Philanthrocapitalism in the White House

“It is wonderful to see all these do-gooders in one room,” said Barack Obama, at a White House gathering on June 30th of leaders of America’s best non-profits. The occasion was the long-awaited launch of a $50m Innovation Fund to support the scaling up of the non-profit community’s best ideas for tackling America’s biggest problems at home.

In attendance were many people from organisations featured in Philanthrocapitalism, including New Profit Inc, Ashoka, Echoing Green, the Skoll Foundation, Harlem Children’s Zone, Robin Hood Foundation, KIPP Schools, Bridgespan Group, City Year, Salesforce Foundation, Sea Change Capital Partners,, Nurse Family Partnership, Atlantic Philanthropies, Edna McConnell Clark Foundation, WalMart, the Gap, the Ford Foundation, the Gates Foundation and so on.

As President Obama made clear, he has been thinking about this challenge for a long time – at least since a conference he was at with, among others, New Profit’s Vanessa Kirsch 15 years ago. “Government can’t do everything and be everywhere – nor should it be,” he said. “If anyone out there is waiting for government to solve all their problems, they’re going to be disappointed. Because ultimately, the best solutions don’t come from the top-down, not from Washington; they come from the bottom-up in each and everyone one of our communities.”

“The bottom line is clear: Solutions to America’s challenges are being developed every day at the grass roots — and government shouldn’t be supplanting those efforts, it should be supporting those efforts,” the president continued. “Instead of wasting taxpayer money on programs that are obsolete or ineffective, government should be seeking out creative, results-oriented programs like the ones here today and helping them replicate their efforts across America.” Hear, hear!

Melody Barnes has been appointed to run the Innovation Fund, which will be used to scale up the best non-profit ideas. This has much in common with the $650m “What Works Fund” launched by another longtime partner of philanthrocapitalism, Arne Duncan, the education secretary. Encouragingly, given the danger that money in this sort of initiative can end up being misdirected by the political process, President Obama said that decisions on which are the best non-profits will be fact based: “We’ll examine their data and rigorously evaluate their outcomes. We’ll invest in those with the best results that are most likely to provide a good return on our taxpayer dollars.”

Most encouragingly of all, the intention is to get a second-opinion from the private-sector before taxpayer money is invested – a second opinion that must put its money where its mouth is. The Innovation Fund will require that non-profits “get matching investments from the private sector – from businesses and foundations and philanthropists – to make those taxpayer dollars go even further.”

As we argue in Philanthrocapitalism, to solve the pressing problems facing the world today, a new partnership is needed between the government, business, non-profits and philanthropy. But this new partnership will not work well if it is just a cosy huddle with everyone trying to do everything. There must be a new division of labour, in which each of government, business, non-profits and philanthropy do what they can do best, and get out of what they do not do well.

The encouraging thing about President Obama’s announcement today is that he clearly gets it: “All of this represents a new kind of partnership between government and the non-profit sector. But I can tell you right now, that partnership isn’t complete, and it won’t be successful, without help from the private sector. And that’s why I’m glad that there are some deep pockets in the audience here – foundations, corporations, and individuals. You need to be part of this effort, as well. And that’s my challenge to the private sector today.

“Our non-profits can provide the solutions. Our government can rigorously evaluate these solutions and invest limited taxpayer dollars in ones that work. But we need those of you from the private sector to step up, as well. We need you to provide that critical seed capital to launch these ideas. We need you to provide those matching funds to help them grow. And we need you to serve as a partner, providing strategic advice and other resources to help them succeed.”

Of course, implementation is going to be challenging, to say the least. There is not much of a track record of scaling up non-profits to draw on for guidance. And $50m is a drop in the ocean compared to the scale of the problems (and to the federal budget – the fund should be far bigger, or at least be scaled up fast if things go well).

Yet this is a most encouraging first step. Here’s hoping philanthropists respond to the president’s leadership by rising to meet his challenge. After all, as he put it, “If we work together – if we all go all-in here – think about the difference we can make.”