The Problem

Related to the capacity issue, most donors prefer funding program objectives and have clear limitations as to how much nonprofit overhead capacity they will support, often in the form of percentage ceilings in their grants. In our current system it’s also not in the donor’s interest to support a nonprofit’s organizational capacity over the many years it may need to develop when that nonprofit may only be a grantee for a couple of years. Thousands of new nonprofits literally sprout up each year to meet similar challenges, and as a donor’s program criteria changes so do the nonprofits it supports to facilitate its objectives.

Related to the measurement issue, as the number of donors who’ve made their money from metrics-based endeavors like finance and technology has increased, nonprofits have come under increasing pressure to demonstrate measured outcomes and value for the investment made in them. Nonprofits have also been encouraged to manage themselves more like businesses. This is somewhat ironic because unlike businesses that can invest product and service revenue back into their own operations to grow and in turn better measure their progress, nonprofit mission support and back office operational investment are not so well aligned. That’s because nonprofit donors are first and foremost interested in the nonprofit’s ability to meet their funding criteria, not necessarily supporting the operational capacity that nonprofits rely on them for as well. It’s no wonder then, that many nonprofits see this focus on objective metrics as a donor-driven exercise and an increased and underfunded mandate on them. After all, the ability to measure impact is also related to an organization’s internal capacity to do so. If it relies on multiple donors for support a nonprofit potentially has the added burden of tracking and analyzing multiple and disparate measures based on individual donor need.

A Workable Solution

What if the standard grant was modified so that extra support (above and beyond the agreed upon program and operating budget) came at the end of a grant as long as a nonprofit produced credible outcome metrics that it had agreed upon with the donor? The metrics would not have to be positive in terms of program outcome, just honest, to receive the support. And this extra support would be for a nonprofit’s general operating expenses.

The donor could still decide to limit the extra support to a percentage of the grant. However, if all the donors a nonprofit relied upon provided this bonus support in return for objective metrics, any percentage limitation would be less of a problem in aggregate. Overall the nonprofit’s capacity support might significantly increase if it received its standard operating support in a grant and produced credible metrics to meet the bonus funding requirements of each of its donors as well. This would provide an incentive for the nonprofit to internalize metric reporting in order to increase its capacity support. The nonprofit with increased capacity support would also be in a better position organizationally to provide these metrics — and much more. Just as importantly, it would also provide an incentive for the donor to increase capacity support in order to get the metrics it required – a win-win situation.

Another result of this “bonus” capacity funding support in return for broader nonprofit metric reporting would likely be a natural reduction in the overall funding pool available because of the extra funds provided. However, would that be such a bad thing when about 45,000 new nonprofits come online each year and all compete for limited resources in an already crowded field? Keep in mind charitable giving peaked at about 326 billion in 2007 and has stayed under 300 billion since. Nonprofits with the ability to provide accurate metrics would be more highly rewarded with an increase in their capacity support, while those nonprofits that could not provide such measurements would see their support diminish.

The result would be more objective reporting from healthier nonprofit institutions; more ubiquitous metrics of what worked and what did not; more satisfied donors; and potentially fewer nonprofits that were unable to report on their outcomes. And all this could be accomplished within the framework of current institutional giving practices by better aligning the incentives [and the mindset for mutual success] without significantly modifying the grant giving workflow process.

The answer to why congressional salaries keep going up despite the generally accepted principal that Congress has become more and more dysfunctional is that Congress pay’s itself — and we (the 99% + 1%) allow them to keep doing so. Moreover they have “automated” the process to guarantee they get raises without taking unsavory votes each year.

Did you know that:

1. Members are free to turn down pay increase and some choose to do so. Most however do not. Nowadays, a cost-of-living-adjustment (COLA) increase takes effect annually unless Congress votes to not accept it. (How many votes NOT to accept it do you think there have been? The answer is not nearly enough as this nifty little chart of congressional pay from 1789-2011 demonstrates - (on this issue the majority seems to be able to manage common ground).
2. Members of the House and Senate earned $174,000 in 2009, up from $165,200 two years earlier. the House and Senate saw their salaries go up by more than 5 percent, or $8,800, from the time the recession began through 2009, according to the federal government.
3. Nearly half of the [550 odd] members of Congress are millionaires. The median personal wealth for members of Congress grew to $911,510 in 2009, up from $785,515 in 2008, (according to the Center for Responsive Politics).
4. Overall, members of Congress saw their personal wealth grow by more than 16 percent during the worst economic downturn in the United States since the Great Depression, according to financial disclosures submitted by lawmakers? Meanwhile, the per capita personal income in the Unites States shrunk by more than half a percentage point from 2007 through 2009
5. The gravy train doesn’t stop either. According to the Congressional Research Service, 413 retired Members of Congress were receiving federal pensions based fully or in part on their congressional service as of Oct. 1, 2006. Of this number, 290 were receiving an average annual pension of $60,972 and 123 Members had retired with average annual pensions of $35,952 in 2006.
6. So many members of Congress think it necessary to run the country according to the wish of our founding fathers 250 years ago. Well, here is a good place to start: From 1789 to 1855, members of Congress received only a per diem (daily payment) of $6.00 while in session, except for a period from December 1815 to March 1817, when they received $1,500 a year. Members only began receiving an annual salary in 1855, when they were paid $3,000 per year.

Add all the members of Congress together (435+100) making 174K per year — And the American people could save $100 million annually simply by not paying them for the job they don’t do, (e.g. governing effectively by coming to decisions). — and that’s without counting benefits, pensions, percs and the staffs they have helping them be as ineffective as they are. Over a decade, that’s 1 billion dollars saved, (approaching real money in Washington terms).

So here is a challenge for all the 99%ers — If the millionaires in Congress want to protect the millionaires in America by keeping their taxes low to avoid funding a bloated, oversized, underperforming government, then let’s start by insuring every millionaire in Congress voluntarily agrees to forgo their federal pay and pension.

