1 00:00:00,989 --> 00:00:04,261 I want to talk about social innovation 2 00:00:04,261 --> 00:00:07,609 and social entrepreneurship. 3 00:00:07,609 --> 00:00:10,773 I happen to have triplets. 4 00:00:10,773 --> 00:00:13,118 They're little. They're five years old. 5 00:00:13,118 --> 00:00:14,187 Sometimes I tell people I have triplets. 6 00:00:14,187 --> 00:00:17,508 They say, "Really? How many?" 7 00:00:17,508 --> 00:00:18,952 Here's a picture of the kids. 8 00:00:18,952 --> 00:00:22,997 That's Sage and Annalisa and Rider. 9 00:00:22,997 --> 00:00:27,903 Now, I also happen to be gay. 10 00:00:27,903 --> 00:00:30,393 Being gay and fathering triplets is by far 11 00:00:30,393 --> 00:00:32,969 the most socially innovative, socially entrepreneurial thing 12 00:00:32,969 --> 00:00:35,297 I have ever done. 13 00:00:35,297 --> 00:00:39,771 (Laughter) (Applause) 14 00:00:39,771 --> 00:00:42,809 The real social innovation I want to talk about 15 00:00:42,809 --> 00:00:44,301 involves charity. 16 00:00:44,301 --> 00:00:47,305 I want to talk about how the things we've been taught to think 17 00:00:47,305 --> 00:00:49,598 about giving and about charity 18 00:00:49,598 --> 00:00:51,558 and about the nonprofit sector 19 00:00:51,558 --> 00:00:55,222 are actually undermining the causes we love 20 00:00:55,222 --> 00:00:59,226 and our profound yearning to change the world. 21 00:00:59,226 --> 00:01:01,639 But before I do that, I want to ask if we even believe 22 00:01:01,639 --> 00:01:04,784 that the nonprofit sector has any serious role to play 23 00:01:04,784 --> 00:01:07,167 in changing the world. 24 00:01:07,167 --> 00:01:10,625 A lot of people say now that business will lift up the developing economies, 25 00:01:10,625 --> 00:01:13,664 and social business will take care of the rest. 26 00:01:13,664 --> 00:01:16,102 And I do believe that business will move 27 00:01:16,102 --> 00:01:19,263 the great mass of humanity forward. 28 00:01:19,263 --> 00:01:23,398 But it always leaves behind that 10 percent or more 29 00:01:23,398 --> 00:01:27,870 that is most disadvantaged or unlucky. 30 00:01:27,870 --> 00:01:29,399 And social business needs markets, 31 00:01:29,399 --> 00:01:31,801 and there are some issues for which you just can't develop 32 00:01:31,801 --> 00:01:35,134 the kind of money measures that you need for a market. 33 00:01:35,134 --> 00:01:38,475 I sit on the board of a center for the developmentally disabled, 34 00:01:38,475 --> 00:01:40,710 and these people want laughter 35 00:01:40,710 --> 00:01:44,768 and compassion and they want love. 36 00:01:44,768 --> 00:01:48,314 How do you monetize that? 37 00:01:48,314 --> 00:01:50,560 And that's where the nonprofit sector 38 00:01:50,560 --> 00:01:52,904 and philanthropy come in. 39 00:01:52,904 --> 00:01:56,595 Philanthropy is the market for love. 40 00:01:56,595 --> 00:01:59,016 It is the market for all those people 41 00:01:59,016 --> 00:02:01,856 for whom there is no other market coming. 42 00:02:01,856 --> 00:02:04,587 And so if we really want, like Buckminster Fuller said, 43 00:02:04,587 --> 00:02:06,976 a world that works for everyone, 44 00:02:06,976 --> 00:02:09,480 with no one and nothing left out, 45 00:02:09,480 --> 00:02:11,642 then the nonprofit sector has to be 46 00:02:11,642 --> 00:02:14,184 a serious part of the conversation. 47 00:02:14,184 --> 00:02:16,888 But it doesn't seem to be working. 48 00:02:16,888 --> 00:02:18,517 Why have our breast cancer charities 49 00:02:18,517 --> 00:02:21,244 not come close to finding a cure for breast cancer, 50 00:02:21,244 --> 00:02:23,312 or our homeless charities not come close 51 00:02:23,312 --> 00:02:26,241 to ending homelessness in any major city? 52 00:02:26,241 --> 00:02:29,592 Why has poverty remained stuck at 12 percent 53 00:02:29,592 --> 00:02:33,478 of the U.S. population for 40 years? 