WEBVTT 00:00:00.989 --> 00:00:04.261 I want to talk about social innovation 00:00:04.261 --> 00:00:07.609 and social entrepreneurship. 00:00:07.609 --> 00:00:10.773 I happen to have triplets. 00:00:10.773 --> 00:00:13.118 They're little. They're five years old. 00:00:13.118 --> 00:00:14.187 Sometimes I tell people I have triplets. 00:00:14.187 --> 00:00:17.508 They say, "Really? How many?" 00:00:17.508 --> 00:00:18.952 Here's a picture of the kids. 00:00:18.952 --> 00:00:22.997 That's Sage and Annalisa and Rider. 00:00:22.997 --> 00:00:27.903 Now, I also happen to be gay. 00:00:27.903 --> 00:00:30.393 Being gay and fathering triplets is by far 00:00:30.393 --> 00:00:32.969 the most socially innovative, socially entrepreneurial thing 00:00:32.969 --> 00:00:35.297 I have ever done. NOTE Paragraph 00:00:35.297 --> 00:00:39.771 (Laughter) (Applause) NOTE Paragraph 00:00:39.771 --> 00:00:42.809 The real social innovation I want to talk about 00:00:42.809 --> 00:00:44.301 involves charity. 00:00:44.301 --> 00:00:47.305 I want to talk about how the things we've been taught to think 00:00:47.305 --> 00:00:49.598 about giving and about charity 00:00:49.598 --> 00:00:51.558 and about the nonprofit sector 00:00:51.558 --> 00:00:55.222 are actually undermining the causes we love 00:00:55.222 --> 00:00:59.226 and our profound yearning to change the world. NOTE Paragraph 00:00:59.226 --> 00:01:01.639 But before I do that, I want to ask if we even believe 00:01:01.639 --> 00:01:04.784 that the nonprofit sector has any serious role to play 00:01:04.784 --> 00:01:07.167 in changing the world. 00:01:07.167 --> 00:01:10.625 A lot of people say now that business will lift up the developing economies, 00:01:10.625 --> 00:01:13.664 and social business will take care of the rest. 00:01:13.664 --> 00:01:16.102 And I do believe that business will move 00:01:16.102 --> 00:01:19.263 the great mass of humanity forward. 00:01:19.263 --> 00:01:23.398 But it always leaves behind that 10 percent or more 00:01:23.398 --> 00:01:27.870 that is most disadvantaged or unlucky. 00:01:27.870 --> 00:01:29.399 And social business needs markets, 00:01:29.399 --> 00:01:31.801 and there are some issues for which you just can't develop 00:01:31.801 --> 00:01:35.134 the kind of money measures that you need for a market. 00:01:35.134 --> 00:01:38.475 I sit on the board of a center for the developmentally disabled, 00:01:38.475 --> 00:01:40.710 and these people want laughter 00:01:40.710 --> 00:01:44.768 and compassion and they want love. 00:01:44.768 --> 00:01:48.314 How do you monetize that? 00:01:48.314 --> 00:01:50.560 And that's where the nonprofit sector 00:01:50.560 --> 00:01:52.904 and philanthropy come in. 00:01:52.904 --> 00:01:56.595 Philanthropy is the market for love. 00:01:56.595 --> 00:01:59.016 It is the market for all those people 00:01:59.016 --> 00:02:01.856 for whom there is no other market coming. 00:02:01.856 --> 00:02:04.587 And so if we really want, like Buckminster Fuller said, 00:02:04.587 --> 00:02:06.976 a world that works for everyone, 00:02:06.976 --> 00:02:09.480 with no one and nothing left out, 00:02:09.480 --> 00:02:11.642 then the nonprofit sector has to be 00:02:11.642 --> 00:02:14.184 a serious part of the conversation. NOTE Paragraph 00:02:14.184 --> 00:02:16.888 But it doesn't seem to be working. 