Philanthropy: Why You Should Demand a ROI
Philanthropy is not about giving money but about solving problems. While well-meaning, the idea of writing a check and calling it "philanthropy" is extremely short-sighted and unfortunately, extremely pervasive.
Instead, philanthropist should think like an entrepreneur and think of social challenges as an opportunity to create large enterprises. It’s really easy to create a $1 billion company--you just have to solve a $10 billion problem. Most of these large $10 to $100 billion problems happen to be social problems. That’s why I think that some of the largest opportunity exist for an entrepreneur in solving humanity’s grand challenges.
True philanthropy requires a disruptive mindset, innovative thinking and a philosophy driven by entrepreneurial insights and creative opportunities. To disrupt the status quo, drive philanthropy at tremendous scale, and develop long-term economic vitality through giving, we must apply the same models for success in our philanthropic endeavors as we do in business.
As a lifelong entrepreneur, I see philanthropic organizations the same as any other business venture. Much like today’s start-ups that accept VC money but never turn a profit, a philanthropic venture that does not create a self-monetizing, sustainable financial model will ultimately fail.
In short, philanthropy requires disruption. This disruptive mindset hinges on a practice I call Entrepreneurial Philanthropy, which is designed to support innovation that creates sustainable, thriving economies in communities with tremendous need. Further, it requires the utilization of several principles rooted in today’s successful enterprises.
A venture that’s not profitable is not sustainable. Philanthropic funds should be treated as venture capital that should only be used to bootstrap a business and to scale the business once the business model has been proven on a smaller scale.
I recently met with a woman who operates a homeless shelter for women in my community, and like most shelters, it is constantly looking for donations. In speaking with me, the woman was seeking advice on how to create a successful operation. I encouraged her to rethink the complete model for the shelter, making it self-sustainable instead of dependent on outside investment.
“What is your product and who is your customer?” I asked her.
“The shelter is my product and the women are my customers,” she responded.
“What if you were to think differently and consider the women at the shelter as your product and local businesses as your customers? These businesses certainly need people who can work, and if you provide services that empower the women, you can help provide them with jobs that could help determine their status for residency or other services at your shelter. As surprising as it may sound, sometimes you can create a successful venture relatively easily by taking your current model and completely turning it on its head,” I told her.
This is the underlying philosophy that I was conveying--by creating a thriving community within her shelter, she would create a strong and sustainable business model. Sustainability is the root of business--and should be the root of successful philanthropic endeavors.
Truly disruptive philanthropic endeavors, much like business ventures, need to think big, targeting tremendously large markets and opportunities. Solving a problem in the millions will never catapult your business into the league of billions. In other words, if you want to create a company worth $1 billion, you must solve a $10 billion problem.
There are many philanthropists and volunteers who act locally, giving tirelessly, donating their time and money to help the sick, poor and other individuals most in need. But why stop there? Philanthropic work on the local level is wonderful, but time and again it has proven incapable of reaching the scale we need to foster economic development and leading to the monumental changes we all seek.
Doesn't philanthropy deserve, indeed require, the same level of audacious hope and limitless opportunity as do our business ventures? Our power to impart positive change goes well beyond our communities. We can surely think about both--our communities and the world beyond--and act on the same.
Scalable Solution for Global Markets
To do that, we need scale. There’s nothing wrong with testing a product locally in small markets, but we have to be sure that the solution is scalable once proven successful. If we go into a philanthropic endeavor afraid of success on the largest of scales, we do that cause no justice. This requires rethinking the solution and the problem, which generally requires us to convert infrastructure problems into information-gap problems. Our job, indeed our collective goal, is to bridge that gap.
Education should not be about building more schools and maintaining a system that dates back to the industrial revolution. We can achieve so much more, at unmatched scale with software and interactive learning. Similarly, think about the healthcare diagnostics we can address through connected sensors and artificial intelligence without the need for expensive, out-of-date physical infrastructure like hospitals.
Build Great Teams
While most philanthropists tend to flock together and build their teams around friends, family, or others who happen to be retired or with a lot of free time on their hands, a great entrepreneur knows that success is directly related to the quality and talents of their team. We cannot just partner with whoever might be available or share our passion during their retirement.
Successful ventures in business or philanthropy are built around great teams who can help us overcome tremendous challenges--and have the right experiences and relationships to do so.
Entrepreneurial Philanthropy is not just a philosophy or a dream. It is a promise that philanthropy is at its best when it is founded on entrepreneurial zest and agility. Investors are right to demand a clear path to self-sustainability from every business they invest in, and I believe we should ask for the same from philanthropy. Indeed, there is a direct correlation between fulfilling peoples’ needs as a successful entrepreneur and as a philanthropist. This is why the work of entrepreneurial philanthropists has a compounding impact that reverberates far beyond the reaches of charity, aid and relief efforts. Money can certainly solve some of the world’s problems, but without an entrepreneurial bent it will only merit short-lived solutions to long-term problems.
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