[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:00.99,0:00:04.26,Default,,0000,0000,0000,,I want to talk about social innovation
Dialogue: 0,0:00:04.26,0:00:07.61,Default,,0000,0000,0000,,and social entrepreneurship.
Dialogue: 0,0:00:07.61,0:00:10.77,Default,,0000,0000,0000,,I happen to have triplets.
Dialogue: 0,0:00:10.77,0:00:13.12,Default,,0000,0000,0000,,They're little. They're five years old.
Dialogue: 0,0:00:13.12,0:00:14.19,Default,,0000,0000,0000,,Sometimes I tell people I have triplets.
Dialogue: 0,0:00:14.19,0:00:17.51,Default,,0000,0000,0000,,They say, "Really? How many?"
Dialogue: 0,0:00:17.51,0:00:18.95,Default,,0000,0000,0000,,Here's a picture of the kids.
Dialogue: 0,0:00:18.95,0:00:22.100,Default,,0000,0000,0000,,That's Sage and Annalisa and Rider.
Dialogue: 0,0:00:22.100,0:00:27.90,Default,,0000,0000,0000,,Now, I also happen to be gay.
Dialogue: 0,0:00:27.90,0:00:30.39,Default,,0000,0000,0000,,Being gay and fathering triplets is by far
Dialogue: 0,0:00:30.39,0:00:32.97,Default,,0000,0000,0000,,the most socially innovative, socially entrepreneurial thing
Dialogue: 0,0:00:32.97,0:00:35.30,Default,,0000,0000,0000,,I have ever done.
Dialogue: 0,0:00:35.30,0:00:39.77,Default,,0000,0000,0000,,(Laughter) (Applause)
Dialogue: 0,0:00:39.77,0:00:42.81,Default,,0000,0000,0000,,The real social innovation I want to talk about
Dialogue: 0,0:00:42.81,0:00:44.30,Default,,0000,0000,0000,,involves charity.
Dialogue: 0,0:00:44.30,0:00:47.30,Default,,0000,0000,0000,,I want to talk about how the things we've been taught to think
Dialogue: 0,0:00:47.30,0:00:49.60,Default,,0000,0000,0000,,about giving and about charity
Dialogue: 0,0:00:49.60,0:00:51.56,Default,,0000,0000,0000,,and about the nonprofit sector
Dialogue: 0,0:00:51.56,0:00:55.22,Default,,0000,0000,0000,,are actually undermining the causes we love
Dialogue: 0,0:00:55.22,0:00:59.23,Default,,0000,0000,0000,,and our profound yearning to change the world.
Dialogue: 0,0:00:59.23,0:01:01.64,Default,,0000,0000,0000,,But before I do that, I want to ask if we even believe
Dialogue: 0,0:01:01.64,0:01:04.78,Default,,0000,0000,0000,,that the nonprofit sector has any serious role to play
Dialogue: 0,0:01:04.78,0:01:07.17,Default,,0000,0000,0000,,in changing the world.
Dialogue: 0,0:01:07.17,0:01:10.62,Default,,0000,0000,0000,,A lot of people say now that business will lift up the developing economies,
Dialogue: 0,0:01:10.62,0:01:13.66,Default,,0000,0000,0000,,and social business will take care of the rest.
Dialogue: 0,0:01:13.66,0:01:16.10,Default,,0000,0000,0000,,And I do believe that business will move
Dialogue: 0,0:01:16.10,0:01:19.26,Default,,0000,0000,0000,,the great mass of humanity forward.
Dialogue: 0,0:01:19.26,0:01:23.40,Default,,0000,0000,0000,,But it always leaves behind that 10 percent or more
Dialogue: 0,0:01:23.40,0:01:27.87,Default,,0000,0000,0000,,that is most disadvantaged or unlucky.
Dialogue: 0,0:01:27.87,0:01:29.40,Default,,0000,0000,0000,,And social business needs markets,
Dialogue: 0,0:01:29.40,0:01:31.80,Default,,0000,0000,0000,,and there are some issues for which you just can't develop
Dialogue: 0,0:01:31.80,0:01:35.13,Default,,0000,0000,0000,,the kind of money measures that you need for a market.
Dialogue: 0,0:01:35.13,0:01:38.48,Default,,0000,0000,0000,,I sit on the board of a center for the developmentally disabled,
Dialogue: 0,0:01:38.48,0:01:40.71,Default,,0000,0000,0000,,and these people want laughter
Dialogue: 0,0:01:40.71,0:01:44.77,Default,,0000,0000,0000,,and compassion and they want love.
Dialogue: 0,0:01:44.77,0:01:48.31,Default,,0000,0000,0000,,How do you monetize that?
Dialogue: 0,0:01:48.31,0:01:50.56,Default,,0000,0000,0000,,And that's where the nonprofit sector
Dialogue: 0,0:01:50.56,0:01:52.90,Default,,0000,0000,0000,,and philanthropy come in.
Dialogue: 0,0:01:52.90,0:01:56.60,Default,,0000,0000,0000,,Philanthropy is the market for love.
Dialogue: 0,0:01:56.60,0:01:59.02,Default,,0000,0000,0000,,It is the market for all those people
Dialogue: 0,0:01:59.02,0:02:01.86,Default,,0000,0000,0000,,for whom there is no other market coming.
Dialogue: 0,0:02:01.86,0:02:04.59,Default,,0000,0000,0000,,And so if we really want, like Buckminster Fuller said,
Dialogue: 0,0:02:04.59,0:02:06.98,Default,,0000,0000,0000,,a world that works for everyone,
Dialogue: 0,0:02:06.98,0:02:09.48,Default,,0000,0000,0000,,with no one and nothing left out,
Dialogue: 0,0:02:09.48,0:02:11.64,Default,,0000,0000,0000,,then the nonprofit sector has to be
Dialogue: 0,0:02:11.64,0:02:14.18,Default,,0000,0000,0000,,a serious part of the conversation.
Dialogue: 0,0:02:14.18,0:02:16.89,Default,,0000,0000,0000,,But it doesn't seem to be working.
