Social Capital Markets

May 18, 2008

L3C Approved in Vermont

Kate Barr provides an excellent overview of the L3C business structure, just now going live in VT. The structure is expressly designed to qualify for mission aligned investments ("program related investments") by foundations. The purpose is to use patient, low return, or no return, philanthropic capital to entice market investors to build businesses that serve social purposes. An example, perhaps, might be a store selling locally grown fresh food in the inner city, thereby helping farmers and consumers, while also providing jobs. Would a community foundation consider investing in a deal life that? Could it be offered through Donor Advised Funds as an investment? Could a church in the inner city take up a collection, give to the Donor Advised Fund and so "have some skin in the game," even if they could not qualify as accredited investors to buy the securities? c.f Reg D.

May 11, 2008

The Temptation of the Two Bottom Lines

Take your two bottom lines, label them to your own satisfaction. Mine are God and Mammon. Those two axes define four quadrants. In one quadrant you do well for God by doing good for Mammon. That is the world of social venture philanthropy. The promoters like to pretend that this quadrant is the largest or only one. We can all do well by doing good. But the most interesting quadrant is the one in which we do very well for God and not at all well for our own worldy self interest. Benefaction means good deeds. Those who peacefully resist injustice and die for the world we want are doing a good deed. They are not doing well by doing good, unless you believe that eternal life, or the kingdom within, is their reward.

How many kind of capital are there? We have certainly financial capital, but it seems from my reading in venture philanthropy and related fields that we also have human capital, social capital, moral capital, political capital, spiritual capital, and many more kinds of capital, almost too many to count. When we systematically misdescribe God's gifts, or those of the holy spirit, in the language of Mammon, how is that account squared?

In the Temptation of the Kingdom, Jesus was given a choice of two bottom lines. He was not given the choice of both bottom lines. What was the problem with Satan? Was he stupid? Our new social capital marketeers could have seduced Jesus himself.

The price we pay by investing so heavily in market-speak is sin and death. Our own dead eyes are the negative balance we carry. Jesus made the blind see and the dead walk. When he returns perhaps we will have the Rapture, or maybe we will simply slough  off our deadness and rise albeit briefly to eternal life. 

May 04, 2008

Hubris, Denial, and Financial Services Culture

The Milken Global Institute Conference...

brings together some of the most extraordinary people in the world - from scientists, business executives and philanthropists to journalists, academics and Nobel laureates - to discuss, debate and deliberate today's most pressing social, political and economic challenges.

One panelist returns home to report: "Mind you, there were some signs of dissent from the Panglossian posturing." Via.

May 02, 2008

Bill Moyers Hates the Free Market?

Rense.com

Bill Moyers, his son John, and their moneyed sidekicks, the Schumann brothers, hate the free market with intemperate ferocity....

Lots of investigative research here, whatever your overall take on Moyers. Of course, we could begin by asking, What Free Market? We talking about contemporary Bulgaria? America in 1843? Our insider-driven markets as we have them today? Free market, free speech, free beer. I am still waiting for delivery. Maybe we as citizens, progressive or conservative, should unite to restore what freedoms we can.

April 28, 2008

Meditations on Mission Investing, by Catherine Austin Fitts

117orpheusandeurydice Catherine has posted a deep Meditation on Mission Investing. If you find it cryptic as to her personal story, this link might help.  All that has befallen her did not happen in America. It could not have. We are a free people, in a free country and a free market; one nation indivisible under God. We are a meritocracy in which the best rise. What Catherine describes is Necropolis, the land of the living dead. Unspeakable. Shadows moving in an underworld. Love, art, the seasons, neighborliness, and truth-telling, will those prevail over death-in-life? As many as the leaves of autumn are the souls on the river of death. Yet love will renew us if we dare open eyes and hearts to the shadow of horror that moves amidst our blindness, fear, and silence.  Orpheus: Do not taste the seed of death, nor look back to find Eurydice.

April 26, 2008

Mission Investing, Catherine Austin Fitts

Catherine Austin Fitts:

I am writing a series of posts on Mission Investing, including some point-counterpoints with Phil Cubeta at gifthub.org.

I bring a few ants to the philanthropy picnic. Catherine brings the fire ants. I will have to read and re-read her densely wrought posts to let the system she sees come into focus. As I understand better, I hope to put in a plea for philanthropy, and see how she might then debunk it.

April 20, 2008

Mapping The Philanthropic Ecosystem

The Ecosystem of Philanthropy

Who is part of your "better world" ecosystem? That is, if you want to create for yourself and those you love a better life in a better world, what other "players" impinge on you, for good or ill? And how might you, then, uplift both your own actions and the overall ecosystem so that a better world is possible? That is the line of thought that I have been pursuing within an informal network over the last several years. I will organize for my own use these observations under key names in my ecosystem.

