Gift Hub

Level the tax law as between charity and forprofit social enterprises?

Lucy Berhnolz, in Blueprint 2013, writes:

The discussions about the tax code and charitable tax deductions should be our opportunity as a body politic and a civil society to re-align the regulatory domains of social good with the actual practice. Three independent studies done in 2010 and 2011 found changes in the tax rules would have minimal effects on giving. Simultaneously, entrepreneurs are rushing to create social purpose businesses. How do we want these two options to co-exist? Who does what best? What are the common goods – the civil society purposes – for which tax incentives and protection from markets is critical? Most of the discussion and hearings, however, will not involve everyday people. As do most discussions in Washington, DC, they will engage the professionals and the vested interests. For this reason and because there is no coalition representing an alternative point of view, I fear that the political battle will be fought narrowly over maintaining the tax deductibility of charitable gifts. There will not (yet) be serious discussion about the most effective ways to provide incentives for private involvement on behalf of public benefit.... 

I guess this means that the tax deduction for charitable gifts might go as well to incentivize social entprepreurs, who would themselves own the enterprise? And that social entprepreurs should maybe form a coalition to get tax breaks for themselves? Or, failing that, the social entrpreneurs' coaltion could repeal or reform the charitable deduction so as to expose some or all charities to the rigors of the market, so that creative destruction could run its course, to the betterment of society, as forprofit firms displace nonprofits in vending services effectively and efficiently? (Per Lester Salamon, a lot of that has already happened with foprofits now having dominant market share in, for example, home health care. Salamon attributes this, in part, to the greater access that forprofits have to capital markets, enabling them to scale up quickly in response to changing economic conditions, and changing government policies.)

Maybe, the best outcome, then, would be to have tax dollars kickstarting a social enterprise which would grow to scale, making the entrepreneur very rich? Maybe, the government, in that case, or we the people, should own a venture capital share in such schemes? Maybe we the people through an elected representative could take a Board seat?

Salamon is a necessary "read" in these debates. He says nonprofits are pulled among four forces, Commericialism, Civic Activism, Volunteerism, and Professionalism. The current emphasis on social ventures considers nonprofits as essentially vendors or providers of services. Some nonprofits like hospitals, schools, and homes for the aging are easier to conceptualize this way than are, say, the women's movement, or a neighborhood midnight basketball program, or a church. One reason we protect nonprofits from the rigors of the market is that they are Values Guardians. They are, as he puts it, the way we keep certain traditions alive (particularistic, rich traditions, like those rooted in race, gender, religion, and the arts). Since we as a nation cannot all agree on "values," we agree to disagree and we agree to surround the public square not only with shops, farms, and factories, but also with sacred places whose towers reach to heaven not as skyscrapers but as fingers pointing to what is higher - though we do not agree on what it might be, we agree that higher has meaning, and it should be protected as sacred, as of another order. We have family and have in certain nonprofits the seedbed of the heart, mind, and soul, where we are all valued and nurtured beyond price by those whose motives are often weighted towards love (of humanity, great books, religious tradition, of children, of those in need, of the poor in whose face they see their Maker's). Schools are not churches, but the Gothic tradition and the dreaming spires of Oxford, Yale, Harvard, University of Chicago, and so many schools remind us of the shared roots (the monks). Not all is for sale (yet), though the sale of Papal Indulgences under a Pirate turned Pope, funded by the Medicis, shows how far Social Enteprise can go, before it too needs to be reformed.

Salamon himself, by the way, has some pretty positive things to say about Social Enterprise and Impact Investing. (Youtube, from 2009, here.) 

The New Future of Posterity - Eternal Data Backup courtesy of the NSA

My social entrepreneurial, public private partnership, is pending approval with the NSA. I am going to offer universal and eternal back up of all chat logs, web trails, emails, and personal global positioning, to all Americans, and others too, at a modest charge. If you lose your Google doc, or an email, or forget where you were ten years ago today, my new high impact high peforming social enterprise, The New Future of Posterity, will sell it back to you, or to your heirs, based on always reliable NSA backups. The social benefits are huge. No lost data! The benefits to me are huge, too, which is encouraging to all concerned, since it means that Virtue, Merit, Leadership, and Entrepreneurialism in a Just Society are Amply Rewarded. I am or will be the Poster Child for that. Fortune will have me on the cover. Disruptive Social Innovator of the Year.

