B-School Paper On CharityFocus

Posted by Nipun Mehta on Jun 21, 2007
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Recent Columbia B-School graduate and CF Tiger Team member Birju apologetically tells me, "I wrote that paper on CharityFocus for my class."  "Oh yeah, how did you do?"  "Got an A."  "Wow. Really?"  "Actually, an A+.  My professor couldn't even believe that such an organization exists!"  "Gee, I wonder what you wrote about CharityFocus?!?"  "Well, I don't know if you'll like it, and I don't want it ever dampen your gift-economy enthusiasm, so I didn't send it to you."

But alas, I finally got a hold of the paper. :)  He describes CF as:

Two of the major paradigm shifters within this organization are the belief in a ‘gift economy’ and the belief that being the change changes the being.  CharityFocus comprises of "Generosity Entrepreneurs" who creatively leverage new ideas and technologies to promote a gift economy. A gift economy is an economic system in which goods and services are given freely, rather than traded. In a market economy, one's wealth is increased by "saving"; in contrast, in a gift economy, the theory is wealth is decreased by hoarding, for it is the circulation of the gifts within the community that leads to increase -- increase in connections, increase in relationship strength.  On the idea of being the change, it is that idea that fuels the goodwill to keep this experiment going.  The team members themselves are seen as beacons of change in the world, and from the outside it seems as though that is a major part of the reason for its success.
And then goes on to add:

The main issue with the viability of this model lies in the non-solicitation of funds.  This is counter-intuitive to most all other non-profits where there are basically fights between organizations for funding.  This also requires courage, but the benefits are tremendous.  No additional time spent simply trying to get people to understand the value being provided, no additional time spent fighting fellow organizations to prove who can ‘help more.’  This is where Nipun provides an understanding of the methods to his madness.  To solicit funds, an organization ends up making promises for the future and creates a vision of the future.  In this era of rapid change, it is increasingly difficult to predict such a future.  Consequently, the organization ends up spending its time attempting to appease the people providing funding and showing them what they want to see.  Instead, a non-profit that doesn't solicit funds speaks more accurately by implicitly saying that there is no guarantee of what is going to happen in the future.  However, if the funding source looks at the work in the past, thinks it has merit, if the source likes the values of the organization, then it invests, and that investment is much more than a simple donation of money.  Because of the lack of solicitation, most funding sources find CharityFocus on their own, and it quickly becomes a situation where the person says “I’m not only a funding source, I’m also a member.”  Such authenticity from the non-profit helps an effort be more self-organizing, and in turn, more innovative.  Because the non-profit no longer wastes time simply trying to appease funding sources, the time is spent being able to think creatively towards value-creating solutions.
And his concluding paragraph:

I don’t know where I stand personally.  I would like to believe it could work in a larger context, but I also notice in myself what I believe exists in society: on aggregate, a need for security, a distrust in others, and a belief in the greed and selfishness of society.  Consequently, while I believe this can be an extremely satisfying way to live and successful in niche markets where the prerequisites are satisfied, I also believe the greater majority of the populous will not be involved in it.  However, it is clear that those following this type of paradigm, and CharityFocus specifically, have happened upon an exciting way to do business.  As more continue to jump on the bandwagon, there will continue to be new and innovative ideas to tackle the issues that have cropped up to date.

How awesome.  Birju, thanks for spending time to understand CharityFocus!   Most of us still are struggling to figure it out. :)

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