Tracy Gary

Key actors in her vision are donor, advisor, and nonprofit. Key indicator of success is the number of dollars raised. Key driver of dollars raised is donor training to help the donor manage the planning process with advisors towards a more inspired, but also prudent result. As donors are trained to ask for philanthropic plans that very request will motivate more advisors to provide such plans.  Training for advisors would then be well-received, since tied to a practical result, that of meeting a real demand. Also, a key actor is the next generation, the children of the donor. If money goes to charity it might come at the expense of taxes first, but at some point it will come at the expense of inheritance. Hence, children must be raised and mentored in their roles as carriers on of a giving tradition. Nonprofits on this model become the convener of the appropriate training and conversation and network.

Tracy and I will present this vision to Advisors in Philanthropy at their Annual Conference next week. The following week I will present a version of it to Southeastern Council of Foundations.  We do have some early success stories. A number of other professionals have expressed interest in this way uplifting the philanthropic ecosystem.

Catherine Austin Fitts

A former investment banker, and former assistant director of HUD, Catherine seems to have stumbled upon the dark side of money and become for awhile an "enemy of the state," as she puts it with a smile, suffering the tribulations of Job, as a lesson in civics for herself and others. She is not keen on philanthropy, because she has seen where money, in certain cases, comes from, with whom it consorts behind the scenes, and how brutally those who control so much of the world's money and power behave when their insider games are outed or challenged. She has seen philanthropy used as cover or cleanser for the reputations of people who should probably be in jail for financial fraud, extortion, drug running, betrayal of the public trust, mere graft, or high crimes and misdemeanors. She also sees that philanthropy will be tolerated as a cleanser as long as it remains both upbeat and ineffectual. Philanthrocapitalism is also safe because it does not challenge, in fact personifies the hegemonic game.

You might think, then, that while Tracy is liberal that Catherine is a revolutionary Marxist taking her cue from Che. In fact she is a Christian Conservative taking her cue from Adam Smith and Jesus Christ, which makes her a dangerous mind. She is not asking capitalism to give way to socialism. She is demanding that capitalism live up to its own founding ideals: financial transparency, honest  book keeping, the rule of law, and the prosecution of criminals regardless of their wealth, rank, philanthropy, connections, or access to armed force, or criminal networks.

Catherine urges us to create a better, more financially intimate world, by withdrawing wealth from the rigged and gamed financial markets and reinvesting in places governed by the rule of law, maybe New Zealand, or maybe your home town, or among a circle of friends who have farms, small businesses, or a local bank.  As an investment banker she thinks bigger than that too, asking who will own the water supply, for example, in your town? Who will commandeer the food supply? Might we not form investment pools that would allow local decision makers to steward such resources for the good of the town, rather than, say, Nestles?

You can see that this is not your idea of "philanthropy," but the actors named by Catherine (the drug dealers, the slum lords, the corrupt governmental officials gaming the sub-prime mess, the investment bankers bringing for profit prisons to market, the private bankers who own the Fed, the governors owning prison stocks and passing "three strikes you're out" laws, the shadowy actors trading drugs for arms and arms for hostages,  the corrupt accountants of both business and government, the blackmailers and hit squads operating here and abroad to silence those who out the dirty game) are part of the same ecosystem in which philanthropy goes about its upbeat work.  Some capitalist like Boverton Beaver who has made billions out of buying companies in, say, the liquor business, gambling stocks, the porn business, or armaments, or in for profit prisons, might call himself a Double Bottom Line Social Investor and might start a double bottom line bakery employing at low wages the convicts on parole from the prison he owns up the hill from the ghetto, blighted by the drug lord whose Harvard educated son sits with Boverton on the board of the local hospital, or the home town newspaper, or serves on a Blue Ribbon Commission studying urban poverty.  That philanthrocapitalist might then endow a business school, or a chair in social venture capitalism, or might fund a DC Think Tank on Engaged Philanthropy, or on Pro-Market Public Policy, or might hire out the writing of any number of white papers and scholarly studies on metrics for double bottom line firms.  All this might then be applauded by leading philanthropy bloggers who, in their business life, consult to the banks and the brokerage houses with their captive philanthropy departments catering to private wealth from sources both light and dark, or who make their living managing Boverton's money. So the world closes back on itself in an ecosystem in which the herbivores, the carnivores, and the hominids thrive and prosper - up to a point, though that punctuated equilibrium is far from optimal from the standpoint of human flourishing. 