For a bit more than the cost of personal data backup, I will, in select situations, sell you each other's private or public info too, but that is on the QT and strictly on a need to know, and ability to pay, basis. I want to be sure not in any way to support or condone any illegal activity, such as front running on trades, based on private emails. Nor do I condone  private, or political blackmail, unless approved through proper channels. NSA data, like Hoover's notorious files could be used for all kinds of nefarious purposes, and I want to steer well clear of that, to the extent possible. Deeming anyone a Terrorist is not something I would ever do lightly, even if I was busy, or late for an appointment. It is a grave matter to be handled with utmost solmnity, when my mind is clear and I have a minute, free of distractions, to give it my full attention. That is why you have my assurance that I will personally approve all questionable data usage, and all requests to access, aggregate, or process such data, much as the President personally approves drone strikes. As Leader and Sole Owner of the New Future of Posterity, I have a moral responsibility to do what is right. No one is perfect, and I freely admit I have made certain mistakes in the past for which I am deeply sorry; but with the fraud conviction behind me now, and my debt to society paid, and all remaining charges of loan sharking (which should have been called mirco-lending) dropped, I hope that I make the right call now as often as not for my own benefit and that of Society, including the unborn millions who will access your personal records at little or no cost. Admittedly, it is hard to balance your needs, those of society, and my own needs as well, but you can be sure I am doing the best I can, given my own well document mental problems, and pressing need for ready money. Per this recent and very sensible post at HBR, I am going to err on the side of making a buck off my social enterprise, since Scaling Up is going to take big money, and that is the only way I can Do the Most Good.

Scaling Social Impact: Cain and Abel

Quite an amazing initiative of Bridgespan and HBR, with support by Omidyar Network. Bit by bit you can see the new worldview of social impact investing and social entrepreneurship building out its infrastructure of thought leaders, prestigious publications, consultants, funders, cultural heroes, aspiring super-smart students, and popular press hagiography. As a loser, I watch leaders with admiration, and always have followed them where they point. I am the other guy in that famous picture of  Napoleon crossing the alps on horseback. The emperor in a magnificent cloak, is pointing triumphantly up the mountain. I am the soldier in the threadbare greatcoat in the snowdrift rolling the canon uphill. Anway, this Scaling Social Impact looks, along with Social Enterprise Review, Bridgespan's own site, FSG, and Lucy Bernholz's site, to be among the best places to not only to learn about social enterprise and but also to learn how to do it, and how to be a Leader within it. You can also learn in adjacent HBR posts about Successful People and their Habits, Pervasive Corruption in Financial Services, and How not to Sabotage your Career just because you are so Smart. Somehow this is all part of a culture of Excellence (it being Harvard and all). The jury is still out on whose interests are served by Scaling Social Impact, but it is clear whose sense of self is served in this emerging Romantic Narrative of Moral Heroism. Cain goes to Occupy, Abel goes to Harvard.

Big Data as a Social Justice Issue

God guard me from those thoughts men think
In the mind alone;
He that sings a lasting song
Thinks in a marrow-bone.

Yeats, A Prayer fo Old Age

Two ways to know whether an apple is ripe enough to eat. Visit the orchard, see the apple, hold it in your hand, take a bite. Or, read a report generated by a database. In giving, per the emerging social economy, we will increasingly rely on trusted intermediaries, and data taxonomies allowing experts to rank and rate that of which they have no personal understanding, or lived experience. We will know the apple is ripe enough to eat when the algorithm tell us it is. What happens at a distance, via experts, are solutions. In the shadow of a final solution, Buber wrote I/Thou. We have family, and civic spaces, to create a buffer from solutions, and the dehumanization of those who solve them by reducing all to I/It. When Bill Schambra grinds the noses of foundation in their long ago support of euthanasia, he is being "unfair," no doubt. But the lived and living insight, is that managed solutions, mediated by experts, and Toqueville's democracy are now increasingly in collision.

"Psychoanalysis is the disease it seeks to cure," said Karl Kraus, referring to his Vienesse contemporary, Freud. If philanthropy, whose root is love, comes to mean primarily cold blooded method, mechanics and results, then philanthropy has become the disease it was meant to cure. 

By contrast, is the work of Mario Marino. His answer to the apple question, is ask the one closest to the tree, the farmer, but ask also what that farmer needs to do the job better, and what systems would best support it, and what metrics, including qualities, as well as quanties the farmer would find most meaningful. The result would be a better run farm, with metrics as unique as the contours of the land, and the personality of the farmer.  When today's Market for Good or Social Economy thinkers are asked about metrics they mean comparables. Taxonomy inputs and outputs that are uniform to be managed at a distance by experts who have no grounded knowledge, no first hand knowlege, no tacit knowledge, no scent, and no taste, of the field they manage by the numbers. They dream of a uniform metric for apples, oranges, pears, poems, games of pushpin, bodies healed, and souls saved that would allow the expert and funders to calculate not only how much good is done, but how much more good is done within categories and among categories, for a given dollar, discounted to a present value to reflect cost of caqpital. This was the dream of Bentham. The man who also dreamed of the Panopticon of total surveillance.

