Why Philanthropy Should Push Back Against the Business Mindset

Giving more money to altruistic initiatives should make those programs stronger, right? Not necessarily. Even some of the most well-known, well-intentioned programs have fallen short of their promises, especially ones funded on hunches instead of data.

Take the anti-drug program D.A.R.E. and the anti-incarceration program Scared Straight.

“(Both) received lots and lots of funding without clarity about whether they work,” says our guest Phil Buchanan, President of the Center for Effective Philanthropy.

“There was an assumption that if you educated kids about drugs in a certain way, they’d be less likely to use them,” he says of D.A.R.E.. And with Scared Straight, there was a belief that if you brought at-risk youth to visit prison inmates, you would help them avoid lives of crime. “In fact, it had the opposite of the intended effect,” Buchanan tells us. “Those programs were rigorously evaluated too late.”

Buchanan has spent the last decade working with some of the nation’s leading foundations, conducting in-depth research and analysis. More recently, he has watched with interest – and some trepidation – as business leaders have begun to step into the philanthropic fray.

Facebook Founder Mark Zuckerberg (/> Facebook Founder Mark Zuckerberg (Credit: Jason McELweenie/Flickr)

Facebook Founder Mark Zuckerberg (Credit: Jason McELweenie/Flickr)

Buchanan points to Facebook founder Mark Zuckerberg’s celebrated $100 million donation in 2010 to improve Newark, New Jersey’s failing schools. Five years on, “There’s real questions about the effectiveness of that effort,” Buchanan says.

“Folks sometimes forget that philanthropy is addressing the very problems that have defied market solutions or in some cases are the result of market failure. And it’s hard work, it’s difficult work; these are the toughest problems that foundations and other donors and non-profits are seeking to address,” Buchanan says.

But those challenges are sometimes overlooked or underestimated by the start-up world, according to Buchanan.

He points to Reddit co-founder Alexis Ohanian’s column in Wired Magazine a few years ago, in which Ohanian concludes that the nonprofit model is broken. “The 20th-century way of guilting people into giving to an opaque, inefficient organization with massive overhead is no longer a viable model,” Ohanian wrote. Buchanan responded with Technology Start-Ups Don’t Hold All the Answers for ‘Broken’ Nonprofits, which appeared in The Chronicle of Philanthropy.

“There’s way too much ignorance about the sector,” Buchanan tells us. “Particularly given what an important role it has played in this country, and the fact that our nonprofit sector, with all its flaws and all its faults, and all the ways it could be better, is the envy of the world.”

Phil Buchanan (Credit:)

Center for Effective Philanthropy President Phil Buchanan (Credit: Jeremy Baldwin)

But when well-intentioned projects fall short, Buchanan says transparency is key. “When something doesn’t work, we should be open about it, we should recognize that it’s going to happen, particularly if you’re taking on the big, audacious goals that foundations are uniquely well-positioned to take on.”

Buchanan notes that new philanthropists tend to become effective philanthropists – they don’t necessarily start out that way. “What I wish we could see is a little bit more learning from the past and learning from each other,” he says. “There is sometimes an assumption that, ‘I’ve made a lot of money and I’m only 35’, in Silicon Valley or wherever. ‘I got results quickly, and it was hard, but here I am and I can do the same thing in philanthropy.’ And then you see how much harder it actually is, as everyone from Andrew Carnegie to Warren Buffett has observed, to really wisely give away resources – as Carnegie said – than to accumulate them.”
DISCLOSURE: Tiny Spark and The Center for Effective Philanthropy have both received grants from The William and Flora Hewlett Foundation.


Phil Buchanan on Twitter

The Center for Effective Philanthropy

Buchanan’s favorite nonprofit blog: “Nonprofit with Balls” by Vu Lee.

The U.S. Justice Department’s Office of Juvenile Justice and Delinquency Prevention cites studies questioning the effectiveness of Scared Straight, which was established in the 1970’s. “Decades of research have shown that this approach is not only ineffective, but possibly harmful to youth.”

The U.S. Government Accountability Office reviewed research on D.A.R.E. in 2003 and stated, “All of the evaluations suggested that D.A.R.E. had no statistically significant long-term effect on preventing youth illicit drug use.”

Forbes: “What Ever Happened To Mark Zuckerberg’s $100M Gift To Newark?” In this Forbes interview, Kimberly Baxter McLain, President and CEO of the Foundation for Newark’s Future, says, “We know that money alone cannot solve the education disparities in the city of Newark. We also know that our investments alone won’t completely transform a billion dollar school district overnight. It’s going to take the entire community of parents, teachers, local leaders, public officials, the philanthropic community and others working together to bring transformational change to Newark’s schools.”

