Transforming Philanthropy

**From the archives. This piece was originally published on on January 18th, 2007.**

5755_largearticlephoto.jpgGiving well -- giving money which provokes positive transformation over the long haul -- can be like juggling porcupines: things can easily end in tears, and everything keeps moving quickly. But the time has come to think about philanthropy in a new way: it's time for us to invent some new porcupine juggling moves.


Worldchanging philanthropy, both organizational and personal, requires a fine sense of the challenges facing the planet. We must understand the causes of those problems and their proposed remedies. We need a sense of who's doing good work in the field and what their approaches are. We have to be aware of the law of unintended consequences and retain enough self-honesty to avoid the ethical pitfalls of power. This takes both a triage doctor's cold assessment of one's ability to impact a given situation and a good teacher's understanding that change is not always subject to calculation, and that when brilliance emerges it is not always subject to the normal rules. Seeing clearly, being honest and thinking ahead are not easy even when large amounts of money are not at stake.

The worldchanging philanthropist's job grows more difficult as our insight into the interwoven nature of the world's problems grows more clear. We know now that efforts to fix a single problem with a single, simple solution rarely succeed. For instance, it turns out that if we're serious about addressing humanitarian crisis, violence and environmental decline in conflict-torn regions, we'd better be prepared to address them all at once and holistically. We are just beginning to see truly effective philanthropy that thinks about its grantmaking in terms of systems, interconnections, leverage points and payoffs which are slow but powerful. We can hope that this big-picture, long-term giving proves to be a growing trend.

But it turns out that there may be some bigger, more fundamental challenges to the practice of worldchanging philanthropy.


If there is any new guiding principle for running a business that can change the world, it is this: most people still assume that doing good and doing well are at odds -- look for places where that idea is not merely wrong, it's so wrong that it presents a business opportunity.

This thinking is ripping through the corporate world. Okay, maybe not ripping, but at least rippling.

Many philanthropists, however, currently run their foundations and trusts on exactly the opposite principle. Consider the Gates Foundation, the world's largest philanthropic outfit (and one whose giving, while certainly imperfect, has earned my respect) and its counterproductive investment portfolio:

Ebocha, Nigeria - Justice Eta, 14 months old, held out his tiny thumb.
An ink spot certified that he had been immunized against polio and measles, thanks to a vaccination drive supported by the Bill & Melinda Gates Foundation.
But polio is not the only threat Justice faces. Almost since birth, he has had respiratory trouble. His neighbors call it "the cough." People blame fumes and soot spewing from flames that tower 300 feet into the air over a nearby oil plant. It is owned by the Italian petroleum giant Eni, whose investors include the Bill & Melinda Gates Foundation.
Justice squirmed in his mother's arms. His face was beaded with sweat caused either by illness or by heat from the flames that illuminate Ebocha day and night. Ebocha means "city of lights."
The makeshift clinic at a church where Justice Eta was vaccinated and the flares spewing over Ebocha represent a head-on conflict for the Gates Foundation. In a contradiction between its grants and its endowment holdings, a Times investigation has found, the foundation reaps vast financial gains every year from investments that contravene its good works.

The reporters went on to discover that the Gates Foundation has massive investments not only in climate enemies like ExxonMobil (in case you missed the connection, climate change threatens the poor in the Global South most of all and is likely to make many health crises worse) but dozens of other companies that have been cited for consumer fraud, corruption, worker abuses, and ties to gambling, alcohol, tobacco and child slavery. (If you're interested in the investigative methodology behind the LA Times' stinging series, they provide it here.) In other words, the Gates Foundation makes much of the billion-plus it distributes each year to make the world better by investing tens of billions in companies that are actively making the world worse.

This is the dirty secret of much philanthropy: often foundations and individual donors continue to directly invest in actions which undermine and contradict the change they are trying to bring into the world through their philanthropy. The relative silence about this point may stem from our inherited attitudes about "charity": that charitable action is always virtuous (when we in fact know that some actions, even untaken charitably, bring more misery than inaction would have), that it is an act in imitation of the holy (and thus small gifts, even if relatively meaningless and insignificant in relation to the wealth of the donor, should be praised) and that it cleanses (and therefore we mustn't criticize the behavior that lead to a charitable person being in a position to be charitable in the first place).