H. Peter Karoff, Amy Kass, Bill Schambra, and others Devoted to the Liberal Arts

What other actors? What are we leaving out? How about the teachers, writers, artists, prophets, and thinkers who are the masters of our spiritual, intellectual, ethical, and cultural traditions? (If you are not familiar with such figures you might think instead of Star Wars or Marvel Comics or Grand Theft Auto or the Matrix; those may be close enough to wisdom, if that is all you have and you don't know the difference.) If our better world is to be guided by what T. E. Hulme called "the best that has been thought and said," then we must listen to voices of the graces, or the holy spirit, or the muses,  or the voice that speaks out of the thunder, or the still voice we have been ignoring, or whatever one wishes to call that voice that rises in us when we are obedient to what is greater than ourselves, what is most alive and life-giving in our traditions. I could go on at great length on this point. Eloquence trumps power. The pen is mightier than the sword. Love conquers all. And the dead shall rise into eternal life, dead or not, as they live on within the tradition they would not betray, even at the cost of their own life, the ultimate gift.  As different as are the three figures mentioned above they share an almost helpless love for the life of the mind and of the spirit. When they discuss giving, it is within the shadow of Mt Ararat  within eyeshot of the ruined garden. I am not implying that they would get crossways with worldly wealth or power. We catch more flies with honey than with vinegar.

Phil to Thee

Well, you can see that the company I keep makes my head ache and buzz.  What I come down to is this: Whatever is the correct map of the ecosystem in which we live, whatever actors you see, or think you see, whichever you name, or fear to name, whatever your personal resources, you cannot blink the questions:

  1. What kind of person do you want to be?
  2. In what kind of world?

As you meditate on those questions, you will need your own vision of success, and a realistic model of your current situation - whether upbeat or dark or chiaroscuro. Given that vision of a better life in a better world, and given your assessment of what you are up against, you will have to make your own decisions, in the light of the traditions that speak to you and through you, as to how you will deploy your money, your time, your attention, your life energy, and your love within a risk profile that includes your assessment of the probability of success or failure under conditions you can barely discern. Each of us can see only a little.

Best Practices within a Learning Community

As we find our way, across this landscape, let us share what we see, share what we learn, mapping our terrain, and sharing the paths that lead out of the dark wood into the light. As you address the two questions above (and they cannot be evaded for the evasion itself is an answer), consider sharing what works and does not work so that we can collectively do better than we could alone. I am trying to take that approach here sharing my notes on what I am learning, and hope you will share as well, whether through a note to me, or on your own blog, or however you wish.  Perhaps if we live in truth, and speak what we know, and look out for each other, we  not only ameliorate specific ills,  and prosper in our own lives, but also uplift the overall ecosystem of which our efforts individually are but a tiny part. 

April 15, 2008

The Essence of Nonprofits?

Nonprofit Assistance Fund in MN lends money to nonprofits. In recent posts NAF has reflected thoughtfully on emerging trends in philanthrocapitalism and what the "essence" of a nonprofit might be.  Maybe the essence is that human beings are social creatures for whom certain social virtues like kindness come naturally (along with vices like greed, hypocrisy, spiritual pride,  and lust for power). Perhaps the unique thing about the nonprofit world (including the arts and private acts of generosity among family, friends, and neighbors) is that public goods lag private goods in a hyper-capitalist economy and that some people will indeed make significant sacrifices of time, money, and ability, or of blood, or even of their own life, for a cause that they consider noble. Perhaps you could get towards an essence if you started from public goods, honor, and an ethic of stewardship. I have not seen so much of that ethos of good stewardship in the business sector, or in government recently.  If the  double bottom in social entrepreneurship line means stewardship, even at net personal cost, I applaud it. But I think social entrepreneurs want, generally, to have it both ways - do good and make out like a bandit. And I am afraid that leaves many worthy projects that do require sacrifice on behalf of others as the province of the nonprofit form or of taxation and government programs. 

April 14, 2008

In the Market for Altruism

Talk_politics_free_hand Speaking of supply and demand curves for altruism and where they intersect, I would think that with the huge demand there would be more supply, but maybe not. It could be that the demanders of altruism are low on the funds needed to purchase it. (Via.) The beauty of markets is that justice is not a product of them.

April 13, 2008

The Market for Warm Glow

Todd Henderson and Anup Milani on Understanding Corporate Philanthropy, excerpted at The University of Chicago Law School Bogs:

The existing literature on public goods ignores the role for-profit firms play in this market, which we call the market for altruism. Once the demand and supply for altruism is understood, asking why firms are philanthropic becomes about as meaningful as asking why Ford produces the Explorer or Apple produces the iPod Nano.

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