The New Yorker: “Schooled.” This long article explains the effects of Zuckerberg’s $100M donation.

Business Insider: “Mark Zuckerberg Gave New Jersey $100 Million To Fix Newark’s Schools, And It Looks Like It Was A Waste”


  1. Tracy

    There’s a lack of respect for teaching in general, with a lot of people assuming they know better than education professionals how to do it. Now we have anyone with money playing “reformer” because they did well at a completely different job. I wouldn’t expect a CPA to understand dentistry or a dentist to be a competent social worker. Even worse is when philanthropists try to undercut teachers unions.

    • Amy

      Interesting point, Tracy. Many argue that money is wielding an increasing amount of power over a number of our public spheres and institutions; public education being just one of them.

      I wonder how we can foster a culture of greater respect for, say, the education professionals you mention and figure out ways to spawn initiatives that are true partnerships, grounded in the expertise of industry professionals and made possible by thoughtful philanthropic dollars. I’m sure many such initiatives exist and perhaps we need to highlight some more of them on our program.

      More broadly, the power imbalance you describe plagues many well-intentioned initiatives in the US and across the globe; those with money and resources (and sometimes little else) assuming they know better than the communities they are purporting to assist. Fortunately, we have come a long way in this regard. There is growing recognition that the most successful initiatives are ones rooted in genuine partnerships, with learning and humility on BOTH sides, rather than the top-down, “reformer” mode you refer to. That outdated approach will unlikely lead to an enduring, positive impact in a community.

      Thanks so much for weighing in. I hope you will continue to do so.

  2. Phil

    The gap you define is often one of viewpoint and relationship vs. the use of a ‘business model’. When we can change the relationship between funder and nonprofit, they can become active collaborators to achieve outcomes by using a transparent and learning focused approach. When we can help a funder act like an investor, and a nonprofit focus on the highest social return for their efforts, success can be aimed at mutually agreed upon results, while a smart performance management approach enables both to have high learning and lowered risk. These elements provide the best risk management we have seen over the years toward achieving the highest human gain for available dollars and efforts.

  3. Marc,

    Thanks for your comment. And, Amy, thanks for weighing in — and for the opportunity to discuss my views with you.

    There’s much to be learned across sectors, in both directions (Peter Drucker wrote a great piece years ago in HBR about what business can learn from nonprofits). But we also need to understand and remember that nonprofit work is distinctly challenging.

    Measurement of results, to choose one example, is very different — and harder — for nonprofits.

    I wrote about this recently in my column in the Chronicle of Philanthropy. https://philanthropy.com/article/Opinion-Technology-Start-Ups/151967 The examples I chose — sweeping generalizations about nonprofits and the applicability of lessons from businesses or start-ups — were just a small sampling of the superficial pronouncements that are so frequently made about what the nonprofit sector “needs”…often from people who have never worked in the sector. I see new ones almost every day. And they’re not helpful if the goal is greater effectiveness.

    A few years ago I did a series of six posts about this phenomenon. You can find them here. http://www.effectivephilanthropy.org/our-starry-eyed-idealization-of-markets/


    • Phil, thanks, I’ll to read your six-part series. Just read one — Companies to the Rescue http://www.effectivephilanthropy.org/companies-to-the-rescue/ — and loved it. The business and nonprofit sectors have a lot to learn from one another. They should
      approach one another with humility.

      Also, I’d argue that some problems being tackled by nonprofits (climate change, notably) do result from what you call “market failure” but others (crappy inner city schools, disease/poverty in dysfunctional nations) were caused by “government failure.” Can we agree that markets/trade/globalization have been the greatest anti-poverty program ever. Hope so!

      I do look forward to continuing the conversation.

  4. A great interview, thanks. There’s a great deal of arrogance and ignorance in Silicon Valley, and the attitude of techno-philanthropists towards nonprofits is irritating, as Mr. Buchanan notes. He’s right that there’s way too much ignorance about the nonprofit sector. He’s also right, of course, that business doesn’t have all the answers, so the nonprofit sector does not need a “business mindset” if the businesses we are talking about are investments banks or crummy airlines.

    That said, I think nonprofits have a lot learn from well-run businesses. They also have special obligations to be honest and transparent about their impact because of their tax-exempt status.

    Let’s try to avoid generalizations about business, foundations and nonprofits. Each sector has its share of the good, the bad and the ugly.

    • Amy

      Thanks, Marc. You raise good points. I think Mr. Buchanan was clear that we must avoid generalizations about both business AND philanthropy.

      Undoubtedly there are well-run and innovative businesses that have wisdom to share with those working in philanthropy and nonprofits. Maybe we should cover their perspective in a future podcast. Suggestions welcome!

      Thanks for listening..


Leave a Comment