Is Philanthropy Ready For System Change?

On July 26th, 2013 Peter Buffett wrote an opinion piece in the New York Times that caused a little brouhaha in the philanthropy and social entrepreneurship worlds. The piece drew praise and criticism, notably from Matthew Bishop, and some buzz for a time, and then faded away.  For me, the criticism missed the point, which I thought was right on.  I decided to write about the topic when one of our young team members from Nicaragua forwarded the op-ed to our whole team. The piece did for him what every good piece will do: it made him feel and it made him think. Even better, it energized him and made him realize that he was not alone.

I drafted my piece and submitted it to the Forbes blog. What I sent was too long and not the right fit for that platform. Happily, they agreed to publish an edited version.  I am now publishing the original piece because I believe that the conversation about the role of philanthropy in our world today has become even more urgent than when the piece was originally written. The essay below is essentially the same as what was first submitted to Forbes, with a few minor edits.


Last week a 23-year-old Nicaraguan named Andres sent an email to our team with the subject “great read!” The piece he forwarded, published that day in the New York Times  was written by Peter Buffett, the son of the world’s most successful and admired investor, Warren Buffett. Buffett argues that the philanthropy industry is not thinking big enough for the range of challenges humanity currently faces. The problem, according to Buffett and to many others who spend time thinking about the role of private wealth in society, is that the conventional wisdom of the aid/philanthropy world lacks creativity and ambition. It focuses on amelioration, when what the world needs is insurrection, like the original act from which the word philanthropy ultimately derives: Prometheus’s revolt against the existing power structure to steal fire from the Gods and give it to humankind.

The philanthropy and development industries, Buffett argues, suffer from the sin of complacency. They work to create small-scale change while remaining complicit in a system that produces untold wealth for a few, poverty for billions, and a planetary ecosystem strained to the breaking point.  Philanthropists need to choose whether to focus on addressing the symptoms or tackling the root cause – the economic, social, and belief systems that have produced a world where most people never get a chance to reach their potential.

Our current system of globalized, industrial capitalism has produced wonders for human progress. At the same time, it has put us on a path that is no longer taking us where we need to go. We live in a profoundly unequal world in which, according to Forbes, the wealthiest 1,200 people have more wealth – and therefore more power – than more than 1.5 billion of their fellow human beings, most of whom are not even able to provide for their children’s most basic needs. Our social and ecological systems are buckling under the pressure; we know it, but we can’t quite figure out how to work together to change it.

We need a new and better way of defining what a successful and sustainable society looks like and how to build it. To some, this might sound radical, Utopian, or even threatening. It should not. Throughout history we have shifted into various new gears as technology, entrepreneurship, and policy have combined to create new opportunities to work together differently, with more respect, and to mutual advantage. We are in one of those times now – a time of instability as one set of norms evolves into another. As younger people have become better educated, more aware of the magnitude of problems facing the world, and armed with communication technologies that they wield more effectively than their elders, they are becoming increasingly powerful players in this shift in ways we are only just beginning to understand.

The pace of these shifts is accelerating. An example from history is the commercialization of the mass produced automobile, which democratized physical mobility for the first time in history. The arrival of cars represented a fundamental change in how people came to view themselves and their interactions with their environment. It’s this kind of transformational shift that should be the true north of visionary philanthropy. The challenge is that too many in the philanthropy and development community have a mindset similar to most people at the turn of the 19th century. At that time people spent untold energy trying out ways to clean up all the horse manure that the horses pulling horse-drawn carriages ceaselessly dumped onto the cobblestone streets. The situation is the same today. We don’t need more advanced manure collection technology. We need to invent cars.

It’s not yet clear if the philanthropy industry is completely on board with its new role as venture capitalist for mankind. There are exceptions, of course, but in general it is easier to be a provider of largesse, operating in a silo with little accountability, than it is to be an investor of scarce resources, accountable to the future. But this is where philanthropy needs to head. Thoughtful philanthropists understand this but there doesn’t seem to be the urgency that is needed.

Why is so little philanthropic risk capital flowing?  Here are a few possible reasons.

  1. Many philanthropists don’t realize that we need system change.
  2. Incumbent non-profit leaders or aid contractors who benefit from the current industry have little incentive to change it.
  3. Many philanthropists don’t know how to efficiently discover the system changing start-ups, in part because the social innovation ecosystem is still underdeveloped.
  4. Many philanthropists don’t feel as if they understand the risks well enough or, relying on the more familiar ground of business, are reluctant to fund approaches that don’t immediately result in quantifiable social impact.

To fix this, more collaboration and accountability is needed. Since the philanthropy industry is essentially accountable to no one, it should at least find ways of making it more accountable to itself. In the venture capital world, investors who miss out on great investments or who pour money into ineffective organizations eventually get fired. Philanthropy needs similar urgency and discipline. The best philanthropic investors should be publicly celebrated and honored the way we honor investors like Warren Buffett. They are more needed than ever.

What if every foundation with an annual giving budget of over $1 million committed 5% of that budget as risk capital to fund innovation – to fund for example, 1-3 early stage ventures or collaborative 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. Pipeline would not be a problem if you know where to look.  As with early-stage venture capital, not every project has to succeed for the money to be well spent.  Without experimentation and risk taking, we won’t get the innovation or build the trust that can lead to system change.

Peter Buffett’s refreshing piece has started a conversation about what really matters: our collective need to change many of our patterns of social and economic relationships, to strengthen our communities, and to promote the dignity, freedom, and agency of everyone on the planet. To build this “everyone a changemaker” world, we need to bring the same creativity and relentlessness that we bring to launching a new company and apply it to what is turning out to be the great challenge of our time – and the defining challenge for the millennial generation – how to shift from our old patterns and create new patterns that build community and create value for all stakeholders.

It’s in no one’s interest to tear down the edifice of capitalism. But it is in all of our interest to define what we value in human, not just market, terms. It is in all of our interest to build a society that understands that we are all interconnected and interdependent, and that we are in fact capable of designing and building new kinds of markets that can solve our problems more effectively than our current system.

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 Profitand 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. The most popular club at all the top business schools today is invariably the Social Enterprise Club. Much of the top entrepreneurial talent wants to be involved in shifting the world to a more sustainable path. Businesses want to be a part of this shift as well, and the best ones understand that their future is riding on it. The opportunity for philanthropy to catalyze these entrepreneurs – whether non-profit or for-profit – is breathtaking.

The son of the world’s most famous investor said we need to shift our gears; he basically implored: 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. Give me this, and I will help. A Nicaraguan sent it around to his team. It spoke to him. It clarified his purpose and gave him strength to deal with the challenges of his job.  And that, in the end, may be the most important legacy of Buffett’s piece. It is rippling across the planet now. Things that needed to be said were said, and the forces for change are mobilizing.   

A shorter version of this article was originally posted in Forbes here.

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