Tuesday, December 16, 2008

For-Profit vs. Non-Profit

I attended Brigham Young University's Economic Self-Reliance Conference in November 2008. I completed my undergraduate studies in finance at BYU, my sister still lives in Provo, Utah, and the conference is a great match for my interests, so I thought I'd give it a try. I wasn't disappointed, and I'll likely attend the conference again at some future point.

Perhaps my favorite session at the two-day event was titled "The Great Debate: For-Profit versus Non-Profit. They're not the same. Is there a sweet spot?" Millionaire entrepreneur Dean Curtis and his development activist brother Lynn have different perspectives on the best way to address poverty in the developing world. Their debate, fashioned after a presidential debate, was nothing groundbreaking, but it was a helpful framework for me to organize some thoughts I have had over the last few years.

Dean started by slamming the "blind give aways" approach of traditional philanthropy, which he says is based not on need, but on the giver's desires. Although this approach makes the giver feel good, it does not actually meet the recipient's needs or wants.

Lynn countered by dogging the "profit at all costs" camp, which is good at generating income but does nothing to address the needs of the poor.

The debate continued, each time edging toward the center. On the for-profit side, the centrist approach was introduced as "social business," which pursues a triple bottom line of profit, social returns, and environmental sustainability. The moderate approach on the non-profit side was labeled as "participant-driven empowerment," which involves the recipients of charity in developing sustainable solutions to their problems.

The full spectrum, listed in order of most left-wing non-profit to most right-wing capitalist, is shown below:

1) Blind give aways: based not on need, but on giver's desires
2) Need-based material donation: once the giver gets tired, the recipient is no better off
3) Donor-driven training: provides long-term skill or knowledge, but recipient is not empowered
4) Participant-driven empowerment: most culturally sensitive non-profit approach, which involves the recipients of charity in developing sustainable solutions to their problems
5) Social business: pursues a triple bottom line of profit, social returns, and environmental sustainability
6) Socially aware business: businesses have foundations and give employees time to volunteer, but the primary motive is still profit
7) Do no harm: doing no harm is not enough if the business also does no good
8) Profit at all costs: good at generating income but does nothing to address the needs of the poor

The Curtis brothers say the sweet spot is somewhere around 4 or 5. When I first got involved in philanthropy about three years ago, I started at 1 or 2. I quickly moved to 3, but right now I'm probably at 5, and I work for a 6 corporation. Although I believe there are times in which approach 2 is necessary and even helpful in the short-term, my belief is that the only long-term approach to lifting people out of poverty falls in the 5-6 range, which is where I intend to focus the majority of my time and money in addressing global poverty.

According to Lynn, "The success of an intervention is not when they thank us for what we've done, but when they come to us and say 'Look what we've done!' "

If you'd like to learn more about the work that Lynn and Dean do together at Sustainable Solutions, click here to visit their organization's web site.

2 comments:

Dr. Paul Rigterink said...

Ryan
I thought you might be interested in what I am planning to do In March in Cordoba Colombia
Paul

The Mas Dinero Project for Improving the Lives of Poor People in Cordoba Colombia

The purpose of the Mas Dinero project is to use the latest findings in science, technology, and social programs to improve the lives of poor people in the Department of Cordoba along the north coast of Colombia. In particular, the object will be to dramatically increase the finances, health, and athletic ability of poor working men and women in Cordoba between the ages of 18 and 70. Four proven methods will be used to increase the income and health of the poorest people. They are:

1) Growing Moringa for use by humans as well as for animal fodder (see
http://www.treesforlife.org/
http://www.moringanews.org/ (especially articles on the use of Moringa for increasing the growth of cattle and pigs which is an important industry in Cordoba)
http://www.echotech.org/mambo/index.php?option=com_content&task=view&id=89&Itemid=122
http://www.echotech.org/mambo/index.php?option=com_content&task=view&id=63&Itemid=140)
(Note: Some ECHO and Trees for Life technical notes are available in Spanish and will be distributed to participants in the Mas Dinero project)

2) Growing tropical fruit trees (see
http://home.comcast.net/~prigter/Bangladesh.doc
http://www.echotech.org/mambo/index.php?option=com_content&task=view&id=63&Itemid=140)

3) Growing other high value food commodities such as Hawaiian Sweet Corn with the help of micro irrigation (if available in Colombia) (see
http://www.ide-india.org/ide/pt/index.shtml and http://www.ide-india.org/ide/ipmas.shtml
http://www.echotech.org/mambo/index.php?option=com_content&task=view&id=160&Itemid=164
http://www.echotech.org/mambo/index.php?option=com_content&task=view&id=63&Itemid=140)

4) Starting Backyard Poultry farms (see
http://home.comcast.net/~prigter/Poverty.doc
http://www.fao.org/english/newsroom/news/2002/5480-en.html, http://www.fao.org/AG/againfo/themes/en/infpd/documents/papers/2004/7afghan1503.pdf, and http://www.globalfoodchainpartnerships.org/cairo/papers/TomFattoriAfghanistan.pdf
http://www.echotech.org/mambo/index.php?option=com_docman&task=doc_view&gid=35

The cost of supplies for each project is expected to be less than $100. Poor participants in the program should be able to substantially increase their income within 1 year and may want to use their profits to expand their businesses.

To increase the athletic ability of the residents a Sports Club will be organized using low cost sports equipment imported into Colombia (badminton, croquet, horseshoes, Frisbees, and softball equipment.) As the income of the residents increases it is expected that a Pitch and Putt golf course will be prepared following the plans supplied by Golf Digest magazine. In addition, a miniature golf course may also be prepared. These golf projects will not be started initially due to the difficulty and cost of importing equipment into rural Colombia.

Initially the concepts described in this paper will be tested in Los Cordobas, Cordoba, Colombia (an isolated village in on the Atlantic coast of Colombia where the author was a Peace Corps volunteer specializing in rural community development). As seeds are produced and concepts are proven, the Mas Dinero program will be expanded to other parts of Cordoba using middle-age women from Los Cordobas as salesman for both the technology and the tropical tree seeds required to take advantage of the technology. These women will be familiar with:

1. The production and use of Moringa, tropical fruit trees, and other high value food commodities,

2. Modern methods for backyard poultry production,

3. The use of micro irrigation (when it becomes available in Colombia)

4. The use of low cost sports equipment
In addition, they will be chosen for their ability to be compassionate with the problems of other women and men living in other parts of Cordoba (since they have experienced similar problems). They will use modern sales techniques to sell the program such as the following slogans:

1. Why not purchase small miracles for the price of a Kola Roman soda (Moringa seeds) (Note: The moringa tree is also known “The Miracle Tree)

2. Why not grow the best possible food for your family and your animals for the price of a Kola Roman (Moringa seeds)

3. Why not start a modern high technology farm for the price of two Kola Romans (Moringa seeds, tropical fruit tree seeds, other selected high value food commodity seeds)

These saleswomen will provide literature in Spanish describing the use of Moringa for family health and animal fodder to potential customers. They will be able to discuss improved technology for tropical farms. It is hoped that these saleswomen will receive help from the Government of Cordoba, leaders of the Catholic Church, and NGOs in the area such as World Vision in Monteria as the program progresses.

David Stoker said...

I like that spectrum. I think both sides are drifting to the middle which is a good trend for everyone. I think the large corporations and large foundations are just starting to arrive there and of course government is moving the slowest of all but still trying to go to that moderate place. It is an Interesting time in the market when incredible resources are moving to the middle and more mechanisms are arriving to identify which investments are at which place in that spectrum.

I would put myself working in a 4-5 organization, with donors from group 6.