in a way that produces significant social good as I demonstrated in a recent post, that’s something Phil should be celebrating instead of tearing down.

By Sean Stannard-Stockton | Also posted in Effective Giving, Philanthropic Capital Markets, Philanthropy | Comments (0)

Financial Planning Magazine on Tactical Philanthropy

September 1, 2008 – 8:18 pm

Jim Grote of Financial Planning magazine has written a generous profile of myself and my firm, Ensemble Capital Management:

Sean Stannard-Stockton is a bit of a Renaissance man in the wealth advisory world. A principal of Ensemble Capital Management in Burlingame, Calif., he’s an expert who brings the two disciplines of wealth management and philanthropy consulting into harmony for high-net-worth clients interested in giving…

…Many planners, he says, offer “a service that revolves around helping people think through their personal charitable interests, their family mission statement and/or social goals.” Their guidance revolves around strategic thinking about philanthropy.

“We offer tactical philanthropy consulting, a phrase we coined in 2004 that is now beginning to enter common usage. This means we focus on structuring our clients’ assets to maximize their personal and philanthropic goals. We are not in the business of encouraging people to give. We just make giving more effective.”

In early 2004, Googling the term tactical philanthropy yielded zero results compared with 92,000 for strategic philanthropy. If you do the same search today, you end up with 110,000 hits for the tactical variety and 236,000 for the strategic…

…Ensemble’s proficiency also includes concierge services that help clients navigate the multidisciplinary practice of philanthropy. For example, Ensemble has brought in an expert in multigenerational family dynamic issues to work with a client who was unsure how to include his family in the foundation’s work. In another instance, Ensemble helped a client explore the possibility of using its foundation’s assets to offer a bank a letter of guarantee, so that nonprofit grantees could receive loans at below-market interest rates.

You can read the whole article here.

By Sean Stannard-Stockton | Also posted in Effective Giving, Ensemble Capital Management, Philanthropy | Comments (0)

How Much is Philanthropic Advice Worth?

August 28, 2008 – 9:41 am

(Note: The kind of advice I’m discussing in this post is grantmaking advice. In other words “which nonprofits should donors invest in”. My firm, Ensemble Capital Management, does not provide this sort of advice. We provide wealth management and philanthropic concierge services)

Recently I predicted that donors would move towards paying for grantmaking advice and that this would transform philanthropy. So how much and why will donors find it valuable to pay for this sort of service?

Let’s say there are five nonprofit organizations working on reducing homelessness in your city. Even without any quantitative impact statistics, it is completely commonsense to assume that some of those organizations are better than others. In fact, it is likely that one or two are significantly better than the others and that one or two are significantly worse. Just for the sake of argument let’s make some assumptions about the organizations.

Let’s assume that the five organizations have the following quantitative social return as measured by reduced cost to tax payers from reduced homelessness (ie. a return of 0% would mean that every dollar given to the organization reduced tax payer expenses by $1).

Org A: 35%, Org B: 25%, Org C: 10% Org D: 0% Org E: -20%

This example assumes that Org A and B are achieving great tax payer savings, Org C is producing a positive result. Org D is reducing tax payer costs on a dollar for dollar basis with donations (meaning the same results could be achieved by making donations to the government treasury). Org E is actually destroying value. If you gave an equal donation to each organization your average return would be 10%, so we can think of this as the “market return” or expected return.

Right now, I think that philanthropists are funding nonprofit organizations without focusing enough on which one is best. With this example we can see just how valuable advice that identifies the best nonprofits actually is.

If you gave $1 million to Org A, you would generate $1.35 million in tax savings. The same gift to Org C would save $1.1 million and a gift to Org E would save $800,000. If you assumed you couldn’t tell which one was best and gave $200,000 to each organization, you would save $1.1 million in taxes. This means that if you could pay an advisor to tell you which organization was the best, this advice would be worth $250,000 (the difference between the $1.35 million savings from funding Org A vs the $1.1 million savings from equally distributing your donation).

If you run the math, this means that an advisor who can correctly pick Org A out of the group can justify charging a fee equal to 18.5% of the donation. (Email me if you’d like to understand the math).

Most all donors would choke on the idea of paying an 18.5% fee on their donation. Donors don’t even like nonprofits have operating expenses, so most couldn’t stomach the idea of paying hefty “operating costs” just to decide which nonprofit to give to.