After all, what sense does it make for millionaires [and non-millionaires for that matter] to be paying taxes to support the salaries, benefits and pensions of other millionaires advocating that they not be taxed to support the very dysfunction they practice daily?
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If the history of the 20th, as well as previous centuries is any guide, [and it most assuredly is], people turning away from democratic institutions and the ballot box in difficult times in favor of street protests does not often end well. Just think of the political choices the mob has made in the past century as an alternative to Democracy and Free Market Systems and how many lives that has cost. That’s not to imply that street protesters don’t have a valid point, because they do. I am always struck however by how obvious and often this trend in history plays out - but how few people notice it while its in process because they neglect to take basic human nature into account.

For example, the weakness of Democracy is that it allows for theocrats’, autocrats’, facists and yes, even the more aggressive and selfish capitalists among us to hijack the system and use it against itself by securing a majority and implementing a non-democratic agenda. The result is inevitably the same. Disenfranchise the real majority long enough and history tells us they will rise up in protest and the whole system will crumble. The concern is what gets built in its place — and history has some uncomfortable lessons for us.

I caution those Libertarian/Conservatives that think each man should fend for himself and government has a small role to play. This is a recipe for disaster where human nature is concerned. It is inevitable in a free market system that without appropriate government controls, regulations and taxation that results in some redistribution of wealth that the most ambitious among us will want to accumulate as much as they can for themselves, and keep it - resulting unsurprisingly in an ever expanding imbalance and eventually, instability. Are their Gates/Buffets and Soros’s out there who give much away? Yes, but their high profile and heralded deeds also speaks to their uniqueness in a world approaching seven billion.

The fact is that in 2011 while there were 120,000 foundations in the United States. About 50% had relatively meager assets under 1 million dollars (58,000) and another 25% (30,000) had assets of between 2-10 million according to the National Center of Charitable Statistics. This means that over 75% of foundations in the US are legal entities (as opposed to bloated institutions) with relatively small endowments - i.e. its not that difficult to create a legal entity that gives away ones money. Yet the number of actual millionaire households in the US as of 2011 is 10.5 million — a total that outstrips the number of foundations by a factor of 100. Even taking into account entities like Fidelity and other donor managed funds that give away money without creating individual institutions there is still a disparity. So it’s obvious the majority (9% of US households) who have wealth are not giving it away wholesale regardless of their low taxes and lifestyles relative to the majority. Moreover, it’s been well documented and cited that providing the most tax breaks to the top 1%-2% has not led to more jobs, increased household wealth across the board or a more satisfied population this last decade. People who accumulate wealth often focus on providing for the security and comfort of close relations first - which is certainly not unreasonable.

The tax code, when applied appropriately and fairly, redistributes some of that wealth to the less advantaged citizenry amongst us, hopefully fostering their ability to be more productive and successful citizens as well. This leads to a stable society while still allowing the most ambitious amongst us to excel and live comfortably — See ancient history: the 90’s in the United States of America — they really happened. Honest!

The ironic moral here is that even if one doesn’t believe that having more obligates sharing the milk of human kindness with one’s fellow man outside of immediate friends and family - it should nevertheless be done out of the same sense of self-interest that prevents that belief. The result of not spreading wealth and power fairly through a democracy, and instead creating special interests to protect it for a chosen few often results in the harbinger raised by the New York Times article — namely instability that threatens all, even the most wealthy among us. History teaches us that when the people rise up in anger they create guillotine’s first for the Hoy Paloy, not each other, although sadly, history records the latter often comes later.

Turning to our erstwhile street protesters and their valid concerns, let’s apply some human nature to them as well. It is true that social networking has done more for bottom up organizing than anything else in the last century — or longer. It provides an unprecedented communication and logistical platform that all can access at once in order to act. Great, but I will hold off my adulation for social networking in this context until it proves itself a tool as adept at creating new vibrant societies as it is taking down corrupt ones that were rotting from the inside anyway. I’m not knocking social networking and the important role it plays in the first part of the process. I am just questioning how well it operates in the second because examples are currently lacking and I am from Missouri (a suburb of New York) – So friggin show me.

Let’s not forget, that we are high order primates [at least the non-conservative, non-fundamentalist amongst us] that still retain many of the traits of the species we evolved from. Primates typically socialize and function in social hierarchies. Indeed, human models of large scale flat communal decision making that stands the test of time are few and far between. You remember those Israeli Kibbutz’s? Models of social equity and communal living in a small country. Have you seen how many Israeli’s are rallying on the streets against social inequity lately?

Inevitably, charismatic leaders and a hierarchy emerge out of group protests to manage the message, maintain a structure long term and move forward with execution. The reality is that getting out on the street and showing enough force to topple a corrupt system is far easier than creating something tangible, practical and functional to replace it. The latter requires far more leadership than the former and a sophisticated organization to implement both policy and practice. If we take the recent Egyptian experience, removing Mubarak has proven far easier and less time consuming than putting something functional up in its place. That may take years. Who will lead it is still an open question, a consensus builder or a strong-arm leader. The Iranians surely didn’t expect that overthrowing the autocratic Shah would lead to the government that now holds them captive almost thirty years later.

The concern the New York Times Article raises is what emerges from street demonstrations that potentially topple hijacked democracies? Is it a newly reconstructed functional democracy or something far darker, as in the case of the Weimar Republic’s collapse in 1930’s Germany. In times of economic stress like these, people demonstrate a tendency towards stability and economic success to the often chaotic freedoms an emerging democracy offers. A more contemporary example of concern are the Russian and Chinese models since 1989 — stable and hardly hard-line facist, but certainly not democratic. How the Arab Spring evolves will also depend on the leadership and hierarchy that evolve from its street protests. If the most organized group in Egypt is the Islamic brotherhood, it stands to reason at least some of their less democratic theology-based policies will prevail in the name of order and stability.

The leadership that emerges from these new street protests in democratic countries may also inevitably determine the fate and future of their systems. So far the model in the US has been the grass roots Tea Party Movement. If the reaction of the audience and prospective leadership in the 2011 GOP Tea-Party-sponsored debates to gay soldiers, the uninsured, evolution, and protecting young women from cervical cancer is any indication - I fear many of us have little to be impressed with, and much to be concerned about.