00:02:16.888 --> 00:02:18.517 Why have our breast cancer charities 00:02:18.517 --> 00:02:21.244 not come close to finding a cure for breast cancer, 00:02:21.244 --> 00:02:23.312 or our homeless charities not come close 00:02:23.312 --> 00:02:26.241 to ending homelessness in any major city? 00:02:26.241 --> 00:02:29.592 Why has poverty remained stuck at 12 percent 00:02:29.592 --> 00:02:33.478 of the U.S. population for 40 years? NOTE Paragraph 00:02:33.478 --> 00:02:36.600 And the answer is, these social problems 00:02:36.600 --> 00:02:38.814 are massive in scale, 00:02:38.814 --> 00:02:41.702 our organizations are tiny up against them, 00:02:41.702 --> 00:02:45.265 and we have a belief system that keeps them tiny. 00:02:45.265 --> 00:02:46.585 We have two rulebooks. 00:02:46.585 --> 00:02:48.531 We have one for the nonprofit sector 00:02:48.531 --> 00:02:51.546 and one for the rest of the economic world. 00:02:51.546 --> 00:02:54.014 It's an apartheid, and it discriminates 00:02:54.014 --> 00:02:56.958 against the [nonprofit] sector in five different areas, 00:02:56.958 --> 00:02:59.350 the first being compensation. NOTE Paragraph 00:02:59.350 --> 00:03:02.262 So in the for-profit sector, the more value you produce, 00:03:02.262 --> 00:03:04.153 the more money you can make. 00:03:04.153 --> 00:03:06.105 But we don't like nonprofits to use money 00:03:06.105 --> 00:03:09.975 to incentivize people to produce more in social service. 00:03:09.975 --> 00:03:12.775 We have a visceral reaction to the idea that anyone 00:03:12.775 --> 00:03:16.182 would make very much money helping other people. 00:03:16.182 --> 00:03:18.185 Interesting that we don't have a visceral reaction 00:03:18.185 --> 00:03:21.944 to the notion that people would make a lot of money not helping other people. 00:03:21.944 --> 00:03:24.220 You know, you want to make 50 million dollars 00:03:24.220 --> 00:03:26.550 selling violent video games to kids, go for it. 00:03:26.550 --> 00:03:28.538 We'll put you on the cover of Wired magazine. 00:03:28.538 --> 00:03:30.545 But you want to make half a million dollars 00:03:30.545 --> 00:03:31.904 trying to cure kids of malaria, 00:03:31.904 --> 00:03:39.821 and you're considered a parasite yourself. (Applause) NOTE Paragraph 00:03:39.821 --> 00:03:42.781 And we think of this as our system of ethics, 00:03:42.781 --> 00:03:44.918 but what we don't realize is that this system 00:03:44.918 --> 00:03:48.022 has a powerful side effect, which is, 00:03:48.022 --> 00:03:51.657 it gives a really stark, mutually exclusive choice 00:03:51.657 --> 00:03:55.029 between doing very well for yourself and your family 00:03:55.029 --> 00:03:57.702 or doing good for the world 00:03:57.702 --> 00:04:00.654 to the brightest minds coming out of our best universities, 00:04:00.654 --> 00:04:02.731 and sends tens of thousands of people 00:04:02.731 --> 00:04:05.326 who could make a huge difference in the nonprofit sector 00:04:05.326 --> 00:04:07.973 marching every year directly into the for-profit sector 00:04:07.973 --> 00:04:12.674 because they're not willing to make that kind of lifelong economic sacrifice. 00:04:12.674 --> 00:04:16.161 Businessweek did a survey, looked at the compensation packages 00:04:16.161 --> 00:04:19.271 for MBAs 10 years of business school, 00:04:19.271 --> 00:04:22.164 and the median compensation for a Stanford MBA, 00:04:22.164 --> 00:04:26.855 with bonus, at the age of 38, was 400,000 dollars. 00:04:26.855 --> 00:04:28.903 Meanwhile, for the same year, the average salary 00:04:28.903 --> 00:04:32.119 for the CEO of a $5 million-plus medical charity in the U.S. 00:04:32.119 --> 00:04:37.437 was 232,000 dollars, and for a hunger charity, 84,000 dollars. 