54 00:02:33,478 --> 00:02:36,600 And the answer is, these social problems 55 00:02:36,600 --> 00:02:38,814 are massive in scale, 56 00:02:38,814 --> 00:02:41,702 our organizations are tiny up against them, 57 00:02:41,702 --> 00:02:45,265 and we have a belief system that keeps them tiny. 58 00:02:45,265 --> 00:02:46,585 We have two rulebooks. 59 00:02:46,585 --> 00:02:48,531 We have one for the nonprofit sector 60 00:02:48,531 --> 00:02:51,546 and one for the rest of the economic world. 61 00:02:51,546 --> 00:02:54,014 It's an apartheid, and it discriminates 62 00:02:54,014 --> 00:02:56,958 against the [nonprofit] sector in five different areas, 63 00:02:56,958 --> 00:02:59,350 the first being compensation. 64 00:02:59,350 --> 00:03:02,262 So in the for-profit sector, the more value you produce, 65 00:03:02,262 --> 00:03:04,153 the more money you can make. 66 00:03:04,153 --> 00:03:06,105 But we don't like nonprofits to use money 67 00:03:06,105 --> 00:03:09,975 to incentivize people to produce more in social service. 68 00:03:09,975 --> 00:03:12,775 We have a visceral reaction to the idea that anyone 69 00:03:12,775 --> 00:03:16,182 would make very much money helping other people. 70 00:03:16,182 --> 00:03:18,185 Interesting that we don't have a visceral reaction 71 00:03:18,185 --> 00:03:21,944 to the notion that people would make a lot of money not helping other people. 72 00:03:21,944 --> 00:03:24,220 You know, you want to make 50 million dollars 73 00:03:24,220 --> 00:03:26,550 selling violent video games to kids, go for it. 74 00:03:26,550 --> 00:03:28,538 We'll put you on the cover of Wired magazine. 75 00:03:28,538 --> 00:03:30,545 But you want to make half a million dollars 76 00:03:30,545 --> 00:03:31,904 trying to cure kids of malaria, 77 00:03:31,904 --> 00:03:39,821 and you're considered a parasite yourself. (Applause) 78 00:03:39,821 --> 00:03:42,781 And we think of this as our system of ethics, 79 00:03:42,781 --> 00:03:44,918 but what we don't realize is that this system 80 00:03:44,918 --> 00:03:48,022 has a powerful side effect, which is, 81 00:03:48,022 --> 00:03:51,657 it gives a really stark, mutually exclusive choice 82 00:03:51,657 --> 00:03:55,029 between doing very well for yourself and your family 83 00:03:55,029 --> 00:03:57,702 or doing good for the world 84 00:03:57,702 --> 00:04:00,654 to the brightest minds coming out of our best universities, 85 00:04:00,654 --> 00:04:02,731 and sends tens of thousands of people 86 00:04:02,731 --> 00:04:05,326 who could make a huge difference in the nonprofit sector 87 00:04:05,326 --> 00:04:07,973 marching every year directly into the for-profit sector 88 00:04:07,973 --> 00:04:12,674 because they're not willing to make that kind of lifelong economic sacrifice. 89 00:04:12,674 --> 00:04:16,161 Businessweek did a survey, looked at the compensation packages 90 00:04:16,161 --> 00:04:19,271 for MBAs 10 years of business school, 91 00:04:19,271 --> 00:04:22,164 and the median compensation for a Stanford MBA, 92 00:04:22,164 --> 00:04:26,855 with bonus, at the age of 38, was 400,000 dollars. 93 00:04:26,855 --> 00:04:28,903 Meanwhile, for the same year, the average salary 94 00:04:28,903 --> 00:04:32,119 for the CEO of a $5 million-plus medical charity in the U.S. 95 00:04:32,119 --> 00:04:37,437 was 232,000 dollars, and for a hunger charity, 84,000 dollars. 