Awesome TED Talk: The Way We Think About Charity is Dead Wrong

In this “persuasive, inspiring, and informative” TED talk, Dan Pallotta shares piercing insights as to why America is focused on capitalism, how that created charity, and why charity is broken. Dan calls out:

…the double standard that drives our broken relationship to charities. Too many nonprofits, he says, “are rewarded for how little they spend — not for what they get done“. Instead of equating frugality with morality, he asks us to start rewarding charities for their big goals and big accomplishments (even if that comes with big expenses). In this bold talk, he says: Let’s change the way we think about changing the world.

In the end, Dan claims that everything the donating public has been taught about giving is dysfunctional… Check out the full video to transform the way society thinks about charity and giving and change.

Key messages from Dan’s talk are:

I. Do charities still have a place in the world as businesses are becoming more socially responsible?

Yes. Inevitably, a portion of the population will always be left behind. “Philanthropy is the market of love… its the market to reach all those that the other markets don’t reach”. The nonprofit sector has to be a serious part of the conversation?

II. The Nonprofit sector is discriminated against and is treated differently from the for-profit sector.

As a result, the proper talent doesn’t enter the market, people can’t find the right organization to support, organizations can’t take risks, and donors aren’t patient enough to wait for stories of their impact.

1. Compensation. You want to make 50 million dollars selling violent video games we’ll reward you by putting you on the cover of Wired magazine. But try and make 1/2 a million curing malaria and you’re considered a parasite. The system is setup to reward people with corporate jobs who donate money, not people that commit their careers to impact.
2. Advertising and Marketing. The for-profit sector is encouraged to spend as much time as possible to to keep generating revenue. However, money spent on marketing for fundraising is frowned upon, even though investments in marketing drive donations. Charitable giving has been stuck at 2% of GDP for the last 40 years because it isn’t allowed to market.
3. Taking Risk in Pursuit of New Ideas for Generating Revenue. Nonprofits are penalized for taking risks on scaling new fundraising endeavors because if they go wrong, there is massive backlash. Meanwhile corporations are encourage.
4. Time. Amazon.com took 6 years to return profit to investors. But if a nonprofit tried to build scale for 6  years before fixing a problem they are ostracized and shut-down.
5. Profits. Nonprofits aren’t allowed to make profits, and so there is no investment market to help support nonprofits that want to scale.

III. Focus on Where Money Goes in Charity Rating Systems Creates Problems

We’ve been taught that charities should spend less on fundraising so that more money can be spent on the cause. However, if spending money to grow fundraising will result in even more funds, then why can’t nonprofits spend money there? Donors don’t want to pay money for overhead, and so organizations are choked.

IV. Next Time You Look At a Charity, Don’t Ask About its Overhead, Ask About the Scale of its Dreams.

“That would be a real social innovation”

You can watch the full video here.