These three attitudes may offer a valid interpretation of the nature charity within the moral framework of certain religious traditions, but as guidance for effectively using money towards worldchanging ends, they are pretty worthless.

Instead, we might suggest three new rules for major philanthropy:

Practice holistic assessment.

Seek transformative impact.

Offer utter transparency


Let's start with the last of these first: transparency.

Lots of people already espouse transparency in philanthropy. Funders increasingly demand for transparency from grant recipients, and, done sensibly, this is a good thing as it helps major donors to evaluate how best to spend their scarce dollars [though sometimes strictly measurable deliverables and business models don't make sense and may do harm].

Then too, the follow-on effects of Big Philanthropy's actions on distributed, citizen-based giving grow more important by the day. The transparency and accountability demanded by large donors also facilitate small donors' effectiveness.

And regular people increasingly fund worldchanging work, or at least aspire to: whether we're talking about distributed, collaborative microlending projects like Kiva or Trickle Up or micropatronage efforts like GiveIndia (the kind of efforts some anticipate growing massive as the phenomenon spreads), involvement brokers like Universal Giving and Nabuur, direct donation to small-scale worthwhile projects, even the new trend in giving away your bonus as a form of philanthropic tithing, we're seeing more and more examples of efforts to tap the passion of regular people to be involved in worldchanging giving, and transparency and accountability help that process, as people want to know that the dollars they give away are properly spent. The Big Guys demanding better practices makes the Little Guys more comfortable sending in a part of their paychecks.

But those of us managing fortunes on behalf of the public good can embrace a much more demanding form of transparency: open books and open impacts. Funders can reveal how they make their money, what is done to produce those profits, how much it costs them to earn that income, and what is spent on management. We can practice asset management that is not only open books (as usually mandated by law in the U.S.) but also aware of multiple bottom lines.

Such an effort might echo through the whole world of worldchanging funding, from cause marketing to small donor recruitment efforts, much to the improvement of all. People are smart: give them good tools and open information for deciding what's worth doing, and they'll support it.


The second new rule, seeking transformative impact, has as much to do with how we invest our money as what we invest it in.

We need in our philanthropy to publicly raise the stakes. We must seek, define, test and pursue courses of action which fundamentally transform the situations with which we're wrestling, not just merely ameliorate some of their worst consequences.

We must expect more than measurable temporary alleviation of suffering or partial mitigation of disaster: we must expect transformation, in all its slow and ungainly glory. We must aim to make big dents in problems (like ending poverty or redesigning our lives so they heal nature).

We must also support new innovative initiatives which offer at least the potential of changing the game by offering the ultimate proof of the possible: working models. In this context, pilot projects, trial efforts, beta tests and model communities prove themselves to be far more than the fringe efforts they're usually dismissed as: offering the "threat of a good example" is never a waste. Folks out there are trying to build prototypes of the change we wish to see in the world: they deserve our support.

Finally, we must walk our talk when it comes to the importance of new visions.

When I was consulting to NGOs, one of the constants I found most troublesome was my clients' near-complete lack of victory scenarios. Often, we were working without any idea of the future we hoped to build in the place of the coming bleak future of which we warned in our campaign literature.

But it's a stark reality of human existence that we can't build what we can't imagine. We are literally unable to take useful steps towards a distant goal (and most goals worth having are distant -- though Dick Raymond's line that "If it doesn't take fifty years, it's not worth doing" may be taking it a bit far) without being able to at least partially imagine that goal. Yet, time and again, we fund campaign after campaign, uncertain as to whether what we are doing is actually even leading anywhere.