96 00:04:37,437 --> 00:04:39,301 Now, there's no way you're going to get a lot of people 97 00:04:39,301 --> 00:04:43,503 with $400,000 talent to make a $316,000 sacrifice 98 00:04:43,503 --> 00:04:47,615 every year to become the CEO of a hunger charity. 99 00:04:47,615 --> 00:04:51,106 Some people say, "Well, that's just because those MBA types are greedy." 100 00:04:51,106 --> 00:04:53,658 Not necessarily. They might be smart. 101 00:04:53,658 --> 00:04:56,042 It's cheaper for that person to donate 102 00:04:56,042 --> 00:04:59,730 100,000 dollars every year to the hunger charity, 103 00:04:59,730 --> 00:05:01,814 save 50,000 dollars on their taxes, 104 00:05:01,814 --> 00:05:06,133 so still be roughly 270,000 dollars a year ahead of the game, 105 00:05:06,133 --> 00:05:08,748 now be called a philanthropist because they donated 106 00:05:08,748 --> 00:05:10,587 100,000 dollars to charity, 107 00:05:10,587 --> 00:05:12,612 probably sit on the board of the hunger charity, 108 00:05:12,612 --> 00:05:14,789 indeed, probably supervise the poor SOB 109 00:05:14,789 --> 00:05:18,303 who decided to become the CEO of the hunger charity, 110 00:05:18,303 --> 00:05:21,984 and have a lifetime of this kind of power and influence 111 00:05:21,984 --> 00:05:25,618 and popular praise still ahead of them. 112 00:05:25,618 --> 00:05:29,328 The second area of discrimination is advertising and marketing. 113 00:05:29,328 --> 00:05:32,833 So we tell the for-profit sector, "Spend, spend, spend on advertising 114 00:05:32,833 --> 00:05:36,398 until the last dollar no longer produces a penny of value." 115 00:05:36,398 --> 00:05:39,937 But we don't like to see our donations spent on advertising in charity. 116 00:05:39,937 --> 00:05:43,711 Our attitude is, "Well, look, if you can get the advertising donated, 117 00:05:43,711 --> 00:05:46,517 you know, at four o'clock in the morning, I'm okay with that. 118 00:05:46,517 --> 00:05:49,068 But I don't want my donations spent on advertising. 119 00:05:49,068 --> 00:05:51,316 I want it go to the needy." 120 00:05:51,316 --> 00:05:53,008 As if the money invested in advertising 121 00:05:53,008 --> 00:05:55,852 could not bring in dramatically greater sums of money 122 00:05:55,852 --> 00:05:57,633 to serve the needy. 123 00:05:57,633 --> 00:05:59,968 In the 1990s, my company created 124 00:05:59,968 --> 00:06:03,072 the long distance AIDSRide bicycle journeys 125 00:06:03,072 --> 00:06:07,564 and the 60-mile-long breast cancer three-day walks, 126 00:06:07,564 --> 00:06:10,924 and over the course of nine years, 127 00:06:10,924 --> 00:06:15,987 we had 182,000 ordinary heroes participate, 128 00:06:15,987 --> 00:06:20,427 and they raised a total of 581 million dollars. 129 00:06:20,427 --> 00:06:25,424 They raised more money more quickly for these causes 130 00:06:25,424 --> 00:06:27,238 than any events in history, 131 00:06:27,238 --> 00:06:30,056 all based on the idea that people are weary 132 00:06:30,056 --> 00:06:32,882 of being asked to do the least they can possibly do. 133 00:06:32,882 --> 00:06:35,280 People are yearning to measure 134 00:06:35,280 --> 00:06:37,472 the full distance of their potential 135 00:06:37,472 --> 00:06:40,616 on behalf of the causes that they care about deeply. 136 00:06:40,616 --> 00:06:43,792 But they have to be asked. 137 00:06:43,792 --> 00:06:45,391 We got that many people to participate 138 00:06:45,391 --> 00:06:47,694 by buying full-page ads in The New York Times, 139 00:06:47,694 --> 00:06:51,123 in The Boston Globe, in primetime radio and TV advertising. 140 00:06:51,123 --> 00:06:52,925 Do you know how many people we would have gotten 141 00:06:52,925 --> 00:06:56,434 if we put up flyers in the laundromat? 