Late last month, a 23-year-old Nicaraguan named Andres circulated an article to our team with the subject “great read!” The piece he forwarded had been published that day in the New York Times and written by Peter Buffett, the son of the world’s most successful and admired investor, Warren Buffett. It argues that the philanthropy industry is not thinking big enough for the range of challenges currently facing humanity. According to Buffet, we need a bold new approach, new frameworks and stories, and creative destruction. Ultimately, the choice philanthropists need to make is whether they want to continue focusing on symptoms or start tackling root causes.
Throughout history we have shifted into a different gear as technology, entrepreneurship, and politics create new opportunities to work together to mutual advantage. We are at one of those times now where technology, social media, online education, cell phone penetration, and a growing generation of engaged young people are converging.
A simple way to look at the role philanthropy can play to accelerate this shift is to look at the car industry, which democratized physical mobility with the invention of mass production. The arrival of cars represented a fundamental change in how people came to view themselves and their interactions with their environment. A major problem of American cities at the turn of the 19th century was cleaning up horse manure from the streets—huge amounts of time and money were spent dealing with the issue, all the while missing the larger challenge—that we needed to invent the car.
It’s this kind of transformational (not incremental) impact that needs to be the true north of strategic, visionary philanthropy. The challenge is that it’s not clear whether the philanthropy industry is completely on board with its new role as venture capitalist for mankind.
Reasons for the limited flow of philanthropic risk capital include:
- Lack of awareness about the need for system change.
- Lack of support to help philanthropists discover the system-changing start-ups.
- Lack of understanding about the risks and therefore a reluctance to fund anything that may not immediately result in quantifiable social impact.
- Lack of accountability, which takes away the urgency and discipline that you see elsewhere in the venture capital world.
- Lack of incentive to change for incumbent non-profit leaders or aid contractors who benefit from the current system.
- A more sophisticated, risk-tolerant philanthropy industry will help build an ecosystem that makes it easier for philanthropic risk capital to flow to people who can put it to work to address our common problems and build community.
Philanthropy would also benefit from taking a more collaborative approach with beneficiaries, viewing them as highly committed entrepreneurial teams that can build and strengthen communities, rather than grateful grant recipients.
What if every foundation with an annual giving budget of $1 million or more committed 10% of that budget as risk capital to fund 1-3 early stage ventures or new initiatives focused on long-term system change?
Coordinating with other foundations would ensure there is enough capital for the venture to be able to prove a concept—or fail fast. As with early-stage venture capital, not every project has to succeed for the money to be well spent; share the failures so we can all learn from them, and celebrate the successes. Without experimentation and risk taking, we won’t get the innovation that will lead to system change.
Peter Buffett’s piece has started a conversation about what really matters: our collective need to change the patterns of many of our social and economic relationships, to strengthen our communities, and to promote the dignity, freedom, and agency of everyone on the planet.
We can see these new patterns emerging all over the world, from Kiva loans to new corporate law in Delaware. Globally, we see the rise of social media, the empowerment of women, cleaner technologies, new standards of doing business, impact investing, and new network models that build social capital.
People are on the move, inventing, building, and scaling new social patterns at a feverish pace. The most creative and committed need to be treated seriously by the philanthropic community.
The good news is that there has never been a better time to be a philanthropist. Organizations like Ashoka, Echoing Green,Draper Richards Kaplan Foundation, Agora Partnerships, New Profit, and many others are working to identify entrepreneurs with new models to create system change. New communities and fellowships are forming with the primary purpose of addressing social problems. Businesses want to be a part of this shift as well, and the best ones understand their future is riding on it.
The son of the world’s uber-capitalist has said we need to shift our gears; he has said, implicitly: Give me great ideas, give me passion, give me something I have not seen before that may fail—but if it works, it will help shape a new story and put us on a new path. Give me this, and I will help. A Nicaraguan heard this and sent it around to his team.
This article was reposted from Forbes. See original article here.