And yet by not paying and not identifying the best nonprofits, donors are destroying social value. They are starving great organizations of resources and subsidizing poorly performing nonprofits that should be going out of business.

The fact is, the spread of returns in my example is probably conservative. Those returns (from +35% to -20%) are more typical of the range you’d see in small to midsize businesses that are functioning in an imperfect market, but one that still rewards top performers and squeezes bad businesses until they go bankrupt. It seems to me that since in the nonprofit world, poorly performing nonprofits that have good fundraisers can stay in business, the spread between the best and worst performers is probable much larger than my example suggests (which means the advisor’s advice is worth more).

Now think about this: Americans gave $300 billion last year. 18.5% of that amount is $56 billion. It might seem ambitious, but that means that there is a potential $56 billion a year business opportunity for grantmaking consultants. That’s almost twice the size of the market of wine and beer. It is almost twice the size of the amount Americans gamble every year.

18.5% seems like a really high fee. $56 billion seems absurd. But think about it this way: If you endowed American giving, so that the $300 billion was a 5% annual payout (in line with most foundations) of our “community endowment”, then the fee would be equal to 0.93% of the endowment.

Guess what many for-profit investment advisors charge their clients? 1% of assets under management.

Being able to identify the best for-profit investments is a hugely valuable talent and a massive industry has grown up around it. I think that nonprofit analysis is just as valuable and we’re going to see quite a robust industry grow over time.

By Sean Stannard-Stockton | Also posted in Effective Giving, Evaluation, Impact Measurement, Philanthropy | Comments (0)

SoCap08 Offer for Tactical Philanthropy Readers

August 26, 2008 – 6:58 am

The people behind the Social Capital Markets Conference that I wrote about yesterday want you there to listen to their “rock star line up” of the social capital movement. So as a special offer, they are offering a 30% discount on the conference registration fees to Tactical Philanthropy readers.

You can find conference info here and the registration form here. Just enter the special discount code for Tactical Philanthropy readers: “TP30″. The discount is valid until September 8.

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Mission Related Investing, Philanthrocapitalism, Philanthropic Capital Markets, Philanthropy | Comments (0)

Social Capital Markets Conference

August 25, 2008 – 7:40 am

From October 13-15, in San Francisco, the Social Capital Markets Conference (SoCap08), will bring together a rock star line up of the social capital movement. Speakers include:

  • Matthew Bishop | THE ECONOMIST
  • Jed Emerson | BLENDED VALUE
  • Doug Bauer | ROCKEFELLER PHILANTHROPY ADVISORS
  • Carla Javits | REDF
  • Jim Fruchterman | BENETECH

In addition, there will be representatives from:

  • ROOT CAPITAL
  • GOOD CAPITAL
  • SKOLL FOUNDATION
  • IDEO
  • B-LAB
  • CALVERT
  • MILKEN INSTITUTE
  • KIVA.ORG
  • ACUMEN
  • GRAMEEN FOUNDATION
  • GOOGLE.ORG

Here’s the official overview:

Social capital. Doing well by doing good. Making money make change. Philanthrocapitalism. Whatever you call it, its the emerging approach of harnessing the power of capital to support a new breed of smart, innovative entrepreneurs committed to changing the world in big, meaningful ways.

The Social Capital Markets Conference 2008 (SoCap08) will bring together the entrepreneurs who want to change the world and the capital that wants to make it happen. SoCap08 is a new event designed to bring together all of the people and organizations with a similar deep passion to change the world through sustainable businesses. Investors and entrepreneurs will find themselves helping to build a new community, gaining encouragement as they realize that they are not alone, but are a part of something big, important – and rapidly growing. Participating organizations include Good Capital, The Economist, REDF, HIP Investors, Citibank, Stanford Social Innovation Review, Living Cities, The United Nations Development Programme and Google.org, among many others.

When: October 13-15, 2008
Where: Fort Mason, San Francisco, California
Who: Hundreds of leading social entrepreneurs and investors from around the world
What: Bringing together the people who are accelerating the flow of capital to good
For more information go to: www.socialcapitalmarkets.net or contact info@xigimedia.net.