The article focused on three big ideas, put forward by a philanthropic consultant, a former fund raiser/author and professor of philanthropy respectively at a recent Council on Foundations event.

• Eliminating Philanthropic Jargon
• Supporting Fund Raising Activities
• Jointly Tackling Some of the Biggest Challenges Facing the Country Today

Well, I guess one out of three ain’t bad.

Eliminating Jargon
So what jargon was the focus of suggested elimination? Of the seven phrases noted in the article “capacity building”, “partnerships” and “sustainable” were among those on the chopping block…

One can’t argue with the idea being inspired. Instead of actually tackling problem’s like capacity building, partnerships and sustainability, why not relabel them as jargon and eliminate them entirely from the donor vocabulary? These three areas are typically so challenging to the philanthropic sector anyway that eliminating the words would instantly solve the problems around them. I think Orwell suggested that in his book 1984, no?

And the suggested substitute for words like sustainable? “Verdant”
a safe innocuous word that means nothing like it, as in green with grass or other rich vegetation or of the bright green color of lush grass. Honestly, wouldn’t it be simpler to give out a tomato plant, herb garden or Chia pet with each grant and call it a day instead of worrying about sustainability issues? Incidentally, I don’t have an issue with the large foundation that uses this word in its mission statement, just the consultant’s suggestion that it’s a great substitute for the concept of sustainability. Words after all do have specific meanings — just ask the guy who invented synonyms.

Support Fund Raisers and Their Events
Another out-of-the-box idea… Instead of putting money from the private and corporate philanthropic sector to work on specific programs of interest to them, why not invest that money more wisely into paying fundraisers to host fund raising events for a set of completely different folks to support its programs – private individuals? That way, instead of having two sources of subsidy funding (institutional and individual) and spreading the risk, the nonprofit could redirect one source of program funding it receives into getting the other to pony up instead… Let’s put this idea into context with a real example:

Wouldn’t it be a great investment if PBS put all its institutional support into those quarterly drives to get the public to pledge more rather than to actually support its programming? I mean really, if you’ve seen one Civil War documentary, educational or science program you’ve seen ‘em all, right? And we all know how philanthropic institutions just love to pay for the kind of organizational capacity building that this idea would entail. However, since we wouldn’t call it capacity building I guess the funder’s wouldn’t have a problem with it.

Of course when I was running a program as a foundation director it might still have been rather difficult justifying a grant for a fund raising event to connect autocratic societies to the Internet in order to open them up — instead of actually supporting programs that did that work….

BTW, can you guess the previous occupation of the speaker that suggested this?

Tackle the Biggest Challenges Facing the Country
Put forward by the educated educator, for this solution to work it would require donor institutions actually partnering together; to support targeted programs; building their capacity; and of course insuring they were sustainable, (as opposed to verdant), in order to eradicate the issue in question for all time.

As I said, one out of three ain’t bad.

60 Minutes did an extremely disturbing, heart-wrenching piece on Sunday night (March 7th) called Homeless children: the Hard Times Generation. The piece was about 2 million more kids in the U.S. (about 16 million or 25%) now living below the poverty line — the largest number since the Great Depression. While pundits try to convince us that adjusting [their] tax rates back to Clinton-era levels is the equivalent of socialism and class warfare, that in this country formerly middle class kids are reduced to doing their homework in the dark with flashlights and candles because their parents can no longer afford the electricity. Such scenes are more typical of news reports from Afghanistan — or at least they used to be.

Listening to their stories, one realizes this so-called Hard Times Generation is being taught to appreciate and empathize with the plight of others in ways the generation that placed them in their current predicament seems to have forgotten. I accuse my generation of Baby Boomers, brought up in post-war wealth, with hard fought, limitless possibilities presented to it, for the plight of this new Hard Luck Generation. We bare collective responsibility because of the decisions made on our watch when we were primarily at the helm. Every generation has a shot at running things, and the Swan Song of the Baby Boomers as we reach retirement is:

• The Great Recession.
• Massive debt due to an unsustainable credit binge that everyone indulged in.
• Monumental economic disparity where the top 1% now account for 33% of the National Income.
• Loss of ground in health and education statistics vis-a-vie the rest of the world.
• Loss of standing in the rest of the world due to diminished wealth and perceived strength.
• An unsustainable energy policy that President Carter warned us about.
• Dependence on a military-industrial complex that President Eisenhower warned us about.

Ok, we are the generation responsible for the PC, IPOD, the Internet, and incredible new advances in science and technology. Who knew dinosaurs had feathers, hobbits existed in Indonesia and that depression could be cured with a pill (if you were willing to accept suicidal tendencies as a mild side effect). However, we are also the generation that reintroduced religion and the fuzzy separation of church and state back into our politics after such activism had receded many decades before. We are a generation that used religious dogma to politically divide our citizens while eschewing religious charity in a similar political context to help our fellow man or be good stewards of the earth.

We are also a generation that fought for civil rights and gender equity. That’s worth a gold star or two, right? Unfortunately, the equity balances we created for gender and race were frittered away creating new economic class inequity that threatens to undermine our society. According to Sam Pizzigati, associate fellow at the Institute for Policy Studies in Washington D.C. “Over the past 30 years, the income of the top 1 percent, adjusted for inflation, doubled. The top one-tenth of 1 percent tripled, and the top one-one-hundredth quadrupled. “Meanwhile, the average income of the bottom 90 percent has gone down slightly.” Wages for most Americans didn’t improve from 1979 to 1998, and the median male wage in 2000 was below the 1979 level, despite productivity increases of 44.5 percent. To make up for lost income, credit card debt soared 315 percent between 1989 and 2006, representing 138 percent of disposable income in 2007.

Our parent’s generation won the World War and the Cold War for us, and we repaid them by going on a personal and national spending binge with money we didn’t have. We are now in hoc up to our eyeballs to a debt-holder with same the communist ideology they regarded for decades as the single greatest threat to our way of life. So how in only a few short decades did we move from the “Greatest Generation” characterized by self-sacrificing citizens to this more “Shameful Generation” of Baby Boomers characterized by self-indulgent consumers?