Dialogue: 0,0:02:16.89,0:02:18.52,Default,,0000,0000,0000,,Why have our breast cancer charities
Dialogue: 0,0:02:18.52,0:02:21.24,Default,,0000,0000,0000,,not come close to finding a cure for breast cancer,
Dialogue: 0,0:02:21.24,0:02:23.31,Default,,0000,0000,0000,,or our homeless charities not come close
Dialogue: 0,0:02:23.31,0:02:26.24,Default,,0000,0000,0000,,to ending homelessness in any major city?
Dialogue: 0,0:02:26.24,0:02:29.59,Default,,0000,0000,0000,,Why has poverty remained stuck at 12 percent
Dialogue: 0,0:02:29.59,0:02:33.48,Default,,0000,0000,0000,,of the U.S. population for 40 years?
Dialogue: 0,0:02:33.48,0:02:36.60,Default,,0000,0000,0000,,And the answer is, these social problems
Dialogue: 0,0:02:36.60,0:02:38.81,Default,,0000,0000,0000,,are massive in scale,
Dialogue: 0,0:02:38.81,0:02:41.70,Default,,0000,0000,0000,,our organizations are tiny up against them,
Dialogue: 0,0:02:41.70,0:02:45.26,Default,,0000,0000,0000,,and we have a belief system that keeps them tiny.
Dialogue: 0,0:02:45.26,0:02:46.58,Default,,0000,0000,0000,,We have two rulebooks.
Dialogue: 0,0:02:46.58,0:02:48.53,Default,,0000,0000,0000,,We have one for the nonprofit sector
Dialogue: 0,0:02:48.53,0:02:51.55,Default,,0000,0000,0000,,and one for the rest of the economic world.
Dialogue: 0,0:02:51.55,0:02:54.01,Default,,0000,0000,0000,,It's an apartheid, and it discriminates
Dialogue: 0,0:02:54.01,0:02:56.96,Default,,0000,0000,0000,,against the [nonprofit] sector in five different areas,
Dialogue: 0,0:02:56.96,0:02:59.35,Default,,0000,0000,0000,,the first being compensation.
Dialogue: 0,0:02:59.35,0:03:02.26,Default,,0000,0000,0000,,So in the for-profit sector, the more value you produce,
Dialogue: 0,0:03:02.26,0:03:04.15,Default,,0000,0000,0000,,the more money you can make.
Dialogue: 0,0:03:04.15,0:03:06.10,Default,,0000,0000,0000,,But we don't like nonprofits to use money
Dialogue: 0,0:03:06.10,0:03:09.98,Default,,0000,0000,0000,,to incentivize people to produce more in social service.
Dialogue: 0,0:03:09.98,0:03:12.78,Default,,0000,0000,0000,,We have a visceral reaction to the idea that anyone
Dialogue: 0,0:03:12.78,0:03:16.18,Default,,0000,0000,0000,,would make very much money helping other people.
Dialogue: 0,0:03:16.18,0:03:18.18,Default,,0000,0000,0000,,Interesting that we don't have a visceral reaction
Dialogue: 0,0:03:18.18,0:03:21.94,Default,,0000,0000,0000,,to the notion that people would make a lot of money not helping other people.
Dialogue: 0,0:03:21.94,0:03:24.22,Default,,0000,0000,0000,,You know, you want to make 50 million dollars
Dialogue: 0,0:03:24.22,0:03:26.55,Default,,0000,0000,0000,,selling violent video games to kids, go for it.
Dialogue: 0,0:03:26.55,0:03:28.54,Default,,0000,0000,0000,,We'll put you on the cover of Wired magazine.
Dialogue: 0,0:03:28.54,0:03:30.54,Default,,0000,0000,0000,,But you want to make half a million dollars
Dialogue: 0,0:03:30.54,0:03:31.90,Default,,0000,0000,0000,,trying to cure kids of malaria,
Dialogue: 0,0:03:31.90,0:03:39.82,Default,,0000,0000,0000,,and you're considered a parasite yourself. (Applause)
Dialogue: 0,0:03:39.82,0:03:42.78,Default,,0000,0000,0000,,And we think of this as our system of ethics,
Dialogue: 0,0:03:42.78,0:03:44.92,Default,,0000,0000,0000,,but what we don't realize is that this system
Dialogue: 0,0:03:44.92,0:03:48.02,Default,,0000,0000,0000,,has a powerful side effect, which is,
Dialogue: 0,0:03:48.02,0:03:51.66,Default,,0000,0000,0000,,it gives a really stark, mutually exclusive choice
Dialogue: 0,0:03:51.66,0:03:55.03,Default,,0000,0000,0000,,between doing very well for yourself and your family
Dialogue: 0,0:03:55.03,0:03:57.70,Default,,0000,0000,0000,,or doing good for the world
Dialogue: 0,0:03:57.70,0:04:00.65,Default,,0000,0000,0000,,to the brightest minds coming out of our best universities,
Dialogue: 0,0:04:00.65,0:04:02.73,Default,,0000,0000,0000,,and sends tens of thousands of people
Dialogue: 0,0:04:02.73,0:04:05.33,Default,,0000,0000,0000,,who could make a huge difference in the nonprofit sector
Dialogue: 0,0:04:05.33,0:04:07.97,Default,,0000,0000,0000,,marching every year directly into the for-profit sector
Dialogue: 0,0:04:07.97,0:04:12.67,Default,,0000,0000,0000,,because they're not willing to make that kind of lifelong economic sacrifice.
Dialogue: 0,0:04:12.67,0:04:16.16,Default,,0000,0000,0000,,Businessweek did a survey, looked at the compensation packages
Dialogue: 0,0:04:16.16,0:04:19.27,Default,,0000,0000,0000,,for MBAs 10 years of business school,
Dialogue: 0,0:04:19.27,0:04:22.16,Default,,0000,0000,0000,,and the median compensation for a Stanford MBA,
Dialogue: 0,0:04:22.16,0:04:26.86,Default,,0000,0000,0000,,with bonus, at the age of 38, was 400,000 dollars.
Dialogue: 0,0:04:26.86,0:04:28.90,Default,,0000,0000,0000,,Meanwhile, for the same year, the average salary
Dialogue: 0,0:04:28.90,0:04:32.12,Default,,0000,0000,0000,,for the CEO of a $5 million-plus medical charity in the U.S.