I’ll be speaking as well as moderator of the New Wealth Management panel:

Social investing is a wave that’s growing. Wealth managers are finding their clients want to explore and get involved in all these new alternative investment opportunities that mix social mission and impact with financial return. How do you manage your fiduciary responsibility while responding to client demand? From the client perspective, how do you explain these new things you want to get involved in to your financial advisor? Learn from some wealth managers how they and their clients who are navigating this new territory in a session designed for both the investor and the financial professional.

It should be a really interesting conference. I’d love to see a contingent of Tactical Philanthropy readers in attendance!

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Mission Related Investing, Philanthrocapitalism, Philanthropic Capital Markets, Philanthropic Investment Strategy, microfinance | Comments (0)

Paying for Philanthropic Advice

August 21, 2008 – 8:57 am

My last post on Philanthropy: Spending Vs. Investing, was picked up by the Chronicle of Philanthropy yesterday. In the comments Jed Emerson weighs in with support for my view, while another reader calls me “All Wrong” and Anne Ellinger of Bolder Giving strikes a middle ground. When you think about the nine outcomes I listed to donors changing the way they think about giving, there is something that emerges from the various interconnected trends that will have a radical impact on philanthropy.

Sooner or later, donors are going to start being willing to pay for advice on how to give. This will transform philanthropy.

Currently, most donors are uninterested in paying for advice related to where to give their money. The most successful model of selling grant making advice to individual donors has been the community foundation model of charging a percentage on the assets in a donor advised fund. Donors were willing to pay because it was pitched as an “administrative fee” and the grantmaking advice was offered as a “free” add on. But the emergence of Schwab Charitable and the Fidelity Gift Fund, where they charge much less for administration (but don’t offer grantmaking advice) has unbundled the grantmaking and “exposed” the fact that donors were actually paying for advice. The wild success of Schwab and Fidelity in attracting new donor assets shows that when presented an option to not pay for (or receive) grantmaking advice, donors will jump on it.

[Update: I didn't mean to imply that community foundations were misleading in how they charged. I was trying to say that when Schwab and Fidelity unbundled the administration of donor advised funds from giving advice - much as Schwab unbundled investment advice from trade execution in the 1970's - we found that many, many donors preferred to only pay for administration]

If you think about it, most consumers refuse to pay for advice on what to spend money on as well. Consumer Reports probably has had the most success in advising people on their spending choices, but they are a rarity. On the other hand, most all investors pay for some sort of advice on how to invest. The market is thriving with everything from full service wealth managers to investing advice books and subscription based information services. On the web, where consumers are rarely willing to pay for information, we can really see the value that consumer place on investment related investing information. The Wall Street Journal is probably the only successful model of a newspaper charging for web access and sites like RealMoney, StockCharts, SentimentTrader and Briefing.com all charge for access.

As long as donors view giving as a spending category, they will be highly resistant to paying for information and advice to guide their giving. But to the extent that donors reframe giving as an investment activity… watch out, you’ll see an explosive new industry emerge to help guide the $300 billion+ that Americans give to charity each year.

By Sean Stannard-Stockton | Also posted in Effective Giving, Grantmaking, Philanthropic Capital Markets, Philanthropy | Comments (7)

Philanthropy: Spending Vs. Investing

August 19, 2008 – 9:26 am

One of the big shifts that is occurring in philanthropy is a change in the way donors perceive how charitable giving fits into their overall financial picture. The most fundamental aspect of this shift is a movement from seeing giving as a “spending category” to seeing it as an “investment category”. There are a number of implications:

  1. When donors view giving as an investment category, they view it as a positive aspect of their financial picture rather than a negative cost. For example, if the cost of your grocery shopping goes up, it negatively impacts your budget. But if the amount you are saving goes up, this is a positive change to your financial picture.
  2. Donors can begin thinking about giving as a percentage of their assets rather than a percentage of their income. Wealthy donors in particular have far more assets than income and so thinking about giving as a percentage of assets would dramatically increase giving. This is the argument put forth by investment manager and philanthropists Claude Rosenberg in Wealthy & Wise. The book demonstrates mathematically that donors can give far more to charity without jeopardizing their financial well being if they think about giving as a percentage of assets.
  3. Donors can begin thinking about nonprofits as organizations they want to support rather than “sellers” of “goods” whose costs they do not want to support. When you buy something from Target, you don’t care about their operating costs, you just want the lowest price. But when you invest in Target you recognize that quality organizations take money to run and you are supportive of well spent operational costs.
  4. The value that donors expect shifts from a short term perspective (such as “buying” the right to feel like you helped someone) to a long term perspective (such as “investing” in the continued success of a high impact nonprofit).
  5. Nonprofits stop seeing donors are “customers” who they must separate from their cash (or even fight a war over) and start seeing them as investors; literally stakeholders of the organization.
  6. Corporate donors also see a shift where “corporate social responsibility” moves from being a cost that they attempt to reduce to an investment in the community from which they derive their profits.
  7. More mission related investment opportunities open up as people become comfortable with blended investments that offer financial and social returns.
  8. The field of philanthropy becomes more focused on building a philanthropic market place as the importance of functioning financial markets becomes more clear.
  9. Wealth managers begin serving the philanthropic needs of their clients as they begin to recognize that giving is not a cost for their client (that should be minimized) but is instead an asset allocation question that is directly intertwined with their clients’ broader wealth management needs.
By Sean Stannard-Stockton | Also posted in Long-Term Philanthropy, Mission Related Investing, Philanthropic Capital Markets, Philanthropy | Comments (2)

Tactical Philanthropy as a Growth Industry

August 18, 2008 – 10:11 am

Recently Wealth Manager magazine wrote a very nice article about the growing trend of wealth management firms specializing in serving philanthropists and positioned my firm, Ensemble Capital Management, as being on the leading edge.

Strategy without tactics is the slowest route to victory, wrote Sun Tzu in The Art of War. Twenty-six centuries later, acknowledging, accepting and exploiting the distinction as a business model is the new new thing in philanthropy.

Strategic philanthropy refers to the big-picture goals, which is to say the popular image of organized giving. Ending poverty, curing cancer, etc. fall under the heading of strategy. The financial plumbing that supports such causes and primes the money pump is tactical philanthropy. The two sides have always been a part of philanthropy, of course. What’s different is the growing specialization of services for each—particularly when it comes to the tactics.

“Philanthropy is broadly understood as the giving of money for social purposes,” says Sean Stannard-Stockton, a principal at Ensemble Capital Management, a Burlingame, Calif. shop that specializes in philanthropic-related money management and financial services for wealthy individuals. “And yet,” he adds, “ there’s been almost no attention to how you structure those financial transactions.”

Until recently, that is. Attention is very much on the rise when it comes to the financial aspects of philanthropy, which Stannard-Stockon and others tag as tactical philanthropy. There is increased focus on the financial processes that make strategic philanthropy possible, he reports. In fact, the trend is so compelling that it convinced Ensemble Capital to re-brand itself four years ago as a specialist wealth manager in the burgeoning niche of tactical philanthropy…

…Arguably, the leading edge of the philanthropy boom is represented by the independent firms that are embracing a philanthropic-centric business model. Consider Ensemble, which was founded in 1997 as a traditional wealth manager, but four years ago began specializing in providing philanthropic services for individuals. Related efforts have since spilled out into the wider world: Stannard-Stockton started his blog, TacticalPhilanthropy.com, in late 2006, raising his profile and leading to his monthly Financial Times column “On Philanthropy.”…

… If the business model of philanthropic planning is compelling, it’s only a matter of time before debate begins in earnest on best practices. One of the emerging topics under discussion includes the question of how to provide philanthropic planning in a way that minimizes—if not eliminates—conflicts of interest. Framing the subject that way recalls the debate over fees versus commissions that first began bubbling in the wider financial services community in the early 1990s. A similar dialogue appears to be forming in tactical philanthropy as it relates to individual clients.

Stannard-Stockton has already staked out his position. “Just as we advise on investments in a non-sales format, we advise on giving in the same way,” he says. “We get paid for managing assets, so we have no conflict in helping people decide between the various vehicles.”

You can read the full article here.

By Sean Stannard-Stockton | Also posted in Philanthropic Capital Markets, Philanthropic Investment Strategy, Philanthropy | Comments (2)

The Importance of Bill Gates & Warren Buffett

August 14, 2008 – 9:09 am

It is hard to imagine that it was just two years ago that Bill Gates announced he would be stepping down from his full time role at Microsoft (at the tender age 52) to work on his foundation full time. Warren Buffett quickly followed with the announcement that he would be giving the bulk of his wealth to the Gates Foundation. I think that this dual announcement was the tipping point in the Second Great Wave of Philanthropy. Ted Turner’s $1 billion gift to the UN in 1997 that sparked the creation of the Slate 60 laid the groundwork, but the Buffett/Gates combo was the event that captured the public’s attention.