To this the builders of the Panopticon, the database of inputs and outputs, will respond: "Expect to be asked." Expect funders to demand. Expect to comply. Do those who make such bossy statements, such peremptory demands, themselves sense the will to power, the bared teeth? Are they sufficiently self aware to feel in themselves the very sin that philanthropy or charity at its best chastens? The sin of pride. I don't think so. Knowledge is power, or Power/Knowledge, as Focault knew. Data is power and is used to exert power.

What I have come to love about Mario Marino on metrics is the passion with which he drives power down the line to the nonprofit leaders, and their subordinates, and to the communities served. He does not want to gather to himself power by running the Database, and driving money to whatever his Database measures, rather he wants to get the front line people to use their own metrics, to improve their own work, so they better achieve their mission. He wants nonprofits to grow up and to become less dependent, more autonomous, by internalizing businesslike internal controls. I read Tom Tierney, in his GiveSmart, as making the same mature point - the point made by a businessperson with real first hand experience in building successful firms through servant leadership. This question of where metrics and databases reside, who controls them and for what purpose is as important as any other question of social justice. I am distressed to see how eager some in our field are, how manic, how exultant they are, to arrogate that power to themselves in the name of philanthropy. From the power of wealth to the power of data, to the power to frame the issues and to coerce compliance - why is this not a moral and political issue?

When I join Occupy to protest economic injustice, and my name, and photo, go into a database, shared with banks, foundations, and the FBI - may I ask - am I input into the database as solution or as problem, and who inputs, who reviews, and who decides? This is more than about privacy it is about mastery and control of civic spaces on behalf of what stakeholders? Who have their voice heard and heeded how?

Facebook is social. Is it the image of a well manged, well governed civic space in a democracy? Will uniltateral agreements, shrink wrap licenses, and walled gardens on owned platforms, or platforms managed by a few, funded by large foundations, be how we manage "Data and Democracy?" 

Impact of the Pease Amendment Phaseout of Itemized Deductions

Excellent post with clear examples from Independent Sector. Overall sentiment is that charitable planning dodged a potential bullet.

Philanthropy and the Social Economy 2013

Lucy Bernholz's Philanthropy and the Social Economy: Blueprint 2013 is now available for a free download from Grantcraft. Lucy's brilliance and breadth is staggering, even daunting, yet light on civil society. In her future, a digital generation turns to crowdsourcing, micro-payments, small gifts on and through the web, guided by indepth data about outcomes and impact, in order to create the world they want. They become social entrepreneurs to make money and do good. In this they are aided by impact investment firms, trusted intermediaries doing research on nonprofit and forprofit enterprises doing good, and by technologically savvy foundations like Gates and Hewlett who seed fund the evolving infrastructure of a market for good. Smart money seeks out high performining, high impact organizations, whether forprofit or nonprofit.

The vision is that of the market, and privately held social platforms that will take market share from stodgy nonprofits and from government programs. I find myself wondering, so often, what courses did these thought leaders not take in college, or what impact did their readings in political theory, ethics, sociology, religion, or the arts, not make upon them? As high level as this breathless futurism is, it still reads to me like boosterism. This is the bourgeois vision of the world we want, in which digital peons express their preferences with Like buttons, and micropayment, or investments in social impact firms, or desultory voting, but the real power is on Wall Street, Silicon Valley, and the thought leaders in business schools at Stanford, Duke, or Harvard.  Politicians are there to be bought, in the market for good. In the account of the rising generation of digital natives, the tacit heros of Lucy's most recent blueprint, I saw no mention of Occupy. Big data played a role there too. That too took place in the public square, but was hard to monetize, own, or control, until the FBI coordinated a nationwide crackdown. Where, then, in Lucy's brave new world do we find, rights, dignities, representation, and justice for all? These subjects just seem not to come up (other than in discussions of privacy rights vs. the need for transparency of data), despite Lucy's position at Stanford's Center of Philanthropy and Civil Society.

The moral and political philosophy behind the Future of Good is utilitarianism. Yet, for all the innovative thinking there is no thought given to the limits of rationalism, utilitarianism, materialism, and their expression in markets. What works, works, I guess. Wish it worked for me, but soon I will be getting one of those treadmill operated generators, like social entrepreneurs are building for the third world, so I can keep the lights on in my Dumpster to study Great Books deep into the night, at least as long as I run fast in place.