stage 1: let's pool our labor to help fix some problem
stage 2: we are all really busy, so let's pool our money to pay people to fix some problem
stage 3: we are frustrated we can't fix the problem ourselves so let's pool our money to lobby the government to force everyone else to spend their money or time fixing the problem
I will add that a lot of non-profits are shams, acting as lifestyle vehicles for their leaders. I went to school with a bunch of rich kids in the ivies and many of the philanthropic organizations they run are a joke -- family trusts that pay the kids as managers a salary, support all kinds of travel, have some high profile parties that support the leaders' social status, and very little spent on actual results.
I agree wholeheartedly and yet suffer from the same malaise to some extent - working for government, while extolling the virtues of the private sector.
I do wonder if the non-profit world is seen not only as more virtuous by high-status people, but also less risky. Even though I don’t think it’s the case, some of the younger folks I know seem to think every company out there will fire them at the drop of a hat, while a non-profit is seen as more stable. I don’t quite understand the phenomenon.
As to the question of safety, I think that's a huge issue, and I think it's broadly about more than non-profits vs. for-profits and more concretely about how adjacent firms are to government funding and regulation.
The publicly traded for-profit company I work for might as well be an arm of the federal government. Maybe 75 years ago, it actually would be. As such, while company employees have less job security than federal employees, we have quite a lot more than in what I'd think of as a totally non-government oriented business. Say, a company that made consumer goods or something.
That seems to be the real divide. Both for and non profits that are effectively "on the market" and independent of government can be expected to be less safe than those that have a safe place at the trough. Everyone knows this, which is why everyone wants a sinecure and not instability.
We'd probably be better off if market based companies did have more of a "stability" ethos and government had less of one, because that'd let more talented people feel better about going into truly private sector work.
I think you're missing a key function of private philanthropy, which is to experiment with new programs and methods that are "risky" in that the results may fail to deliver. But when they are successful, they can serve as models for government to scale.
Many of these experiments cannot be replaced by private enterprise, because they do not seek profit, nor will they initially be tried by government, because they are too risky.
I'm most familiar with the Robin Hood Foundation's work, which has succeeded in doing exactly what I'm referring to above.
Organizations evolve, and I have watch environmental non-profits evolve over the last half century. Organizations that initially did some good work (and, generally, rather so-so science) have gradually become anti-science organizations creating highly negative outcomes which impact all of humanity. Their objectives appear to have become keeping the money flowing their way. If science gets in the way, "junk science" is all-too-often utilized to win the PR war.
Isn't this (and also similar complaints about ESG investing) ultimately FOOLish?
In practice I think most ESG concepts and also a whole lot of philanthropy is misplaced at best and frequently counterproductive and I think taxing every organization equally despite its profit status would be a better way to do things. But... I don't see grounds for limiting folks' freedom to do as they wish with their property, and I'm skeptical that the government would do any better for the reasons we outline constantly
I think the highest value philanthropy would be on that effectively moved public policy toward cost effective actions on climate change, immigration, trade policy, deficit reduction, tax progressivity. But they are had to find. :(
Re: "For-profit firms are accountable to customers. Non-profits are at best accountable to donors [...]."
Colleges and universities rely on donors and customers (tuition revenues). They compete for enrollments (customers). It would seem, then, that they would be accountable also to customers. However, students have a free-rider problem: Each student wants the degree to be a clear, strong credential for career entry; but many want to take gut courses/sections where possible. Departments compete for enrollments in order to garner resources from the administration; and a devil's pact spontaneously emerges at some margins: I pretend to teach, you pretend to learn, and the world won't know the difference. The degree then becomes a noisy signal. Employers then demand that students have high-quality internships on their resumes, and that students complete concrete projects as part of their job applications, in order to clarify the degree signal. Remote, third-party payment (by parents) also weakens accountability.
There is a complication at selective, residential colleges and universities, where the student-customer is also *an input* to the education-experience of peers on campus.
Students who have scholarships usually aren't accountable to donors who fund the scholarships. (Some scholarships do require students to maintain a threshold GPA).
There seems to be an implicit long-term contract in philanthropy for collegiate athletics: Each side knows that future gifts will be conditional on productivity of current gifts to athletics.
By contrast, donors who support diversity don't seem to have clear metrics other than mere retention. For example, productive diversity would entail interaction and integration across Majors, roommates, clubs -- but donors don't track any of these outcomes.
I should mention that gifts to colleges and universities in the USA amount to more than $50 billion annually, and constitute more than 10% of philanthropy.