Dialogue: 0,0:04:32.12,0:04:37.44,Default,,0000,0000,0000,,was 232,000 dollars, and for a hunger charity, 84,000 dollars.
Dialogue: 0,0:04:37.44,0:04:39.30,Default,,0000,0000,0000,,Now, there's no way you're going to get a lot of people
Dialogue: 0,0:04:39.30,0:04:43.50,Default,,0000,0000,0000,,with $400,000 talent to make a $316,000 sacrifice
Dialogue: 0,0:04:43.50,0:04:47.62,Default,,0000,0000,0000,,every year to become the CEO of a hunger charity.
Dialogue: 0,0:04:47.62,0:04:51.11,Default,,0000,0000,0000,,Some people say, "Well, that's just because those MBA types are greedy."
Dialogue: 0,0:04:51.11,0:04:53.66,Default,,0000,0000,0000,,Not necessarily. They might be smart.
Dialogue: 0,0:04:53.66,0:04:56.04,Default,,0000,0000,0000,,It's cheaper for that person to donate
Dialogue: 0,0:04:56.04,0:04:59.73,Default,,0000,0000,0000,,100,000 dollars every year to the hunger charity,
Dialogue: 0,0:04:59.73,0:05:01.81,Default,,0000,0000,0000,,save 50,000 dollars on their taxes,
Dialogue: 0,0:05:01.81,0:05:06.13,Default,,0000,0000,0000,,so still be roughly 270,000 dollars a year ahead of the game,
Dialogue: 0,0:05:06.13,0:05:08.75,Default,,0000,0000,0000,,now be called a philanthropist because they donated
Dialogue: 0,0:05:08.75,0:05:10.59,Default,,0000,0000,0000,,100,000 dollars to charity,
Dialogue: 0,0:05:10.59,0:05:12.61,Default,,0000,0000,0000,,probably sit on the board of the hunger charity,
Dialogue: 0,0:05:12.61,0:05:14.79,Default,,0000,0000,0000,,indeed, probably supervise the poor SOB
Dialogue: 0,0:05:14.79,0:05:18.30,Default,,0000,0000,0000,,who decided to become the CEO of the hunger charity,
Dialogue: 0,0:05:18.30,0:05:21.98,Default,,0000,0000,0000,,and have a lifetime of this kind of power and influence
Dialogue: 0,0:05:21.98,0:05:25.62,Default,,0000,0000,0000,,and popular praise still ahead of them.
Dialogue: 0,0:05:25.62,0:05:29.33,Default,,0000,0000,0000,,The second area of discrimination is advertising and marketing.
Dialogue: 0,0:05:29.33,0:05:32.83,Default,,0000,0000,0000,,So we tell the for-profit sector, "Spend, spend, spend on advertising
Dialogue: 0,0:05:32.83,0:05:36.40,Default,,0000,0000,0000,,until the last dollar no longer produces a penny of value."
Dialogue: 0,0:05:36.40,0:05:39.94,Default,,0000,0000,0000,,But we don't like to see our donations spent on advertising in charity.
Dialogue: 0,0:05:39.94,0:05:43.71,Default,,0000,0000,0000,,Our attitude is, "Well, look, if you can get the advertising donated,
Dialogue: 0,0:05:43.71,0:05:46.52,Default,,0000,0000,0000,,you know, at four o'clock in the morning, I'm okay with that.
Dialogue: 0,0:05:46.52,0:05:49.07,Default,,0000,0000,0000,,But I don't want my donations spent on advertising.
Dialogue: 0,0:05:49.07,0:05:51.32,Default,,0000,0000,0000,,I want it go to the needy."
Dialogue: 0,0:05:51.32,0:05:53.01,Default,,0000,0000,0000,,As if the money invested in advertising
Dialogue: 0,0:05:53.01,0:05:55.85,Default,,0000,0000,0000,,could not bring in dramatically greater sums of money
Dialogue: 0,0:05:55.85,0:05:57.63,Default,,0000,0000,0000,,to serve the needy.
Dialogue: 0,0:05:57.63,0:05:59.97,Default,,0000,0000,0000,,In the 1990s, my company created
Dialogue: 0,0:05:59.97,0:06:03.07,Default,,0000,0000,0000,,the long distance AIDSRide bicycle journeys
Dialogue: 0,0:06:03.07,0:06:07.56,Default,,0000,0000,0000,,and the 60-mile-long breast cancer three-day walks,
Dialogue: 0,0:06:07.56,0:06:10.92,Default,,0000,0000,0000,,and over the course of nine years,
Dialogue: 0,0:06:10.92,0:06:15.99,Default,,0000,0000,0000,,we had 182,000 ordinary heroes participate,
Dialogue: 0,0:06:15.99,0:06:20.43,Default,,0000,0000,0000,,and they raised a total of 581 million dollars.
Dialogue: 0,0:06:20.43,0:06:25.42,Default,,0000,0000,0000,,They raised more money more quickly for these causes
Dialogue: 0,0:06:25.42,0:06:27.24,Default,,0000,0000,0000,,than any events in history,
Dialogue: 0,0:06:27.24,0:06:30.06,Default,,0000,0000,0000,,all based on the idea that people are weary
Dialogue: 0,0:06:30.06,0:06:32.88,Default,,0000,0000,0000,,of being asked to do the least they can possibly do.
Dialogue: 0,0:06:32.88,0:06:35.28,Default,,0000,0000,0000,,People are yearning to measure
Dialogue: 0,0:06:35.28,0:06:37.47,Default,,0000,0000,0000,,the full distance of their potential
Dialogue: 0,0:06:37.47,0:06:40.62,Default,,0000,0000,0000,,on behalf of the causes that they care about deeply.
Dialogue: 0,0:06:40.62,0:06:43.79,Default,,0000,0000,0000,,But they have to be asked.
Dialogue: 0,0:06:43.79,0:06:45.39,Default,,0000,0000,0000,,We got that many people to participate
Dialogue: 0,0:06:45.39,0:06:47.69,Default,,0000,0000,0000,,by buying full-page ads in The New York Times,
Dialogue: 0,0:06:47.69,0:06:51.12,Default,,0000,0000,0000,,in The Boston Globe, in primetime radio and TV advertising.