But the importance of Buffett/Gates is not simply the amount of assets in play. In the grand scheme of things, tens of billions of dollars doesn’t really amount to much. Instead, the Gates/Buffett announcement will come to be seen as the clarion call to action that spurred people of all walks of life to embrace “giving while living” and ended the traditionally dominate choice to give to charity at the end of one’s life. Buffett said at the time of the gift that he had always planned to give at this death, but that his wife’s passing and Gates’ philanthropy had inspired him to give now.

Now we get the news that Andrew Forrest, the richest person in Australia, is going to give away nearly all of his fortune before he dies. While Forrest did not directly cite Buffett’s example, you can read in this CNBC article that Forrest and Buffett share a lot in common.

Part of the trend can be attributed to the increasing global wealth and the natural tendency for people to give more as they find that they have more than they need. But separately from “doing good”, both Forrest and Buffett cited another growing trend, the desire to not harm their children by giving them too much wealth. Buffett’s mantra is to give your children “Enough so they can do anything they want, but not so much that they can do nothing.”

In my own practice as a wealth manager, I find that my clients (both those who are philanthropic and those who are not) are highly concerned with trying to avoid giving their children too much rather than figuring out ways to give them more. What’s so interesting to me is that plenty of evidence (such as that presented in the wonderful book Philanthropy: Heirs & Values) shows that the best way to pass assets on to your children in a way that preserves the wealth and does not spoil the children is to have the entire family engage in philanthropy together.

And so we see that philanthropy is not just an extra service for wealth managers to provide to their clients, it is a core element of wealth management in a post-Gates/Buffett world.

By Sean Stannard-Stockton | Also posted in Philanthropy | Comments (0)

‘Blood money’ that became a force for good

August 12, 2008 – 10:11 am

My newest column from the Financial Times is out. For those that read the print edition, my column has been moved to the Tuesday edition. For those keeping score, this column marks the one year anniversary of my On Philanthropy column. You will find the full archive of my past columns here.

‘Blood money’ that became a force for good

By Sean Stannard-Stockton

Published: August 12, 2008 - Link to original Financial Times column

Like everyone who lost a loved one on 9/11 Steve and Liz Alderman were devastated when their 25-year-old son, Peter, was killed in the World Trade Center attack. Like many, they chose to honor their son’s memory by creating a foundation in his name.

Of the 303 non-profit organizations launched in response to 9/11, only 27 were still operating five years later, according to a study by the NonProfit Times. What has kept the Peter C. Alderman Foundation going is his parents’ focus on maximizing the impact of their foundation through rigorous analysis. In the words of Peter’s father, Steve: “We will abandon anything that doesn’t work.”

When the Aldermans received $1.4m from the September 11 Victim Compensation Fund, Liz thought of it as “blood money” and almost turned it down. She told me recently that she used to lie awake at night thinking about the people she wanted to kill to avenge Peter’s death. But, with Steve’s encouragement, they accepted the money and launched a private foundation to help victims of terrorism and mass violence round the world.

“Using the money for a good cause was the best revenge,” Steve told me. “The only way for us to counteract great evil was with great good.”

Today the Peter C. Alderman Foundation, in partnership with Harvard University, builds mental health clinics and provides local doctors with the tools they need to treat the emotional wounds of victims of terrorism and mass violence in places such as Cambodia, Uganda and Rwanda. Its work has attracted partners such as the US Department of Health and Human Services and the pharmaceutical company, Eli Lily.

When I spoke to the Aldermans about their foundation, I was struck by the fact they, unlike most philanthropists who talk about the grants they have made, talk about the effect they have had. With an annual operating budget of $500,000 they have set out to help people across the globe. Liz and Steve found that, to have the impact they were seeking, they had to identify outstanding partners and find ways to leverage their giving.

“Starting a foundation was like starting a small business,” Steve said. “Our daughter, Jane, even got her MBA when she realized that we didn’t know enough about business.” She is now the foundation’s executive director.

The Aldermans represent the vanguard of philanthropy - individuals who have recognized that philanthropy is not defined by the act of giving but by the achievement of impact. It is both an emotional act of love by the giver as well as a strategic investment in our social fabric. The Aldermans have discovered that the most emotionally satisfying philanthropy is a gift that has impact.