Perhaps even more to the point, the absence of a vision of change fogs the debate: the status quo is present and real, even if somewhat awful, and few people will leave that safe shore and strike out for a distant shore where things might be better, unless they feel they can see that shore and how to swim there. Put another way, Bucky Fuller was quoted as saying "You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete." You can't get people to defect from their current way of doing things unless you offer them a new model.

And yet, all too often, strategic thinking and visionary planning remain unfunded because they lack the sort of immediate return that makes those of us in a position to give feel our gifts are doing something. So our philanthropy comes to mimic the proverbial fogged-in Norwegian sea captain who was utterly lost, but making great headway.

These transformative criteria -- long-term goals, good models, powerful visions -- could provide us with the sorts of instrumentation we need to make sure that our progress is progress towards a goal.

Here, too, wise moves on the part of large philanthropic players can magnify the impact of distributed, citizen philanthropy: by doing these things -- by defining areas in which real success is possible and setting a high bar for measuring that success, funding the sorts of R+D that smaller donors can't pay for (and the private sector mostly won't) and enabling smart, practical people to generate new operative strategic visions of a world that works -- worldchanging philanthropists of real means can create a NGO landscape which allows small donors to invest in funding new approaches that offer a better future, rather than merely offering temporary relief.


Holistic assessment is in many ways the most difficult, and most needed, step.

It's difficult because in the real world, everything's all stuck together: systems function with great complexity, causes and effects are linked indirectly, chaotic and emergent behaviors are everywhere, human beings do bizarre things, and, as the Wombat reminds us, it's all interconnected. It's hard to track the true consequences of our actions.

But act we must. Things need doing. And we are luckily getting better and better at understanding systems, at modeling, at creating indicators, at anticipating second order effects, gaming change and creating generative feedback. These concepts (and others, like network effects and system dynamics) can start to sound like a New Age stew, but that linguistic awkwardness is merely the by-product of rapid growth in our ability to understand the world around us in ways which made no sense to us even twenty years ago. We shouldn't let the murkiness of the language muddy the clarity of the insights we're being offered today.

Today, we have an array of tools for judging the consequences -- intended or not -- of our organizational behaviors. There are guides to ethical corporate behaviors for everything from investing to outsourcing, choosing materials to relating interpersonally (a great many of these guides have been reviewed on these webpages). It may be difficult to know whether all the activities we undertake as organizations are ultimately beneficial, but we can very easily do the due diligence to make sure they are not immediately undermining our stated missions.

Indeed, I will go so far as to say that this is the new standard for doing philanthropic business: all of our actions, not just our giving, must visibly do no harm, and whenever possible, must reinforce the kind of change we're seeing in the world.

To do this, we'll need new research and higher standards. We'll need new socially-responsible investment tools that give the managers of even small philanthropic funds the ability to choose good investments effectively and easily.

Here, too, transparency can become a tool. If philanthropic organizations can have the courage to transparently account for their direct actions of all sorts, not just their giving, they can enlist the knowledge, insight and intelligence of large communities of concerned citizens. They can, as the buzzword has it, crowdsource. Indeed, a not-for-profit, independent community dedicated to evaluating and furthering knowledge of companies' business practices specifically in light of the investment of philanthropic and public trust funds would seem to me to be an idea worth exploring.

But we can go farther than merely making sure our profits don't indirectly stem from genocide or child slavery -- we can actively invest in the good.

Right now, we lack good mechanisms for finding and investing in socially-transformative enterprises on a large scale. This, indeed, is the root of Paul Hawken's contention that SRI is failing. Our choice not to invest in companies which are in the business of making change would seem to arise from two related ideas. The first is the idea that the business of philanthropy is giving away money to do good, and so whatever practices a philanthropic organization uses to get that money are at worst a necessary evil. The second is the idea that program officers are good at giving money, and fund managers are good at getting it, and things are smoothest when they stay the heck out of one another's way.

But it's not at all difficult for me to imagine an organization where all the organization's financial transactions were seen as part of its program, and where those managing the money were seen as a special type of program officer, just as responsible for furthering the mission as those giving the money away.