142 00:06:56,434 --> 00:06:59,636 Charitable giving has remained stuck, in the U.S., 143 00:06:59,636 --> 00:07:04,027 at two percent of GDP ever since we started measuring it in the 1970s. 144 00:07:04,027 --> 00:07:06,327 That's an important fact, because it tells us 145 00:07:06,327 --> 00:07:08,831 that in 40 years, the nonprofit sector 146 00:07:08,831 --> 00:07:12,183 has not been able to wrestle any market share 147 00:07:12,183 --> 00:07:14,895 away from the for-profit sector. 148 00:07:14,895 --> 00:07:17,047 And if you think about it, how could one sector 149 00:07:17,047 --> 00:07:20,239 possibly take market share away from another sector 150 00:07:20,239 --> 00:07:23,224 if it isn't really allowed to market? 151 00:07:23,224 --> 00:07:24,940 And if we tell the consumer brands, 152 00:07:24,940 --> 00:07:27,759 "You may advertise all the benefits of your product," 153 00:07:27,759 --> 00:07:30,933 but we tell charities, "You cannot advertise all the good that you do," 154 00:07:30,933 --> 00:07:34,559 where do we think the consumer dollars are going to flow? 155 00:07:34,559 --> 00:07:37,856 The third area of discrimination is the taking of risk 156 00:07:37,856 --> 00:07:42,128 in pursuit of new ideas for generating revenue. 157 00:07:42,128 --> 00:07:45,507 So Disney can make a new $200 million movie that flops, 158 00:07:45,507 --> 00:07:48,355 and nobody calls the attorney general. 159 00:07:48,355 --> 00:07:51,675 But you do a little $1 million community fundraiser 160 00:07:51,675 --> 00:07:54,783 for the poor, and it doesn't produce a 75 percent profit 161 00:07:54,783 --> 00:07:56,576 to the cause in the first 12 months, 162 00:07:56,576 --> 00:07:59,396 and your character is called into question. 163 00:07:59,396 --> 00:08:02,287 So nonprofits are really reluctant to attempt any brave, 164 00:08:02,287 --> 00:08:05,807 daring, giant-scale new fundraising endeavors 165 00:08:05,807 --> 00:08:07,805 for fear that if the thing fails, their reputations 166 00:08:07,805 --> 00:08:09,710 will be dragged through the mud. 167 00:08:09,710 --> 00:08:11,621 Well, you and I know when you prohibit failure, 168 00:08:11,621 --> 00:08:13,432 you kill innovation. 169 00:08:13,432 --> 00:08:16,348 If you kill innovation in fundraising, you can't raise more revenue. 170 00:08:16,348 --> 00:08:18,404 If you can't raise more revenue, you can't grow. 171 00:08:18,404 --> 00:08:23,235 And if you can't grow, you can't possibly solve large social problems. 172 00:08:23,235 --> 00:08:25,944 The fourth area is time. 173 00:08:25,944 --> 00:08:29,923 So Amazon went for six years without returning any profit to investors, 174 00:08:29,923 --> 00:08:31,571 and people had patience. 175 00:08:31,571 --> 00:08:34,157 They knew that there was a long-term objective down the line 176 00:08:34,157 --> 00:08:36,078 of building market dominance. 177 00:08:36,078 --> 00:08:38,904 But if a nonprofit organization ever had a dream 178 00:08:38,904 --> 00:08:42,779 of building magnificent scale that required that for six years, 179 00:08:42,779 --> 00:08:44,659 no money was going to go to the needy, 180 00:08:44,659 --> 00:08:46,844 it was all going to be invested in building this scale, 181 00:08:46,844 --> 00:08:50,151 we would expect a crucifixion. 182 00:08:50,151 --> 00:08:52,072 And the last area is profit itself. 183 00:08:52,072 --> 00:08:54,735 So the for-profit sector can pay people profits 184 00:08:54,735 --> 00:08:57,114 in order to attract their capital for their new ideas, 185 00:08:57,114 --> 00:09:00,471 but you can't pay profits in a nonprofit sector, 186 00:09:00,471 --> 00:09:04,972 so the for-profit sector has a lock on the multi-trillion-dollar capital markets, 187 00:09:04,972 --> 00:09:07,348 and the nonprofit sector is starved for growth 188 00:09:07,348 --> 00:09:10,316 and risk and idea capital. 