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‘Dead Wrong’ Charitable components during meetings may have had a major growth spurt in recent years. But it turns out that how we feel about charitable giving isn’t modern at all, according to Dan Pallotta, author of Uncharitable: How Restraints on Nonprofits Undermine Their Potential.

Our beliefs can be traced back, Pallotta said during a talk at TED 2013, to America’s 17th-cen- tury forefathers, the Puritans, who were aggressive capitalists but also Calvinists who were taught that self-interest was a sure road to damnation. Donat- ing to charity — calculated at five cents on the dollar — was the way they did penance for making a profit.

This lingering Puritan notion about “self-deprivation [being] our strategy for social change” is crippling our ability to make lasting, meaningful progress toward remedying the social ills that continue to plague us, Pallotta said. “The things we have been taught to think about giving and about charity and about the nonprofit sector are undermining the causes we love and our profound yearning to change the world.”

Pallotta’s TEDTalk, “The Way We Think About Charities Is Dead Wrong,” has already been viewed two million times. Here are some highlights:

“Our social problems are mas- sive in scale, our organizations are tiny up against them, and we have a belief system that keeps them tiny. We have two rulebooks: one for the nonprofit sector and one for the rest of the world that discriminates against the nonprofit sector in five areas.”

1 Compensation “We have a visceral reaction that anyone would make very much money

helping people. Interestingly, we do not have a visceral reac- tion to the notion that people would make a lot of money not helping other people. If you want to make $50 million sell- ing violent videogames to kids, go for it and we’ll put you on the cover of Wired magazine. But if you want to make half a million dollars trying to cure kids of malaria, you’re consid- ered a parasite.”

2 Advertising and marketing

“We tell the for-profit sector to spend, spend, spend on advertising until the last dollar no longer produces a penny of value. But we don’t like to see our donations spent on advertising in charity. As if the money invested in advertising could not bring in dramatically greater sums of money to serve the needy.”

3 Taking risks on new revenue ideas “Nonprofits are reluctant to try any new, brave, daring, giant-scale fundraising endeavors for fear that if the thing fails, their reputations will be dragged through the mud. But we all know that when

you prohibit failure, you kill innovation.”

4 Time “Amazon went for six years without returning any profit to investors, and people had patience. They knew there was a long-term objective down the line of building market dominance. But if a nonprofit organization ever had a dream of building mag- nificent scale that required that for six years, no money was going to go to the needy — it was all going to be invested in building this scale — we would expect a crucifixion.”

5 Profit to attract risk capital “The for-profit sector can pay people profits in order to attract their capital for their new ideas, but you can’t pay profits in a nonprofit sector, so the for-profit sector has a lock on the multitrillion-dollar capi- tal markets and the nonprofit sector is starved for growth and risk and idea capital.

“A very dangerous question [po- tential donors ask] is, what per- centage of my donation goes to the cause versus overhead?

There are a lot of problems with this question. First, it makes us think that overhead is a nega- tive — not part of the cause. But it absolutely is, especially if it’s being used for growth. It forces organizations to forgo what they really need to grow.

“Our generation does not want its epitaph to read, ‘We kept charity overhead low.’ So the next time you’re looking at a charity, don’t ask about the rate of their overhead, ask about the scale of their dreams — how they measure their progress toward those dreams and what resources they need to make them come true. Our generation’s enduring legacy should be that we took responsibility for the thinking that had been handed down to us, that we revisited it, we revised it, and we reinvented the way humanity thinks about changing things.”

To watch Dan Pallotta’s TEDTalk and learn more about his work, visit danpallotta.com.

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