Not for Profit

Not for Profit#

Recently, I was listening to the Conversations with Tyler podcast , and he had Stewart Brand on, who said something that stuck with me:

“One of the things I’ve noticed all my life is that philanthropy should be the most creative thing going. It’s got to be more creative than government. It’s got to be more creative than anything the commercial entities can do. That it is not, is just a waste because, especially in America — we’re the most philanthropic society in the world, and yet it’s not as creative as it should be.”

This strikes me as basically true. Very few of the transformative, exciting advances I can think of are born out of a philanthropic urge.

Maybe for some people it’s just not even a question. Of course the free hand of the market or the mighty central planning facilities of the state can do better than people trying to do good for its own sake. But if you share my ideological bent, I think you should be surprised and, as Brand says, a bit disappointed that all the cool stuff seems born out of hierarchical organizations driven by power or profit.

Obviously philanthropies are quite potent at solving organizational and logistical problems. My intent isn’t to say, “the food bank is bad” or “the Against Malaria Foundation never does anything amazing”. But giving food to people without enough food may have been the first altruistic act any hairless ape ever took and there’s nothing particularly transformational about the idea that “A million anti-mosquito nets isn’t cool. You know what’s cool? A billion anti-mosquito nets”. Brand’s premise isn’t that philanthropies aren’t good or aren’t effective. It’s that they’re not creative.

Attacking the Premise#

Maybe this premise is just wrong. That’d let me weasel my way out of the cognitive dissonance the easy way. Maybe not for profit organizations are doing all kinds of creative stuff all the time. I tried to think of some examples.

The Wikimedia Foundation: this one seems really strong. Wikipedia is an incredible resource and I think it can basically only work as a not for profit organization. If the government tried to run it, no one would trust it and if it was trying to optimize for page views and ad clickthrough rates, I think the conflicts of interest would tear it to shreds. If the only creative endeavor a 501(c)(3) organization ever did was cataloguing all of human knowledge into a free resource, I still think they’re doing all right.

Open Source Software: many OSS projects are owned or run through a nonprofit and the community is certainly one of at least partially philanthropic motives. There are too many to list individual projects here but I think it’s clear that creative work is happening in this space. In the modern OSS ecosystem a lot of the work / funding is piggy-backing off of for profit actors though, so I don’t think we can give full credit.

Fast Grants: this is the one Brand mentions in the podcast. The Fast Grants organization tried to fill gaps in COVID-19 research funding. The type of research free enterprise won’t fund (on account of there not being any money in it) and the government can’t fund fast enough (on account of sclerotic bureaucracy). There are probably many opportunities that share the low expected value, high potential payoff, short time threshold properties that make Fast Grants interesting.

Valve Software: okay this one is a stretch, Valve is definitely not a philanthropy. But with their lack of hierarchy or external shareholders and no likely liquidity event in sight, Valve is basically an anarchist collective that happens to make video games DOTA hats. I think it’s clear that Valve has their own set of values that do not always align with the profit motive and while they’re not always effective at shipping video games, they certainly seem to turn the whole industry on its head every few years.

So, can we just ditch the premise? I’m not sure we can. Bold new ideas are certainly born from nonprofits. But are they being produced with a philanthropic motive at anywhere near the scale they are by government research grants or profit seeking companies? I’m not convinced.

Low Hanging Fruit#

One depressing possibility is there’s simply no reason for philanthropies to be creative. The most effective uses of money are zero-sum games. Look at the charities GiveWell includes in their Maximum Impact Fund. Vitamin A supplementation, Malaria nets and medications, Shistosomiasis drugs, direct cash transfers. We are still leaving hundred dollar bills on the ground in terms of improving human flourishing. We don’t need creative new ideas as much as we need to solve hard coordination problems and get the resources where they can do the most good.