189 00:09:10,316 --> 00:09:13,581 Well, you put those five things together -- you can't use money 190 00:09:13,581 --> 00:09:15,982 to lure talent away from the for-profit sector, 191 00:09:15,982 --> 00:09:17,922 you can't advertise on anywhere near the scale 192 00:09:17,922 --> 00:09:20,539 the for-profit sector does for new customers, 193 00:09:20,539 --> 00:09:23,308 you can't take the kinds of risks in pursuit of those customers 194 00:09:23,308 --> 00:09:25,448 that the for-profit sector takes, 195 00:09:25,448 --> 00:09:27,204 you don't have the same amount of time to find them 196 00:09:27,204 --> 00:09:28,622 as the for-profit sector, 197 00:09:28,622 --> 00:09:31,399 and you don't have a stock market with which to fund any of this, 198 00:09:31,399 --> 00:09:33,582 even if you could do it in the first place, 199 00:09:33,582 --> 00:09:35,502 and you've just put the nonprofit sector 200 00:09:35,502 --> 00:09:38,657 at an extreme disadvantage to the for-profit sector 201 00:09:38,657 --> 00:09:41,361 on every level. 202 00:09:41,361 --> 00:09:44,843 If we have any doubts about the effects of this separate rule book, 203 00:09:44,843 --> 00:09:46,573 this statistic is sobering: 204 00:09:46,573 --> 00:09:49,163 From 1970 to 2009, 205 00:09:49,163 --> 00:09:51,434 the number of nonprofits that really grew, 206 00:09:51,434 --> 00:09:55,122 that crossed the $50 million annual revenue barrier, 207 00:09:55,122 --> 00:09:57,274 is 144. 208 00:09:57,274 --> 00:09:59,479 In the same time, the number of for-profits that crossed it 209 00:09:59,479 --> 00:10:02,739 is 46,136. 210 00:10:02,739 --> 00:10:06,171 So we're dealing with social problems that are massive in scale, 211 00:10:06,171 --> 00:10:08,613 and our organizations can't generate any scale. 212 00:10:08,613 --> 00:10:12,588 All of the scale goes to Coca-Cola and Burger King. 213 00:10:12,588 --> 00:10:15,542 So why do we think this way? 214 00:10:15,542 --> 00:10:20,016 Well, like most fanatical dogma in America, 215 00:10:20,016 --> 00:10:23,135 these ideas come from old Puritan beliefs. 216 00:10:23,135 --> 00:10:26,485 The Puritans came here for religious reasons, or so they said, 217 00:10:26,485 --> 00:10:29,799 but they also came here because they wanted to make a lot of money. 218 00:10:29,799 --> 00:10:31,942 They were pious people but they were also 219 00:10:31,942 --> 00:10:34,399 really aggressive capitalists, 220 00:10:34,399 --> 00:10:37,978 and they were accused of extreme forms of profit-making tendencies 221 00:10:37,978 --> 00:10:40,217 compared to the other colonists. 222 00:10:40,217 --> 00:10:43,273 But at the same time, the Puritans were Calvinists, 223 00:10:43,273 --> 00:10:45,947 so they were taught literally to hate themselves. 224 00:10:45,947 --> 00:10:48,978 They were taught that self-interest was a raging sea 225 00:10:48,978 --> 00:10:52,339 that was a sure path to eternal damnation. 226 00:10:52,339 --> 00:10:54,611 Well, this created a real problem for these people, right? 227 00:10:54,611 --> 00:10:57,347 Here they've come all the way across the Atlantic to make all this money. 228 00:10:57,347 --> 00:11:01,103 Making all this money will get you sent directly to Hell. 229 00:11:01,103 --> 00:11:03,044 What were they to do about this? 230 00:11:03,044 --> 00:11:04,996 Well, charity became their answer. 