Dan Pallotta’s TED talk The way we think about charity is dead wrong and summary below.
http://www.ted.com/talks/dan_pallotta_the_way_we_think_about_charity_is_dead_wrong.html
Compensation
- Notion that NFP’s shouldn’t make money out of helping other people, while commercial companies make money out of not helping people (e.g. selling violent video games ).
- NFP staff = get low pay (economic sacrifice). Stats back this up. It’s more economically viable to donate $100k to charity, save 50% on tax, sit on board, and have power and influence than actually go and work for the charity.
Advertising and marketing
- Notion that NFPs shouldn’t spend money on advertising, it should go to the cause. While commerical companies spend on advertising until they can’t add any more value. But the way to reach people is through premium advertising.
- NFPs can’t wrestle market share from fro profit sector unless it markets itself.
Taking risk in the pursuit of new revenue streams
- Notion that commercial companies can lose money but if an NFP does so it calls character into questions so NFPs don’t take risks for fear. When you prohibit failure you kill innovation. So you can’t raise more. So you can’t grow. So you can’t solve large social problems.
Time
- Amazon didn’t return profits for 6 years. People had p[patience as had long term vision of market dominance. Can’t do that in NFPs.
Profit
- Notion that overhead is a negative for NFPs so they reduce costs/forego things that they actually need to grow. E.g. spend less on fundraising so there’s more money for the cause.
- Problem is pie never gets bigger. But fundraising has the potential to multiply the amount of money you have. E.g. Give researcher 350k to cure breast cancer. Or give 350k to fundraising team to multiply it by 554%.
Summary
- Can’t pay profits in NFPs (starves risk, growth and idea capital). Cant advertise. Can’t recruit. Can’t take risks. There’s no spare time to do it and you don’t have the money to do it anyway.
- Don’t confuse morality with frugality.
- Our epitaph should read – we changed the world. Not we kept overheads low.
Elena Plaiter 