00:04:37.437 --> 00:04:39.301 Now, there's no way you're going to get a lot of people 00:04:39.301 --> 00:04:43.503 with $400,000 talent to make a $316,000 sacrifice 00:04:43.503 --> 00:04:47.615 every year to become the CEO of a hunger charity. NOTE Paragraph 00:04:47.615 --> 00:04:51.106 Some people say, "Well, that's just because those MBA types are greedy." 00:04:51.106 --> 00:04:53.658 Not necessarily. They might be smart. 00:04:53.658 --> 00:04:56.042 It's cheaper for that person to donate 00:04:56.042 --> 00:04:59.730 100,000 dollars every year to the hunger charity, 00:04:59.730 --> 00:05:01.814 save 50,000 dollars on their taxes, 00:05:01.814 --> 00:05:06.133 so still be roughly 270,000 dollars a year ahead of the game, 00:05:06.133 --> 00:05:08.748 now be called a philanthropist because they donated 00:05:08.748 --> 00:05:10.587 100,000 dollars to charity, 00:05:10.587 --> 00:05:12.612 probably sit on the board of the hunger charity, 00:05:12.612 --> 00:05:14.789 indeed, probably supervise the poor SOB 00:05:14.789 --> 00:05:18.303 who decided to become the CEO of the hunger charity, 00:05:18.303 --> 00:05:21.984 and have a lifetime of this kind of power and influence 00:05:21.984 --> 00:05:25.618 and popular praise still ahead of them. NOTE Paragraph 00:05:25.618 --> 00:05:29.328 The second area of discrimination is advertising and marketing. 00:05:29.328 --> 00:05:32.833 So we tell the for-profit sector, "Spend, spend, spend on advertising 00:05:32.833 --> 00:05:36.398 until the last dollar no longer produces a penny of value." 00:05:36.398 --> 00:05:39.937 But we don't like to see our donations spent on advertising in charity. 00:05:39.937 --> 00:05:43.711 Our attitude is, "Well, look, if you can get the advertising donated, 00:05:43.711 --> 00:05:46.517 you know, at four o'clock in the morning, I'm okay with that. 00:05:46.517 --> 00:05:49.068 But I don't want my donations spent on advertising. 00:05:49.068 --> 00:05:51.316 I want it go to the needy." 00:05:51.316 --> 00:05:53.008 As if the money invested in advertising 00:05:53.008 --> 00:05:55.852 could not bring in dramatically greater sums of money 00:05:55.852 --> 00:05:57.633 to serve the needy. NOTE Paragraph 00:05:57.633 --> 00:05:59.968 In the 1990s, my company created 00:05:59.968 --> 00:06:03.072 the long distance AIDSRide bicycle journeys 00:06:03.072 --> 00:06:07.564 and the 60-mile-long breast cancer three-day walks, 00:06:07.564 --> 00:06:10.924 and over the course of nine years, 00:06:10.924 --> 00:06:15.987 we had 182,000 ordinary heroes participate, 00:06:15.987 --> 00:06:20.427 and they raised a total of 581 million dollars. 00:06:20.427 --> 00:06:25.424 They raised more money more quickly for these causes 00:06:25.424 --> 00:06:27.238 than any events in history, 00:06:27.238 --> 00:06:30.056 all based on the idea that people are weary 00:06:30.056 --> 00:06:32.882 of being asked to do the least they can possibly do. 00:06:32.882 --> 00:06:35.280 People are yearning to measure 00:06:35.280 --> 00:06:37.472 the full distance of their potential 00:06:37.472 --> 00:06:40.616 on behalf of the causes that they care about deeply. 00:06:40.616 --> 00:06:43.792 But they have to be asked. 00:06:43.792 --> 00:06:45.391 We got that many people to participate 00:06:45.391 --> 00:06:47.694 by buying full-page ads in The New York Times, 00:06:47.694 --> 00:06:51.123 in The Boston Globe, in primetime radio and TV advertising. 