Dialogue: 0,0:06:51.12,0:06:52.92,Default,,0000,0000,0000,,Do you know how many people we would have gotten
Dialogue: 0,0:06:52.92,0:06:56.43,Default,,0000,0000,0000,,if we put up flyers in the laundromat?
Dialogue: 0,0:06:56.43,0:06:59.64,Default,,0000,0000,0000,,Charitable giving has remained stuck, in the U.S.,
Dialogue: 0,0:06:59.64,0:07:04.03,Default,,0000,0000,0000,,at two percent of GDP ever since we started measuring it in the 1970s.
Dialogue: 0,0:07:04.03,0:07:06.33,Default,,0000,0000,0000,,That's an important fact, because it tells us
Dialogue: 0,0:07:06.33,0:07:08.83,Default,,0000,0000,0000,,that in 40 years, the nonprofit sector
Dialogue: 0,0:07:08.83,0:07:12.18,Default,,0000,0000,0000,,has not been able to wrestle any market share
Dialogue: 0,0:07:12.18,0:07:14.90,Default,,0000,0000,0000,,away from the for-profit sector.
Dialogue: 0,0:07:14.90,0:07:17.05,Default,,0000,0000,0000,,And if you think about it, how could one sector
Dialogue: 0,0:07:17.05,0:07:20.24,Default,,0000,0000,0000,,possibly take market share away from another sector
Dialogue: 0,0:07:20.24,0:07:23.22,Default,,0000,0000,0000,,if it isn't really allowed to market?
Dialogue: 0,0:07:23.22,0:07:24.94,Default,,0000,0000,0000,,And if we tell the consumer brands,
Dialogue: 0,0:07:24.94,0:07:27.76,Default,,0000,0000,0000,,"You may advertise all the benefits of your product,"
Dialogue: 0,0:07:27.76,0:07:30.93,Default,,0000,0000,0000,,but we tell charities, "You cannot advertise all the good that you do,"
Dialogue: 0,0:07:30.93,0:07:34.56,Default,,0000,0000,0000,,where do we think the consumer dollars are going to flow?
Dialogue: 0,0:07:34.56,0:07:37.86,Default,,0000,0000,0000,,The third area of discrimination is the taking of risk
Dialogue: 0,0:07:37.86,0:07:42.13,Default,,0000,0000,0000,,in pursuit of new ideas for generating revenue.
Dialogue: 0,0:07:42.13,0:07:45.51,Default,,0000,0000,0000,,So Disney can make a new $200 million movie that flops,
Dialogue: 0,0:07:45.51,0:07:48.36,Default,,0000,0000,0000,,and nobody calls the attorney general.
Dialogue: 0,0:07:48.36,0:07:51.68,Default,,0000,0000,0000,,But you do a little $1 million community fundraiser
Dialogue: 0,0:07:51.68,0:07:54.78,Default,,0000,0000,0000,,for the poor, and it doesn't produce a 75 percent profit
Dialogue: 0,0:07:54.78,0:07:56.58,Default,,0000,0000,0000,,to the cause in the first 12 months,
Dialogue: 0,0:07:56.58,0:07:59.40,Default,,0000,0000,0000,,and your character is called into question.
Dialogue: 0,0:07:59.40,0:08:02.29,Default,,0000,0000,0000,,So nonprofits are really reluctant to attempt any brave,
Dialogue: 0,0:08:02.29,0:08:05.81,Default,,0000,0000,0000,,daring, giant-scale new fundraising endeavors
Dialogue: 0,0:08:05.81,0:08:07.80,Default,,0000,0000,0000,,for fear that if the thing fails, their reputations
Dialogue: 0,0:08:07.80,0:08:09.71,Default,,0000,0000,0000,,will be dragged through the mud.
Dialogue: 0,0:08:09.71,0:08:11.62,Default,,0000,0000,0000,,Well, you and I know when you prohibit failure,
Dialogue: 0,0:08:11.62,0:08:13.43,Default,,0000,0000,0000,,you kill innovation.
Dialogue: 0,0:08:13.43,0:08:16.35,Default,,0000,0000,0000,,If you kill innovation in fundraising, you can't raise more revenue.
Dialogue: 0,0:08:16.35,0:08:18.40,Default,,0000,0000,0000,,If you can't raise more revenue, you can't grow.
Dialogue: 0,0:08:18.40,0:08:23.24,Default,,0000,0000,0000,,And if you can't grow, you can't possibly solve large social problems.
Dialogue: 0,0:08:23.24,0:08:25.94,Default,,0000,0000,0000,,The fourth area is time.
Dialogue: 0,0:08:25.94,0:08:29.92,Default,,0000,0000,0000,,So Amazon went for six years without returning any profit to investors,
Dialogue: 0,0:08:29.92,0:08:31.57,Default,,0000,0000,0000,,and people had patience.
Dialogue: 0,0:08:31.57,0:08:34.16,Default,,0000,0000,0000,,They knew that there was a long-term objective down the line
Dialogue: 0,0:08:34.16,0:08:36.08,Default,,0000,0000,0000,,of building market dominance.
Dialogue: 0,0:08:36.08,0:08:38.90,Default,,0000,0000,0000,,But if a nonprofit organization ever had a dream
Dialogue: 0,0:08:38.90,0:08:42.78,Default,,0000,0000,0000,,of building magnificent scale that required that for six years,
Dialogue: 0,0:08:42.78,0:08:44.66,Default,,0000,0000,0000,,no money was going to go to the needy,
Dialogue: 0,0:08:44.66,0:08:46.84,Default,,0000,0000,0000,,it was all going to be invested in building this scale,
Dialogue: 0,0:08:46.84,0:08:50.15,Default,,0000,0000,0000,,we would expect a crucifixion.
Dialogue: 0,0:08:50.15,0:08:52.07,Default,,0000,0000,0000,,And the last area is profit itself.