Back in the 60’s and 70’s, with little to lose, our generation fought for its rights. Now it’s fighting just as hard for the right to keep all the tangible stuff it’s accumulated over the decades. The shift started as an SNL parody, Al Franken’s “Me Generation” in the early 80’s, followed by a movie featuring Gordon Gecko and his famous creed “Greed is Good”. Outrageous entertainment nobody could truly take seriously, right? However, Al Franken is now in the Senate and Wall Street took Gecko very seriously, and what started out as parody and entertainment is no longer funny. Our political and private sector leaders have let us down — and those leaders, fellow baby boomers - are us…

Too many of us don’t vote, and too many of those that do are willing to vote against their and the country’s long term interests in the vague hope that the policies promoted will allow them to aspire to the top 1% of the pyramid — and screw the rest. We talk about the future debt burden to our children while we let the kids featured Sunday night on 60 Minutes fall through the cracks in the present. We expect the same level of services and fight any attempt to raise taxes or lower entitlements by throwing elected leaders with practical solutions out of office… Can anyone spell I-N-S-A-N-I-T-Y???

Some blame Ronald Reagan for the national shift. While he may have started the pendulum swinging in the “Right” direction it would be rather hard to reconcile his policies, politics and the way he worked with the other party to his fellow Republicans today. His generation still believed in shared sacrifice and the shining city on the hill — for all Americans. Those who came after him and attempt to speak in his name think more in terms of gated-communities in the valley — for themselves.

I am afraid the America of today is the creation of a cynical, self-interested and entitled generation — my generation. It’s a generation that turned its back on the same tenants that allowed our society to grow, flourish and provide prosperity to the greatest number of people in the post-war era – Ironically the same era that bred it. What are these values that we now eschew?

• We no longer value “Made in America”.
• We no longer require banks to invest in our the economy and not themselves.
• We promote business schools that teach short term shareholder gains at the expense of long term national economic interest.
• We no longer value limited disparity between rich and pure.
• We think we value education even while we revile the educated.
• We think we value science while we employ our political system to undermine it.
• We aspire to ethical standards and a national ethos no higher than a typical episode of Survivor, and The Apprentice.

Societies don’t function stably for very long with the kind of disparities we now allow - with millions of people falling into poverty and unable to afford healthcare and a decent education. There are a lot of things we used to think would never happen in America. We should not be so naïve to believe we will escape social unrest as a reaction to deepening economic disparities at some point in future if we don’t try to correct them. My dear grandmother comes to mind again recounting the history of our Russian branch of the family and the great-aunt who was never quite the same after her husband was killed and she was stoned by fed-up peasants in full revolt as she beat a hasty retreat from the Revolution in 1917.

I have greater hope that this new generation can right things. It knows economic despair, is by nurture more collaborative, and can empathize with its fellow citizens more than Baby Boomers seem to be able to anymore. And it is American, inheriting the same spirit of taking on challenges and overcoming obstacles that is the DNA of our culture. And maybe if we leave them bankrupt, less educated, unable to afford health care and living in a devastated hell-scape of extinct species, depleted energy and natural resources it will spur them to exceed even our “Greatest Generation” in turning things around. After all, we Baby-Boomers were left with just the opposite and look how we are leaving things?

It becomes a threat to our democracy when objective facts diverge from the opinions of sources we trust promoting their perspective as the absolute truth.

When Stephen Colbert exercises truthiness (a term he takes credit for coining) he does so on Comedy Central and frames it as a caricature of the truth. He and Jon Stewart act in the tradition of court jesters speaking truth to power through comedy – And they make it clear that is what they are doing.

Contrast this to a qualitatively different application of truthiness; when Glenn Beck makes truthy assertions on a news channel, relates much of what he doesn’t like about progressives to either National Socialism or Communism, and indicates in all seriousness on his radio show that he is channeling god. He is using truthiness to advance an agenda that he is serious about, on a channel that defines itself as news with the tag line “We Report, You Decide”.

I use Beck as the most egregious example rather than Keith Olbermann on The Left because Beck is helping to spur an actual political [Tea Party] movement while Olbermann just doesn’t have that impact. However, truthiness disguised as news on both the Left and Right is equally problematic. Unfortunately cable networks are in a ratings war and use infotainment to supplement news. Infotainment does not necessarily have to be truthy but if truthiness serves up better Nielsen numbers it’s fair game - In fact, this sentence could sadly be the more accurate mission statement for FOX or MSNBC.

Outside its comedic role caricaturing truth, truthiness plays both a constructive and destructive role in serious issues:

In the case of faulty conjecture on Intelligence data, it has cost thousands of lives in the last decade.

However, it can also be useful for serious issues if it serves to self-correct – That is, if it spurs objective inquiry to get to the truth. This occurred in the vaccination debate where perceived truth based on conjecture and faulty research that vaccines caused autism led to further scientific research — which disproved the original truthy conjecture and junk science and even led to a legal opinion against it in the so-called vaccine court.

Truthiness seems to be used more, and more effectively, on the conservative side of the debate to question objective science like global warming and evolution, and a range of other objective truths, (like Obama being born in Kenya, the so-called Clear Skies Act actually reducing air pollution controls, the mandated use of death panels in the Health Care bill, WMD in Iraq being a slam dunk, etc.).

It’s not that The Right has either a monopoly or is necessarily even better at truthiness. It’s that it is far better at its dissemination; effectively framing its message and forwarding its agenda. That’s because it tends to be more organized, is narrower in its range of perspectives and disagreements, and generally better at subordinating individual viewpoints to achieve the group objective. One is far more likely to be ejected for expressing an alternative perspective. By contrast, the definition of a liberal firing squad is a circle. Gaining consensus on The Left is like herding cats because its modus operandi is the big tent metaphor where all viewpoints are welcomed and honored. Hence more time is spent hand wringing and trying to gain consensus on what the message is then actually implementing what’s been decided. One would be hard pressed to argue that the Obama administration has used truthiness as an official tool either more or more effectively than the Bush administration. Another definition of truthiness is that it is the truth you feel. Bush famously worked from the gut while Obama works from the mind where truthiness runs into problems when confronted with cold facts.

