In the first three parts of this article, I described what an impact-based social capital market is, why it matters yet doesn’t currently exist, how we can jumpstart its creation using a catalyst, and what other elements need to come together to make it a reality in the next 2-5 years. I will use this last post to address some common issues that people raise when discussing the concept:
Issue: An impact-based social capital market focuses too much on “thinking” and not enough on “feeling” which is a core motivation for donors.
Answer: An impact-based social capital market is based on a simple premise: ensuring that charitable contributions are going to organizations that are actually having an impact. In that sense, it includes a component of “thinking” in that it nudges donors to not waste their money on organizations that do not prioritize having impact. However, it is incorrect to assume that this precludes feelings from playing a role in donor decision making. As we say at Philanthropedia, donors participating in an impact-based social capital market will choose causes with their hearts, and organizations with their minds. In that way, there is perfect alignment between what donors are passionate about – contributing to a cause they feel connected to – and an impact-based social capital market which allows them to make sure these contributions are given to high-impact organizations.
Issue: Donor behavior cannot be changed and donors do not want to participate in an impact-based social capital market.
Answer: In my mind, there is little evidence to support the claims above. For example, Charity Navigator has successfully changed donor behavior, even if on the basis of the wrong set of metrics. So while it is certainly true that getting people to think about impact is no walk in the park, I believe we can achieve that goal if we as a sector collectively focus on a common set of beliefs and corresponding language, and then invest to create appropriate products and services that help guide the donor.
Issue: The catalyst you proposed suffers from many important limitations, for example X, Y, and Z.
Answer: Undoubtedly, all catalysts will have both pros and cons – this is an expected consequence of any approach that we can possibly think of. Spending too much time worrying about being a bit more “right” is a mistake however – instead, we need to focus attention on the much bigger challenge of putting together the other necessary elements of an impact-based social capital market once we have a “good enough” catalyst.
That is the approach we have taken with Philanthropedia too: we have explicitly aimed for a set of recommendations that are good enough and inexpensive to source. This mindset, combined with a methodology that focuses on continuous improvement, can produce great results over time: for reference, compare our national climate change research results to our Bay Area climate change results (choose a random organization and click on “expert assessment” to read expert comments). The rise in quality of expert comments in the span of less than 6 months is staggering!
I hope that this 4-part article provides a clear definition of the concept of an impact-based social capital market and its related elements. Obviously, there are many remaining questions and challenges and I welcome your feedback in the comment section or at firstname.lastname@example.org.
If you want to get more involved, please reach out to the email above as well. You will be joining a group of more than a 1000 experts and tens of organizations that are committed to the vision that I described above.
Thanks for reading!