Dialogue: 0,0:08:52.07,0:08:54.74,Default,,0000,0000,0000,,So the for-profit sector can pay people profits
Dialogue: 0,0:08:54.74,0:08:57.11,Default,,0000,0000,0000,,in order to attract their capital for their new ideas,
Dialogue: 0,0:08:57.11,0:09:00.47,Default,,0000,0000,0000,,but you can't pay profits in a nonprofit sector,
Dialogue: 0,0:09:00.47,0:09:04.97,Default,,0000,0000,0000,,so the for-profit sector has a lock on the multi-trillion-dollar capital markets,
Dialogue: 0,0:09:04.97,0:09:07.35,Default,,0000,0000,0000,,and the nonprofit sector is starved for growth
Dialogue: 0,0:09:07.35,0:09:10.32,Default,,0000,0000,0000,,and risk and idea capital.
Dialogue: 0,0:09:10.32,0:09:13.58,Default,,0000,0000,0000,,Well, you put those five things together -- you can't use money
Dialogue: 0,0:09:13.58,0:09:15.98,Default,,0000,0000,0000,,to lure talent away from the for-profit sector,
Dialogue: 0,0:09:15.98,0:09:17.92,Default,,0000,0000,0000,,you can't advertise on anywhere near the scale
Dialogue: 0,0:09:17.92,0:09:20.54,Default,,0000,0000,0000,,the for-profit sector does for new customers,
Dialogue: 0,0:09:20.54,0:09:23.31,Default,,0000,0000,0000,,you can't take the kinds of risks in pursuit of those customers
Dialogue: 0,0:09:23.31,0:09:25.45,Default,,0000,0000,0000,,that the for-profit sector takes,
Dialogue: 0,0:09:25.45,0:09:27.20,Default,,0000,0000,0000,,you don't have the same amount of time to find them
Dialogue: 0,0:09:27.20,0:09:28.62,Default,,0000,0000,0000,,as the for-profit sector,
Dialogue: 0,0:09:28.62,0:09:31.40,Default,,0000,0000,0000,,and you don't have a stock market with which to fund any of this,
Dialogue: 0,0:09:31.40,0:09:33.58,Default,,0000,0000,0000,,even if you could do it in the first place,
Dialogue: 0,0:09:33.58,0:09:35.50,Default,,0000,0000,0000,,and you've just put the nonprofit sector
Dialogue: 0,0:09:35.50,0:09:38.66,Default,,0000,0000,0000,,at an extreme disadvantage to the for-profit sector
Dialogue: 0,0:09:38.66,0:09:41.36,Default,,0000,0000,0000,,on every level.
Dialogue: 0,0:09:41.36,0:09:44.84,Default,,0000,0000,0000,,If we have any doubts about the effects of this separate rule book,
Dialogue: 0,0:09:44.84,0:09:46.57,Default,,0000,0000,0000,,this statistic is sobering:
Dialogue: 0,0:09:46.57,0:09:49.16,Default,,0000,0000,0000,,From 1970 to 2009,
Dialogue: 0,0:09:49.16,0:09:51.43,Default,,0000,0000,0000,,the number of nonprofits that really grew,
Dialogue: 0,0:09:51.43,0:09:55.12,Default,,0000,0000,0000,,that crossed the $50 million annual revenue barrier,
Dialogue: 0,0:09:55.12,0:09:57.27,Default,,0000,0000,0000,,is 144.
Dialogue: 0,0:09:57.27,0:09:59.48,Default,,0000,0000,0000,,In the same time, the number of for-profits that crossed it
Dialogue: 0,0:09:59.48,0:10:02.74,Default,,0000,0000,0000,,is 46,136.
Dialogue: 0,0:10:02.74,0:10:06.17,Default,,0000,0000,0000,,So we're dealing with social problems that are massive in scale,
Dialogue: 0,0:10:06.17,0:10:08.61,Default,,0000,0000,0000,,and our organizations can't generate any scale.
Dialogue: 0,0:10:08.61,0:10:12.59,Default,,0000,0000,0000,,All of the scale goes to Coca-Cola and Burger King.
Dialogue: 0,0:10:12.59,0:10:15.54,Default,,0000,0000,0000,,So why do we think this way?
Dialogue: 0,0:10:15.54,0:10:20.02,Default,,0000,0000,0000,,Well, like most fanatical dogma in America,
Dialogue: 0,0:10:20.02,0:10:23.14,Default,,0000,0000,0000,,these ideas come from old Puritan beliefs.
Dialogue: 0,0:10:23.14,0:10:26.48,Default,,0000,0000,0000,,The Puritans came here for religious reasons, or so they said,
Dialogue: 0,0:10:26.48,0:10:29.80,Default,,0000,0000,0000,,but they also came here because they wanted to make a lot of money.
Dialogue: 0,0:10:29.80,0:10:31.94,Default,,0000,0000,0000,,They were pious people but they were also
Dialogue: 0,0:10:31.94,0:10:34.40,Default,,0000,0000,0000,,really aggressive capitalists,
Dialogue: 0,0:10:34.40,0:10:37.98,Default,,0000,0000,0000,,and they were accused of extreme forms of profit-making tendencies
Dialogue: 0,0:10:37.98,0:10:40.22,Default,,0000,0000,0000,,compared to the other colonists.
Dialogue: 0,0:10:40.22,0:10:43.27,Default,,0000,0000,0000,,But at the same time, the Puritans were Calvinists,
Dialogue: 0,0:10:43.27,0:10:45.95,Default,,0000,0000,0000,,so they were taught literally to hate themselves.
Dialogue: 0,0:10:45.95,0:10:48.98,Default,,0000,0000,0000,,They were taught that self-interest was a raging sea
Dialogue: 0,0:10:48.98,0:10:52.34,Default,,0000,0000,0000,,that was a sure path to eternal damnation.
Dialogue: 0,0:10:52.34,0:10:54.61,Default,,0000,0000,0000,,Well, this created a real problem for these people, right?
Dialogue: 0,0:10:54.61,0:10:57.35,Default,,0000,0000,0000,,Here they've come all the way across the Atlantic to make all this money.
Dialogue: 0,0:10:57.35,0:11:01.10,Default,,0000,0000,0000,,Making all this money will get you sent directly to Hell.
Dialogue: 0,0:11:01.10,0:11:03.04,Default,,0000,0000,0000,,What were they to do about this?
