The Year of Fighting Over What Works

Last year we made a set of predictions for 2010. Some were satisfyingly prescient – the surge in mega-giving we predicted for 2010 became a reality through the Buffett-Gates Giving Pledge (even if we were off the mark in betting on Steve Jobs rather than Larry Ellison to be the Gates business rival who would step up to major philanthropy). On the other hand Tiger Woods did not emerge as the leading celebrity philanthropist, as we had hoped, prefering to reconnect with Buddhism (though maybe this year…).

So what do we expect in 2011? (You can watch Matthew talk about some of these ideas here.)

1) A battle is going to rage over the relationship between profit and philanthropy. Last year we predicted that the flotation of shares in Indian microfinance business SKS would be one of the events of 2010. So it was. Yet so too was a backlash against what critics saw as SKS’s exploitative lending practices. What much of the debate about microfinance revealed is that there is a deep suspicion within the development community of for-profit solutions to poverty. Contrast that to a report by JPMorgan that came out in November, trumpeting a $1 trillion business opportunity in so-called impact investing (doing good while making a financial return). If microfinance ruffled feathers, we are expecting a full on cock-fight as more private profit-seeking capital is invested in sensitive areas like healthcare, education, water and sanitation.

2) Underlying this debate is going to be the growing trend towards the privatisation of aid. Most of the governments of the rich world are going to continue to scale back their aid commitments as chill fiscal winds blow through the G8 club that has been the main aid donor in the past. We do not expect emerging powers such as China to be willing to step up and fill that gap straight away. As government aid recedes, it is going to have to be private donors and impact investors who fill the gap.

3) The good news is that private giving by the wealthy is going to continue to surge, helped by billionaire arm-twisting under the auspices of the Giving Pledge. One tycoon who has signed the pledge that we expect to get serious about fulfilling it this year is David Rubenstein of the private-equity firm Carlyle. At least as significant will be a new cohort of philanthrocapitalists in India – a country where wealth creation has raced ahead of government’s ability to deliver basic services like health and education to those at the bottom of the pyramid. Quality of giving will become just important an issue as quantity for the Pledgers. So far most of the focus has been on how much is given; now there will be more and more questions about how the new super-donors will put their money to work in a thoughtful, impactful way. About time too.

4) In the US the ‘hot topic’ for philanthropy is going to be school reform and globally it will be maternal and child health. Even the act of picking hot topics has critics and supporters. “Global solutions don’t lend themselves to “annual hot lists”, protests Lucy Bernholz, whereas Steve Goldberg thinks that philanthrocapitalism should be ready to take on even the biggest challenges, given the twin crises of resources and effectiveness faced by government. Anyway. Why these two ‘hot topics’ for 2011? The debate about US school reform, and philanthropy’s role in that reform, has been hotting up in 2010 and, frankly, isn’t going to go away. America’s failing schools are, for many philanthrocapitalists, the big strategic threat to the nation’s future so they aren’t going to give up on trying to improve them, even as the protests of their critics grow more shrill. Globally, malaria was the top cause of 2010 and will remain a high priority for Gates and others in 2011. Critics of the Gates Foundation approach say that it is too reliant on technological solutions, which is a criticism of its initial approach to communicable diseases that the foundation broadly accepts, as we discuss in the book. Yet Gates has started to swim deeper into the complexities of health system reform in developing countries as part of its expanded work on maternal and child health. Watch this space.

5) The most interesting country to watch in 2011 is going to be Britain. Prime Minister David Cameron’s ‘Big Society’ vision for reform and renewal of how the UK tackles social problems is going to need to deploy all the tools of philanthrocapitalism if it is to succeed. Over the next 12 months he’ll have to start turning rhetoric into reality.

6) The relationship between taxation and philanthropy is also going to be pushed front of stage in 2011 as fiscal tightening will reopen the debate about the tax subsidy to giving, particularly by the rich. The risk is that this debate simply reduces to bashing the rich. Yet there is an opportunity to revisit tax rules to think about the fairness and efficiency of tax breaks for philanthropy (see, for example, behavioural economics guru Richard Thaler’s recent thoughtful piece in The New York Times or the British government’s tentative steps to consider a mandatory payout rule for grantmaking foundations).

7) One of the sad landmarks of 2011 will be the 10th anniversary of the 9/11 attacks, which will offer pause for reflection on how much progress has been made in undermining support for extremists who preach and practice terrorism. A few philanthrocapitalists are working to tackle this problem around the world, such as the Education for Employment Foundation, but this remains a difficult and controversial area for donors. Indeed, one of last year’s predictions that was, sadly, off beam (the humanitarian response to deadly floods notwithstanding) was that philanthropists would do more to help Pakistan. That our world is still so threatened a decade after the wake-up call of 9/11 is surely a sign that this is an area where innovation and risk-taking is desperately needed.

8 ) Celebrity philanthropy will continue to boom, as will conspicuous philanthropy (with Lady Gaga due to perform at the annual Robin Hood Foundation fundraiser in New York in May). Perhaps Lady Gaga will emerge as the next big celanthropist, though Ed Norton and Ben Stiller are already showing promising signs of doing something big. Wyclef Jean had a terrible time in 2010, because he did not take seriously enough the governance of his foundation. There are few better run foundations than LiveStrong but we wonder how it will fare if the investigations under way into its founder, Lance Armstrong, damage his reputation; hopefully there is nothing to worry about.

9) Mass philanthrocapitalism will increasingly turn to politics. Websites such as Kiva and DonorsChoose, that have built up online communities of givers and micro-lenders, will increasingly try to channel the commitment of their crowds into political influence on relevant policies such as education reform and international aid. If they succeed, expect others to quickly follow their lead.

10) “When even shoeshine boys are giving you stock tips, it’s time to sell” was Joseph Kennedy’s explanation of his prescient decision to get out of the stock market before the Wall Street Crash of 1929. On that basis, maybe, just maybe, 2011 will be the year when social enterprise jumps the shark. Social entrepreneurs are everywhere, it seems. Some are, indeed, changing the world. Many are not. Also, the phrase has become so ubiquitous and now seems to cover everything from for-profit businesses that claim to have a conscience to old-school charities that you have to ask if it means anything at all. Last year we wrote a piece for Innovations magazine where we argued that we need a more nuanced understanding of the institutions and mechanisms that will create a capital curve for social innovation, which can grow great ideas from start-up to scaled-up solutions. The loose language of social entrepreneurship may be holding us back. Maybe in 2011 we will develop a much needed, more precise lexicon to describe what, in the world of social innovation, actually works.