00:06:51.123 --> 00:06:52.925 Do you know how many people we would have gotten 00:06:52.925 --> 00:06:56.434 if we put up flyers in the laundromat? NOTE Paragraph 00:06:56.434 --> 00:06:59.636 Charitable giving has remained stuck, in the U.S., 00:06:59.636 --> 00:07:04.027 at two percent of GDP ever since we started measuring it in the 1970s. 00:07:04.027 --> 00:07:06.327 That's an important fact, because it tells us 00:07:06.327 --> 00:07:08.831 that in 40 years, the nonprofit sector 00:07:08.831 --> 00:07:12.183 has not been able to wrestle any market share 00:07:12.183 --> 00:07:14.895 away from the for-profit sector. 00:07:14.895 --> 00:07:17.047 And if you think about it, how could one sector 00:07:17.047 --> 00:07:20.239 possibly take market share away from another sector 00:07:20.239 --> 00:07:23.224 if it isn't really allowed to market? 00:07:23.224 --> 00:07:24.940 And if we tell the consumer brands, 00:07:24.940 --> 00:07:27.759 "You may advertise all the benefits of your product," 00:07:27.759 --> 00:07:30.933 but we tell charities, "You cannot advertise all the good that you do," 00:07:30.933 --> 00:07:34.559 where do we think the consumer dollars are going to flow? NOTE Paragraph 00:07:34.559 --> 00:07:37.856 The third area of discrimination is the taking of risk 00:07:37.856 --> 00:07:42.128 in pursuit of new ideas for generating revenue. 00:07:42.128 --> 00:07:45.507 So Disney can make a new $200 million movie that flops, 00:07:45.507 --> 00:07:48.355 and nobody calls the attorney general. 00:07:48.355 --> 00:07:51.675 But you do a little $1 million community fundraiser 00:07:51.675 --> 00:07:54.783 for the poor, and it doesn't produce a 75 percent profit 00:07:54.783 --> 00:07:56.576 to the cause in the first 12 months, 00:07:56.576 --> 00:07:59.396 and your character is called into question. 00:07:59.396 --> 00:08:02.287 So nonprofits are really reluctant to attempt any brave, 00:08:02.287 --> 00:08:05.807 daring, giant-scale new fundraising endeavors 00:08:05.807 --> 00:08:07.805 for fear that if the thing fails, their reputations 00:08:07.805 --> 00:08:09.710 will be dragged through the mud. 00:08:09.710 --> 00:08:11.621 Well, you and I know when you prohibit failure, 00:08:11.621 --> 00:08:13.432 you kill innovation. 00:08:13.432 --> 00:08:16.348 If you kill innovation in fundraising, you can't raise more revenue. 00:08:16.348 --> 00:08:18.404 If you can't raise more revenue, you can't grow. 00:08:18.404 --> 00:08:23.235 And if you can't grow, you can't possibly solve large social problems. NOTE Paragraph 00:08:23.235 --> 00:08:25.944 The fourth area is time. 00:08:25.944 --> 00:08:29.923 So Amazon went for six years without returning any profit to investors, 00:08:29.923 --> 00:08:31.571 and people had patience. 00:08:31.571 --> 00:08:34.157 They knew that there was a long-term objective down the line 00:08:34.157 --> 00:08:36.078 of building market dominance. 00:08:36.078 --> 00:08:38.904 But if a nonprofit organization ever had a dream 00:08:38.904 --> 00:08:42.779 of building magnificent scale that required that for six years, 00:08:42.779 --> 00:08:44.659 no money was going to go to the needy, 00:08:44.659 --> 00:08:46.844 it was all going to be invested in building this scale, 00:08:46.844 --> 00:08:50.151 we would expect a crucifixion. NOTE Paragraph 00:08:50.151 --> 00:08:52.072 And the last area is profit itself. 