Dialogue: 0,0:11:03.04,0:11:04.100,Default,,0000,0000,0000,,Well, charity became their answer.
Dialogue: 0,0:11:04.100,0:11:07.17,Default,,0000,0000,0000,,It became this economic sanctuary
Dialogue: 0,0:11:07.17,0:11:10.60,Default,,0000,0000,0000,,where they could do penance for their profit-making tendencies
Dialogue: 0,0:11:10.60,0:11:14.08,Default,,0000,0000,0000,,at five cents on the dollar.
Dialogue: 0,0:11:14.08,0:11:15.84,Default,,0000,0000,0000,,So of course, how could you make money in charity
Dialogue: 0,0:11:15.84,0:11:18.95,Default,,0000,0000,0000,,if charity was your penance for making money?
Dialogue: 0,0:11:18.95,0:11:23.06,Default,,0000,0000,0000,,Financial incentive was exiled from the realm of helping others
Dialogue: 0,0:11:23.06,0:11:26.16,Default,,0000,0000,0000,,so that it could thrive in the area of making money for yourself,
Dialogue: 0,0:11:26.16,0:11:29.34,Default,,0000,0000,0000,,and in 400 years, nothing has intervened
Dialogue: 0,0:11:29.34,0:11:34.62,Default,,0000,0000,0000,,to say, "That's counterproductive and that's unfair."
Dialogue: 0,0:11:34.62,0:11:38.80,Default,,0000,0000,0000,,Now this ideology gets policed by this one very dangerous question,
Dialogue: 0,0:11:38.80,0:11:43.05,Default,,0000,0000,0000,,which is, "What percentage of my donation goes to the cause versus overhead?"
Dialogue: 0,0:11:43.05,0:11:44.93,Default,,0000,0000,0000,,There are a lot of problems with this question.
Dialogue: 0,0:11:44.93,0:11:46.78,Default,,0000,0000,0000,,I'm going to just focus on two.
Dialogue: 0,0:11:46.78,0:11:51.24,Default,,0000,0000,0000,,First, it makes us think that overhead is a negative,
Dialogue: 0,0:11:51.24,0:11:54.66,Default,,0000,0000,0000,,that it is somehow not part of the cause.
Dialogue: 0,0:11:54.66,0:11:59.64,Default,,0000,0000,0000,,But it absolutely is, especially if it's being used for growth.
Dialogue: 0,0:11:59.64,0:12:02.40,Default,,0000,0000,0000,,Now, this idea that overhead is somehow
Dialogue: 0,0:12:02.40,0:12:03.75,Default,,0000,0000,0000,,an enemy of the cause
Dialogue: 0,0:12:03.75,0:12:06.69,Default,,0000,0000,0000,,creates this second, much larger problem, which is,
Dialogue: 0,0:12:06.69,0:12:09.96,Default,,0000,0000,0000,,it forces organizations to go without the overhead things
Dialogue: 0,0:12:09.96,0:12:11.74,Default,,0000,0000,0000,,they really need to grow
Dialogue: 0,0:12:11.74,0:12:14.89,Default,,0000,0000,0000,,in the interest of keeping overhead low.
Dialogue: 0,0:12:14.89,0:12:17.11,Default,,0000,0000,0000,,So we've all been taught that charities should spend
Dialogue: 0,0:12:17.11,0:12:20.26,Default,,0000,0000,0000,,as little as possible on overhead things like fundraising
Dialogue: 0,0:12:20.26,0:12:23.65,Default,,0000,0000,0000,,under the theory that, well, the less money you spend on fundraising,
Dialogue: 0,0:12:23.65,0:12:26.86,Default,,0000,0000,0000,,the more money there is available for the cause.
Dialogue: 0,0:12:26.86,0:12:29.70,Default,,0000,0000,0000,,Well, that's true if it's a depressing world
Dialogue: 0,0:12:29.70,0:12:32.65,Default,,0000,0000,0000,,in which this pie cannot be made any bigger.
Dialogue: 0,0:12:32.65,0:12:36.51,Default,,0000,0000,0000,,But if it's a logical world in which investment in fundraising
Dialogue: 0,0:12:36.51,0:12:39.81,Default,,0000,0000,0000,,actually raises more funds and makes the pie bigger,
Dialogue: 0,0:12:39.81,0:12:41.78,Default,,0000,0000,0000,,then we have it precisely backwards,
Dialogue: 0,0:12:41.78,0:12:44.69,Default,,0000,0000,0000,,and we should be investing more money, not less,
Dialogue: 0,0:12:44.69,0:12:47.06,Default,,0000,0000,0000,,in fundraising, because fundraising is the one thing
Dialogue: 0,0:12:47.06,0:12:49.73,Default,,0000,0000,0000,,that has the potential to multiply the amount of money
Dialogue: 0,0:12:49.73,0:12:54.23,Default,,0000,0000,0000,,available for the cause that we care about so deeply.
Dialogue: 0,0:12:54.23,0:12:56.62,Default,,0000,0000,0000,,I'll give you two examples. We launched the AIDSRides
Dialogue: 0,0:12:56.62,0:13:00.42,Default,,0000,0000,0000,,with an initial investment of 50,000 dollars in risk capital.
Dialogue: 0,0:13:00.42,0:13:05.15,Default,,0000,0000,0000,,Within nine years, we had multiplied that 1,982 times
Dialogue: 0,0:13:05.15,0:13:10.93,Default,,0000,0000,0000,,into 108 million dollars after all expenses for AIDS services.
Dialogue: 0,0:13:10.93,0:13:12.74,Default,,0000,0000,0000,,We launched the breast cancer three-days
Dialogue: 0,0:13:12.74,0:13:16.85,Default,,0000,0000,0000,,with an initial investment of 350,000 dollars in risk capital.
Dialogue: 0,0:13:16.85,0:13:21.19,Default,,0000,0000,0000,,Within just five years, we had multiplied that 554 times
Dialogue: 0,0:13:21.19,0:13:24.80,Default,,0000,0000,0000,,into 194 million dollars after all expenses
Dialogue: 0,0:13:24.80,0:13:26.78,Default,,0000,0000,0000,,for breast cancer research.