What interests me personally about truthiness is that I defined my career at OSI promoting Open Societies through the provision of access to information on the Internet. As the Internet has evolved however, I see a greater need for mediation that turns information into knowledge and limits the more damaging effects of junk information one receives along with useful information online. Truthiness in broadcast media lasts a news cycle or two and is then lost. Truthiness on the Internet has staying power, and gains new life with every search result. Truthiness flows through the Internet like a free-radical with the potential to cause cancer if not subjected to the antioxidant of objective facts. I want to be clear here that I am not arguing that the Internet and social networking is the problem. That would be like arguing that the lymphatic system is to blame because it provides a vehicle to transport cancerous cells throughout the body. The problem is truthiness masquerading as truth and being accepted as such.

The viral nature of the Internet combined with emergent social networks offers a unique host to transmit truthiness like…. a virus. Online social networks accelerate this trend by bringing like-minded people together in large numbers, allowing opinion promoted as fact to quickly become the truth if repeated enough times and by enough people; for example that our President is Born in Kenya and is a Muslim. There has never been a medium that’s had a more profound effect on mass group dynamics and interaction in 1) real time and 2) without regard to the limitations of geography.

Truthiness existed before the Internet and has always challenged our collective notions of reality by turning the perception of the world of a few into a reality for many. Witness National Socialism under Hitler, Communism under Stalin, Al Queda under Bin laden and the way the perspectives of a handful of individuals with clinically diagnosable mental health issues shaped global realities. I’ll add the Bush administration’s view of the world related to weapons of mass destruction in Iraq, Johnson’s escalation of Vietnam after the Gulf of Tonkin Incident and even the destruction of the Maine in Cuba that precipitated the Spanish American war to demonstrate how truthiness affects global realities in Democracies as well, (and without regard to political leaning).

What is interesting about truthiness in democratic societies and specifically online is that it is not forced by Church or State but democratically promoted and spread by the group and to a more or lesser extent influenced by the celebrity of the truthiness-teller. Witness Sarah Palin’s Twitter and FaceBook following.

You actually only need a few key ingredients to create a new reality - A charismtic personality, the ability to organize, operationalize and disseminate ideas and a typically disaffected public willing to listen to “truths” and act on them through revolution or the ballot box.

So what’s unique about truthiness and its effects in the Internet Age?

Pre-Internet the firewalls to counter truthiness were more pervasive and I would argue more persuasive as well. Ideologies like National Socialism and Communism occurred in pockets of the population that were persuaded [or forced by those previously persuaded] to adopt these truths. Counterbalancing these pockets were always large segments of the population outside the affected geographies that could be persuaded by objective facts that an alternative reality actually existed — and trusted sources in journalism and the political leadership of Democracies that could convey facts persuasively to counter these skewed views of the world

Many of these firewalls have now broken down:

• Post Nixon-era, the real sense of trust in our political leadership has never recovered. It’s a testament to the trust the American people had in its leadership that practicing “duck and cover” to protect against nuclear fallout and even using former Nazi’s to help put a man on the moon once seemed imminently reasonable pre-Watergate if the government said it was ok. With Democrats and Republicans now not even able to sit down to lunch together in the Congressional cafeteria, let alone to do the people’s work, the public’s antipathy and cynicism seems well founded.
• Charismatic politicians have been replaced by persuasive political pundits. Witness Sarah Palin’s transformation and increased public following as she’s transitioned from accountable elected official to unaccountable talking head.
• Pre-Internet, the ability to organize, operationalize and disseminate information to create new realities from skewed perceptions of the world had a much higher opportunity cost. Changing hearts and minds often required years, heavy artillery and a secret police force.
• The nature of the Internet allows truthiness to spread instantaneously and globally, and then to multiply on the medium as entities echo it; until it becomes so pervasive among the trusted sources people now look to for information that it is assumed to be the truth.
• The media’s adoption of infotainment as journalism to maintain ratings has introduced truthiness into a vehicle that we once counted on as citizens of a democracy to separate fact from conjecture masquerading as fact.
• The Internet has had a profound collateral effect on journalism. In addition to traditional jouralism taking on its new entertainment role, the craft itself has been “democratized” so that anyone can call themselves a citizen journalist and use their celebrity to convince people that their truthiness is actually the truth.

The implications of these breached firewalls on our Democracy is not yet fully understood or appreciated — but we at least have a preview of its impact:

Many believe that we are being led by an Islamo-Facist-Communist-Socialist President with a Kenyan Birth Certificate — and that our current economic circumstance is not due to providing tax cuts to the rich, deregulating Wall Street and spending one trillion dollars to find non-existent weapons of mass destruction but rather on misguided attempts to avert financial collapse, invest in necessary education, infrastructure and manufacturing and to fix a health care system most said was broken…

But hey, they heard it on the news and can back it up with “proof” easily available on the Internet….

I believe social returns actually do exist in the world of strategic philanthropy, social entrepreneurship, corporate giving or whatever incarnation of support is provided with the intention of concurrently creating economic and social value. Social returns only look elusive because of the way we seek to measure them, the tools we use to quantify them and the time line we use to address them. In short, the “units of good” we attempt to describe are an incomplete measure of social return which can lead one to the conclusion that they really don’t exist.

The problem is not unlike the Heisenberg Uncertainty Principle:

This Principle states: Certain pairs of physical properties, such as position and momentum, cannot be simultaneously known to arbitrarily high precision. The more precisely one property is measured, the less precisely the other can be measured.