00:08:52.072 --> 00:08:54.735 So the for-profit sector can pay people profits 00:08:54.735 --> 00:08:57.114 in order to attract their capital for their new ideas, 00:08:57.114 --> 00:09:00.471 but you can't pay profits in a nonprofit sector, 00:09:00.471 --> 00:09:04.972 so the for-profit sector has a lock on the multi-trillion-dollar capital markets, 00:09:04.972 --> 00:09:07.348 and the nonprofit sector is starved for growth 00:09:07.348 --> 00:09:10.316 and risk and idea capital. NOTE Paragraph 00:09:10.316 --> 00:09:13.581 Well, you put those five things together -- you can't use money 00:09:13.581 --> 00:09:15.982 to lure talent away from the for-profit sector, 00:09:15.982 --> 00:09:17.922 you can't advertise on anywhere near the scale 00:09:17.922 --> 00:09:20.539 the for-profit sector does for new customers, 00:09:20.539 --> 00:09:23.308 you can't take the kinds of risks in pursuit of those customers 00:09:23.308 --> 00:09:25.448 that the for-profit sector takes, 00:09:25.448 --> 00:09:27.204 you don't have the same amount of time to find them 00:09:27.204 --> 00:09:28.622 as the for-profit sector, 00:09:28.622 --> 00:09:31.399 and you don't have a stock market with which to fund any of this, 00:09:31.399 --> 00:09:33.582 even if you could do it in the first place, 00:09:33.582 --> 00:09:35.502 and you've just put the nonprofit sector 00:09:35.502 --> 00:09:38.657 at an extreme disadvantage to the for-profit sector 00:09:38.657 --> 00:09:41.361 on every level. 00:09:41.361 --> 00:09:44.843 If we have any doubts about the effects of this separate rule book, 00:09:44.843 --> 00:09:46.573 this statistic is sobering: 00:09:46.573 --> 00:09:49.163 From 1970 to 2009, 00:09:49.163 --> 00:09:51.434 the number of nonprofits that really grew, 00:09:51.434 --> 00:09:55.122 that crossed the $50 million annual revenue barrier, 00:09:55.122 --> 00:09:57.274 is 144. 00:09:57.274 --> 00:09:59.479 In the same time, the number of for-profits that crossed it 00:09:59.479 --> 00:10:02.739 is 46,136. 00:10:02.739 --> 00:10:06.171 So we're dealing with social problems that are massive in scale, 00:10:06.171 --> 00:10:08.613 and our organizations can't generate any scale. 00:10:08.613 --> 00:10:12.588 All of the scale goes to Coca-Cola and Burger King. NOTE Paragraph 00:10:12.588 --> 00:10:15.542 So why do we think this way? 00:10:15.542 --> 00:10:20.016 Well, like most fanatical dogma in America, 00:10:20.016 --> 00:10:23.135 these ideas come from old Puritan beliefs. 00:10:23.135 --> 00:10:26.485 The Puritans came here for religious reasons, or so they said, 00:10:26.485 --> 00:10:29.799 but they also came here because they wanted to make a lot of money. 00:10:29.799 --> 00:10:31.942 They were pious people but they were also 00:10:31.942 --> 00:10:34.399 really aggressive capitalists, 00:10:34.399 --> 00:10:37.978 and they were accused of extreme forms of profit-making tendencies 00:10:37.978 --> 00:10:40.217 compared to the other colonists. 00:10:40.217 --> 00:10:43.273 But at the same time, the Puritans were Calvinists, 00:10:43.273 --> 00:10:45.947 so they were taught literally to hate themselves. 00:10:45.947 --> 00:10:48.978 They were taught that self-interest was a raging sea 00:10:48.978 --> 00:10:52.339 that was a sure path to eternal damnation. 00:10:52.339 --> 00:10:54.611 Well, this created a real problem for these people, right? 00:10:54.611 --> 00:10:57.347 Here they've come all the way across the Atlantic to make all this money. 00:10:57.347 --> 00:11:01.103 Making all this money will get you sent directly to Hell. 00:11:01.103 --> 00:11:03.044 What were they to do about this? NOTE Paragraph 00:11:03.044 --> 00:11:04.996 Well, charity became their answer. 