5 Memorable Quotes from “The way we think about charity is dead wrong”

The following quotes are from a talk given by Dan Pallotta at the 2013 TED Conference, which is available online and has had over 5 million views.

There are two rulebooks: One for the nonprofit sector and one for the rest of world:

1. Compensation

“You want to make $50m selling violent video games to kids, go for it, and we’ll put you on the cover of Wired magazine. But you want to make $0.5m trying to cure kids of malaria and you’re considered a parasite yourself.” 

2. Advertising and marketing

“But we don’t like to see our donations spent on advertising in charity. Our attitude is, 'Well, look, if you can get the advertising donated, you know, to air at four o’clock in the morning, I’m okay with that. But I don’t want my donation spent on advertising, I want it to go to the needy.' As if the money invested in advertising could not bring in dramatically greater sums of money to serve the needy.” 

3. Taking risk on new revenue generation ideas

“So Disney can make a new $200m movie that flops and nobody calls the attorney general. But you do a little $1m community fundraiser for the poor, and it doesn’t produce a 75% profit to the cause in the first 12 months and your character is called into question. So nonprofits are really reluctant to attempt any brave, daring, giant-scale new fundraising endeavours.”

4. Time

“So Amazon went for six years without returning any profit to investors, and people had patience. They knew that there was a long-term objective down the line, of building market dominance. But if a nonprofit organisation ever had a dream of building magnificent scale that required that for six years, no money was going to go to the needy, it was all going to be invested in building this scale, we would expect a crucifixion.”

5. Profit to attract risk capital

“So the for-profit sector can pay people profits in order to attract their capital for their new ideas, but you can’t pay profits in a nonprofit sector, so the for-profit sector has a lock on the multi-trillion-dollar capital markets, and the nonprofit sector is starved for growth and risk and idea capital.”

“Well, you put those five things together – you can’t use money to lure talent away from the for-profit sector; you can’t advertise on anywhere near the scale the for-profit sector does for new customers; you can’t take the kinds of risks in pursuit of those customers that the for-profit sector takes; you don’t have the same amount of time to find them as the for-profit sector; and you don’t have a stock market with which to fund any of this, even if you could do it in the first place – and you’ve just put the nonprofit sector at an extreme disadvantage to the for-profit sector, on every level.”

“So we are dealing with social problems that are massive in scale, and our organisations can’t generate any scale."

..and the dangerous question: “What percentage of my donation goes to the cause versus overhead?”. For Dan’s thoughts on the problems with that question, then you’ll have to watch the video at The way we think about charity is dead wrong.

#generosity #wekeptthecharityoverheadlow #wechangedtheworld #scaleofdreams #solveproblems

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Source for chart: George Overholser and Sean Stannard-Stockton, Tactical Philanthropy