In our case the two measured properties are, respectively, physical and behavioral rather than both physical. However, by trying to measure both in a similar way using Return on Investment (ROI) metrics as a foundation for defining SROI, Steve’s “unit’s of good” issue rears its ugly head. ROI and bottom line consumerism deal with tangible physical transactions whose benefits are measured at the time the transaction is made. On the other hand, Social return on investment (SROI) often deals with benefit derived from complex human behaviors that are less tangible and occur over significant lengths of time after the transaction. We often end up imprecisely measuring the long term behavioral impacts of SROI because we concentrate on measuring the impact of the physical transaction in much the same way we do with ROI.

The two examples below compare the practical implications of ROI and SROI metrics on both the physical transaction and associated behaviors.

Return on Investment (ROI): The Short Term Transaction
In our ROI example, Mr. Jones buys a big house. He does so to maintain a standard of living which also displays his affluence and houses his growing family. As a result of this expensive purchase he makes specific career decisions; works harder into the night; competes harder for that promotion; competes to send his kid to a better school; participates in the community and at the PTA to better their programs, etc…. And all this is completely beside the point related to our ROI metrics….

We really don’t care what Mr. Jones does beyond his decision to purchase the home. The primary goal of measuring and reporting on return on investment (ROI) for his real estate agent happens at the time Jones closes on the home. The agent doesn’t even care about Jones’ other associated transactions (the expensive furnishings, the Mercedes in the driveway) — unless he also happens to own a car and furniture dealership… The agent is only judged on how many homes he sells to how many Joneses.

Social Return on Investment (SROI): The Long Term Behavior
Mr. Smith has been having a tough time of it and is homeless, until the Housing for the Homeless Program puts him into its subsidized housing program. Having a roof over his head allows Smith to get a job he would otherwise not have gotten because he didn’t have an address. It also limits his exposure to illness which takes pressure off the health care system. Once gainfully employed Smith seeks help for his depression and relationship issues and wins back the return of his daughter from foster care. He can now pay his own rent for the home as well. In fact, once participants like Mr. Smith get into homes they are required to pay back the original investment in them either in small installments from their new paychecks or through community service.

The mission of the Housing for the Homeless NGO is about lifting people out of poverty and making them net contributors to society by putting them in homes with all the supplementary benefits this accrues. The transaction involved in getting Mr. Smith in his home is only a tactic Housing for the Homeless uses to achieve these broader mission goals.

Applying the same transactional approach to metrics as in our ROI example — we can measure how many homeless were placed into subsidized housing, and how many subsequently got jobs and paid back the initial investment in them. To what extent the burden was relieved from the health care system is a bit more difficult to quantify as is the success of counseling for many, but it is still possible… Even more difficult to measure is Smith’s increased self-confidence; the fact that Smith raised his daughter differently; that his daughter subsequently decided to go to med school and 15 years later became a doctor serving her community instead of running away from her foster home and becoming homeless herself; that having his daughter back, Mr. Smith joined the PTA and helped develop a new after school program assisting youth in his community. These subsequent behaviors are not easily measured short term or tracked in terms of units of good. The benefits accrue over years – but they are still legitimate socially returned benefits of the program with quantifiable value.

So, in contrast to ROI, measuring real SROI is about the long term behaviors that result from the initial transaction and only partially about the actual transaction itself. Unfortunately, many SROI metrics measure real SROI as effectively as Twitter can relate the core points of a PhD Thesis. Too often, they convey immediate, one dimensional sound bites of an initiative.

The quality of one set of SROI measures over another is often more about how many objective statistics can be related to a specific initiative. For example, technical initiatives like getting kids online often just generate more good objective statistics than feeding hungry kids and trying to track changes in their educational proficiency over time. In the former example, you can not only track how many kids get online but invade their privacy to find out what they are doing with their new found access. Other SROI measurements distinguish themselves by clever assumptions that project rather than really measure impact over time.

So why do we try to quantify complex behaviors that occur over years by applying short term transactional metrics more suited to ROI and calling them SROI? I would suggest it is to justify real time, short term, funding decisions that determine whether social initiatives are supported or not.

This raises a reasonable question: Are current approaches to SROI measurement really about proving actual and holistic social returns on investment? Or are they more about rationalizing further investment in socially responsible programs using metrics that entities investing their dollars are just more comfortable seeing — no matter how imperfect the measurements really are?

It is completely reasonable for program investors to want to measure something that objectively quantifies success, and for those who receive a program investment to quantify and show results. However, to make believe what is being measured in many cases is real SROI without addressing the limitations, realities and reasons for measurement is what I think causes the dissonance between the resourcers and the resourced in the continuing SROI debate.

What is often measured and called SROI are short term transactional impacts. Getting at real SROI is an exercise in objective academic research often best done years after the actual transaction takes place.

I had the opportunity and pleasure to work with MacKinnon at the Open Society Institute when I was dealing with these issues of media censorship as Director of its Internet Program and then as CTO of its Information program. In this instance I must point to what I feel are a few flaws in her argument using Amazon caving into pressure to pull WikiLeaks in the larger context of our First Amendment rights being threatened in the US by online corporate control.

As her founding status in Global Voices Online and the Global Network Initiative indicate, MacKinnon has been at the forefront of the citizen journalism movement. This movement presumes, I think correctly, that the ability to participate in journalism has been democratized. The Internet has created more, not fewer spaces and opportunities to participate. Anyone can take part and in a variety of ways — in this case even a private company that hawks books and electronics as its core business, with a hosting business on the side.

It’s precisely because news dissemination is no longer the monopoly of traditional newspapers, radio and television that that Amazon situation should not be considered as the sky falling. Amazon made a decision to drop certain content it hosts during the Christmas rush to limit the bad press of being perceived as a national security risk in its own country. Presumably, it simply didn’t help its large screen TV sales… Today however, there are a variety of other citizen journalist sources, corporate and private, and about a gazillion other hosters online that can pick up the gauntlet without incurring the same legal risks Amazon decided it would not take — And any American with Internet access and the will can find them. To underscore this, in the comments section on MacKinnon’s commentary on CNN a commenter freely offered that while the WikiLeaks domain may have been killed it still had an active IP address that he provided. Placing that IP in my browser transferred me to yet another IP, and via the magic of the Internet, to the WikiLeaks site.

