Doing good, doing well

Thomas J. Walsh

is an editor at Geneva Global Inc., a for-profit philanthropy company based in Wayne

For-profit philanthropy . . . a contradiction in terms? Well, 2006 might have been the year that brought the philanthropic urge (to help people, as the Greek roots remind us, out of "love" for people) together with the moneymaking principle. The aim of the recent movement toward for-profit philanthropy (also labeled "hybrid" or "entrepreneurial") is to keep philanthropic efforts on course with a successful business model, not to enrich shareholders.

And why not? Where is it written that doing people good must never make a buck?

With the normal speculation at the end of last year about the identity of Time magazine's Person of the Year, it would not have been a surprise if the 2006 winner had been a philanthropist, given the amount of media attention lavished on that formerly rarified world last year. Nor would it have been a shocker had an economist of some stripe graced the cover.

I was expecting some combination of the two. It could easily have been Muhammad Yunus, the Bangladeshi "banker to the poor" who won the 2006 Nobel Prize for mainstreaming the idea of "microloans" to destitute Third World women.

There's much convergence going on between these two formerly disparate realms. Philanthropy, evidently, is no longer just the domain of the Annenbergs and the Rockefellers of the world. And the normally staid field of economics is undergoing a dramatic makeover - the image of slide rules and thick, square glasses has given way to well-traversed blogs and appearances on network morning talk shows.

Chances are you (or "You," the ultimate identity of Time's '06 person or the year) have been a part of this trend. Last year was the year of the economics runaway best seller. Have you read Freakonomics, as millions of others have, coauthored by Steven D. Levitt (a self-styled "rogue economist") and savvy writer Stephen J. Dubner? What about Malcolm Gladwell's The Tipping Point or Thomas L. Friedman's The World Is Flat? Maybe you've lent them to friends or recommended them at dinner parties.

Who knew macroeconomics would turn out to be so cool?

Consider this: The CEO of YouTube Inc. was in attendance at the annual World Economic Forum last week. Last year, Brangelina showed up. Rocker-cum-international statesman Bono, funky shades and all, is, as expected, making an appearance at the annual confab in Davos, Switzerland. Bono's racy cause is - of course! - debt relief for Third World countries, among other things. (For more, check back issues of the Economist, the Harvard Business Review, and People.) Thanks to celebrity and best sellers, the dismal is being extracted from "the dismal science."

The convergence is happening during a particularly flourishing period for global philanthropy, which, at its best, seeks to drill down to root causes and produce actual, measurable results - precisely the sort of things these popular best sellers aim to do. Much of what for-profit businesses are good at doing would be wonderful for philanthropic organizations. Keeping track of things, for example. You could measure how much or how well lives are changed through charitable donations - that's something the Freakonomics guys might think about wading into. Communication is now instantaneous, and transparency is no longer just a business watchword. Isn't it about time traditional philanthropies and charitable foundations got onboard?

I work for a for-profit philanthropic company, and sometimes the for-profit has prompted some double-takes. Things have been easier to explain since Google established its own for-profit philanthropy (Google.org) last year. Observers realized that Google's newest venture has much more financial latitude than nonprofit organizations. This could be where solid economic principles and sound business practices finally come together with philanthropy.

True, the Gates Foundation might be exceptional in terms of size, since its endowment, padded last year by the considerable wealth of investor Warren Buffett, is in the stratosphere. But the goals of eradicating malaria and addressing the global AIDS pandemic are no less revolutionary than the iPod or an Excel spreadsheet.

So it's real and it's growing. And it suggests a new attitude on the part of you, the person donating to philanthropies. I'm not arguing that anyone abandon the nonprofit groups. But I am arguing for a realistic mind-set. If you're thinking of donating to an enormous, mainstream charity, do everyone a favor by asking somebody at the charity what your money is paying for. If you get a murky answer, it's irresponsible to go along with it. Stiffen your spine and harden your head.

Hard head, soft heart: That's the attitude at the core of the new giving. Think of charity as a bank, or the stock market, where you invest and expect a return. Charitable transactions should be no different. The return on investment won't be cash, but if the investment does what it should, the return will be measured by lives changed, preferably in a quantifiable manner - down to the family, down to the person.

As in the stock market, you might lose a few bucks in the bargain. But you should at least know when that happens, and why, and how it can be changed so other donors won't get burned. Think about donations to relief organizations for Hurricane Katrina, or the Asian tsunami, or the families of 9/11 victims. These groups no doubt did a world of good. But did your donation go where you thought it would, or did you just have to take it on faith?

Remember the bumper sticker from the old car you drove in college, the one that urged everyone to "Question Authority"? Seems like a Freakonomically sound idea to me, and one that's not so naive after all.