231 00:11:04,996 --> 00:11:07,173 It became this economic sanctuary 232 00:11:07,173 --> 00:11:10,602 where they could do penance for their profit-making tendencies 233 00:11:10,602 --> 00:11:14,079 at five cents on the dollar. 234 00:11:14,079 --> 00:11:15,836 So of course, how could you make money in charity 235 00:11:15,836 --> 00:11:18,953 if charity was your penance for making money? 236 00:11:18,953 --> 00:11:23,063 Financial incentive was exiled from the realm of helping others 237 00:11:23,063 --> 00:11:26,159 so that it could thrive in the area of making money for yourself, 238 00:11:26,159 --> 00:11:29,338 and in 400 years, nothing has intervened 239 00:11:29,338 --> 00:11:34,615 to say, "That's counterproductive and that's unfair." 240 00:11:34,615 --> 00:11:38,804 Now this ideology gets policed by this one very dangerous question, 241 00:11:38,804 --> 00:11:43,052 which is, "What percentage of my donation goes to the cause versus overhead?" 242 00:11:43,052 --> 00:11:44,933 There are a lot of problems with this question. 243 00:11:44,933 --> 00:11:46,780 I'm going to just focus on two. 244 00:11:46,780 --> 00:11:51,237 First, it makes us think that overhead is a negative, 245 00:11:51,237 --> 00:11:54,658 that it is somehow not part of the cause. 246 00:11:54,658 --> 00:11:59,644 But it absolutely is, especially if it's being used for growth. 247 00:11:59,644 --> 00:12:02,405 Now, this idea that overhead is somehow 248 00:12:02,405 --> 00:12:03,754 an enemy of the cause 249 00:12:03,754 --> 00:12:06,692 creates this second, much larger problem, which is, 250 00:12:06,692 --> 00:12:09,964 it forces organizations to go without the overhead things 251 00:12:09,964 --> 00:12:11,744 they really need to grow 252 00:12:11,744 --> 00:12:14,894 in the interest of keeping overhead low. 253 00:12:14,894 --> 00:12:17,109 So we've all been taught that charities should spend 254 00:12:17,109 --> 00:12:20,255 as little as possible on overhead things like fundraising 255 00:12:20,255 --> 00:12:23,653 under the theory that, well, the less money you spend on fundraising, 256 00:12:23,653 --> 00:12:26,861 the more money there is available for the cause. 257 00:12:26,861 --> 00:12:29,702 Well, that's true if it's a depressing world 258 00:12:29,702 --> 00:12:32,647 in which this pie cannot be made any bigger. 259 00:12:32,647 --> 00:12:36,509 But if it's a logical world in which investment in fundraising 260 00:12:36,509 --> 00:12:39,807 actually raises more funds and makes the pie bigger, 261 00:12:39,807 --> 00:12:41,777 then we have it precisely backwards, 262 00:12:41,777 --> 00:12:44,691 and we should be investing more money, not less, 263 00:12:44,691 --> 00:12:47,065 in fundraising, because fundraising is the one thing 264 00:12:47,065 --> 00:12:49,733 that has the potential to multiply the amount of money 265 00:12:49,733 --> 00:12:54,230 available for the cause that we care about so deeply. 266 00:12:54,230 --> 00:12:56,616 I'll give you two examples. We launched the AIDSRides 267 00:12:56,616 --> 00:13:00,425 with an initial investment of 50,000 dollars in risk capital. 268 00:13:00,425 --> 00:13:05,149 Within nine years, we had multiplied that 1,982 times 269 00:13:05,149 --> 00:13:10,933 into 108 million dollars after all expenses for AIDS services. 270 00:13:10,933 --> 00:13:12,744 We launched the breast cancer three-days 271 00:13:12,744 --> 00:13:16,849 with an initial investment of 350,000 dollars in risk capital. 272 00:13:16,849 --> 00:13:21,190 Within just five years, we had multiplied that 554 times 273 00:13:21,190 --> 00:13:24,795 into 194 million dollars after all expenses 274 00:13:24,795 --> 00:13:26,775 for breast cancer research. 