Here is how philanthropy has evolved:
stage 1: let's pool our labor to help fix some problem
stage 2: we are all really busy, so let's pool our money to pay people to fix some problem
stage 3: we are frustrated we can't fix the problem ourselves so let's pool our money to lobby the government to force everyone else to spend their money or time fixing the problem
I will add that a lot of non-profits are shams, acting as lifestyle vehicles for their leaders. I went to school with a bunch of rich kids in the ivies and many of the philanthropic organizations they run are a joke -- family trusts that pay the kids as managers a salary, support all kinds of travel, have some high profile parties that support the leaders' social status, and very little spent on actual results.
I agree wholeheartedly and yet suffer from the same malaise to some extent - working for government, while extolling the virtues of the private sector.
I do wonder if the non-profit world is seen not only as more virtuous by high-status people, but also less risky. Even though I don’t think it’s the case, some of the younger folks I know seem to think every company out there will fire them at the drop of a hat, while a non-profit is seen as more stable. I don’t quite understand the phenomenon.
I have exactly the same issue. :(
As to the question of safety, I think that's a huge issue, and I think it's broadly about more than non-profits vs. for-profits and more concretely about how adjacent firms are to government funding and regulation.
The publicly traded for-profit company I work for might as well be an arm of the federal government. Maybe 75 years ago, it actually would be. As such, while company employees have less job security than federal employees, we have quite a lot more than in what I'd think of as a totally non-government oriented business. Say, a company that made consumer goods or something.
That seems to be the real divide. Both for and non profits that are effectively "on the market" and independent of government can be expected to be less safe than those that have a safe place at the trough. Everyone knows this, which is why everyone wants a sinecure and not instability.
We'd probably be better off if market based companies did have more of a "stability" ethos and government had less of one, because that'd let more talented people feel better about going into truly private sector work.
I think you're missing a key function of private philanthropy, which is to experiment with new programs and methods that are "risky" in that the results may fail to deliver. But when they are successful, they can serve as models for government to scale.
Many of these experiments cannot be replaced by private enterprise, because they do not seek profit, nor will they initially be tried by government, because they are too risky.
I'm most familiar with the Robin Hood Foundation's work, which has succeeded in doing exactly what I'm referring to above.
Organizations evolve, and I have watch environmental non-profits evolve over the last half century. Organizations that initially did some good work (and, generally, rather so-so science) have gradually become anti-science organizations creating highly negative outcomes which impact all of humanity. Their objectives appear to have become keeping the money flowing their way. If science gets in the way, "junk science" is all-too-often utilized to win the PR war.
A dramatic example of this organizational evolution process is GreenPeace which has been accused of crimes against humanity in an open letter signed by 159 Nobel Prize winners. https://supportprecisionagriculture.org/nobel-laureate-gmo-letter_rjr.html
Isn't this (and also similar complaints about ESG investing) ultimately FOOLish?
In practice I think most ESG concepts and also a whole lot of philanthropy is misplaced at best and frequently counterproductive and I think taxing every organization equally despite its profit status would be a better way to do things. But... I don't see grounds for limiting folks' freedom to do as they wish with their property, and I'm skeptical that the government would do any better for the reasons we outline constantly
I didn't say to ban it. Just realize that it is, contrary to most people's instinct, morally inferior to profit-seeking investment
I think the highest value philanthropy would be on that effectively moved public policy toward cost effective actions on climate change, immigration, trade policy, deficit reduction, tax progressivity. But they are had to find. :(
Re: "For-profit firms are accountable to customers. Non-profits are at best accountable to donors [...]."
Colleges and universities rely on donors and customers (tuition revenues). They compete for enrollments (customers). It would seem, then, that they would be accountable also to customers. However, students have a free-rider problem: Each student wants the degree to be a clear, strong credential for career entry; but many want to take gut courses/sections where possible. Departments compete for enrollments in order to garner resources from the administration; and a devil's pact spontaneously emerges at some margins: I pretend to teach, you pretend to learn, and the world won't know the difference. The degree then becomes a noisy signal. Employers then demand that students have high-quality internships on their resumes, and that students complete concrete projects as part of their job applications, in order to clarify the degree signal. Remote, third-party payment (by parents) also weakens accountability.
There is a complication at selective, residential colleges and universities, where the student-customer is also *an input* to the education-experience of peers on campus.
Students who have scholarships usually aren't accountable to donors who fund the scholarships. (Some scholarships do require students to maintain a threshold GPA).
There seems to be an implicit long-term contract in philanthropy for collegiate athletics: Each side knows that future gifts will be conditional on productivity of current gifts to athletics.
By contrast, donors who support diversity don't seem to have clear metrics other than mere retention. For example, productive diversity would entail interaction and integration across Majors, roommates, clubs -- but donors don't track any of these outcomes.
I should mention that gifts to colleges and universities in the USA amount to more than $50 billion annually, and constitute more than 10% of philanthropy.