May 4, 2000 | Read Time: 7 minutes
From Amazon to Priceline, Internet companies have become America’s new family of non-profit organizations — and they may remain so for a long time. The shock to many of us in the non-profit world is that bleeding money on the way to market dominance is seen not only as a successful commercial strategy, but as the approach of choice. More remarkable still is the fact that people who have succeeded at this strategic gambit are now viewed as possible partners, even mentors, to non-profit leaders, whose entire experience has been a struggle to conserve their ever-scarce funds. While online entrepreneurs search madly for “the new new thing,” non-profit leaders fight fiercely every day to avoid placing their bets on the wrong wrong thing. On its face, the marriage of digital entrepreneurs to non-profit organizations seems ill-advised — even disastrous. We have all heard of isolated examples of bright, young, wealthy entrepreneurs who arrogantly wade into the operations of non-profit groups and tell people how to do their work. But while we should be wary of shotgun marriages between new money and old institutions, successful relationships are, indeed, starting to bud.
In the Gilded Age a century ago, John D. Rockefeller and Andrew Carnegie put their vast wealth to civic purposes and laid the groundwork for modern philanthropy. Today, once again, we can envision people with huge sums of money doing great good, thinking large thoughts, and becoming partners with non-profit institutions that possess precious knowledge and skilled human capital. The challenge is how best to channel technology and the vast new wealth into social and civic causes.
The task could not be more urgent. Non-profit groups are operating under new and increasing pressures. Major policy and financing shifts at the federal and state levels are transforming their work environment. In a post-welfare-reform society, privatization, commercialization, and competition are destroying the comfortable relationships among non-profit, for-profit, and government organizations.
Consider the pressures to transform non-profit social-service organizations. They must employ high-level information-technology capacity to bid on and to manage large contracts to help welfare recipients move into the work force. The growing intrusion and influence of large for-profit companies, like Lockheed-Martin and Maximus, are putting non-profit providers at a distinct disadvantage in the competion for welfare contracts. Non-profit groups must be fully computerized and well managed or they will lose contracts and autonomy to the businesses that can outbid, outmanage, and out-reward them.
When governments off-load their work to contractors, productivity and accountability become key measures of performance. Non-profit groups must integrate best practices in technology, finance, and management — today’s rules of commerce — whether they like it or not. Those that fail to master technological tools and managerial skills will increasingly lose control of their fates and independence. Much has been made of a digital divide separating rich from poor and black from white. But an equally important divide is the one that separates non-profit groups from their commercial counterparts.
So technology and capital are keys to the solution. Indeed, the better application of technology will lead to greater productivity and accountability, which can then spread the values of non-profit organizations from a position of strength.
A signal way to make that happen is to channel the brainpower and financial resources of the technology wunderkinds into philanthropic and civic efforts. But for this to occur, we need to bridge the cultural, experiential, and strategic divides that get in the way of a productive relationship between technology multimillionaires and the leaders of non-profit organizations.
For their part, the wealthy — foundations and individuals — must resist the easy assumption that their wealth is a sign of civic knowledge and professional skill. They need to admit what they don’t know and be willing to learn — something that might be especially difficult for the hard-driving young entrepreneurs who achieved their success through the application of single-minded intensity and unshakable self-confidence.
At the same time, they must realize that non-profit managers have always operated with scarce resources and under tight constraints. They have had to struggle to make ends meet, and still do. They don’t enter their professions to make a killing, certainly not by the time they reach 30. They have never heard of price-to-earnings ratios. Their definition of equity is not the capitalist’s definition of equity. They truly believe that the accumulation of knowledge and patient, long-term service define real social investment.
Non-profit groups have to make changes, too. If voluntary organizations want the new money, they have to peel back fear of or contempt for the marketplace and recognize that this is a commercial republic, by our founding fathers’ design, not a social or egalitarian one. Money has always driven our nation.
The resistance is natural and strong. Charity and foundation leaders are just getting comfortable with financial statements, public-private partnerships, and real returns on investment. Now they have to learn about “value propositions,” “first-mover advantage,” and “exit strategies.” In addition to learning such concepts, non-profit groups must actively seek out the wealthy, using meaningful data and cogent presentations, to help educate them about the abundant possibilities for social and civic change. In a recent talk I had with a wealthy, sympathetic technology entrepreneur, he practically pleaded for a conversation he could understand. He said, “We are very rational people. We think strategically. We hate generalities and we like data. Our decisions are data-driven.”
Non-profit groups also can help their cause by stopping their complaining about being left out of this era of great wealth and worrying that the boom will be over soon. America’s staggering wealth is not going away. At no other time in history have we been so close to solving the great issues of class, race, and economic security. This is America’s Second Gilded Age. Non-profit groups can finally provide solutions to problems that plagued our country even before the First Gilded Age.
Thus there is a real bargain waiting to be struck. Money and technology for knowledge and skill. In Seattle, philanthropists like Bill and Melinda Gates, Paul Brainerd, and others have taken steps that could well serve as a model for the thousands of dot-com millionaires.
First, they are building on their strengths in technology and information systems. Take Mr. Brainerd’s brainchild, One Northwest. This management- and technology-assistance organization serves environmental groups in the Pacific Northwest. It takes Mr. Brainerd’s knowledge as founder of the Aldus software company, as well as money, to solve problems of inadequate information technology. The same is true on a larger canvas in the work of the Gates Foundation’s massive effort to wire libraries.
Second, they act with strategic focus, not throwing their money or their talk around loosely and rewarding success with increased funds.
Third, they take a long view, not expecting a quick-hit victory and a near-term exit strategy. They’ll be around for a while.
Taken together, those are three essential elements of a philanthropic strategy that will make a difference. At its best, it provides both money and technology and creates powerful new networks to solve social and civic problems.
Like the machine age of a century ago, invention and innovation are changing our lives irrevocably. They are producing an influential group of people and foundations with extraordinary wealth — and that wealth is not going to disappear. There has to be something more than market domination and out-of-control consumption, however. Fairness, equity, and human development are also essential in this new information age — and that is what the new bargain offers. The mega-wealthy can provide the money and the technological capability to help answer some of our most pressing social questions — and to nudge old-money philanthropy and non-profit institutions in new, more productive directions. Some have already begun to do so. The need now is to stop the cynicism and questioning of motives and to seize the opportunity to forge cross-sector partnerships that can, ultimately, solve our most pressing civic and social issues.
Edward Skloot is executive director of the Surdna Foundation, in New York. This article is adapted from a keynote address he delivered last month at the annual Nonprofit Executive Seminar, in Seattle.