In a world full of such organizations, the hundreds of billions of dollars in the coffers of these organizations would become a gigantic lever for change, helping to create revenue for giving and propel innovative, worldchanging enterprises at the same time. (We perhaps have begun to see the emergence of such thinking in, though the jury's still out.)

But we need to go further, actively embracing in all our actions the kinds of openness, transparency, network-building and win-win actions that are driving the unfolding of the contemporary movement to change the world. As we invest in change, and give transformatively, and embrace transparency, philanthropic organizations ought also to support open source answers, facilitate the release of information in the public commons and offer incentives (instead of subtle barriers) to groups collaborating together.

Perhaps what's needed is a sort of philanthropic footprint report... a process any philanthropic group could undertake that would help it not only see the direct and indirect effects of its practices, but also to own up to them in public, spurring it on to better behavior where it has lagged, and encouraging imitation where it has excelled.

Indeed, in an era when knowing your backstory is fundamental to intelligent and ethical action, telling the story of our philanthropic footprints may become the new annual report, and the bottom line might just be truly transformative change.


Great article... inspirational for a Friday morning at the start of the weekend. Addressing the root causes of poverty, inequality and exclusion. Duly summarized - with links to LATimes article - and circulated to key colleagues i the Jordanian NGO where I work. The contents will be used to inform our (hopefully critical) contribution to a conference on public private partnerships / CSR to be held at Dead Sea, (Jordan) in a couple of weeks.

Glad to see the links to websites promoting ethical forms of micro-finance: the groundswell of practitioner criticism of the dominant so-called 'best practice' is growing. Here in Jordan, we have interest from OXFAM UK and from FPSC (Spanish NGO), and a call from Government of Jordan's Ministry of Planning and International Cooperation’s to find new approaches to micro-finance that actually lead to increased empowerment not greater indebtedness. This weekend we meet to develop our strategy; your links will be used. Any other good examples out there?

As to the importance of positive visions… well, after a week battling against a "can’t do" culture, that’s why I log on to worldchanging.

Posted by: winkie williamson on 18 Jan 07

Great piece. I am not sure if you have seen the latest round of this, but it looks like the Gates Foundation has decided not to shake things up and is going to stay the course. See LA Times:,0,5906621.story

Never-the-less, it is important that this issue is debated, which is starting to happen, at least in the blogosphere.

Posted by: Aman on 19 Jan 07

Great post Alex, a lot of great information here and a refreshing new look at an important sector.

Posted by: Foster on 19 Jan 07

Great article, you have helped me focus my own thinking. I am a volunteer with nabuur and working to develop a Canadian charitable organzaiton that will provide seed funds to organizations that are working to take control of their own lives and income.


Posted by: Bob Ewing on 20 Jan 07

Foundations are only required to donate 5% of assets. Activists have been wanting law to change so they have to give 10% -- a world changing difference that makes a difference.

Foundations are essentially wealth protection rackets for wealthy people. No critique of their existence to maintain extreme wealth concentration.

Good start.

Posted by: Timothy Colman on 21 Jan 07

Alex, thank you for this comprehensive essay. It is heartening to see that itself practices the three rules of enlightened philanthropy so well- holistic approach, transformative impact and utter transparency. In my view, the existence and nurturing of this site itself is a major act of philanthropy in the full sense of the word. I am sure one day, very soon, a huge asteroid sized endowment fund will drop into from the sky and enable it to move forward with vigor.

A troubling aspect of some sections of is the occasional mention and implication that this is essentially a journalistic endeavor with a mission to "report" on the tools, methods and Ideas. Yes, it does report, but the reporting is a vehicle used to foster, inspire and communicate the motivation, urgency, and the scope of tasks at hand to make a better world (in a hurry). Indeed the implied goal of this site is to transform and counter, within a few years, our primordial inadequacy (since it was not needed for evolutionary advantage) of not being able to "honestly and fearfully" relate to distant ice caps breaking off or tsunamis 10,000 miles away or acid rain caused by smoke stacks in another continent. I don't think CNN or FOX news can aspire to these lofty goals of transformative impact and for that matter nor can magazines like popular mechanics, Omni or Scientific American.