00:11:04.996 --> 00:11:07.173 It became this economic sanctuary 00:11:07.173 --> 00:11:10.602 where they could do penance for their profit-making tendencies 00:11:10.602 --> 00:11:14.079 at five cents on the dollar. 00:11:14.079 --> 00:11:15.836 So of course, how could you make money in charity 00:11:15.836 --> 00:11:18.953 if charity was your penance for making money? 00:11:18.953 --> 00:11:23.063 Financial incentive was exiled from the realm of helping others 00:11:23.063 --> 00:11:26.159 so that it could thrive in the area of making money for yourself, 00:11:26.159 --> 00:11:29.338 and in 400 years, nothing has intervened 00:11:29.338 --> 00:11:34.615 to say, "That's counterproductive and that's unfair." NOTE Paragraph 00:11:34.615 --> 00:11:38.804 Now this ideology gets policed by this one very dangerous question, 00:11:38.804 --> 00:11:43.052 which is, "What percentage of my donation goes to the cause versus overhead?" 00:11:43.052 --> 00:11:44.933 There are a lot of problems with this question. 00:11:44.933 --> 00:11:46.780 I'm going to just focus on two. 00:11:46.780 --> 00:11:51.237 First, it makes us think that overhead is a negative, 00:11:51.237 --> 00:11:54.658 that it is somehow not part of the cause. 00:11:54.658 --> 00:11:59.644 But it absolutely is, especially if it's being used for growth. 00:11:59.644 --> 00:12:02.405 Now, this idea that overhead is somehow 00:12:02.405 --> 00:12:03.754 an enemy of the cause 00:12:03.754 --> 00:12:06.692 creates this second, much larger problem, which is, 00:12:06.692 --> 00:12:09.964 it forces organizations to go without the overhead things 00:12:09.964 --> 00:12:11.744 they really need to grow 00:12:11.744 --> 00:12:14.894 in the interest of keeping overhead low. NOTE Paragraph 00:12:14.894 --> 00:12:17.109 So we've all been taught that charities should spend 00:12:17.109 --> 00:12:20.255 as little as possible on overhead things like fundraising 00:12:20.255 --> 00:12:23.653 under the theory that, well, the less money you spend on fundraising, 00:12:23.653 --> 00:12:26.861 the more money there is available for the cause. 00:12:26.861 --> 00:12:29.702 Well, that's true if it's a depressing world 00:12:29.702 --> 00:12:32.647 in which this pie cannot be made any bigger. 00:12:32.647 --> 00:12:36.509 But if it's a logical world in which investment in fundraising 00:12:36.509 --> 00:12:39.807 actually raises more funds and makes the pie bigger, 00:12:39.807 --> 00:12:41.777 then we have it precisely backwards, 00:12:41.777 --> 00:12:44.691 and we should be investing more money, not less, 00:12:44.691 --> 00:12:47.065 in fundraising, because fundraising is the one thing 00:12:47.065 --> 00:12:49.733 that has the potential to multiply the amount of money 00:12:49.733 --> 00:12:54.230 available for the cause that we care about so deeply. NOTE Paragraph 00:12:54.230 --> 00:12:56.616 I'll give you two examples. We launched the AIDSRides 00:12:56.616 --> 00:13:00.425 with an initial investment of 50,000 dollars in risk capital. 00:13:00.425 --> 00:13:05.149 Within nine years, we had multiplied that 1,982 times 00:13:05.149 --> 00:13:10.933 into 108 million dollars after all expenses for AIDS services. 00:13:10.933 --> 00:13:12.744 We launched the breast cancer three-days 00:13:12.744 --> 00:13:16.849 with an initial investment of 350,000 dollars in risk capital. 00:13:16.849 --> 00:13:21.190 Within just five years, we had multiplied that 554 times 00:13:21.190 --> 00:13:24.795 into 194 million dollars after all expenses 00:13:24.795 --> 00:13:26.775 for breast cancer research. 