My Thoughts on Dan Pallotta’s “The Way We Think About Charity is Dead Wrong”- Part 5: Profit to Attract Risk Capital in Non-Profit vs For-Profit

Today I’d like to discuss the fifth point which Dan Pallotta addresses in his “TED Talk”: “The Way We Think About Charity is Dead Wrong” (you can find the video here in case you haven’t seen it: http://www.ted.com/talks/lang/he/dan_pallotta_the_way_we_think_about_charity_is_dead_wrong.html?source=facebook#.UUgVUSeiOi1.facebook ), which is that for-profit companies have the ability to pay people (i.e. investors) profit in order to attract risk capital for new ideas, whereas no such concept exists in the non-profit world (in fact, it seems to go against the very nature of philanthropy).

Dan asserts that this situation leaves the NGO world starved for growth, risk, and idea capital. I agree with his point, and I honestly do not have a brilliant solution for it. This may sound simplistic, but this is where the non-profit field has to appeal to the emotional side of the donor. They need to want to give because they want to give, not because they are going to get something financial in return (except perhaps a tax break? 😉 ).

I think an effective way to do this is to try to connect a donor with an individual person that they are helping (of course, in a way that this does not intrude on the recipient’s privacy). For example, in a children’s charity, perhaps donors could sponsor a single child, and therefore feel that the child’s successes are in fact also “their” successes. I know that the idea of “sponsoring a child” is not a new one. I guess what I am trying to say is, because NGOs cannot return profit to their donors in order to attract money for new projects, I think we should try and focus on creating a personal connection between the donor and our cause.

Or maybe it’s time to totally revamp the “non-profit” institution, and allow donors to become “investors”, and to receive a portion of profit on long-term projects?

What do you think?

Chava Ashkenazi
Jerusalem, Israel

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4 Responses to My Thoughts on Dan Pallotta’s “The Way We Think About Charity is Dead Wrong”- Part 5: Profit to Attract Risk Capital in Non-Profit vs For-Profit

  1. jonnydegani says:

    I agree, but I think it’s already happening with sites like kickstarter.

  2. chavaleh1127 says:

    Excellent point Jon! Kickstarter seems to focus more on creative/artistic projects, but this could be a great paradigm for the non-profit world to establish similar types of programs.

  3. Freek says:

    In most cases the goal of the NGO is that – if there is any profit resulting from their work – that profit is meant for the recipients of the aid, to further increase their standard of living. And not to flow back to our rich western world. At least that’s the thought in my line of work – drilling deepwater wells , providing clean water in areas where the people cannot reach it themselves. The resulting health and economic growth is for them to use…

  4. chavaleh1127 says:

    I agree with you that, to date, it has always been the goal of an NGO to funnel all its profits to the cause (and this is definitely the ideal situation). I think Dan’s point (and also what I wrote about) is to try to come up with new and creative ways as to how the non-profit world can “compete” with the for-profit world in terms of getting capital from investors who might not be as inclined to “donate”, but would “invest”. I think it’s about reaching a different type of market which, to-date, the non-profit world has not been able to reach.

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