275 00:13:26,775 --> 00:13:30,027 Now, if you were a philanthropist really interested in breast cancer, 276 00:13:30,027 --> 00:13:31,373 what would make more sense: 277 00:13:31,373 --> 00:13:35,273 go out and find the most innovative researcher in the world 278 00:13:35,273 --> 00:13:38,347 and give her 350,000 dollars for research, 279 00:13:38,347 --> 00:13:42,114 or give her fundraising department the 350,000 dollars 280 00:13:42,114 --> 00:13:47,340 to multiply it into 194 million dollars for breast cancer research? 281 00:13:47,340 --> 00:13:50,565 2002 was our most successful year ever. 282 00:13:50,565 --> 00:13:54,007 We netted for breast cancer alone, that year alone, 283 00:13:54,007 --> 00:13:57,853 71 million dollars after all expenses. 284 00:13:57,853 --> 00:14:00,197 And then we went out of business, 285 00:14:00,197 --> 00:14:03,309 suddenly and traumatically. 286 00:14:03,309 --> 00:14:08,012 Why? Well, the short story is, our sponsor split on us. 287 00:14:08,012 --> 00:14:09,863 They wanted to distance themselves from us 288 00:14:09,863 --> 00:14:12,834 because we were being crucified in the media 289 00:14:12,834 --> 00:14:16,044 for investing 40 percent of the gross in recruitment 290 00:14:16,044 --> 00:14:19,427 and customer service and the magic of the experience 291 00:14:19,427 --> 00:14:22,692 and there is no accounting terminology to describe 292 00:14:22,692 --> 00:14:25,494 that kind of investment in growth and in the future, 293 00:14:25,494 --> 00:14:30,467 other than this demonic label of overhead. 294 00:14:30,467 --> 00:14:35,823 So on one day, all 350 of our great employees 295 00:14:35,823 --> 00:14:40,179 lost their jobs 296 00:14:40,179 --> 00:14:43,818 because they were labeled overhead. 297 00:14:43,818 --> 00:14:46,110 Our sponsor went and tried the events on their own. 298 00:14:46,110 --> 00:14:47,471 The overhead went up. 299 00:14:47,471 --> 00:14:49,988 Net income for breast cancer research went down 300 00:14:49,988 --> 00:14:55,984 by 84 percent, or 60 million dollars in one year. 301 00:14:55,984 --> 00:14:58,536 This is what happens when we confuse 302 00:14:58,536 --> 00:15:03,217 morality with frugality. 303 00:15:03,217 --> 00:15:06,221 We've all been taught that the bake sale with five percent overhead 304 00:15:06,221 --> 00:15:10,946 is morally superior to the professional fundraising enterprise with 40 percent overhead, 305 00:15:10,946 --> 00:15:13,538 but we're missing the most important piece of information, 306 00:15:13,538 --> 00:15:17,507 which is, what is the actual size of these pies? 307 00:15:17,507 --> 00:15:22,313 Who cares if the bake sale only has five percent overhead if it's tiny? 308 00:15:22,313 --> 00:15:25,169 What if the bake sale only netted 71 dollars for charity 309 00:15:25,169 --> 00:15:27,217 because it made no investment in its scale 310 00:15:27,217 --> 00:15:29,468 and the professional fundraising enterprise netted 311 00:15:29,468 --> 00:15:32,295 71 million dollars because it did? 312 00:15:32,295 --> 00:15:34,392 Now which pie would we prefer, and which pie 313 00:15:34,392 --> 00:15:38,247 do we think people who are hungry would prefer? 314 00:15:38,247 --> 00:15:41,991 Here's how all of this impacts the big picture. 315 00:15:41,991 --> 00:15:45,327 I said that charitable giving is two percent of GDP in the United States. 316 00:15:45,327 --> 00:15:48,064 That's about 300 billion dollars a year. 317 00:15:48,064 --> 00:15:51,593 But only about 20 percent of that, or 60 billion dollars, 318 00:15:51,593 --> 00:15:53,544 goes to health and human services causes. 