As MacKinnon correctly points out, “Speech within the kingdom of Amazonia is not protected in the same way that speech is constitutionally protected in America’s public spaces.” She also points out that the new virtual realm “is largely made up of virtual spaces that are created, owned and operated by the private sector” — maybe largely, but certainly not completely. The fact that public spaces continue to exist on a growing Internet is a net addition to sharing information that did not previously exist in the pre-Internet era when corporate monopolies largely controlled news dissemination.

MacKinnon has decided to draw a line in the sand about a company’s self-censoring a form of free speech that is near and dear to her heart. I haven’t heard her commenting as vociferously on the sexual content (also classified as free expression in our country) that these same companies regularly self-censor as part of their user agreements — and which could at least be argued to be less life or career threatening on a global scale than WikiLeaks data might turn out to be.

MacKinnon points a number of times to the Internet age responsibilities of “companies that are now the arbiters of public discourse” – but as opposed to what? The responsibilities of the pre-internet age media outlets that used to control the public discourse?

As the citizen journalist movement has broadened the discourse to include new players, I’d argue that we must be realistically aware of their limitations related to the public interest even as they participate in the public discourse. Anyone that has read an Assange interview or one about him could reasonably question his balance of public interest versus self-interest. Similarly, most companies exist to make a profit. The extent of their public interest is defined by their accountability to 1) their shareholders, 2) the demands of their customers and 3) regulation which define the legality of their operations. Amazon made a legitimate business and legal decision weighing the number of customers who would stop buying Wii’s because it censored certain speech versus those who would not purchase because it was labeled a threat to their national security. Assange made a similar calculation about his reputation in publishing the leaked and potentially illegal data.

Ironically, a controversial case like WikiLeaks truly showcases the value-add of traditional media companies that do exist to serve the public interest. Unlike the larger group of participants that now engage in citizen journalism around the world, an entity like the New York Times has the investigative, analytical and legal wherewithal to put 250,000 raw emails into context for its readership and vociferously defend its constitutional right to publish them. In pursuing Amazon the erstwhile Senator Lieberman went after a rather soft target. He didn’t presume to mix it up with the New York Times.

I noticed as well that MacKinnon chose a traditional media outlet, CNN, to get her opinion out to a broad audience as did WikiLeaks in choosing traditional media outlets to share its data. So maybe this discourse is less about the new public interest responsibilities of citizen journalist participants both public and private, and more about valuing and protecting the institutions that have traditionally existed to serve those interests. Traditional media outlets do have an important place in this new era of citizen journalism and it would be a shame to view them as archaic and obsolete precisely because their public interest credentials are so clearly defined. They still present powerful public forums to make one’s case.
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In it she states:

“The focus on innovation and scale has been met with a healthy dose of skepticism. Some of the nonprofit sector’s greatest champions and most thoughtful leaders have voiced concern that the focus on innovation and scale is just the latest fad, that it doesn’t appropriately build on what we know works, and that it is an insider-only conversation with little relevance to the broader field. When innovation and scale are framed as ends in and of themselves, these criticisms are entirely valid. But when scale and innovation are exclusively in service of growing the impact of important programs, these criticisms fall away.”

In my experience as a grant maker [as the OSI Director of the Global Internet Program] scale and innovation are two very different things. Most funders are exceptional at one and terrible at the other, and the same is true of the private sector related to socially responsible innovation. It turns out that when and how the various sectors intervene is critical to successful outcomes related to scale and innovation.

Innovation is something foundations are quite good at, in particular funding seed and pilot projects that the private sector would not support to begin with. For example, in 1996 high speed internet access in Romania was extremely expensive and limited. So OSI put in mobile satellite communications for high speed Internet access in the 4 major cities spread throughout that country. They were installed for the priority use of the educational (primarily high school) and nonprofit sector. As a business proposition, this was not thought of as a good investment, yet the community was in dire need of being served – and the foundation’s primary priority.

On the other hand, Foundations are often terrible funders of scale; more often than not because it involves some sort of sustainability model to keep the project going at these increased levels of investment. While funders talk about sustainability, they often mean “finding someone else to continue funding this rather than us”. When faced with real business proposals to keep a successfully scaled socially responsible project going, foundations are often conflicted and confused. You’ll often hear concerns voiced that the nature of the revenue model puts the project in jeopardy as a traditional nonprofit grant. To be both socially responsible and still generate revenue remains a philosophical issue in the nonprofit sector for both funders and nonprofits. However, unless scaled projects move from funder subsidy to government grant subsidy, some type of underlying business model is needed to support these larger scale initiatives in perpetuity – particularly in these times of reduced government spending and foundations that typically do not fund large amounts forever. Finally, typical funder program criteria geared to piloting innovation may have the unintended consequence of limiting the ability of a larger scaled project to thrive.

Returning to the OSI experience again, once it had placed the Internet satellites in Romania, the foundation assumed in five years it would either be the only entity offering such a service, or it would create a local market for it. Fortunately for the foundation, within 12 months it had 14 competitors vying to provide service to a variety of constituencies. You see, the problem was that resources were tight in Romania at that time for research and development, making it a very risky investment to test. Once the foundation stepped in with resources to fund risky innovation that proved successful, it eliminated much of the downside risk, allowing others to follow its lead. Now the foundation was offering a subsidized service to its constituents and not long afterward the business community came to OSI to ask it to start charging even a nominal fee and/or restricting the user base because the subsidies were actually undermining the market the foundation had created. A broader audience tangentially related to its constituency were also using it. The foundation complied when it felt an appropriate inexpensive price point could be found that intersected with its subscriber’s new found understanding of how the Internet (a previously esoteric concept) could be useful in their lives. Some subsidies were also still provided to the core student population as well. When it came time to really scale the ISP service the foundation had nurtured it actually spun it off into a real business which could be bought and scaled by another commercial ISP that eventually bought it.