00:13:26.775 --> 00:13:30.027 Now, if you were a philanthropist really interested in breast cancer, 00:13:30.027 --> 00:13:31.373 what would make more sense: 00:13:31.373 --> 00:13:35.273 go out and find the most innovative researcher in the world 00:13:35.273 --> 00:13:38.347 and give her 350,000 dollars for research, 00:13:38.347 --> 00:13:42.114 or give her fundraising department the 350,000 dollars 00:13:42.114 --> 00:13:47.340 to multiply it into 194 million dollars for breast cancer research? NOTE Paragraph 00:13:47.340 --> 00:13:50.565 2002 was our most successful year ever. 00:13:50.565 --> 00:13:54.007 We netted for breast cancer alone, that year alone, 00:13:54.007 --> 00:13:57.853 71 million dollars after all expenses. 00:13:57.853 --> 00:14:00.197 And then we went out of business, 00:14:00.197 --> 00:14:03.309 suddenly and traumatically. NOTE Paragraph 00:14:03.309 --> 00:14:08.012 Why? Well, the short story is, our sponsor split on us. 00:14:08.012 --> 00:14:09.863 They wanted to distance themselves from us 00:14:09.863 --> 00:14:12.834 because we were being crucified in the media 00:14:12.834 --> 00:14:16.044 for investing 40 percent of the gross in recruitment 00:14:16.044 --> 00:14:19.427 and customer service and the magic of the experience 00:14:19.427 --> 00:14:22.692 and there is no accounting terminology to describe 00:14:22.692 --> 00:14:25.494 that kind of investment in growth and in the future, 00:14:25.494 --> 00:14:30.467 other than this demonic label of overhead. 00:14:30.467 --> 00:14:35.823 So on one day, all 350 of our great employees 00:14:35.823 --> 00:14:40.179 lost their jobs 00:14:40.179 --> 00:14:43.818 because they were labeled overhead. 00:14:43.818 --> 00:14:46.110 Our sponsor went and tried the events on their own. 00:14:46.110 --> 00:14:47.471 The overhead went up. 00:14:47.471 --> 00:14:49.988 Net income for breast cancer research went down 00:14:49.988 --> 00:14:55.984 by 84 percent, or 60 million dollars in one year. NOTE Paragraph 00:14:55.984 --> 00:14:58.536 This is what happens when we confuse 00:14:58.536 --> 00:15:03.217 morality with frugality. 00:15:03.217 --> 00:15:06.221 We've all been taught that the bake sale with five percent overhead 00:15:06.221 --> 00:15:10.946 is morally superior to the professional fundraising enterprise with 40 percent overhead, 00:15:10.946 --> 00:15:13.538 but we're missing the most important piece of information, 00:15:13.538 --> 00:15:17.507 which is, what is the actual size of these pies? 00:15:17.507 --> 00:15:22.313 Who cares if the bake sale only has five percent overhead if it's tiny? 00:15:22.313 --> 00:15:25.169 What if the bake sale only netted 71 dollars for charity 00:15:25.169 --> 00:15:27.217 because it made no investment in its scale 00:15:27.217 --> 00:15:29.468 and the professional fundraising enterprise netted 00:15:29.468 --> 00:15:32.295 71 million dollars because it did? 00:15:32.295 --> 00:15:34.392 Now which pie would we prefer, and which pie 00:15:34.392 --> 00:15:38.247 do we think people who are hungry would prefer? NOTE Paragraph 00:15:38.247 --> 00:15:41.991 Here's how all of this impacts the big picture. 00:15:41.991 --> 00:15:45.327 I said that charitable giving is two percent of GDP in the United States. 00:15:45.327 --> 00:15:48.064 That's about 300 billion dollars a year. 00:15:48.064 --> 00:15:51.593 But only about 20 percent of that, or 60 billion dollars, 00:15:51.593 --> 00:15:53.544 goes to health and human services causes. 