Dialogue: 0,0:13:26.78,0:13:30.03,Default,,0000,0000,0000,,Now, if you were a philanthropist really interested in breast cancer,
Dialogue: 0,0:13:30.03,0:13:31.37,Default,,0000,0000,0000,,what would make more sense:
Dialogue: 0,0:13:31.37,0:13:35.27,Default,,0000,0000,0000,,go out and find the most innovative researcher in the world
Dialogue: 0,0:13:35.27,0:13:38.35,Default,,0000,0000,0000,,and give her 350,000 dollars for research,
Dialogue: 0,0:13:38.35,0:13:42.11,Default,,0000,0000,0000,,or give her fundraising department the 350,000 dollars
Dialogue: 0,0:13:42.11,0:13:47.34,Default,,0000,0000,0000,,to multiply it into 194 million dollars for breast cancer research?
Dialogue: 0,0:13:47.34,0:13:50.56,Default,,0000,0000,0000,,2002 was our most successful year ever.
Dialogue: 0,0:13:50.56,0:13:54.01,Default,,0000,0000,0000,,We netted for breast cancer alone, that year alone,
Dialogue: 0,0:13:54.01,0:13:57.85,Default,,0000,0000,0000,,71 million dollars after all expenses.
Dialogue: 0,0:13:57.85,0:14:00.20,Default,,0000,0000,0000,,And then we went out of business,
Dialogue: 0,0:14:00.20,0:14:03.31,Default,,0000,0000,0000,,suddenly and traumatically.
Dialogue: 0,0:14:03.31,0:14:08.01,Default,,0000,0000,0000,,Why? Well, the short story is, our sponsor split on us.
Dialogue: 0,0:14:08.01,0:14:09.86,Default,,0000,0000,0000,,They wanted to distance themselves from us
Dialogue: 0,0:14:09.86,0:14:12.83,Default,,0000,0000,0000,,because we were being crucified in the media
Dialogue: 0,0:14:12.83,0:14:16.04,Default,,0000,0000,0000,,for investing 40 percent of the gross in recruitment
Dialogue: 0,0:14:16.04,0:14:19.43,Default,,0000,0000,0000,,and customer service and the magic of the experience
Dialogue: 0,0:14:19.43,0:14:22.69,Default,,0000,0000,0000,,and there is no accounting terminology to describe
Dialogue: 0,0:14:22.69,0:14:25.49,Default,,0000,0000,0000,,that kind of investment in growth and in the future,
Dialogue: 0,0:14:25.49,0:14:30.47,Default,,0000,0000,0000,,other than this demonic label of overhead.
Dialogue: 0,0:14:30.47,0:14:35.82,Default,,0000,0000,0000,,So on one day, all 350 of our great employees
Dialogue: 0,0:14:35.82,0:14:40.18,Default,,0000,0000,0000,,lost their jobs
Dialogue: 0,0:14:40.18,0:14:43.82,Default,,0000,0000,0000,,because they were labeled overhead.
Dialogue: 0,0:14:43.82,0:14:46.11,Default,,0000,0000,0000,,Our sponsor went and tried the events on their own.
Dialogue: 0,0:14:46.11,0:14:47.47,Default,,0000,0000,0000,,The overhead went up.
Dialogue: 0,0:14:47.47,0:14:49.99,Default,,0000,0000,0000,,Net income for breast cancer research went down
Dialogue: 0,0:14:49.99,0:14:55.98,Default,,0000,0000,0000,,by 84 percent, or 60 million dollars in one year.
Dialogue: 0,0:14:55.98,0:14:58.54,Default,,0000,0000,0000,,This is what happens when we confuse
Dialogue: 0,0:14:58.54,0:15:03.22,Default,,0000,0000,0000,,morality with frugality.
Dialogue: 0,0:15:03.22,0:15:06.22,Default,,0000,0000,0000,,We've all been taught that the bake sale with five percent overhead
Dialogue: 0,0:15:06.22,0:15:10.95,Default,,0000,0000,0000,,is morally superior to the professional fundraising enterprise with 40 percent overhead,
Dialogue: 0,0:15:10.95,0:15:13.54,Default,,0000,0000,0000,,but we're missing the most important piece of information,
Dialogue: 0,0:15:13.54,0:15:17.51,Default,,0000,0000,0000,,which is, what is the actual size of these pies?
Dialogue: 0,0:15:17.51,0:15:22.31,Default,,0000,0000,0000,,Who cares if the bake sale only has five percent overhead if it's tiny?
Dialogue: 0,0:15:22.31,0:15:25.17,Default,,0000,0000,0000,,What if the bake sale only netted 71 dollars for charity
Dialogue: 0,0:15:25.17,0:15:27.22,Default,,0000,0000,0000,,because it made no investment in its scale
Dialogue: 0,0:15:27.22,0:15:29.47,Default,,0000,0000,0000,,and the professional fundraising enterprise netted
Dialogue: 0,0:15:29.47,0:15:32.30,Default,,0000,0000,0000,,71 million dollars because it did?
Dialogue: 0,0:15:32.30,0:15:34.39,Default,,0000,0000,0000,,Now which pie would we prefer, and which pie
Dialogue: 0,0:15:34.39,0:15:38.25,Default,,0000,0000,0000,,do we think people who are hungry would prefer?
Dialogue: 0,0:15:38.25,0:15:41.99,Default,,0000,0000,0000,,Here's how all of this impacts the big picture.
Dialogue: 0,0:15:41.99,0:15:45.33,Default,,0000,0000,0000,,I said that charitable giving is two percent of GDP in the United States.
Dialogue: 0,0:15:45.33,0:15:48.06,Default,,0000,0000,0000,,That's about 300 billion dollars a year.
Dialogue: 0,0:15:48.06,0:15:51.59,Default,,0000,0000,0000,,But only about 20 percent of that, or 60 billion dollars,
Dialogue: 0,0:15:51.59,0:15:53.54,Default,,0000,0000,0000,,goes to health and human services causes.