The moral of this story, and the one I suggest in my Book The Dynamics of Technology for Social Change, Lessons Learned from the Field is that subsidy funders like foundations are actually wonderful seed funders for socially responsible innovation that doesn’t have an immediately recognizable business model. However, once a socially responsible project is successful, ready for scaling and the next tier of funding, it should have a good business plan and resource input from the private sector. The private sector is typically better at scaling successful enterprise, social or otherwise. Conversely the private sector is often terrible at funding pilot social innovation, often sacrificing the “social” part for profit to maintain its viability. In effect the baby gets thrown out with the bathwater before it has a chance to mature.

As an example, had the OSI ISP project in Romania started as a business rather than a grant, we would have had to sacrifice our poor nonprofit and student users who could not initially pay for such an abstract thing before using it and prioritizing it as a useful resource in their lives. It would have instead had to concentrate on users who could immediately pay. However, by starting as a social enterprise with a grant, the foundation first satisfied its constituency while concurrently proving the project economically viable. Only then was it scaled as a business investment when it was strong enough to defend continuing to support subsidies for some nonprofit and educational users; had proven it could convert people who now understood the value of the Internet into paying customers; and additionally proved it could attract new paying users.

This type of initial philanthropic approach followed by private sector scaling [to a greater or lesser degree] is certainly not unique to OSI. Sesame Street, PBS Newshour, Grameen Bank all followed similar trajectories. Innovation and scaling are both necessary ingredients to promote successful projects – but who is involved in these two areas and at what point are critical to a project’s success. In my experience, socially responsible projects invested in too heavily and too quickly by subsidy donors can ruin said projects as well. You see this often in the developing world where some social entrepreneur comes up with a ground breaking and unique idea that is promoted at one or another International donor’s conference. The project becomes a funder darling and immediately many donors pile on and smother it with resources before a good operational/business plan is in place to expand appropriately. The water “play pump” comes to mind as a recent, but by no means, unique example.

Not every project lends itself to both social and entrepreneurial approaches. Human rights work comes to mind as an example where the mission is often to spread information about abuse far and wide, and a revenue generation model might limit that mission by allowing only those willing to pay for it to access the information. However many socially responsible projects do lend themselves to a hybrid approach of innovation and scaling. The education, health care and arts & culture sectors for example have long attached revenue models to socially responsible service provision.

In the final analysis, it is useful to look at socially responsible investment with a venture funding lens — in so far as it starts with “angel funding” and progresses in tiers with funding and other resource support as a project matures. The private, government and philanthropic sectors would do well to partner in defining at what point its best for the different sector actors to invest in and help a socially responsible project innovate and scale — and what the most positive role is for each to help market it, fund it, operationally support it, etc. at different stages of a project’s development.

“Overreliance on measures and statistics can become a crutch to compensate for a lack of confidence and intuitive and experiential knowledge. Could it be that the obsessive measurement form of strategic philanthropy has become the Swiss army knife of effective philanthropy—handy in a pinch but perhaps not always ideal?”

I think this focus on measurement and metrics is the natural reaction to the shifting underlying dynamics of grant making/giving even as the field clings to earlier conceptions of how philanthropy should work — and that our new reality makes obsolete.

There is a fundamental difference in how donor’s give and assess grants when their choice is between a few A-List nonprofits in various sectors providing services –to- having to choose from an average of 44,000 NEW 501c3’s a year being created. All are competing for 300 billion per year in annual giving which hasn’t risen in some years. So demand keeps increasing while supply does not. The most fundamental change is that giving to support the nonprofit organization’s mission objectives has morphed into a set of more sophisticated foundation gate keeping criteria to filter between tens of thousands of new organizations… In affect philanthropy is now supporting its program criteria/goals first and then the nonprofit’s – although both perceive they are supposed to be supporting the nonprofits.

With all the new choices, foundations naturally switch between nonprofits year over year to meet their more sophisticated program goals. This inevitably leads to the old paradigm of a handful of nonprofits receiving years of support (by virtue of their being the only game in town) breaking down… So now the nonprofit is left wondering why the foundation no longer supports what *IT* actually needs instead of the foundation’s program mission.

As a natural outgrowth of filtering out nonprofits and selecting on their own program criteria, foundations additionally now want to measure the results of the nonprofits they are funding against their stated objectives even while they underfund the nonprofit infrastructure to meet these demands… (this is an outgrowth of American Society’s quarter century drive to apply a bottom line/commodity-like ethos to everything including what used to be measured on more ethical/moral/social scales). This creates further dissonance in the nonprofit that seems to be losing on both sides of the equation – Underfunded of the capacity support it most needs -> to meet ever more stringent measurements -> in order to satisfy the donors program requirements…

Here is where the “dance of deceit” comes in and why measurement is so nebulous and difficult – because there is an active but discreet effort on the part of nonprofits and often sympathetic program officers to shift resources earmarked for the grant’s programmatic goals (the desire) to administrative capacity (the need) so that the grantee can function to satisfy the grant.

The problem is, transparent measurements would unmask what many appreciate happens throughout the sector – and that might require everyone to address these issues directly – which would cost far more money. After all, it is still cheaper to fund a nonprofit to meet foundation mission objectives and even lose 20%-25% of the funding to inefficiency then it is to fund the capacity of a single nonprofit year over year until it is strong enough to do so on its own.

Let’s also remember that efficiency is not efficacy – many nonprofits are effective even while extremely inefficient because of the dedication of people working even without adequate resources. So the status quo continues in the same way many poor countries with terrible governments survive - on remittances from a shadow economy from its hard working citizens abroad. The shadow economy in our sector is this discreet shifting of resources from the programmatic to administrative capacity when the grant is given - supported by dedicated nonprofit staff and fuzzy measurements of what is occurring.

The greatest irony is that nonprofits will in fact have to bow to more bottom line measurements if they wish to survive, not because of foundation decree but because of the changing environment. If giving remains stagnant at 300 billion in this weak economy while nonprofits continue to be created at a 44K annual clip – eventually nonprofits will get smart and realize that they need some sort of business development in order to generate enough resources just to survive. These new revenue requirements will drive the need for better metrics – not because the foundations want them but because the nonprofits need them.