I don’t think I buy this argument for two reasons. One is the simple existence of positive-sum games. Malaria nets are good and we should be supplying way more of them. But Malaria vaccines are better. RTS,S was developed by GlaxoSmithKline and Pfizer BioNTech is working on a mRNA vaccine. While the rollout will certainly be assisted by philanthropic organizations (as many vaccines already are) the design and development is still private. It’s possible that as they focus on things like lives saved per dollar or ratio of expenses spent on project philanthropies are too short-termist to come up with changes to the underlying game. I’m not convinced a ton of Americans are pouring over audits before they decide how to direct their money but possibly charities end up optimized for the short term at the expense of research and development.

The other counter-argument is that a lot of charitable giving just isn’t directed towards these types of effective altruism projects. I wish it was! You should give money to GiveWell. I strongly recommend it. People fund arts and museums and other types of much less “urgent” causes. These things are also good, but I don’t think you can make the same argument that they can’t spend money creatively because of the dire needs they address.

The Best Minds of My Generation#

Another disappointing possibility is that this is basically all capitalism’s fault.

A simple story goes like this: doing the best creative work requires the best creative people. If you want to hire great people, you’ll need to bid a lot of money for their labor. Philanthropies can’t do this because the cleverest people end up spending their lives trading junk bonds or optimizing the color blue a checkout button is and finance / tech can afford to pay sky-high salaries.

A different story goes like this: smart driven people used to go into finance so they could make a lot of money doing finance things. They told themselves stories about how greed was good and unbridled avarice was how you grew the pie and made the world better. But now big tech companies hire the smartest and most driven people. They tell a story about positive-sum games and doing well by doing good. An altruistic endeavor gives people things they want for free and so does Gmail. Ad-supported isn’t actually the same as free, but sometimes the magic trick works.

These two stories lead to the same place. Either by buying their loyalty with money or stories about “changing the world” private companies can outbid non-profits for the talent you’d need to do great work.

I’m not sure I buy this argument either. For one, if this was really true, you’d expect philanthropies to be way more dysfunctional. The high bidder for logistics will be Flexport or whatever. The high bidder for advertising and fundraising talent will be private companies. I think there are definitely some dysfunctional philanthropies but there are lots of dysfunctional companies too! In addition, if this sort of ruthless capitalism narrative was true, you wouldn’t see well funded philanthropies at all. Altruism certainly seems to be alive and well, so why not altruistic creativity?

The Best Laid Plans#

Whether you’re a tech nerd who calls it waterfall or an anarchism nerd who calls it high modernism. Whether you’re a general who knows no plan survives contact with the enemy or a boxer who knows everybody has a plan until they get punched in the face. People have a strong sense that if you want to execute a complex endeavor the best solution is not a well considered comprehensive plan but a generative, evolving system that optimizes for your aims. I think the paragon of high modernism in philanthropies is One Laptop Per Child OLPC . The revolution of cheap mobile computing for everyone happened. More Africans have mobile phone service than have running water. But it happened on the back of cheap Chinese smartphones not cute open source laptops.

Free market companies have a way to do evolution. They have easy access to a scoring function (profit) and an ability to iterate quickly to maximize that value function. I think non-profits often don’t. They’re lead by idealists who believe that what they’re doing is valuable and right with no brutally corrective guidance from the market. This is not dissimilar to an idea that Joe Studwell talks about in How Asia Works, the idea of “export discipline”. Developing economies were well served to focus at least some of their production on the export market, not because of the money it brought in but because of the corrective feedback from needing to sell on a free market. No one buys sub-par steel or OLPC laptops.

While it’s tempting to believe without the profit motive companies can be more creative, I think we often see situations where adding constraints boosts creativity. Without a force to push non-profits to evolve and avoid “big plan” thinking, maybe it’s not so surprising they do less creative work.

Fin#

I’m not sure where I come out after all this. I think it’s a really interesting topic and I want to continue developing my thoughts. I’d love to hear about philanthropies that are focused on long-term thinking and creativity. I hope none of this comes off as defeatist or cynical. You can still do a lot of good in the world by donating money to causes you care about and charities that are particularly effective. I really do urge you to check out GiveWell’s website, it’s both an excellent charity and a really useful resource for thinking about effective altruism. But maybe there is also more we could do in the world to help make non-profit organizations powerful drivers of change and evolution.