00:15:53.544 --> 00:15:57.220 The rest goes to religion and higher education and hospitals 00:15:57.220 --> 00:16:00.142 and that 60 billion dollars is not nearly enough 00:16:00.142 --> 00:16:02.349 to tackle these problems. 00:16:02.349 --> 00:16:04.493 But if we could move charitable giving 00:16:04.493 --> 00:16:09.750 from two percent of GDP up just one step 00:16:09.750 --> 00:16:13.234 to three percent of GDP, by investing in that growth, 00:16:13.234 --> 00:16:17.036 that would be an extra 150 billion dollars a year in contributions, 00:16:17.036 --> 00:16:19.827 and if that money could go disproportionately 00:16:19.827 --> 00:16:21.527 to health and human services charities, 00:16:21.527 --> 00:16:24.708 because those were the ones we encouraged to invest in their growth, 00:16:24.708 --> 00:16:29.313 that would represent a tripling of contributions to that sector. 00:16:29.313 --> 00:16:30.676 Now we're talking scale. 00:16:30.676 --> 00:16:34.279 Now we're talking the potential for real change. 00:16:34.279 --> 00:16:36.591 But it's never going to happen by forcing 00:16:36.591 --> 00:16:39.277 these organizations to lower their horizons 00:16:39.277 --> 00:16:44.774 to the demoralizing objective of keeping their overhead low. NOTE Paragraph 00:16:44.774 --> 00:16:48.297 Our generation does not want its epitaph to read, 00:16:48.297 --> 00:16:50.962 "We kept charity overhead low." 00:16:50.962 --> 00:16:59.048 (Laughter) (Applause) 00:16:59.049 --> 00:17:01.279 We want it to read that we changed the world, 00:17:01.279 --> 00:17:02.924 and that part of the way we did that 00:17:02.924 --> 00:17:05.990 was by changing the way we think about these things. 00:17:05.990 --> 00:17:08.035 So the next time you're looking at a charity, 00:17:08.035 --> 00:17:10.276 don't ask about the rate of their overhead. 00:17:10.276 --> 00:17:12.495 Ask about the scale of their dreams, 00:17:12.495 --> 00:17:16.406 their Apple-, Google-, Amazon-scale dreams, 00:17:16.406 --> 00:17:18.305 how they measure their progress toward those dreams, 00:17:18.305 --> 00:17:21.214 and what resources they need to make them come true 00:17:21.214 --> 00:17:23.064 regardless of what the overhead is. 00:17:23.064 --> 00:17:27.882 Who cares what the overhead is if these problems are actually getting solved? 00:17:27.882 --> 00:17:31.331 If we can have that kind of generosity, 00:17:31.331 --> 00:17:35.051 a generosity of thought, then the non-profit sector can play 00:17:35.051 --> 00:17:39.287 a massive role in changing the world for all those citizens 00:17:39.287 --> 00:17:45.421 most desperately in need of it to change. 00:17:45.421 --> 00:17:50.485 And if that can be our generation's enduring legacy, 00:17:50.485 --> 00:17:53.085 that we took responsibility 00:17:53.085 --> 00:17:56.077 for the thinking that had been handed down to us, 00:17:56.077 --> 00:17:58.917 that we revisited it, we revised it, 00:17:58.917 --> 00:18:02.716 and we reinvented the whole way humanity thinks about changing things, 00:18:02.716 --> 00:18:06.317 forever, for everyone, 00:18:06.317 --> 00:18:11.117 well, I thought I would let the kids sum up what that would be. 00:18:11.117 --> 00:18:12.537 Annalisa Smith-Pallotta: That would be -- 00:18:12.537 --> 00:18:14.985 Sage Smith-Pallotta: -- a real social -- 00:18:14.985 --> 00:18:16.886 Rider Smith-Pallotta: -- innovation. NOTE Paragraph 00:18:16.886 --> 00:18:20.382 Dan Pallotta: Thank you very much. Thank you. NOTE Paragraph 00:18:20.382 --> 00:18:29.518 (Applause) 00:18:29.518 --> 00:18:33.518 Thank you. (Applause)