Unlike many relatively small foundations, the Peter C. Alderman Foundation has an in-depth strategic plan. Through its mental health clinics, the foundation has reached 65,000 people with traumatic depression. Many grantmakers simply measure themselves by the scope of their activities, but the Alderman foundation goes further and documents that it has seen 80 per cent of the people it has treated return to productive lives.

In Cambodia, where the legacy of the genocidal Pol Pot and the brutal Khmer Rouge still grips the populace, the Aldermans have proved they can treat traumatic depression. Demand has been so large that the foundation created a second clinic to eliminate the 14-month waiting list. Importantly, the Aldermans have shown they can achieve their mission cost effectively; the Cambodia clinic system provides services at a cost of $50 a head.

The Peter C. Alderman Foundation is not the first to have a strategic plan, strong partners and demonstrated impact. But it is part of an emerging group of relatively small family foundations that are demonstrating how to use effectively these tools.

The Aldermans have shown that the most effective way both to help people and soothe their own emotional wounds is through a focused strategy and measurement of impact.

I was struck by how the Aldermans talked like seasoned social action experts with impact data and leverage statistics dominating our conversation. But, in the end, the Aldermans are grieving parents trying their best to make sense of a devastating loss. “I’ve realized that you can’t cry when you’re working on the computer,” Liz said. “You get the keys all wet.”

The writer is a principal and director of tactical philanthropy at Ensemble Capital Management and author of the blog TacticalPhilanthropy.com.

By Sean Stannard-Stockton | Also posted in Financial Times Column, Foundations, Impact Measurement, Philanthropy | Comments (0)

Network for Good Charity Badge & Philanthropic “Markets”

August 11, 2008 – 11:20 am

A couple weeks ago my wife decided to raise money to save an art therapy program at a public school in a disadvantaged area of the San Francisco Bay Area where we live. She had spent the last year as a volunteer art therapist at the school during a program to complete her masters degree.

The situation of many of the students was seriously dire. When my wife completed the program, the only thing that made her feel OK about leaving the kids was that they’d have a new therapist next year. Then the California budget cuts kicked in and the program was cut.

The amazing thing is that this was a volunteer program. But they needed to pay a supervisor $1,000 per year (or about $1.25 per hour) to oversee the volunteer therapists.

So my wife took it upon herself to raise the money to save the program. We brainstormed about various ways to do it. We thought about putting on an art related event that people would buy tickets for. We wondered if people in the relatively affluent area where we live would want to support a program in a low income area a couple of towns away where they’d likely have no personal contacts. But she decided that she just had to get it done.

Two weeks ago she created a Network for Good fundraising widget and sent an email around to about 75 people with our offer to match whatever gift they made to the program. About a week later the program was fully funded with enough extra that they can either fund half of a second year or provide money so the volunteer therapists (all students) don’t have to pay for the kids art supplies.

What made this work was Network for Good has created a seamless transaction system that lets people very easily create a web link through which anyone can make a contribution and get a tax deductible receipt.

There’s always been people with big hearts and an important cause they want to support. Now it is easy (and cheap) to make the transaction really, really simple. This is the beauty of a functioning market. A market makes it easy and cost effective for people to engage in financial transactions. That’s the whole point of a market and the reason why I think the emergence of a philanthropic capital market is so important.

Today, if I hear about a book I’m interested in I type the title into the custom search bar in my browser and am taken directly to amazon.com. I can then order the book with one click (Amazon has my credit card and mailing address pre-stored). Because of this I’ve read a ton of interesting books this year that I never would have bought if I had to remember the title and trek to the local bookstore (or, in a pre-market environment, had to find the author and asked her to have a copy of the book created for me). I also have a stack of very interesting books I’ve never read on my bookcase, but that’s another story.

Markets help people find the products and services they want to find in an easy and cost effective way. The people that supported my wife’s fundraising clearly wanted to support the program. But if she had had to put on an event or walk door to door, she might never have decided to raise the money. If she had mailed out requests, some of the people who wanted to support the event would not have taken the time to find a checkbook and a stamp and mailed in their support.

Marketplaces also provide trust. You’ll buy something from a store you’ve never heard of if it is located in a mall you frequent. But you won’t buy the same thing at the same price from someone who approaches you in the parking lot. We live in a country where trust in nonprofits is quite low. A better marketplace can help fix that.