There is no precedence for the function that this site serves. Our lexicon probably lacks an apt word phrase yet. Being a philanthropic institution is an incidental characteristic of this site. "Giving well" and genuine philanthropy is much more than dispensing monetary charity. When Newton sat down and wrote up solutions in Principia for about 190 intractable problems of the day within two years (upon being goaded on by a dogged colleague), that was one of the greatest acts of philanthropy - it transformed the world. Newton was a goof off and was not planning to pen these solutions down and boy are we lucky that he actually got himself to do it. Other examples of such unconventional philanthropy are the principles of non-violence and civil disobedience of Thoreau, Gandhi and MLK, the collectives who fought for women's suffrage and civil rights, Gorbachev's bloodless and brilliant diplomatic coup and more recently, the open source creations of the Apache Web server and Linux. When functions as "a rootless yet blooming, kind of rolling, seed spewing electronic tumbleweed", as poetically described by Bruce Sterling, it ensures that growth of green in receptive minds. That is certainly philanthropic.

I argue now that as an institution is (or should evolve to be) more than a philanthropic organization. It has an additional fourth dimension to the three attributes (or rules) already referred to above for a major philanthropy. That is the open dialogue and conversation that facilitates across the globe about "real and working" solutions in operation today. There is no major philanthropy that allows discussion of how to use its resources. The goal for worldchanging should be nothing less than to harness the passion and the labors of love of millions of like minded "NGO types" working on / hoping to work on sustainable "Low-Profit" initiatives. The goal is to design, refine, incubate and implement myriad carbon-neutral or carbon-negative life-style options to usher in, as Alex states in his editorial introduction, "a new model that allows unprecedented prosperity". This function then is beyond seed spewing. It requires us to get in the mud and do some organic farming.

It is my sincere hope that will evolve to organize itself similar to the very successful open source initiatives such as Apache web server or Linux development communities. These two software products are two of the most robust, flawless and secure products ever created and there is no corporation on earth that can marshall the resources to match the "love of labor" of millions of smart geeks who work on these products only and only because there is not a single dollar involved. Eben Moglen understands it, a lot of us here do, Mitch Kapor at MIT and EFF does, along with many others. It confuses me to no end that Bruce Sterling does not share this view, noting his comment on Eben Moglen's superb talk. It confuses me because Bruce's introduction to worldchanging book is spot on.

So, is a software product? An "operating system" to boot (pun intended)! If software is logic and thought flow based on ideas that is influenced by and at the same time used to manipulate and interleave physical hardware activity, then may be it is. is a software product of ideas and thought flow that draws from and at the same time impacts the physical activity of billions on the planet. The analogy gets even better if we view each human being and living creatures and ecosystem components as discrete computer chips / hardware components functioning as a loosely coupled massively multi-processing system(s)in societies as finite state automata, then yes we could use a new, lean, safe, and robust "general purpose" operating system. An operating system allows and facilitates any number of client specific applications to be developed, tested and implemented. can indeed be the future operating system. If monarchies and feudal systems were like the mainframe OS, the modern democratic "I" societies are like operating on PC windows, then can be the Linux of the near future for planet earth.

Lest I be accused of going off-topic, let me tie this back to; sorry for the long comment.

Posted by: Subbarao Seethamsetty on 21 Jan 07

A good site with good information.
Please let me know how I can be affliated to your organization.

Posted by: Edith Munubbe on 22 Jan 07

Very important ideas. We've got a poll on Aligned Investing - taking a foundtion's social mission into account when setting investment policies - at Lots of votes and several important comments.

Its also important to note, as a visitor did, that the costs of certain investing decisions are not nonexistent, they are simply being carried by other than the investor. They raised the issue of starting a social good investing index against which philanthropic returns could be measured. Anyone want to add to the idea?

Posted by: Lucy Bernholz on 22 Jan 07