Dialogue: 0,0:15:53.54,0:15:57.22,Default,,0000,0000,0000,,The rest goes to religion and higher education and hospitals
Dialogue: 0,0:15:57.22,0:16:00.14,Default,,0000,0000,0000,,and that 60 billion dollars is not nearly enough
Dialogue: 0,0:16:00.14,0:16:02.35,Default,,0000,0000,0000,,to tackle these problems.
Dialogue: 0,0:16:02.35,0:16:04.49,Default,,0000,0000,0000,,But if we could move charitable giving
Dialogue: 0,0:16:04.49,0:16:09.75,Default,,0000,0000,0000,,from two percent of GDP up just one step
Dialogue: 0,0:16:09.75,0:16:13.23,Default,,0000,0000,0000,,to three percent of GDP, by investing in that growth,
Dialogue: 0,0:16:13.23,0:16:17.04,Default,,0000,0000,0000,,that would be an extra 150 billion dollars a year in contributions,
Dialogue: 0,0:16:17.04,0:16:19.83,Default,,0000,0000,0000,,and if that money could go disproportionately
Dialogue: 0,0:16:19.83,0:16:21.53,Default,,0000,0000,0000,,to health and human services charities,
Dialogue: 0,0:16:21.53,0:16:24.71,Default,,0000,0000,0000,,because those were the ones we encouraged to invest in their growth,
Dialogue: 0,0:16:24.71,0:16:29.31,Default,,0000,0000,0000,,that would represent a tripling of contributions to that sector.
Dialogue: 0,0:16:29.31,0:16:30.68,Default,,0000,0000,0000,,Now we're talking scale.
Dialogue: 0,0:16:30.68,0:16:34.28,Default,,0000,0000,0000,,Now we're talking the potential for real change.
Dialogue: 0,0:16:34.28,0:16:36.59,Default,,0000,0000,0000,,But it's never going to happen by forcing
Dialogue: 0,0:16:36.59,0:16:39.28,Default,,0000,0000,0000,,these organizations to lower their horizons
Dialogue: 0,0:16:39.28,0:16:44.77,Default,,0000,0000,0000,,to the demoralizing objective of keeping their overhead low.
Dialogue: 0,0:16:44.77,0:16:48.30,Default,,0000,0000,0000,,Our generation does not want its epitaph to read,
Dialogue: 0,0:16:48.30,0:16:50.96,Default,,0000,0000,0000,,"We kept charity overhead low."
Dialogue: 0,0:16:50.96,0:16:59.05,Default,,0000,0000,0000,,(Laughter) (Applause)
Dialogue: 0,0:16:59.05,0:17:01.28,Default,,0000,0000,0000,,We want it to read that we changed the world,
Dialogue: 0,0:17:01.28,0:17:02.92,Default,,0000,0000,0000,,and that part of the way we did that
Dialogue: 0,0:17:02.92,0:17:05.99,Default,,0000,0000,0000,,was by changing the way we think about these things.
Dialogue: 0,0:17:05.99,0:17:08.04,Default,,0000,0000,0000,,So the next time you're looking at a charity,
Dialogue: 0,0:17:08.04,0:17:10.28,Default,,0000,0000,0000,,don't ask about the rate of their overhead.
Dialogue: 0,0:17:10.28,0:17:12.50,Default,,0000,0000,0000,,Ask about the scale of their dreams,
Dialogue: 0,0:17:12.50,0:17:16.41,Default,,0000,0000,0000,,their Apple-, Google-, Amazon-scale dreams,
Dialogue: 0,0:17:16.41,0:17:18.30,Default,,0000,0000,0000,,how they measure their progress toward those dreams,
Dialogue: 0,0:17:18.30,0:17:21.21,Default,,0000,0000,0000,,and what resources they need to make them come true
Dialogue: 0,0:17:21.21,0:17:23.06,Default,,0000,0000,0000,,regardless of what the overhead is.
Dialogue: 0,0:17:23.06,0:17:27.88,Default,,0000,0000,0000,,Who cares what the overhead is if these problems are actually getting solved?
Dialogue: 0,0:17:27.88,0:17:31.33,Default,,0000,0000,0000,,If we can have that kind of generosity,
Dialogue: 0,0:17:31.33,0:17:35.05,Default,,0000,0000,0000,,a generosity of thought, then the non-profit sector can play
Dialogue: 0,0:17:35.05,0:17:39.29,Default,,0000,0000,0000,,a massive role in changing the world for all those citizens
Dialogue: 0,0:17:39.29,0:17:45.42,Default,,0000,0000,0000,,most desperately in need of it to change.
Dialogue: 0,0:17:45.42,0:17:50.48,Default,,0000,0000,0000,,And if that can be our generation's enduring legacy,
Dialogue: 0,0:17:50.48,0:17:53.08,Default,,0000,0000,0000,,that we took responsibility
Dialogue: 0,0:17:53.08,0:17:56.08,Default,,0000,0000,0000,,for the thinking that had been handed down to us,
Dialogue: 0,0:17:56.08,0:17:58.92,Default,,0000,0000,0000,,that we revisited it, we revised it,
Dialogue: 0,0:17:58.92,0:18:02.72,Default,,0000,0000,0000,,and we reinvented the whole way humanity thinks about changing things,
Dialogue: 0,0:18:02.72,0:18:06.32,Default,,0000,0000,0000,,forever, for everyone,
Dialogue: 0,0:18:06.32,0:18:11.12,Default,,0000,0000,0000,,well, I thought I would let the kids sum up what that would be.
Dialogue: 0,0:18:11.12,0:18:12.54,Default,,0000,0000,0000,,Annalisa Smith-Pallotta: That would be --
Dialogue: 0,0:18:12.54,0:18:14.98,Default,,0000,0000,0000,,Sage Smith-Pallotta: -- a real social --
Dialogue: 0,0:18:14.98,0:18:16.89,Default,,0000,0000,0000,,Rider Smith-Pallotta: -- innovation.
Dialogue: 0,0:18:16.89,0:18:20.38,Default,,0000,0000,0000,,Dan Pallotta: Thank you very much. Thank you.
Dialogue: 0,0:18:20.38,0:18:29.52,Default,,0000,0000,0000,,(Applause)
Dialogue: 0,0:18:29.52,0:18:33.52,Default,,0000,0000,0000,,Thank you. (Applause)