319 00:15:53,544 --> 00:15:57,220 The rest goes to religion and higher education and hospitals 320 00:15:57,220 --> 00:16:00,142 and that 60 billion dollars is not nearly enough 321 00:16:00,142 --> 00:16:02,349 to tackle these problems. 322 00:16:02,349 --> 00:16:04,493 But if we could move charitable giving 323 00:16:04,493 --> 00:16:09,750 from two percent of GDP up just one step 324 00:16:09,750 --> 00:16:13,234 to three percent of GDP, by investing in that growth, 325 00:16:13,234 --> 00:16:17,036 that would be an extra 150 billion dollars a year in contributions, 326 00:16:17,036 --> 00:16:19,827 and if that money could go disproportionately 327 00:16:19,827 --> 00:16:21,527 to health and human services charities, 328 00:16:21,527 --> 00:16:24,708 because those were the ones we encouraged to invest in their growth, 329 00:16:24,708 --> 00:16:29,313 that would represent a tripling of contributions to that sector. 330 00:16:29,313 --> 00:16:30,676 Now we're talking scale. 331 00:16:30,676 --> 00:16:34,279 Now we're talking the potential for real change. 332 00:16:34,279 --> 00:16:36,591 But it's never going to happen by forcing 333 00:16:36,591 --> 00:16:39,277 these organizations to lower their horizons 334 00:16:39,277 --> 00:16:44,774 to the demoralizing objective of keeping their overhead low. 335 00:16:44,774 --> 00:16:48,297 Our generation does not want its epitaph to read, 336 00:16:48,297 --> 00:16:50,962 "We kept charity overhead low." 337 00:16:50,962 --> 00:16:59,048 (Laughter) (Applause) 338 00:16:59,049 --> 00:17:01,279 We want it to read that we changed the world, 339 00:17:01,279 --> 00:17:02,924 and that part of the way we did that 340 00:17:02,924 --> 00:17:05,990 was by changing the way we think about these things. 341 00:17:05,990 --> 00:17:08,035 So the next time you're looking at a charity, 342 00:17:08,035 --> 00:17:10,276 don't ask about the rate of their overhead. 343 00:17:10,276 --> 00:17:12,495 Ask about the scale of their dreams, 344 00:17:12,495 --> 00:17:16,406 their Apple-, Google-, Amazon-scale dreams, 345 00:17:16,406 --> 00:17:18,305 how they measure their progress toward those dreams, 346 00:17:18,305 --> 00:17:21,214 and what resources they need to make them come true 347 00:17:21,214 --> 00:17:23,064 regardless of what the overhead is. 348 00:17:23,064 --> 00:17:27,882 Who cares what the overhead is if these problems are actually getting solved? 349 00:17:27,882 --> 00:17:31,331 If we can have that kind of generosity, 350 00:17:31,331 --> 00:17:35,051 a generosity of thought, then the non-profit sector can play 351 00:17:35,051 --> 00:17:39,287 a massive role in changing the world for all those citizens 352 00:17:39,287 --> 00:17:45,421 most desperately in need of it to change. 353 00:17:45,421 --> 00:17:50,485 And if that can be our generation's enduring legacy, 354 00:17:50,485 --> 00:17:53,085 that we took responsibility 355 00:17:53,085 --> 00:17:56,077 for the thinking that had been handed down to us, 356 00:17:56,077 --> 00:17:58,917 that we revisited it, we revised it, 357 00:17:58,917 --> 00:18:02,716 and we reinvented the whole way humanity thinks about changing things, 358 00:18:02,716 --> 00:18:06,317 forever, for everyone, 359 00:18:06,317 --> 00:18:11,117 well, I thought I would let the kids sum up what that would be. 360 00:18:11,117 --> 00:18:12,537 Annalisa Smith-Pallotta: That would be -- 361 00:18:12,537 --> 00:18:14,985 Sage Smith-Pallotta: -- a real social -- 362 00:18:14,985 --> 00:18:16,886 Rider Smith-Pallotta: -- innovation. 363 00:18:16,886 --> 00:18:20,382 Dan Pallotta: Thank you very much. Thank you. 364 00:18:20,382 --> 00:18:29,518 (Applause) 365 00:18:29,518 --> 00:18:33,518 Thank you. (Applause)