At the end of the day what matters is that the kids my wife worked with, who live incredibly hard lives, will have a stable adult who cares about them in their life. Everyone wants to make the world a better place, but a functioning marketplace where costs are low, convenience is high, fraud is low and trust is high can help people move from wanting the world to be better to making the world a better place.

By Sean Stannard-Stockton | Also posted in Effective Giving, Fundraising, Philanthropic Capital Markets, Philanthropy | Comments (4)

Jacob Harold Follow Up

August 5, 2008 – 9:39 am

Well, well. Is Jacob Harold an outstanding thinker or what? I think one of the best things about the way Jacob outlines his ideas is that he paints the possibility of a philanthropic capital/information market without invoking the idea that philanthropy needs more “business thinking”.

I’m back from vacation and while sitting in the sun I read an advance copy of Paul Brest’s (The CEO of the Hewlett Foundation, where Jacob works) forthcoming book Money Well Spent. I’m not going to comment on the book now, but I was struck by a study cited in the book that showed how powerful the framing of an issue can be. The study presented the classic game of The Prisoner’s Dilemma and watched how it was played depending on what it was called. The Prisoner’s Dilemma is a study in “game theory” in which two players can either behave in a cutthroat way or a collaborative way. They must make their choice without knowing what the other player has chosen. In the study cited in Brest’s book, the researchers found that if they told participants the game was called The Wall Street Game, players tended to select the cutthroat choice more frequently than if they told the players it was called The Collaboration Game. The game didn’t change, but the players significantly changed their behavior based only on what they believed the game was called.

This ties into earlier conversations we’ve had on this blog about renaming nonprofits (for-benefit organizations?). But it also shows how Jacob (as an employee at a foundation) is better able to discuss the topics he focused on than I am as the owner of a wealth management company. We’re both talking about them same things, but we present them with different frames.

All of this ties back to the debate around Philanthrocapitalism. I think that the area between disciplines yield the most interesting discoveries. I believe that “consilience” is the key to the advancements in philanthropy that are starting to kick into gear. But the next big thing is not to force philanthropy to be more “business-like”, nor is it to get capitalism to be “more good”. The next big thing is mining the knowledge of the two fields and creating something completely new.

I think Jacob is one of the people who is well ahead of most of us in understanding what that “something new” will look like.

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Philanthropic Capital Markets, Philanthropy | Comments (0)

Jacob Harold: The Philanthropic Tool Box

July 25, 2008 – 11:34 am

(Sean Stannard-Stockton is on vacation. This is a guest post from Jacob Harold, a program officer at the William and Flora Hewlett Foundation.)

They say that if all you have is a hammer, the whole world looks like a nail. Let me add: if you have a toolbox, the whole world can look like an opportunity. The nonprofit sector—with its diversity of skills, relationships, and methods—is our collective toolbox for social change. And philanthropy is society’s attempt to pick the right tool at the right time: allocating precious resources to issues, organizations, and interventions.

But an individual donor trying to make a good philanthropic choice is like a carpenter reaching into a toolbox in the dark while wearing thick mittens. And at the bottom of the toolbox are well-crafted, well-made tools (nonprofits that are not just well-meaning, but also well-run) mixed in with tools ill-suited to the task.

So, to perhaps over-use the metaphor, the Hewlett Foundation’s Philanthropy Program is trying to do two things: first, get donors to take off their mittens and learn how to use their fingers to find the right nonprofit; second, shine a light into the toolbox and make it clear which organizations are the strongest.

As a guest blogger next week on Tactical Philanthropy I’ll share some about our thoughts and questions and questions about improving the practice of philanthropy. I’m looking forward to your feedback—and any clever mitten-removal and light-shining strategies you might have.

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Effective Giving, Jacob Harold, Philanthropy | Comments (3)

Life = Risk

July 21, 2008 – 8:02 am

One of the core lessons of financial markets is that you can only increase returns by increasing risk (you can be more talented than other people at any given level of risk, but the level of risk is the primary determinate of long term returns). I’ve been talking for a long time about why the social sector needs to embrace the idea that only people that run the risk of failure (and therefore fail sometimes) can achieve greatness.

Here’s video proof:

By Sean Stannard-Stockton | Also posted in Effective Giving, Foundations, Grantmaking, Philanthropy, video | Comments (6)