Take 19 minutes out of your day and watch this video. We guarantee it won’t leave you indifferent. It’s a TED talk in which Dan Pallotta summarizes the main points of his book “Uncharitable,” where he shares how everything we’ve been taught and think about charity and philanthropy is part of the cause behind why this sector is so far from reaching its goal.
Throughout the challenging journey of developing Kukumiku, we always kept his views in mind. Sometimes we agreed, sometimes we didn’t, but we were never indifferent. Learning about him will also help you get to know us a little better.
Dan Pallotta (1961, US) has launched numerous innovative non-profit projects since his college years; along the way, he has experienced both success and failure, but has always strived to innovate and do things differently. Here is what his extensive experience has led him to argue:
If you can’t watch it, below is a (personal) summary of his controversial yet eye-opening viewpoints.
Video summary
We hold a belief system with a double standard: one rulebook for the non-profit sector and another for everyone else. This unconsciously discriminates against the non-profit and charitable sector, preventing it from reaching its goals, as explained in the following 5 points:
- Compensation. Or why the charity sector must be non-profit while others are for-profit. While we don’t mind and even praise someone making money from a violent video game or promoting negative values, we reject the idea that someone could earn money helping others. We immediately stigmatize them and label them as parasites. Consequently, the corporate world attracts the most talented and qualified people, while the non-profit sector cannot afford to hire them. This in turn drives the best doctors, economists, advertisers, etc., toward the for-profit sector to the detriment of charity. The wage gap is so wide that anyone torn between both sectors would find it more rewarding to join the corporate world and donate most of their income to good causes rather than working in the non-profit sector.
- Marketing and advertising. Or why the charity sector isn’t allowed to invest in advertising. We don’t like seeing charitable organizations spend on advertising. We want that money to go straight to the charitable cause. Most people are generous and want to help, but you have to reach out and ask them. While we expect companies to reinvest a large portion of their revenue into advertising and more advertising, we don’t allow a charitable organization to spend money to raise more money.
- Risk-taking is not tolerated. Or why the non-profit sector isn’t allowed to innovate. Disney can spend $200 million on a new movie and have it flop completely, but next year they’ll try again. In the charity sector, failure isn’t allowed, which suffocates innovation. And without innovation, growth is virtually impossible.
- Time. Or how the non-profit sector is expected to deliver immediate results. While a company like Amazon took 6 years to turn a profit and nobody had any problem waiting because they knew the goal was big and worth it, no one is allowed to even think of a charity project that hasn’t allocated at least 75% of its income in its first year to the cause it was created for. This forces solidarity organizations to avoid large-scale, far-reaching projects and keeps them from dreaming of growing.
- There can be no dividends. As its name suggests, the non-profit sector cannot generate financial profits, and is therefore flatly denied access to a massive amount of money that ends up flowing to the for-profit sector.
According to Dan Pallotta, these five factors represent major discrimination and a huge disadvantage for the non-profit sector—especially when the goals and problems it faces are on such a massive scale.
Why are cancer organizations far from finding a cure? Or why are organizations fighting poverty not even close to eradicating it?
A very dangerous question
This entire mindset ends up boiling down to a very dangerous question we always ask ourselves when we support a charity:
How much of our money goes to the cause and how much goes toward the organization’s overhead?
We don’t look kindly on the money retained by the organization for overhead. We think that money should go directly to the cause we care about.
This makes us think that an organization keeping its expenses low is morally superior to one with higher overhead, when in reality, in Pallotta’s view, we confuse morality with frugality. What should truly interest us more than the size of an organization’s overhead is the scale of its dreams or its accomplishments.
Contradiction
What good is it if an organization allocates only 5% of its income to overhead if it only manages to raise €1,000, while another spends 40% of its income but raises €1 million? If you are truly interested in the cause they champion, what should really matter to you is what they manage to achieve, not the percentage of their income they invest in growing.
Therefore, Dan Pallotta concludes in summary, if we agree that the problems the non-profit sector aims to solve are large-scale, and at the same time we hold it back from recruiting the brightest minds, don’t let it spend money to raise money, don’t allow it to take risks and fail, don’t give it time to innovate and grow, and deny it access to the vast pool of capital reserved for the corporate world, we ourselves are part of the reason they cannot achieve their goals and make this world a better and fairer place.