How Things Grow

Hello and Happy New Year!

A new poll has Dean Phillips at 21% in New Hampshire - he has a chance to make history on January 23rd! I see Dean as our best chance to put America on a better track.

I spoke at USC a few months ago when a student asked me something important: “Outside of political reform, how can we best bring about a human-centered economy that works for people in the age of AI?”

I responded, “Help a non-profit grow, as they are based on more human-centered goals and values.”

My answer was fine as far as it went. But at present non-profits are structurally capped in terms of their growth and impact due to a number of factors.

This is a subject Dan Pallotta knows all too well. Dan helped start AIDS Rides and Breast Cancer 3-Day Walks, which raised over $500 million for their respective causes. He then became passionate about the fact that non-profits are hamstrung in their ability to truly address our problems. “Why has poverty stayed at essentially the same level for decades?” Dan asks. He gave a TED Talk on this topic and a documentary about Dan’s work and ideas, “Uncharitable,” is now streaming.

So, why can’t non-profits grow to solve our biggest problems? First, charities pay less. As Dan describes, “If you want to sell video games and make $50 million go for it, but if you want to cure malaria we have a big problem with you making $500,000. The median Stanford MBA makes $400,000 a year . . . so it’s cheaper for the MBA to donate $100,000 to charity and get a tax break, become a philanthropist and sit on the board and boss around the head of the charity and have a lifetime of prosperity and accolades than to actually run the nonprofit.”

The second area is advertising and marketing. “It’s fine for companies to spend to the moon on marketing, but we don’t like our donations spent on advertising. It’s one reason why the non-profit sector has been stuck at 2% of GDP and unable to wrestle away any market share.”

The third area is taking risks. “Disney can make a $200 million movie that flops and no one calls the attorney general. If you do a $1 million fundraiser for the poor and it doesn’t bring in 75% return in the first 12 months your character gets called into question. If you can’t take risks, you can’t grow and you can’t innovate.”

The fourth area is time. “For-profit companies like Amazon can invest in a giant project for 10 years in a bet on scale that pays off later. In philanthropy if you tried to build something at scale for 6 years and nothing went to the needy during that time, someone would have lost their job 5 years ago.”

The fifth area is capital. “The for-profit sector can pay people profits to attract capital for their new ideas, but the non-profit sector is starved for growth and idea capital.”

So in summary, you can’t pay as much, you can’t advertise, you can’t take risks, you don’t have the same amount of time, and you don’t have a stock market to fund it even if you find something promising. Says Dan, “From 1970 – 2009, 144 non-profits grew to over $50 million in revenue per year. The number of for-profit companies that grew to that level was 46,136. The problems are at scale but our non-profits can’t keep up.”

I spent 6 years running a non-profit that I founded in 2011 before running for President. People would say, “Non-profits run on two things: passion and money.” Too often we put too much weight on the first and expect people to make do with less or even take permanent vows of poverty in order to do good work.

Dan’s fundamental argument is that we need to rethink the concept of overhead for non-profits if it is funding growth. What’s better, a bake sale that spends 5% on expenses to raise $71 and helps 1 person or a hunger charity that spends 40% on growth to raise $71 million and helps 1 million people? If your goal is to actually solve the real problems, the answer is obvious.

What would a human-centered economy look like? First, it would require a government that channels resources more effectively to improve people’s lives. And second, it would include a thriving non-profit sector that solves problems and rewards people doing the work.

For my interview of Dan click here and for the documentary click here. To reform the political system with Forward click here. For our best shot to change things this cycle, check out the Dean Phillips campaign, which could give rise to a more human-centered economy starting with universal healthcare. He’s at 21% in New Hampshire and rising fast - and the vote is in 2 weeks!